Measuring Cost Savings of Solar Photovoltaic Supply Chains

There is a necessity for the world to deploy renewable energy at an unparalleled speed and scale. This is done to decrease carbon emissions and fulfill climate targets.

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Solar energy promises to play a vital role in attaining a supportable and low-carbon energy future, particularly if the production price continues to fall as it has over the past four decades.

A new study reported in Nature has estimated that the globalized supply chain has helped save countries $67 billion in solar panel production charges. Furthermore, the study discovered that if strong nationalistic policies that restrict the free flow of talent, capital, and goods are implemented, solar panel charges will be much higher by 2030.

The study, which is the first to measure the cost savings of a globalized value chain for the solar industry, comes during a time when several countries have initiated policies that would help nationalize renewable energy supply chains to profit local manufacturers.

The researchers suggest that policies such as imposing import tariffs could complicate measures to expedite the deployment of renewables like solar by increasing the cost of production.

What this study tells us is if we’re serious about fighting climate change, policymakers need to implement policies that promote collaboration across global value chains with regard to scaling up low-carbon energy technologies.

John Helveston, Study Lead Author and Assistant Professor, Engineering Management and Systems Engineering, George Washington University

Helveston added, “While this study focuses on one industry—solar—the effects we describe here are applicable to other renewable energy industries, such as wind energy and electric vehicles.”

The study observed historically installed capacities, input material, and sales price data for solar panel modules present in Germany, US., and China, the three biggest solar-deploying countries, between 2006 and 2020.

The research group estimated that the globalized solar supply chain helped save the countries an integrated $67 billion; $24 billion in savings for the U.S., $7 billion in savings for Germany, and $36 billion in savings for China.

The study discovered that if each of the three countries approved strong nationalistic trade policies that limited cross-border learning over a similar period, solar panel prices in 2020 would have been considerably higher; 83% higher in Germany,107% in the U.S., and 54% in China.

Our research shows international collaboration is key to addressing global climate change. Nationalistic policies hurt every country and risk missing pressing climate targets.

Gang He, Study Corresponding Author and Assistant Professor, Energy Policy, Stony Brook University

The research group also studied the price implications of more protectionist trade policies going ahead. Additionally, they evaluate that if powerful nationalistic policies are applied, each country's solar panel prices will be nearly 20 to 25% higher by 2030. This is in comparison to a future with globalized supply chains.

Policies that cut off global value chains and restrict flows of people and capital will disrupt the global learning processes that have contributed precisely to solar’s success story,” stated Michael Davidson, Assistant Professor at the University of California San Diego and co-author in the study.

Davidson added, “Models demonstrating the feasibility of meeting ambitious clean energy targets rely upon continued cost declines which may not materialize if countries choose to go it alone.”

The study is founded on a 2019 paper published by Helveston in the journal Science, which demanded greater collaboration with powerful manufacturing collaborators like those in China to quickly reduce the cost of solar and expedite the deployment of low-carbon energy technologies.

The new Inflation Reduction Act contains many important policies that support the development of low-carbon energy technologies in the U.S., which is critical to addressing climate change and would introduce more innovation and capacity in the marketplace.

John Helveston, Study Lead Author and Assistant Professor, Engineering Management and Systems Engineering, George Washington University

Helveston added, “What our study contributes to this conversation is a reminder not to implement these policies in a protectionist manner. Supporting the U.S. manufacturing base can and should be done in a way that encourages firms to trade with foreign partners to continue to accelerate cost reductions.”

Journal Reference

Helveston, J. P., et al. (2022) Quantifying the cost savings of global solar photovoltaic supply chains. Nature.


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