feed-in tariffs in Europe and subsidies in Japan, which created business that Suntech and other Chinese companies captured thanks to their low costs. Shi is particularly grateful to the German feed-in tariff. “I was very lucky,” he said. “In 2004 Germany created the world market.” Today about 95 percent of the total revenues of Suntech and Yingli Green Energy, another Chinese solar company, are derived from markets outside of China.
“There’s great momentum in China,” Shi said. “We used to pursue the American dream. Now everybody is pursuing the Chinese dream. And now Suntech has a host of competitors in China. The world is very competitive. If I’m not careful, I will be left behind. We have to keep innovating.”19
China’s advantages extend beyond low-cost manufacturing. Chinese incentives are aimed not just at stimulating domestic market demand, as in the United States, Europe, and Japan, but at promoting manufacturing and exports. In consequence, non-Chinese manufacturers are shifting a growing part of their manufacturing to China in order to stay competitive. Meanwhile, the degree of support provided by Beijing and by local Chinese governments for solar manufacturing has emerged as a new trade issue between China and the West.
THIN FILM
Despite the striking shift of the solar cell industry east to China, one of the world’s largest—and lowest cost—manufacturers of solar panels is a U.S. company based in Arizona, First Solar. John T. Walton—a son of Walmart’s founder, Sam Walton, and an heir to the Walton fortune—was the major early backer in the late 1990s.
First Solar is able to produce solar cells at such a low cost because of an innovative manufacturing process based on thin-film technology, which it has refined over the years. Crystalline silicon, going back to Solarex, is the manufacturing technology that is most favored on an industrywide basis. Thin-film production is a mass-manufacturing process that uses nonsilicon materials. In general, thin-film cells are less efficient than crystalline silicon cells, but they can also be significantly cheaper to produce.
Indeed, First Solar has been able to drive costs so far down as to make it more competitive with some kinds of conventional generation. Reflecting the increasingly global nature of PV demand, First Solar runs production lines in factories on three continents: the original, near Toledo, Ohio; another in Germany; and the largest, in Malaysia.
First Solar has been expanding from its core business of making PVs into the business of developing solar projects. In 2009 First Solar signed a contract to undertake construction of what it has said will be the world’s largest solar plant with a massive 2-gigawatt solar farm in China’s Inner Mongolia Province, with a surface area of about twenty-five square miles (slightly larger than the area of Manhattan). “This is nuclear power–size scale,” said Michael Ahearn, CEO of First Solar at the time of the announcement. First Solar is expected to build a factory in China to help supply solar cells for the project, which is scheduled to be completed by 2019.20
THE SOLAR MENU
It has been more than a century since Albert Einstein, in those weeks in the patent office in Zurich, laid out the principle of photovoltaics. But it was not until the twenty-first century that photovoltaics really began to move beyond remote locations for their viability.
With declining costs, greater capacity, and government subsidies, the annual PV market has grown from 0.6 gigawatts in 2003 to 20 gigawatts in 2010. By 2010 about 40 gigawatts of solar cells have been installed, with most of this coming in just in the last few years. In 2010, $75 billion was invested in the solar photovoltaic business worldwide. Future growth depends both on the extent of government support and the rate at which PV costs are brought down further.21 Yet the industry’s growth has been volatile, even more than other corners of the renewables sector. Sentiment of panel makers and investors, among others, has swung rapidly—in large part propelled by the introduction (or amendment or phase out) of incentives.
As the solar cell industry has grown, so too has the interest of venture capitalists in investing in it, and funding has increased dramatically. Today there is a fierce race among companies—both established companies and new VC-funded start-ups—riding a host of competing technologies, to bring down costs and improve efficiencies.22
The menu of technologies for PV is extensive. There are trade-offs to each of these technologies, which can be summarized as cost versus efficiency. Some types of PV are cheaper to make than others but are less efficient at converting sunlight into energy. Others