SCIENTIFIC AMERICAN. Why China is dominating the solar industry.

China, according to Chung, had “dabbled” in solar energy only as a source of electricity to help impoverished rural areas remote from its power grid. But then some of its pioneering companies became intrigued by the income that manufacturing solar panels for export to Germany might bring in. When Spain and Italy began their own rapidly expanding solar incentives, adding to the demand, China began scouring the world, hiring more solar experts and shopping for machinery and polysilicon supplies to meet the expected surge of orders for solar panels.

According to some veterans in the U.S. solar industry, China bought solar companies and invited others to move to China, where they found cheap, skilled labor. Instead of paying taxes, they received tax credits.

Chung notes that China’s government was also generous in other ways. Making solar panels is difficult. To make them efficiently, the business requires large, semiautomated factories.

“It is not easy to add small bits of capacity to meet growing demands; you have to add it in big chunks,” he said. He called it a “yo-yo effect” that tends to create more and more capacity. That made solar still more attractive to China.

China’s solar companies have shareholders who want profits, Chung said. But the government “has other constituencies that are demanding jobs and factories to be put up.” That pressure came from provincial and local governments that found, according to DOE, that the federal government was willing to chip in as much as $47 billion to help build its solar manufacturing into what it calls a “strategic industry.”

Expanding renewable energy became one of seven categories of business that receive special attention including loans and tax incentives under China’s five-year plans.

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