Last week in Beijing I sat down with some executives from First Solar, the Arizona-based solar producer of thin-film solar photovoltaic (PV) cells. First Solar is one of the most cost-efficient producer of PV cells in the world, and one of the ways the company has been able to continually lower its costs is by going big- REALLY BIG.
Our meeting came on the heels of a historic agreement between First Solar and China's northern province of Inner Mongolia to build the world's largest solar power plant that will eventually have 2 GW of installed capacity (nearly the capacity of the Hoover Dam) and span an area of about 25 square miles (roughly the size of Manhattan). By increasing the scale of production, First Solar can lower the overall cost of manufacturing its modules, which the company hopes will eventually make its PV cells comparable in price to dirty fossil fuels. First Solar has been able to lower the average manufacturing cost of a PV cell from 98 cents per watt in December 2008 to 87 cents per watt at the moment, and First Solar hopes it can reduce this further to 52 cents per watt by 2014.
Despite its recent foray into the Chinese market, First Solar is at its core an America company powered by American workers and by American ingenuity. First Solar was started by Harold McMaster, an Ohio glass-maker who specialized in making tempered glass for the booming industries of the 1950's: automobiles and television sets. By the mid 1980's, McMaster realized the vast untapped potential of solar power and decided to take what he already knew about glass making and use it to create what would become the world's leading thin-film solar technology. McMaster started his solar company at the University of Toledo in Ohio, and Ohio is still home to First Solar's R&D headquarters and manufacturing facility, located in Perrysburg, 8 miles south of Toledo.
As First Solar has grown to become the world's largest manufacturer of cadmium telluride thin-film PV cells, the factory in Perrysburg has continued to expand and currently employs more than 700 people. First Solar also has manufacturing facilities in Germany and Malaysia, but by increasing the scale of its existing Ohio manufacturing facility, First Solar has been able to manufacture PV cells in Ohio at a rate comparable to its lowest-cost facility in Malaysia. Ohio Governor, Ted Strickland said at the announcement of the Ohio facility's expansion, "In making this significant investment and expansion in Toledo, First Solar is helping us to send a message to the world that Ohio is reinventing itself as the leader in the advanced energy industry."
And First Solar is not the only solar company investing in Ohio. There are currently 115 solar firms in Ohio, employing over 6,000 people in research and manufacturing, according to the "Growing Ohio's Green Economy" report. There is an entire infrastructure that already exists in Ohio to build auto equipment, and now Ohio is taking advantage of this underutilized infrastructure to build a solar industry that will create thousands of new jobs. ABC News' Charlie Gibson recently reported on how Ohio is turning around its economy by shifting its focus from automobiles to solar energy, making it the next Silicon Valley for solar (watch the video here).
So why did First Solar choose China as the site of the world's largest solar power plant instead of a location in the US? In short, there is still not enough market certainty in the US for a solar plant of this scale to be feasible due to the stop-and-go support that renewable energy has received in the US. But in order for First Solar and other renewable energy companies to increase the scale of production to eventually out-price fossil fuels there needs to be market demand and market certainty. In contrast, a solar market has thrived in Germany because of policies like feed-in tariffs that have ensured a stable market for solar projects there. And now China has taken similar measures and is poised to become the world's next largest solar market.
Until the US institutes similar policies that encourage the development of a stable market for solar energy, companies like First Solar will continue to turn to countries like China and Germany to provide most of the demand for their products, and the US will keep missing opportunities to expand its green economy. On the flip side, if the US can pass the Clean Energy Jobs and American Power Act that is currently before the Senate, then American companies like First Solar will finally have a stable market for their solar cells in the US, where Harold McMaster developed First Solar's thin-film technology decades ago.
Establishing a stable market in the US for First Solar's PV cells accomplishes two important objectives. First, by increasing market demand for solar cells, companies like First Solar can scale-up, produce solar cells more efficiently and eventually out-price fossil fuels. Although First Solar is continually reducing its costs, it solar cells still can't compete with the cheap price of coal and oil. As the executives from First Solar told me, they see their primary competitor at the moment as fossil fuels, not Chinese solar producers, since they are all working together in the race to make solar energy cheaper than the fossil fuels that cause climate change. Secondly, an increase in US demand for solar PV cells will lead to the creation of more green jobs in places like Perrysburg, Ohio and across the US in order to meet the growing demand for solar cells. China has realized the potential that solar and other clean energy has to create jobs and this is one of the reasons they have welcomed First Solar's project in Inner Mongolia.
Eventually, First Solar or one of its competitors will find a way to produce PV cells in a way that is cheaper than fossil fuels, and whichever company accomplishes this feat will become the new world leader in solar. As President Obama put it during his recent visit to MIT: "The world is now engaged in a peaceful competition to determine the technologies that will power the 21st century. From China to India, from Japan to Germany, nations everywhere are racing to develop new ways to produce and use energy. The nation that wins this competition will be the nation that leads the global economy. I am convinced of that. And I want America to be that nation. It's that simple."