1
INNOVATION AND ELECTRICITY GENERATION OF
WIND AND SOLAR PV IN CHINA
Long T. Lam, Ph.D.
Technological Change & Entrepreneurship
Carnegie Mellon Portugal Program
May 2, 2017
Advisors:
Prof. Inês Azevedo
Prof. Lee Branstetter (Heinz College)
2
Motivation: The Top 6 Carbon Emitters
CO2 emissions from fossil-fuel use and cement production in the top 5 emitting countries and EU
EDGAR v4.3.2 FT2015(JRC/PBL 2016: IEA 2014 (suppl. With IEA 2016 for China, BP 2016, NBS 2016, USGS 2016, WSA 2016, NOAA 2016)
3
Agenda
• Research Motivation
• China’s wind power industry: patents and learning rate*
• Expert elicitation for China’s solar PV industry
• Grid integration of China’s renewable energy
• Policy implications and conclusions
• Acknowledgements
*: This chapter has been accepted for publication in Energy Policy as Lam, L.T., Branstetter, L., Azevedo, I.M.L.,
2017. China’s wind industry: leading in deployment, lagging in innovation. Energy Policy 106, 588-599.
4
China’s Wind Turbine Industry
• Explosive growth in China’s wind energy capacity
• 2001-2010 installed capacity increased more than 100 times; cumulative
installed capacity in 2016 was 169 GW.
• Sources of competitiveness: government support and industrial policies;
technology transfer; learning; substantial indigenous innovation
5
Chinese Wind Power Patents
Chinese inventors
• Chinese inventors
obtained small number of
international patents: 16
from EPO and 91 from
USPTO
Patents granted by EPO
secured few international
patents
• Chinese international
patents are less likely to be
cited relative to Western
counterparts
No. of Patents (Total)
• Leading Chinese firms
No. of Patents (Annual)
• Significant fraction to
No. of Patents (Total)
of patents
No. of Patents (Annual)
Patents granted by different offices
• China granted thousands
6
Learning Rates for China’s Wind Industry
• Decrease in capital cost drives learning
• 4.5% learning rate using unit capital cost
• 4.1% learning rate using LCOE
• Moderate relative to historical learning rates
• Denmark 8.8% learning from 1981-1990 (100x capacity increase)
• Germany 12% learning from 1991-2000 (60x capacity increase)
• China is a late-comer in wind turbine sector
• Technology was adopted from abroad
• Limited space for technological improvement
7
Agenda
• Research Motivation
• China’s wind power industry: patents and learning rate
• Expert elicitation for China’s solar PV industry
• Grid integration of China’s renewable energy
• Policy implications and conclusions
• Acknowledgements
8
China’s Solar PV Industry
• Industry is similar to others in manufacturing sector
• Tech know-how from turn key production lines (de la Tour, 2011)
• Focus on traditional multicrystalline silicon (mc-Si) technology
• Small number of international patents
• Reports of innovation throughout the industry
• Sharp drop in cell and module production costs and product prices
• Adoption of new processes and materials
• Trina mc-Si cell has world’s highest efficiency (Green et al., 2016)
9
Expert Elicitation
• In retrospect
• Rank the importance of different components in reducing c-Si
module and system costs
• Identify important technological and non-technological factors
• Future prospects
• Estimate efficiency and cost of utility-scale c-Si, thin-film PV,
concentrating PV, organic PV, and emerging technologies by 2030
• Estimate cost for utility-scale c-Si PV systems in China
• 16 experts from industry, academia, and national labs
• All but three are Chinese nationals
• Most experts have had professional experience outside of China
10
Important Factors
• Technology adoption and improvement throughout the supply
chain
• Drop in polysilicon price was critical
• Some advances were indigenous, e.g. seed-assisted growth method
• Non-technological factors were critical as well
• “Market formation policies” around the world: FIT, RPS, net-metering laws,
ITC (Gallagher, 2014)
• Economies of scale, agglomeration effects, learning-by-doing, human
capital mobilization, vertical integration (Yu et al., 2011; Goodrich et al.,
2013; Luo et al., 2013, Gallagher, 2014)
• Open and modular nature of c-Si PV
11
2030 C-Si Module Cost
12
2030 C-Si PV System Cost
120
100
Cost, US ¢ /Watt
novel
mono
80
60
multi
40
20
0
A
B
D
F
G
H
I
K
L
O
13
Agenda
• Research Motivation
• China’s wind power industry: patents and learning rate
• Expert elicitation for China’s solar PV industry
• Grid integration of China’s renewable energy
• Policy implications and conclusions
• Acknowledgements
*:This chapter has been published as Lam, L.T., Branstetter, L., Azevedo, I.M.L., 2016. China's wind electricity
and cost of carbon mitigation are more expensive than anticipated. Environ. Res. Lett. 11, 1–11.
14
China’s Electricity Generation from Renewables
• China installed more wind turbines than the U.S. but generated
much less electricity.
• Pervasive grid connection and curtailment problems
120,000"
(a) Cumula ve Capacity Installed
200"
(b) Annual Electricity Genera on
180"
100,000"
USA
China
60,000"
40,000"
20,000"
Electricity Genera on (TWh)
80,000"
160"
140"
120"
100"
USA
China
80"
60"
40"
20"
0"
0"
2005"2006"2007"2008"2009"2010"2011"2012"2013"2014"
2005"2006"2007"2008"2009"2010"2011"2012"2013"2014"
15
Measuring Performance of China’s Wind
Turbines
• Capacity factor
• Ex-ante, estimated in CDM Project Design Document (CF ex-ante)
• Ex-post using actual generation and cumulative installed capacity (CF expost, installed) or cumulative grid-connected capacity (CF ex-post,
connected)
• Utilization factor (UF): portion of hours turbines are in use in a year
• Often included in national reports
• Levelized cost of electricity (LCOE) and Cost of Carbon
Mitigation (CCM) are estimated under the same four scenarios
(CF ex-ante; UF; CF ex-post, installed; CF ex-post, connected)
16
Low Capacity Factors
• Large discrepancies between estimated and actual
performance
CF ex-ante
30%
CF ex-post, connected
UF
CF ex-post, installed
Capacity Factor
25%
20%
15%
10%
5%
0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
17
Levelized Cost of Electricity
• LCOE is one-half to two times more expensive than estimated
• Gaps have narrowed in recent years
18
Cost of Carbon Mitigation
• CCM is four to six times higher than anticipated
19
Conclusions and Policy Implications (1)
• Remarkable improvements with few fundamental breakthroughs
• Unprecedented production level through economies of scale and learning
• “Platform for production development” (Nahm and Steinfeld, 2014)
• Policies are important in creating demand
• Dependency on policy support will continue in the near future
• Challenges ahead
• Overcapacity; short-term focus on profit; delays in advanced cell adoption
• Heavy focus on c-Si at the expense of other PV technologies
20
Conclusions and Policy Implications (2)
• China’s experiences can offer policy insights to India and other
developing economies
• Long-term policy and financial commitment
• Comprehensive planning: installation, generation, and distribution
• Tension in dual goals of deployment and employment in manufacturing
• Opportunities in energy storage and micro-grids
• Trade is not a zero-sum game
• Tariffs hurt Chinese PV makers and U.S. polysilicon producers
• U.S. customers and PV installers benefit from low prices
• Tariffs have not necessarily enhanced competitiveness of U.S. PV makers
21
Acknowledgements
• Profs. Inês Azevedo, Lee
•
•
•
•
•
•
•
•
Branstetter, Kelly Sims Gallagher,
Francisco Veloso
Participating PV experts
Dr. Ahmed Abdullah (UCSD)
Ana Paola Giordano, Tatiana
Marques, António Moreira (CLSBE)
Prof. Granger Morgan (CMU)
Prof. Joseph Yuan, Sun Shuang
(Tsinghua University)
Dr. Robert Margolis (NREL)
Prof. Sally Xu (Peking University)
Dr. Yang Liu (IEA)
• Carnegie Mellon Portugal
•
•
•
•
•
•
•
•
Program
Portuguese Foundation for
Science and Technology
AWEA
Blakemore Freeman Foundation
CEDM, CEIC, Scott Energy
Institute (CMU)
CMU Library
First China-US PV Youth Forum
NSF East Asia Pacific Summer
Institute
SPPM (Tsinghua University)
22
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24
Additional Slides
25
Wind patents by producers
EPO
Firm
Year
Founded
Ownership
structure
Goldwind
1998
Sinovel
USPTO
PCT/WIPO
2015 Cumulative
Capacity (MW)
Apps
Patents
Apps
Patents
Apps
Patents
Foreign
SOE on stock
exchange
31130
6
1
10
5
15
7
3
2006
SOE on stock
exchange
16240
21
1
22
1
9
7
5
Guodian
United Power
2007
SOE
14450
0
0
2
0
5
1
0
Dongfang
2004
SOE on stock
exchange
10660
0
0
0
0
0
0
0
Mingyang
2006
Public
10110
0
0
0
0
5
0
0
Shanghai
Electric
2004
SOE on stock
exchange
7330
0
0
0
0
5
0
0
XEMC
Windpower
2006
SOE
7040
19
6
2
1
4
0
4
Envision
2007
Private
6890
38
2
72
28
11
7
7
CSIC
Chongqing
2004
SOE
5300
0
0
0
0
1
1
0
Windey
(Yunda)
2001
SOE
4160
1
0
0
0
3
2
0
85
10
108
35
58
25
19
Total
26
Main Patenting Routes
27
Poisson Model
• 𝜇𝑖 is estimated from observed characteristics:
• 𝜇𝑖 = 𝑒𝑥𝑝 𝑥𝑖 𝛽 , 𝑖 = 1, … , 𝑁
• The log-likelihood is:
• 𝑙𝑛𝐿 𝛽 =
𝑁
′
{𝑦
𝑥
𝑖
𝑖=1
𝑖𝛽
− exp 𝑥𝑖′ 𝛽 − 𝑙𝑛𝑦𝑖 !}
28
Negative Binomial
29
Results: Patent Citation Analysis
1981-2014
2004-2014
2002-2012
NB
Poisson
NB
Poisson
NB
Poisson
2.322***
2.300***
2.157***
2.168***
2.239***
2.221***
(0.297)
(0.292)
(0.284)
(0.284)
(0.305)
(0.298)
2.256***
2.251***
2.379***
2.353***
2.043***
2.052***
(0.303)
(0.303)
(0.326)
(0.323)
(0.287)
(0.287)
3.009***
3.078***
3.223***
3.234***
2.943***
2.979***
(0.392)
(0.403)
(0.430)
(0.433)
(0.407)
(0.411)
1.658***
1.671***
1.674***
1.696***
1.577***
1.604***
(0.203)
(0.204)
(0.210)
(0.212)
(0.206)
(0.208)
2.530***
2.554***
2.548***
2.592***
2.387***
2.433***
(0.323)
(0.326)
(0.334)
(0.339)
(0.323)
(0.326)
0.000
0.000
0.140***
0.137***
0.109***
0.110***
0.000
0.000
(0.024)
(0.024)
(0.021)
(0.021)
Year Dummies
Y
Y
Y
Y
Y
Y
Exposure
Y
Y
Y
Y
Y
Y
Observations
Pseudo Loglikelihood
3328
3328
2700
2700
2748
2748
-7189.471
-9246.003
-6203.965
-7910.894
-6325.228
-8163.777
Germany
Japan
US
Denmark
ROW
Constant
30
Results: Learning Rate
Capital Cost (mRMB/MW)
12
11
10
Variable
9
Cumulative Capacity
8
7
(2)
(3)
-0.051***
-0.060***
-0.066***
(-0.012)
(0.008)
(0.007)
-0.607***
Plant’s load factor
(0.036)
6
5
-0.387***
-1.213
2.527***
(-0.131)
(0.099)
(0.074)
Year Effect
Y
Y
Y
Province Effect
Y
Y
Y
R-Squared
0.613
0.716
0.604
Observations
1477
1477
1477
Constant
2004 2005 2006 2007 2008 2009 2010 2011 2012
Capacity Factor
(1)
0.36
0.34
0.32
0.3
0.28
0.26
0.24
0.22
0.2
0.18
0.16
*** p<0.01, ** p<0.05, * p<0.1
2004 2005 2006 2007 2008 2009 2010 2011 2012
31
Learning Rate Estimation
Ct = aNtα
𝐶𝑡 − 𝐶𝑡2
𝑎(𝑁𝑡 𝛼 − 𝑎(2𝑁𝑡
𝐿𝑒𝑎𝑟𝑛𝑖𝑛𝑔 𝑟𝑎𝑡𝑒 =
↔
𝐶𝑡
𝑎(𝑁𝑡 𝛼
𝛼
↔ 1 − 2𝛼
32
Global Solar PV Installation
SolarPower Europe, 2015
33
Results: Technological Factors
Stage
Key Factors
Polysilicon
Investment and scaling up of production plants; hydrochloronation
technology upgrade; increase number of seed rods in furnace; reduction
in electricity use; investment in FBR technology
Ingot/Wafer
Seed-assisted growth method using crystalline Si and quartz; diamond
wire sawing; larger furnace and larger ingots; black Silicon; direct wafer
Cell
Improved efficiency; improved silver paste recipe; efficiency use of silver
paste; higher number of busbars; high-efficiency cells (PERC/L/T, IBC,
HIT)
Module
Domestic production and reduction of material use of key components
(EVA sheets, glass, backsheets); replacement of TPT backsheets
Equipment
Indigenization of equipment for Al BSF; automation; gradual
domestication of key equipment for high-efficiency cells
34
Results: Technological Factors
Stage
Key Factors
Polysilicon
Investment and scaling up of production plants; hydrochloronation
technology upgrade; increase number of seed rods in furnace; reduction
in electricity use; investment in FBR technology
Ingot/Wafer
Seed-assisted growth method using crystalline Si and quartz; diamond
wire sawing; larger furnace and larger ingots; black Silicon; direct wafer
Cell
Improved efficiency; improved silver paste recipe; efficiency use of silver
paste; higher number of busbars; high-efficiency cells (PERC/L/T, IBC,
HIT)
Module
Domestic production and reduction of material use of key components
(EVA sheets, glass, backsheets); replacement of TPT backsheets
Equipment
Indigenization of equipment for Al BSF; automation; gradual
domestication of key equipment for high-efficiency cells
35
Thin Film Technologies
• Thin film technologies most
promising and can challenge
silicon on efficiency and cost
• Amorphous Si already ”out”
• Cadmium Telluride (CdTe) and
Copper-Indium-Gallium-Selenide
(CIGS) most viable
• Continue to improve in efficiency
and cost, though China not very
active in this technology
36
Concentrator Photovoltaic (CPV)
• General skepticism toward
CPV’s future viability
• Collapse of polysilicon price
makes low concentrator PV less
attractive
• High concentrator PV uses highefficiency multi-junction cells, but
high system costs
• May make sense in sunny
region close to big load
center with high electricity
price
37
Excitonic and Perovskite
• Continued gain in efficiency
for dye-sensitized solar
cells and organic PV
• Reliability issues
• Perovskite most promising
among emerging
technologies
• Efficiency up six times since
introduction
• Would not be commercially
ready in the near future
September 9, 2016
38
Trade Dispute: AD/CVD Tariffs Timeline
10/2011: SolarWorld
filed complaint with the
USDOC and USITC
2011
2012
2013
10/2012: Final ruling
from DoC for Chinese
cells (23.75%–
254.66%)
2014
2015
September 9, 2016
39
Trade Dispute: Effects of US First Round Tariffs
Source: Yahoo! Finance
Final USDoC ruling: Oct 2012
September 9, 2016
40
Trade Dispute: AD/CDV Tariffs Timeline
12/2013: US
companies filed
second petition
2011
2012
2013
2014
2015
12/2014: Final ruling of
the second round for
Chinese wafers, cells,
modules (23.74 –
258.57%)
September 9, 2016
41
Trade Dispute: Effects of US Second Round Tariffs
Canadian
Solar
Sales
Sales
(1,000s
USD)
2011
192,381
2012
254,097
2013
215,262
2014
604,537
2015
903,748
Source: OSIRIS
Source: Yahoo! Finance
Jan 2015
September 9, 2016
42
Trade Dispute: AD/CVD Tariff Timeline
07/2012: China launched an
investigation on US
renewable energy program
2011
2012
2013
12/2014: WTO
decided US tariffs
breached rules
2014
2015
01/2014: China’s final
ruling on imported
polysilicon from US
(~55%) & South Korea
(2.4% - 48.7%)
September 9, 2016
43
Trade Dispute: Effects of China Tariffs on Polysilicon
16
Chinese anti-dumping tariffs enacted
U.S. Poly (000's MT)
14
12
10
8
Excess capacity
6
Production
4
2
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016
Source: GTM Research & SEIA. “U.S. Solar Market Insight: Q1 2016.”
PV Mfgs. % of Sales Revenue by Region, 2015
•
PV manufacturers have varying degree of regional exposure
– The majority of revenue from First Solar and Sunpower comes from the U.S. with virtually no
penetration in the Chinese market
– Many of the publicly traded Chinese companies have large, but no overwhelming revenues from
their domestic market – demand could be coming from private companies
– Shunfeng-Suntech generated 58% of its revenue in China in 2015
Note: not all companies separate revenue into each geographic location represented in graphic. In those
instances, all non-separated numbers are classified in “other” unless otherwise stated.
Sources: Company figures based on Q4 ’15 (and previous) SEC filings by the respective companies. JA Solar
and ReneSola have no filed their annual reports yet so 2014 numbers are reflected. Jinko Solar US numbers
represent revenues the company received from all of “America” as U.S. was not broken out separately.
44
September 9, 2016
45
Trade Dispute: Recent Developments
• US/EU organizations that have come out against the tariffs
• SolarPower Europe (formerly European Photovoltaic Industry Association),
representing 1.3 million European jobs and 130,000 European companies
related to PV
• PV modules could be sold 20% cheaper in the EU without
trade restrictions on Chinese panels, according to a study
commissioned by Solar Alliance for Europe (SAFE)
• Australia canceled anti-dumping investigations
• Trade uncertainties under the new administration
September 9, 2016
46
Trade Dispute: Response from Chinese Firms
• Go Big: build up international manufacturing capacity
• Pros: develop local production capacity in emerging markets; circumvent
anti-dumping tariffs
• Cons: tariffs may change to apply to cells/modules manufactured in SE
Asia; challenges in developing local supply chain
• Maintain a Presence: acquisition in US/EU markets
• Pros: less risk; can obtain new tech manufacturing capability
• Cons: limited ability to grow market presence; risks in acquision; no
benefits of inexpensive SE Asian manufacturing
• Stay Home: focus on growing Chinese market
• Pros: Not subject to trade uncertainty; proximity to market
• Cons: lack of diversification; missing out on growing markets
47
What did experts miss before?
-“People do not really understand the detailed operation of this industry and did not taking into consideration the
contribution by China.”
• -The cost structure for crystalline Si is different.
• “People may be familiar with electronics industry, but PV industry has a wider scope than just crystalline Si. Although
the core component is crystalline Si, but it’s not the biggest part in terms of cost.”
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
-Price of polysilicon
-Scale of Chinese production
-The domestic manufacturing and installation of equipment
-The rush of private investment
-Break up of polysilicon monopoly and partially the rate of technological improvement
-“They did not consider the manufacturing in China. Chinese and German investors would invest massively in
manufacturing and lower the costs that fast. If the manufacturing had stayed in Germany, the price would have
stayed at 4-5 dollars/W.”
-Polysilicon supply increased; China broke up and decreased the monopolistic profits
-Technological improvements: thinner wafer, thinner silver electrode, higher efficiency
-Wrong judgment on the scale of polysilicon material expansion
-Rapid improvement in efficiency thanks to technological improvements (equipment as well as other manufacturing
processes)
• -Economies of scale
48
CdTe
49
CIGS
50
OPV
51
Perovskite Solar Cell
52
Perovskite Structure
53
Probability of System Cost…
Expert
<4RMB/W (%)
>6RMB/W (%)
A
100
0
B
100
0
D
95-100
0-5
F
95-100
0-5
G
50-60
0
H
20-40
0
I
30
0
K
90-100
0-5
L
80-90
10-20
O
40
25
54
The number of foreign patents awarded to
Chinese inventors is increasing rapidly
Total number of USPTO patent grants
55
US firms aggressively patent their
inventions in other major markets…
30
25
20
15
U.S. applicants
10
5
0
U.S.
Europe
Japan
Two
Three
Triadic
Triadic
Markets Markets
56
But the top 100 indigenous Chinese
applicants patent only a small fraction of
their inventions outside China
30
25
20
15
U.S. applicants
Chinese applicants
10
5
0
U.S.
Europe
Japan
Two
Three
Triadic Triadic
Markets Markets
57
We are not the only ones who question the
value of Chinese patent grants
• Brian Wright and his students have found that Chinese indigenous
inventors inflate their patent applications to meet local government
targets…
• …And to benefit from local government subsidies (Lei et al., 2015)
• Domestic patents of low quality can also be an asset in an evolving legal
system that struggles to distinguish between a good patent and a bad
patent
• The number and growth rate of domestic patenting may (substantially)
overstate the true innovation of indigenous Chinese firms
58
Chinese domestic patent data suggest an
explosion of innovation…
SIPO Patent Grants, 1993-2011
1,000,000
900,000
800,000
Invention Patents
Utility Models
Design Patents
Total Grants
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
59
But the numbers of “true” patent grants
(invention patents) are much smaller…
SIPO Patent Grants, 1993-2011
1,000,000
900,000
800,000
Invention Patents
Utility Models
Design Patents
Total Grants
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
60
A significant fraction of Chinese invention
patents are awarded to foreign
inventors…
61
Indigenous firms allow their domestic
patents to expire much earlier than foreign
firms do