Is China's Solar Industry Heading for an Eclipse?

BEING HOME to some of the world's top solar product companies, China has the power to dictate the future of solar energy across the globe. “The stakes are immense,” says Ryne Raffaelle, associate provost of Rochester Institute of Technology (RIT) in New York and former director of the National Renewable Energy Laboratory's photovoltaic center. “Solar is the fastest-growing market in the world. It’s a US$300 billion industry."

China now makes more than half of all crystalline silicon photovoltaic panels sold in the world. Suntech Power Holdings, Yingli Green Energy Holdings, Trina Solar and a host of other Chinese firms have become industry pace-setters, driving international competition and pricing trends.  But after blazing across the globe from small beginnings just 10 years ago, is China's solar panel industry becoming a victim of its own success?

As China's solar sector arrives at a turning point, experts are debating whether it will be forced to depart from its tried-and-tested formula. What's increasingly clear to all is that Chinese solar companies will soon need to offer more than the low-cost products and exporting prowess, say experts. That's easier said than done, of course, and reorienting their business models to focus on greater domestic market expansion and differentiating products through innovation is full of risks, even if it ultimately provides a more sustainable strategy than what they have now.

“China is even more vulnerable than the U.S. or Europe in energy security,” says Mauro Guillen, a Wharton management professor and director of the school's Lauder Institute.“It has every incentive to develop all its resources” for the home market. That involves innovation, not just low-cost production, he adds, something China's government may want to bear in mind when deciding where to channel subsidies under its latest growth plan. “If you [just] subsidize production, you could be subsidizing something that is not economical,” says Guillen. “But if you subsidize innovation, in the end, you may find something that works much better than coal,” China’s primary fuel.

The Sound of Alarm Bells

For now, it's not long-term innovation but the survival of a sector-wide upheaval that's consuming China's attention. One reason: A trade skirmish with the U.S. in a Chinese industry that exports 90% of output.ΠΑΙΔΙΚΑ ΠΑΠΟΥΤΣΙΑ