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Nature | Vol 612 | 1 December 2022 | 83
Article
Quantifying the cost savings of global solar
photovoltaic supply chains
John Paul Helveston1, Gang He2 ✉ & Michael R. Davidson3,4
Achieving carbon neutrality requires deploying renewable energy at unprecedented
speed and scale1,2, yet countries sometimes implement policies that increase costs
by restricting the free ow of capital, talent and innovation in favour of localizing
benets such as economic growth, employment and trade surpluses3,4. Here we assess
the cost savings from a globalized solar photovoltaic (PV) module supply chain. We
develop a two-factor learning model using historical capacity, component and input
material price data of solar PV deployment in the United States, Germany and China.
We estimate that the globalized PV module market has saved PV installers US$24
(19–31) billion in the United States, US$7 (5–9) billion in Germany and US$36 (26–45)
billion in China from 2008 to 2020 compared with a counterfactual scenario in which
domestic manufacturers supply an increasing proportion of installed capacities over
a ten-year period. Projecting the same scenario forwards from 2020 results in
estimated solar module prices that are approximately 20–30 per cent higher in 2030
compared with a future with globalized supply chains. International climate policy
benets from a globalized low-carbon value chain4, and these results point to the need
for complementary policies to mitigate welfare distribution eects and potential
impacts on technological crowding out.
Solar energy is promised to play a crucial role in achieving a sustain-
able, low-carbon energy future and avoiding the worst impacts of
climate change
1
. Over the past 40 years, solar photovoltaic (PV) prices
have fallen by over two orders of magnitude, and during the period
2010 to 2021, the global weighted-average levelized cost of energy
of newly commissioned utility-scale solar PVs fell by 88% (ref. 5),
making solar PVs cheaper than fossil fuel power in some parts of the
world. Installed costs (excluding the cost of capital) fell by 81% over
this period
5
. Although these dramatic price declines have been a boon
for accelerating low-carbon energy deployment6, further declines
will be necessary to deploy renewables at the speed and scale that
is needed to achieve climate targets, especially in the remaining
parts of the world where fossil fuel power is still cheaper7. Recent
research suggests that the rates of solar and wind energy deployment
in even the fastest-deploying nations are not high enough to meet
the targets necessary to avoid the worst consequences of climate
change8.
Nonetheless, rapid price declines in solar PV have not been without
controversy. China, for example, has played an outsized role in scal-
ing up the mass production of solar PV cells and modules, comprising
78% of global production in 2021
9,10
(Fig.1). Greg Nemet went as far
as to call this outcome China’s “gift to the world”11, referring to the
dramatic manufacturing cost reductions achieved by Chinese firms
in the past decade
5
. Yet other nations view the concentration of PV
manufacturing in China as a competitive threat, and some have attrib-
uted this outcome to unfair trade practices and industrial policies
implemented by China’s government
12
. Countries seeking to capitalize
on the growing clean energy sector are looking to protect and grow
domestic manufacturers3.
In response to these concerns, the United States and the European
Union have imposed steep solar tariffs on imports from China and other
countries. In June 2022, the Biden administration invoked the Defense
Production Act to accelerate the onshoring of solar PV manufacturing
13
.
These efforts could lead to less efficient national learning processes
replacing the learning processes associated with global supply
chains that have led to drastic price declines4. The free flow of capital
(for example, foreign finance-backed start-ups), talent (for example,
international collaborations with Chinese researchers) and innovations
(for example, technologies pioneered in labs overseas and licensed and
mass-produced in China) were essential to the rise of China’s competi-
tive solar PV industry14. Each of these activities is increasingly under
scrutiny by the United States and other governments
15
. In the event
of strict nationalization policies (including, inter alia, trade barriers
in final or intermediate solar goods, restrictions on cross-national
research and development, and barriers to cross-border investment),
subsequent cost and performance improvements could derive pri-
marily from activities, knowledge and capital within national borders,
potentially slowing the rate of price declines in globally traded solar
PV components and, consequently, the rate of solar PV deployment.
International climate policy and renewable energy deployment
policy now face a crossroads: continue relying on global supply chains,
or pivot towards domestic technology development and production.
https://doi.org/10.1038/s41586-022-05316-6
Received: 30 June 2021
Accepted: 2 September 2022
Published online: 26 October 2022
Check for updates
1Department of Engineering Management and Systems Engineering, George Washington University, Washington DC, USA. 2Department of Technology and Society, College of Engineering and
Applied Sciences, Stony Brook University, Stony Brook, NY, USA. 3Department of Mechanical and Aerospace Engineering, University of California San Diego, La Jolla, CA, USA. 4School of Global
Policy and Strategy, University of California San Diego, La Jolla, CA, USA. ✉e-mail: gang.he@stonybrook.edu
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