Solar Manufacturing Costs Not Driven Primarily by Labor
Production scale, not lower labor costs, drives China’s current advantage in manufacturing photovoltaic (PV) solar energy systems, according to a new report by the Energy Department’s National Renewable Energy Laboratory (NREL) and the Massachusetts Institute of Technology (MIT). Although the prevailing belief is that low labor costs and direct government subsidies for PV manufacturing in China account for that country’s dominance in PV manufacturing, the NREL/MIT study shows that a majority of the region’s competitive advantage comes from production scale—enabled, in part, through preferred access to capital (indirect government subsidies)—and resulting supply chain benefits. The study’s findings suggest that the current advantages of China-based manufacturers could be reproduced in the U.S.
“Assessing the Drivers of Regional Trends in Solar Photovoltaic Manufacturing,” co-authored by NREL and MIT, and funded by the Energy Department through its Clean Energy Manufacturing Initiative, was published recently in the peer-reviewed journal Energy & Environmental Science. By developing manufacturing cost models, the team of researchers examined the underlying causes for shifts from a global network of manufacturers to a production base that is now largely based in China.