Amidst Tengger desert, an arid and inhospitable territory in China’s Inner Mongolia spanned by 36,700 km of yellow sand, there exists a vast, blue oasis. But to the disappointment of any weary travelers fooled by this mirage, they have stumbled upon not a body of water, but rather the Tengger Desert Solar Park. This Solar Park is an oasis of energy that spans over 16 square miles. With the capacity of harvesting over 1.5 gigawatts – equal to 1.5 billion watts – of energy from our sun, it is currently one of the largest solar farms in the world. The Tengger Desert Solar Park is currently “supplying power to more than 600,000 homes.” Only three decades ago, solar technology in China was still in its infancy, supplying electricity to remote villages. Since then China has come to dominate this industry, manufacturing solar panels to meet expanding domestic and foreign demands. The infinitude of the Sun’s power, combined with the diminishing cost of solar panels, appears to be an ideal solution for reducing dependence on fossil fuel and curtailing harmful emissions into the atmosphere. However, to fully incorporate solar energy as a renewable alternative, China is exploring options to decrease government subsidies to mitigate negative environmental externalities and spur innovation towards efficiency.
Indispensable to the development of modern China is a large reserve of coal which fueled the nation’s manufacturing based economy and a blooming population. According to ChinaPower, “[s]ince 2011, China has consumed more coal than the rest of the world combined.” Despite being home to the world’s third largest coal reserve, China’s exponential increases in energy demand compels the country’s leaders to seek alternative sources, one of them being solar.
While China was not amongst the first countries to pioneer solar technologies, this strategic industry quickly attracted the attention of both the state and private industries back in the 1990’s. In order to promote the use of solar energy, China has long provided loans and tax incentives to businesses within this key industry. Under the state’s strong financial support, China “is the largest solar market in the world, and has installed capacity of around 130 GW.”
Over the past years, strong governmental support for producing solar panels at competitive prices has, to certain extents, led to oversights on the negative environmental externalities. In one article, CNN has cited a statistic from the International Renewable Energy Agency (IRENA), estimating that “China alone is set to produce 20 million tons of solar panel waste by 2050.” It is likely that, in the near future, solar panels manufacturers may come to internalize these externalities especially as President Xi Jinping is pushing for stronger environmental protection measures through his campaign “Green Mountain and Clear Rivers are Gold and Silver Mountains.” In terms of policies, the government may try to lower subsidies in order to incentivize solar companies to focus on quality and efficiency instead of mass production, which in the past has led to wasteful surpluses.
Lowering subsidies will also push the solar industry towards solving certain operational obstacles, one of them being the geographical distance between the energy source and the demand. While immense plains and deserts of the western China offer many advantages for building solar parks, these regions are also among the most sparsely populated and have relatively low energy consumption. On the contrary, the areas of highest demand fall along the country’s eastern sea coasts where most of the industrial and commercial hubs are located. To export the harvested energy across the two geographical extremes would require huge investments in a power grid able to withstand harsh climatic conditions as well as diligent maintenance. Due to the current lack in infrastructure efficiency, around 10% of the generated solar energy is lost, which is also known as curtailment. While government subsidies might have provided a buffer towards these losses in the past, the current trend to lowering the subsidies will encourage private companies to internalize these inefficiencies.
The blooming of the solar power industry in China is inevitable. In the concurrent efforts to power an expanding economy and mitigate dependence on coal, solar power will continue to be a promising source of renewable energy. However, the pressing environmental and geographical challenges suggest that it is time that the Chinese government reconsider the “training wheel” policies – subsidies and feed-in tariffs – in order to encourage innovation and efficiency in the industry.