Thread by @davidfickling

How did the US invent solar power and dominate it for 60 years, before giving it up to China over the past decade?

The answer is, IMO, quite different to the stories we have told ourselves in recent years. And it has important lessons for the future.🧵

bloomberg.com/graphics/2024-…

Over the past few months I traveled to the former and future heartlands of the solar industry — Hemlock, Michigan and Leshan, Sichuan — to understand this chart.

How, in the space of 15 years, did China go from a bit-player in this key solar raw material to complete dominance?

There’s a ready explanation used by trade warriors as justification for tariffs and other bans: Beijing set out to dominate this industry, and may want to use solar energy as a weapon the way Moscow uses gas.

That’s the rationale behind the Biden administration’s 50% tariffs.

But I don't think it makes a lot of sense. China has offered a lot of support to state-owned companies and the real estate sector over the past decade - but that's not been the case with solar power. In fact the industry is a bit of a basket case:

bloomberg.com/news/articles/…

This is pretty obvious if you look at the level of individual firms. These businesses are often listed so you can read their accounts, which give the lie to arguments that they are benefiting from state support and easy money:

bloomberg.com/opinion/articl…

I think the far better argument staring us in the face: solar manufacturing is fundamentally low-margin and capital-intensive, so it's really, really hard to make money.

Western solar companies saw this years ago, and it's why they never invested enough.

bloomberg.com/opinion/articl…

But there's one industry that quite closely resembles solar, with low margins, global competition, high capital requirements and rapid product cycles: automobile manufacturing.

The secret of making money there, as Henry Ford and Shoichiro Toyoda learned long ago, is scaling up.

As this great graphic by @hecharts demonstrates, that what Chinese manufacturers of solar polysilicon have done over the past decade — and it has given them a more or less impregnable position:

@hecharts By building at far greater scales they have unlocked far lower prices than their competitors in the US and Germany and a handful of other countries. And they've built sufficient capacity that it's unlikely anyone else will spend the money on a competitively-sized plant.

@hecharts The US managed to maintain its dominance of solar polysilicon until about 2011, when it managed to get itself dragged into a previous solar trade war.

The outcome was a devastating own goal for the US which did nothing to halt China’s rise:

@hecharts If Washington wants to do better in future, both in terms of climate and in terms of industrial policy, it needs to look more at giving investors confidence in enduring demand for clean technology, rather than the current situation.

@hecharts If you are going to impose 50% tariffs, you need to make sure you have a viable industry to protect.

That’s not the case with solar, where the poorly-targeted and disjointed nature of support means that plants in the US are now closing every month.

bloomberg.com/graphics/2024-…

@hecharts If there is no industry being protected, all you are doing is raising the cost of clean technology and making it harder to compete with fossil fuels.

It’s a maddeningly futile policy — a way of prolonging the climate crisis while pretending you are doing something to stop it.

@hecharts This won’t be enough to derail the energy transition globally — but the more countries jump on the protectionist bandwagon (looking at you, India) the more that major emitting countries will hamper their chances to get cheap, clean energy:

@hecharts I do worry that if we don’t break out of our current paradigm — where fossil fuels are the biggest global trade, and move freely, while clean technology is singled out for punitive tariffs designed to choke off commerce altogether — we could badly set back net zero.

@hecharts Do read the whole piece here! (ends)

bloomberg.com/graphics/2024-…

Oh, and here is a video version of the story!

https://x.com/opinion/status/1840699688988614690

And thanks for everyone who helped with this story, especially @hchuaeoan @hecharts @rpollard @mikenizza @TimOBrien Michael Johnson and many more!