What China's solar panel obsession means for the world

Ed Butler (0:01)

Hi there, I'm Ed Butler. Welcome to Business Daily from the BBC World Service. Today we're looking at China, a world leader in the crucial industrial transition towards green energy. And we're focusing on just one of those green products, solar panels.

Laura Bicker (0:18)

Manufacturing has scaled up huge levels of production. They've installed more solar panels across the country than any other part of the world combined. In fact, in May last year, they were installing 100 solar panels a second.

Ed Butler (0:34)

Yes, thanks to heavy investment, China has almost single-handedly made solar energy cheaper in most countries than traditional fossil fuel generation. But is the industry sustainable?

Desmond Shum (0:46)

The manufacturing capacity of China in the solar industry is twice the global capacity. All of the five companies are money-losing. So I think the loss is something like 2 billion US plus here.

Ed Butler (0:58)

China's solar revolution, and what it says about the country as an industrial superpower too. Business Daily from the BBC.

Jerry Shi (Shi Zhongrong) (1:08)

My mission was to reduce cost of generation from solar technology. So we have to believe the power of belief. OK, that's my personal slogan.

Ed Butler (1:19)

This is Dr Shi Zhongreng. He's a solar scientist and entrepreneur, sometimes called the father of China's modern solar industry. In 2001, he had gone home to China after years spent abroad in Australia, where he had been studying photovoltaic technology, basically how to convert light into electricity. His plan was to launch his own PV firm, SunTech Power.

Wu Shi, it was one of the local governments that you approached, right? And they gave you $6 million, I think, to start up as Startup Capital. How much did that change things?

Jerry Shi (Shi Zhongrong) (1:59)

That's very, very much important. And I think at the time, SunTech was one of the first companies backed by government.

And that's very critical. Without the $6 million, nothing would have happened. There was no supply chain. We didn't have land. We had to lease manufacture buildings. So the real support we get from government is capital and also the encouragement, supporting talent like myself, because the market was not there at the time.

Ed Butler (2:30)

But in a sense, it was being created in Germany, wasn't it? Where German subsidies for the consumers were transforming the market. Now, this is what allowed SunTech Power Holdings to thrive.

Jerry Shi (Shi Zhongrong) (2:46)

Yeah, I think so, and also many other companies. As I said, Germany was the first market for all PV manufacturers. But on the other hand, there wasn't enough manufacturers locally in Germany and even in Europe to actually fulfill the market requirement.

Ed Butler (3:02)

It must have been crazy to have gone from a guy with a couple of hundred thousand dollars in his pocket just turning up in China hoping to start a company, and within three years you're a multi-multi-millionaire. I mean, what was that like?

Jerry Shi (Shi Zhongrong) (3:19)

Very exciting, you know, Ed, while you're young, you tend to have energy and spirit to do that. So I think you only need a couple of hours of sleep every evening. As we say, we often have dream, but how to turn dream to reality?

Ed Butler (3:37)

Well, as mentioned, Dr. Shi was living the dream, not just thanks to Chinese state subsidies, but also because European countries were offering generous financial incentives to their own consumers to get them to buy solar panels. By 2008, glossy corporate videos were touting SunTech power's growth and technical prowess.

SPEAKER_5 (3:59)

At SunTech, we are creating access to the world's most abundant energy source. From 10 megawatts to 1,000 megawatts in less than a decade, from the world's largest producer of crystal and PV modules.

Ed Butler (4:12)

And its founder, Xi Zhongren, had become a multi-billionaire, China's richest man.

Jerry Shi (Shi Zhongrong) (4:19)

I started SunTech because I believe solar can provide radical and practical solutions to competitive climate change.

Ed Butler (4:29)

Despite all the hype and the western demand for these panels, what's interesting is how much support the solar sector was still receiving as a whole.

Desmond Shum is a Hong Kong businessman, also a sometime billionaire himself, an author of a memoir, Red Roulette, in which he describes life inside the Chinese elite during these boom years. He says that solar's growth model was actually pretty typical of many Chinese export industries at the time.

Desmond Shum (4:58)

So what happened usually is some company stumbled onto it, and then it's showing exponential growth. And then the central government say, well, look at it, this is very promising. It is looks like we can look to really dominant this industry. And then the state machine go behind it. Once the state machine get behind it, it's no longer economic campaign or commercial story. It's almost like a political economic story. You need government approval to get bank loans. That central government backing internal finance, that is backing from the banks.