Coronavirus-Induced Shortage of Solar Panel Components Highlights China’s Major Role in Solar Supply Chain

Last week, the Star Tribune ran a story about how the Coronavirus has disrupted the global solar panel supply chain, potentially causing the delay of two large solar installations in Wisconsin. The supply-chain interruptions have occurred because of factory shutdowns and travel restrictions in China, highlighting the major role that China has plays in the solar supply chain.

According to the article:

“Asia, and particularly China, is the globe’s primary supplier of solar cells and panels, and is also a major source of inverters and racking system components. Racks hold solar panels in place; inverters convert panels’ DC current into AC.

Also, about 80% of the specialty glass used to manufacture solar panels comes from China, said Martin Pochtaruk, president of Heliene, a solar-panel maker in Mountain Iron, Minn.”

The Los Angeles Times reports:

“Of the top 10 cell makers, nine are mainly Chinese manufacturers and one is from South Korea,” adding “overseas plants could be hit as they will be unable to receive components from China given flight restrictions, according to the China Photovoltaic Industry Assn. The group has asked the government to delay tariff cuts for domestic projects — meant to encourage solar plants to compete on their own against conventional fuels such as coal and natural gas — due at the end of March.”

China’s rise in the world solar panel market was achieved because the country bought solar companies and invited others to move to China, where they found cheap, skilled labor. Also, instead of paying taxes, they received tax credits, according to an article in Scientific American.

It is estimated that between 2008 and 2016, China spent more than $47 billion subsidizing the solar industry to build up its manufacturing capacity.

This buildup of capacity has been a key reason why solar panel prices fell 80 percent from 2008 to 2013.  The most-recent declines in solar component prices appear to have come as a result of China cutting it’s generous subsidies for solar installations, causing a drop in demand for panels in China. This has led to a surplus of supply, leading to panels being sold abroad at deep discounts.

Despite falling prices, solar panels produce electricity at a cost of around $60 per megawatt hour, without federal subsidies, in the Minnesota. This is essentially double the cost of electricity from our existing coal, nuclear, and natural gas plants. This, coupled with the fact that solar panels only produce about 18 percent of their potential output on an annual basis, means that solar is simply an additional cost to running the grid, no matter how low the cost of solar panels goes.

In the end, the impact of the Coronavirus on the solar industry will likely be short-lived. However, this news represents a good time to reflect on the fact that solar panels are dependent upon subsidies on both the production and consumption end, with China subsidizing panel manufacturers to bring down prices and the U.S. subsidizing panel consumers in the from of a 30 percent tax credit.