How innovation drives China's PV achievements

China's renewable energy industry is increasingly defined in new concepts, and the research and development work in the photovoltaic industry is more prominent than the solar thermal and wind energy industries. We explore the comparison of these three industries and quantify the leadership role of the photovoltaic industry.

Although Chinese companies have shown extraordinary progress in all three industries (for example, China ranks first in production in all three industries), all three industries follow a completely different development model. For example, the wind power industry is driven by government policies and strong domestic demand; the solar photovoltaic industry is an export-oriented industry; and the development of the solar thermal industry is actively promoted through the university branch, including its core technology. Sharing with other companies in the industry.

The development results of the wind power industry are also different. The actual innovation system led by large power generation companies is gradually forming; the solar photovoltaic industry is struggling to survive; and the solar thermal industry is developing a highly competitive and innovative ecosystem, and is from the low end. The market (bottom of the pyramid, suburban market) is gradually integrated into higher-level markets. While we hope to gain a deeper insight into some of the key factors that have led to the evolution of these three industries in different models, this article can only be explored slightly as two of the three industries are still evolving rapidly. At the same time, because of the exploratory nature of this paper, we have used a historical perspective (Kiesser, 1994) for case studies (Eisenhardt 1989; 3 Glaser and Strauss, 1967; Yin 1989).

According to the results of our analysts, there are four factors that influence the evolution of different models in the three industries: the cost-effectiveness of technology, government support, the ability of the value chain to support the industry, and the strategy of leading companies. These four factors are not completely independent, but reflect different aspects of the same evolutionary process: cost-effectiveness can be considered as the main element of the earliest conditions of industry evolution, while the remaining three factors create the earliest conditions, especially Cost-effectiveness. Industry innovation and development have evolved as a result of interactions between these factors.

First, factors that influence the development of national innovation systems (Freeman, 1988; Lundvall, 1992; Nelson, 1993; Pavitt, 1985) or local “diamonds” (Porter, 1990), for new industries. The importance of the national innovation system and local “diamonds” has long been unquestionable. Despite this, we still don't know much about the actual national innovation system or the development of local “diamonds”. Although this research has only just begun, it has also found the special importance of cost-effectiveness. When the cost is very high, it is very difficult to establish an actual national innovation system or local “diamonds”.

Second, this study also involves policies and strategies. For example, the results of this study indicate that when the industry relies heavily on international markets, not only in product sales, but also in the procurement of raw materials, major equipment and core production processes, it may be very difficult to establish an actual national innovation system or local “diamonds”. .

We found that there are four factors that influence the evolution of different models in three industries: the cost-effectiveness of technology, government support, the ability of the value chain to support the industry, and the strategy of business leadership. These factors are detailed below.

Cost-effectiveness

The direct cause of the different evolutionary pathways in the three industries is the difference in cost-effectiveness: the low cost of the solar thermal industry allows it to grow without government support, and the photovoltaic industry hinders its development compared to higher costs. For example, in the solar thermal industry, China has also transferred technologies such as Germany and Canada to manufacture solar collectors and solar water heaters. However, the cost is very high and the corresponding market is very small.

The market began to expand after Beijing Tsinghua Sunshine Energy Development Co., Ltd. (Tsinghua Solar), affiliated with Tsinghua University, invented the technology to manufacture solar collectors and solar water heaters at much lower cost. Even today, China's product cost is still only one-third of Europe's. In 2010, China's solar thermal industry market was worth about 7.35 billion yuan (920 million euros). The European market is only about 260 million euros.

The situation in the photovoltaic industry is different. Baoding's Yingli Group has become one of the largest solar photovoltaic cell manufacturers in China and the world. However, when it was founded in 1998, its main business was nothing more than a government-supported 3 MW solar PV project, a high-tech demonstration project rather than a commercial project. At that time, high costs made it difficult for solar energy to achieve commercial success. In fact, the Yingli Group's 3 MW PV project received a subsidy of RMB 20 million from the government.

Similarly, when Suntech was founded in 2001, the initial design capacity was only 3 megawatts, although Shi Zhengrong showed that the successful production capacity was raised to 10 megawatts. Suntech has also received government funding. Most of the initial $8 million in capital investment came from the Wuxi government. Subject to the small domestic market, Suntech's growth must rely on the international market.

In fact, even in 2011, according to our interviews with a company in Beijing, even if it received 50% government subsidy investment, the company's PV projects still can not bring any surplus. This situation is very common in the entire industry, and the reason for companies investing in solar PV is mainly strategic considerations rather than short-term profitability. But for the international market, the cost structure of Chinese companies is already competitive enough. In fact, Chinese solar photovoltaic cell manufacturers, including Yingli Group and Suntech, are very fortunate: they happen to be able to export to the rapidly growing international market soon after they start operations.

In 2004, China's solar photovoltaic cell production was 50 megawatts. In the years following: 2005, 2006, 2007, 2008 and 2009 production increased to 200 MW, 400 MW, 1088 MW, 2600 MW and 4011 MW, respectively. The cost-effectiveness of the wind power industry is only moderate, and the evolution of the wind power industry is also showing cost-effectiveness everywhere. In order to change the energy structure, the former power bureau began to encourage the wind power industry in 1993 and plans to reach 100 megawatts of installed capacity in 2000. However, the development of the wind power industry is very slow, and this goal was not realized until 2005. In addition to the technical challenges, the underlying cause is the high cost of wind power. In contrast, the cost of wind power is about twice that of coal-based power generation (0.8~1.2 yuan/kWh). For power companies, the reform of the power supply industry in 1998 required them to reduce the cost of power generation, so they did not have any driving force to develop new energy. For local governments, because the higher cost of wind power must be shared by local users, they also agree that there is no incentive to support the development of this new energy (Shi, 2010).

The evolution of the solar photovoltaic industry also shows the impact of cost-effectiveness. Since 2009, the development of the solar industry has been beginning to take place. In addition to increased government support, another major reason is cost reduction: The lowest bid price for the first round of the Solar Concession Program in 2009 fell to 1.09 yuan / kWh, while the second round of 2010 The minimum bid price for the solar concession project fell to 0.7288 yuan / kWh. Although the price of solar energy is still higher than wind energy, I believe the current price is still acceptable.

Government support

When cost-effectiveness, government policies may play a pivotal role in the development of an industry. In addition to the solar thermal industry, the wind power industry and the solar photovoltaic industry have received a lot of help from the government's policies, although the wind power industry has received more powerful help. For example, according to the Renewable Energy Law, the basic principle for the development of renewable energy is that it must be economically justified. In response to this principle, the government plans to install wind power much more than solar energy: in 2005, 2010 and 2020, the installed capacity of wind power plans is 760 MW, 105 MW and 30 GW, respectively, while solar energy The planned installed capacity is correspondingly small: 65 MW, 300 MW and 1.8 GW. In order to promote the realization of the installed capacity target, the government has planned to establish seven 10 GW wind power bases in Inner Mongolia, Xinjiang, Gansu, Hebei, Jilin and Jiangsu, two of which will be built in Inner Mongolia. Later, the base of Shandong was added. The plan for the giant base has attracted large-scale investment from state-owned power companies and private companies. The difference in planned installed capacity affects the actual installed capacity. For example, the installed capacity of wind power in 2007 was 3,287 megawatts, while the cumulative installed capacity was 5,875 megawatts; compared to 20 megawatts of installed solar power in 2007, the cumulative installed capacity was 100 megawatts. As of 2009, the cumulative installed capacity of wind power has reached 25,853 megawatts, and solar energy has only 300 megawatts. In response to the same principle, other favorable policies of the wind power industry are also earlier and more active than those implemented by the solar industry. For example, in August 2008, the government announced trial management measures for the Special Fund for Wind Power Equipment. This is the first piece of legislation that is implemented to support renewable energy equipment using the budget of the central government.

Industry value chain capability

The cost-effectiveness and government support determined by the processing technology, the ability of the entire industry value chain, including the ability to cut costs, are important factors that can explain the evolution of the three industries in different models. The industry value chain of the wind power industry and the solar thermal industry shows that it has stronger capabilities in supporting the development of the industry than the photovoltaic industry. The third factor in the wind power industry value chain to support the industry more effectively is the dynamics of the industry. Cost-effectiveness, strong government support, and the easy transfer of existing knowledge and capabilities make the wind power industry highly active, and practitioners can benefit from mutual development. In the wind power industry, the actual "diamonds" described by Porter (1990) have become more and more clear. For example, the supply required by wind farm developers is not only low-cost, but must also be high-quality products. This complex requirement also forces component suppliers to accelerate their localization process and increase investment in research and development. The giants of the wind farm developers are also working with universities and research institutes to nurture new talents and new technologies.

The situation in the solar industry is very different. Although leading companies including Yingli Group already have some experience in entering this industry, most companies have no knowledge of key equipment, key raw materials and key knowledge and capabilities when they first entered the industry. And must buy from other countries. The localization process has also been very slow. For example, even today, 50% of the key raw material - polysilicon, still needs to be imported. When using expensive imported equipment and procedures to produce polysilicon, it is very difficult to cut costs. Therefore, the value chain of the solar industry is also unable to provide cost-effective products to support the rapid development of the industry. The industry dynamics of the photovoltaic industry are also different. In the absence of the intense demand of local power supply companies, solar photovoltaic cell manufacturers have always relied on the international market. This market focus makes it difficult for local companies in the value chain to take conscious action to build “stones” in the industry (Porter, 1990). The entire industry has become more fragmented, and corporate relationships are more competitive than cooperative.

Leadership strategy

The fourth factor affecting the evolution of the three industries is the strategy of leading companies. In the wind power industry, Guodian and other leading-level power supply companies have played an important role in shaping the development of the industry. After the reorganization of China's power in 2002, Guodian found that it could not compete with other giant power supply companies, including coal-based power generation, and chose new energy sources based on wind power as the strategic focus. Guodian not only uses wind power development as a strategic goal, but also develops a clear strategy to achieve this goal. At the same time, Guodian also concluded that the cost reduction can be achieved by increasing the scale of wind turbines, and the installed capacity is the key to wind power generation.

In the solar thermal industry, the company affiliated with Tsinghua University, referred to as Tsinghua Sunshine, is the main driver of the industry. Since the 1970s, the R&D team led by Professor Yin Zhiqiang has become a source of advanced technology, and the world's largest solar thermal market has been developed with no government subsidies. For this reason, Professor Yin was awarded the "Achievement Through Action Award in memorial of Christopher A. Weeks" in 2005.

In contrast to the wind power industry and the solar thermal industry, the solar photovoltaic industry is mainly focused on the development of its international market. Therefore, the value chain assistance of leading companies is realized in the solar industry later. After winning the first round of solar concession projects in 2009, the industry leaders began to seriously consider the industry-wide assistance and cooperation to significantly reduce costs (up to 1 yuan / kWh)

in conclusion

We ask why China's wind power industry, solar thermal industry and solar photovoltaic industry each follow different innovation and development approaches.

Due to the exploratory nature of this paper, we are a bit reluctant to develop a model or even a framework to explain the evolution of these three industries in China. However, these four factors do show some patterns. First, although cost-effectiveness is not dependent on other factors but on them, it does seem to be more important than the color of the other three factors when starting a new industry.

The lower cost of the wind and solar industries makes them easier to develop than the solar photovoltaic industry. Second, when cost-effectiveness is not high at the outset, if the government, value chain capabilities, and corporate strategies are supported, a highly dynamic system can be developed. In the wind power industry, these three factors have contributed to the continuous reduction of wind power costs, thus effectively promoting the rapid growth of China's wind power industry. The situation in the solar photovoltaic industry is very different. The central government’s policy was not implemented until 2009. The knowledge and capabilities required for solar PV are unfamiliar to most industry players, and the value chain capabilities have always been weak. Although leading companies such as Yingli Group have made many efforts to cut costs, they are not facing strong pressures like wind power companies because their markets are mainly international markets. As a result, the development of China's solar industry is not as fast as the wind power industry and the solar thermal industry.

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