How China became solar royalty

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Adrienne Ma. And I'm Emily Fang, one of NPR's international correspondents. I cover China, Adrian, and I wanted to explore with you this incredible transformation that happened while I was living in China. It used to be this country that was completely dependent on coal-fired electricity and other fossil fuels. Oh, I mean, I have visited Beijing a few times. I remember when I first went in the 90s, it seemed so smoggy there. I can't help but wonder if part of the reason was all those fossil fuels you just mentioned. Absolutely. And while coal is still number one there, we are seeing things begin to change.

0:53Because China as a country now actually dominates the world in solar energy. It doubled five times in the past 10 years, from about 11 gigawatts in 2013 to 350 gigawatts in 2023. strength. This is Sophie Liu. She's a researcher at Global Energy Monitor, which is a nonprofit that tracks global energy. And Sophie says China is now the world leader in solar. On today's show, we'll find out how that happened and how China changed the global energy market. That's coming up after the break.

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2:25Because with all you've done to find your rich, they'll do all they can to help you keep enjoying it. Edward Jones, member SIPC. To tell the story about the rise of China in terms of solar, I wanted to start with someone the industry has nicknamed the Sun King. I have been, you know, walking towards my goal of solar everywhere. It's like my dream. The Sun King is an amazing nickname. Does the Sun King, though, have a real name? I hope he kind of doesn't. Sorry to disappoint you, Adrian, but the Sun King does have a real name. His name is Shi Jinrong, and he's seen it all in the solar industry.

3:06He's seen the boom and the bust and then the boom again of China solar. And I first met him several years ago, actually, in Shanghai at this noisy solar industry exhibition. And he described to me then just what it took to create this industry in China from basically nothing. because when he first started his company, SunTech Power Holdings, in 2001, solar was dominated by Japan, the U.S., and Germany. Yes, markets in Europe and the U.S., but not here. And also there was no supply chain, all right, and no capital. I'm only back 20 years, and it was so difficult to raise any money here. But Xi starts meeting with local governments in China, and they're all eager for high-tech manufacturing.

3:58So they ask him for a business plan, which he admits he'd never written before. In 2001, Shi does get investment from a small city called Wuxi, and Suntech starts making panels there within a year and a half. Suntech grows fast, but they get an extra boost in 2006. That's when China launches an important strategy. its 11th five-year plan. And in it, China declares renewable energy and particularly solar to be key economic priorities. That means there is now billions of dollars in state money to go to research and development on solar panels. And China starts giving basically free land and electricity and also tax breaks to solar companies like Suntec.

4:42And Suntec starts expanding even faster. But they have a problem. We realized the supply chain got a problem. We couldn't have enough to supply the industry at the pace of expansion, especially polysilicon. So polysilicon is this silicon, crystalline-like material that you melt down and you make panels with. And SunTech was actually growing so quickly, they could not get enough of it. Shi tells me wait times were like one to two years for him to get big batches of polysilicon from the United States. So Shi eventually helps cultivate a network of new Chinese companies that today make about 80 % of the world's polysilicon and solar wafers.

5:28And building your supply chain locally like this has a huge advantage. It keeps costs low, further driving down the price of Chinese solar panels, and it helps China maintain its stranglehold on all parts of the solar industry. Shi's company SunTech does really well through all of this. It listed on the New York Stock Exchange and at its peak, it was valued at$16 billion. Shi becomes a mega millionaire overnight. And then China takes another step. It gives solar power a preferential rate. What a preferential rate means is that the Chinese government starts paying more for solar energy that is sold to the grid than, say, energy derived from coal or nuclear power.

6:14So people who are generating solar energy and selling it to the grid are now making a lot more money. Lots of people living in China see an opportunity. They want to sell power to the grid, too. And demand for solar panels that they can put on their roofs takes off. And this in turn leads to more opportunity for Chinese manufacturers. More domestic solar panel makers pop up and begin cranking out panels. And this disrupts the global market in a big way. Remember, before China came on the solar scene, Japanese, American, and German companies dominated, and they were starting to see real results.

6:52But almost overnight, Chinese panels became so cheap, And they were being made in such volume that these companies could not compete and they went bankrupt. And of course, the U.S. wasn't trying to let that happen to them. And that's why in 2012 and 2014, the U.S. Commerce Department slaps tariffs on Suntech because it alleges the company was getting too much state support from the Chinese government. And they were therefore unfairly outcompeting American producers. But these tariffs didn't really work. Sophie Liu of Global Energy Monitor says China rocketed to the top of the global solar charts where it remains today.

7:34Today, the operating utility-scale solar capacity is about more than health of the world's combined operating solar capacity. This capacity is nearly five times more than that of the U.S. So what about the Sun King? What does he have to say about all this? So I caught up again with him recently, and she defends this price war. He argues, with some controversy, that it was only China that had the scale to make solar energy cost competitive with fossil fuels. And he argues that if solar did not become as cheap as it is now because of China, we would not be seeing the global solar revolution that we have today.

8:19The global citizen should send to Chinese entrepreneurs, engineers. And without this, really, we don't know how can we deal with climate change. But you know, this is not an overwhelmingly positive story for Xi and SunTech and even solar. No, it is not. The solar industry in China, it almost gets too successful. There's too much being made for way too cheap. and it leads to a big bubble that eventually pops. Xi's company defaults, Suntech has more than$2 billion in debt, and the board of his own company strips Xi of his leadership title. It's a bit of a mess. There's ups and downs, and sometimes you need luck, right?

9:07If all unlucky things happen to you simultaneously, it's probably hard for you to deal with. So sometimes we call solar industries like a roller coaster. Xi's career with SunTech may be in ruins, but now that the dust has cleared, he can see his legacy. That supply chain for polysilicon, the preferential government policies, the cut-right prices that companies in China are able to deliver, that's still all in place today. And entrepreneurs like Xi helped lay that groundwork for China's solar revolution. But that's not the end of the story. Not for the Sun King. No, not for the Sun King. He has started a new company making a flexible lightweight panel he's invented.

9:50And he's building a new factory, not in China, but in Indiana. Because building in the U.S. has an advantage now. This year, President Biden doubled U.S. tariffs on Chinese solar panels from 25 % to 50%. And so Made in America, at least to the Sun King, is looking way more attractive. This episode was produced by Cooper Katz McKim with engineering by Sina Lafredo and Sophie MacArthur. It was fact-checked by Sierra Juarez. Cake & Cannon edits the show in the indicators of production of NPR.

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