Explaining How China Have Affected The Price Of Solar Panels

Over the last few years, the solar power business has really taken off with several countries looking to get in on the action

. The manufacture had previously been concentrated in countries such as Germany and Spain, where theyd long been encouraged to expand this sector. However, China appears to be the country that is currently dominating this industry with rapid expansion from long-term loans and investment from the Chinese government. This has led to the importation of relatively cheaper Chinese solar panels into various countries looking to meet renewable energy targets.

Through globalisation and free trade, the flow of goods from various countries is completely left unhindered. Therefore if a country is able to produce a good and market it at a lower price than another, they stand to benefit considerably and this explains why China have targeted the solar power industry. With the Chinese government controlling the countrys actions, their officials are able to choose worthwhile projects that may require heavy investment but will eventually be profitable ventures.

The Chinese Development Bank is leading the way in lending to these Chinese solar panel companies from the request of the government. The difference between the CDB and most regular commercial banks is that it raises most of its funds from long-term bonds, where funders are unable to withdraw the money until the term is finished. This allows the CDB and the government to identify industries such as solar power, where long-term profits can be made and invest in them appropriately.

The effects can be clearly seen when looking at the top ten solar cell producers; in 2006 there were 2 from China and in 2010 there were 6. These Chinese solar power companies have received heavy investment between these two dates and have made rapid progress in claiming the global solar market.

With the government investment, these companies have been able to take advantage of economic principles such as economies of scale, by buying in bulk quantities to lower costs. Capital would have been used on research and development to look at ways of creating better solar panels. In relation to labour costs in countries such as the USA, Germany and Spain, Chinese labour will be considerably cheaper. In addition, there is less pressure on these Chinese companies to abide by pollution or environmental standards, as shown by the 4-day protest in Haining where several hundred villagers accused a solar panel factory of releasing toxins into a local river.

All of these factors have allowed China to establish a strong foothold in the solar industry and to be able to offer solar panels at prices that have been unheard of previously. There has been an average fall of 33% this year and experts are predicting a further fall before the year is out, so there has been no better time to invest in relatively cheap solar PV panels. However, people may wish to wait to see whether further savings could be made from Chinas dominance of the industry and the openness of trade between countries.

by: James Pilkington

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