Toward a Sunny Future? Global Integration in the Solar PV Industry

Abstract

Policymakers seem to face a trade-off when designing national trade and investment policies related to clean energy sectors. They have pledged to address climate change and accelerate the large-scale deployment of renewable energy technologies, which would benefit from increased global integration, but they are also tempted to nurture and protect domestic clean technology markets to create green jobs at home and ensure domestic political support for more ambitious climate policies. This paper analyzes the global integration of the solar photovoltaic (PV) sector and looks in detail at the industry’s recent growth patterns, industry cost structure, trade and investment patterns, government support policies and employment generation potential.

In order to further stimulate both further growth of the solar industry and local job creation without constructing new trade and investment barriers, we recommend the following:

1. Governments must provide sufficient and predictable long-term support to solar energy deployment. Such long-term frameworks bring investments forward and encourage cost cutting and innovation, so that government support can decrease over time. A price on carbon emissions would provide an additional long-term market signal and likely accelerate this process.

2. Policymakers should focus not on solely the manufacturing jobs in the solar industry, but on the total number of jobs that could possibly be created including those in research, project development, installation, operations and maintenance.

3. Global integration and broader solar PV technology deployment through lower costs can be encouraged by keeping global solar PV markets open. Protectionist policies risk slowing the development of global solar markets and provoking retaliatory actions in other sectors. Lowering existing trade barriers—by abolishing tariffs, reducing non-tariff barriers and harmonizing industry standards—would create a positive policy environment for further global integration.

About the Authors

Jacob Funk Kirkegaard is a research fellow at the Peterson Institute for International Economics. Thilo Hanemann is research director at the Rhodium Group. Lutz Weischer is a research analyst with the World Resources Institute’s Climate and Energy Program. Matt Miller is a consultant in the solar industry with manufacturing and development experience.