Deglobalizing the Solar Industry Would Cost the World At Least $15B by 2030
Angie Warren

Deglobalizing the Solar Industry Would Cost the World At Least $15B by 2030

The United States is in quite the pickle when it comes to the solar industry.

On one hand, the Biden administration wants to reduce emissions and hit the targets outlined in the Paris Agreement by installing as much solar power as cheaply and as quickly as possible. On the other hand, the U.S. wants to be a leader in clean energy tech, foster new industries and create new jobs in the sector. To do so, however, the U.S. has to reduce reliance on foreign powers—especially ones with economic and political practices as questionable as China.

And therein lies the issue: China manufactures 78% of the world’s photovoltaic (PV) cells—the key component in solar panels. Switching that production to U.S. soil will cost money and time—two luxuries in short supply in the race against climate change. A new study, published today in Nature, attempts to quantify just how much money globalization has saved the industry to date, and how much it would cost to shift away from the model.

To get a handle on how much money a globalized PV market has saved the world economy so far, researchers began by creating a model that estimated how much China, Germany and the United States (the three leaders in PV tech) learned and benefited from each other between 2008 and 2020. So far, the team calculates that the United States saved $24 billion compared to if it had gradually begun a 10-year transition to domestic-only PV production starting in 2008. Meanwhile, Germany saved $7 billion and China saved $36 billion, for a combined total of $67 billion.

The researchers then used the same model to project forward to 2030. They evaluated two different scenarios. In the first, the three countries continue to ramp up PV production at a rate consistent with the previous decade, while also gradually transitioning away from the globalized PV market to a fully domestic one. The second scenario assumes an even more aggressive expansion of solar energy tech–one that would actually get us closer to the climate targets laid out in the Paris Agreement–but at the same gradual shift away from globalized supply chains. Both scenarios are compared against leaving the industry as is.

Compared to a fully globalized supply chain, in the first scenario 2030 PV prices would be about 20% higher for all three countries, with energy costs increasing from $262 to $320 per kW in the United States. In the second scenario, in which the solar industry grows even more rapidly, the cost of deglobalization increases by another 5% — from $221 per kW to $276 in the United States.

Between 2020 and 2030, the researchers estimate that deglobalizing the PV market would cost the world economy $15 billion under the conservative estimate and as much as $36 billion if we actually build as much solar as the International Energy Agency says we need. In other words, the more aggressively we build out solar energy, the more deglobalization will sting.

Gang He, an assistant professor of energy policy at Stony Brook University and one of the authors of the study, says it’s up to policy makers to decide if that cost is worth paying.

“If countries all want to harvest the domestic benefits, then it gets harder for countries to work together,” says He. “We don't have a solution for that. We just present evidence-based research to show that if we move in that direction, this is what will happen. And we need to find a way to address that.”

One idea is to try to accomplish the shift with a carrot rather than a stick. In other words, instead of blocking the flow of goods or information with tariffs and or quotas, governments could focus on incentivizing domestic purchasing, He says. Incentives and investing would build the U.S. domestic solar industry without artificially inflating the cost of buying Chinese panels and thus limiting how much renewable energy the country can install per dollar. The problem is the gains from the green energy revolution are often distributed unequally.

“We need to introduce policy to redistribute the welfare,” says He. “Maybe it's through redistribution of the revenue or taxes or other mechanisms. It's very complicated, we understand. But simply blocking the global supply chain may not be the answer. No matter what the geopolitics, we still need to find a way to work together. That's the clear message I hope to deliver.”