Australian “Local Manufacturing” Solar Subsidies to Go to China?

Essay by Eric Worrall

“I think you definitely need collaboration [with China]”.

The ‘Future Made in Australia’ plan for solar panels relies on a crucial ingredient: Help from China

By James Purtill May 6, 2024

Twenty-three years ago, a Chinese-Australian solar scientist moved from Sydney to Wuxi to build China’s solar panel manufacturing industry from scratch, using technology developed in Australian universities.

Shi Zhengrong became the world’s first clean energy billionaire, nicknamed “The Sun King”. China went on to dominate global solar panel manufacturing and, thanks to a mix of innovation and cut-throat competition, made solar the cheapest source of electricity in history.

Australian science graduates filled the top technology roles at the biggest Chinese solar companies. And a solar cell design developed in Australia became the global standard.

Meanwhile, Australia mostly stopped building its own solar panels.

Now, with the federal government preparing to ramp up Australia’s own tiny solar manufacturing industry, Dr Shi sees the story coming full circle.

“It’s an exciting opportunity for Australia,” he said, speaking to the ABC from China.

“I think you definitely need collaboration [with China], but I think Australia is in a better position compared to 20 years ago in China.”

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The public reaction in the weeks since has been mixed. Many energy experts welcomed the plan as a way to ensure supply of a critical energy resource (solar will soon generate most of Australia’s electricity) and carve out a slice of a growing global industry.

But some economists and the federal government’s own Productivity Commission warned it could lead to the government wasting money by subsidising the production of panels that China can make more cheaply.

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Read more: https://johnmenadue.com/the-future-made-in-australia-plan-for-solar-panels-relies-on-a-crucial-ingredient-help-from-china/

What did we do wrong, to be cursed with such a parade of economically incompetent politicians? The government’s own productivity commission is warning it’s a bad idea, but politicians would rather listen to an Australian trained Chinese scientist who has already made billions of dollars off Australia’s economic incompetence, and stands to make billions more if this plan goes ahead.

The following article is from 2006 – why Shi Zhengrong, the Sun King, chose China over Australia;

Arise the Sun King

September 12, 2006 — 10.00am

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Many factors, including China’s determination to attract its brightest minds back from overseas to help create new high-tech businesses, have contributed to Shi’s good fortune. His company’s rapid expansion has also been fuelled by rising global demand for solar cells, as governments in countries such as Germany and Japan, unlike here, have embraced clean energy.

“He was the right person at the right spot at the right time to move in both Chinese and Western cultures,” says Professor Martin Green, of the University of NSW, about his former student. “He was successful because of his own personal skills as a technologist and his ability to handle the managerial and political aspects of setting up and manufacturing in China.”

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Content with his comfortable life in Sydney, he took Australian citizenship, but his homeland kept a close eye on this rising solar expert. At Chinese New Year and other festive occasions Shi was invited to celebrations at the Chinese embassy. “It was the policy of the Government to attract people like me – overseas scholars – to come back,” he says. In 2000 representatives of the Wuxi region approached him with an offer of $US6 million to establish a conventional photovoltaic solar cell manufacturing plant. Shi was sceptical that he could turn a profit in China. “The system was corrupted. I didn’t have any confidence [in returning],” he says.

He was also reluctant to give up his work on thin films – the technology of the future. But a two-week visit to China changed his mind. The infrastructure had improved and he could see that the handful of solar cell manufacturers there were losing money because of a lack of good technology.

With his experience and plentiful ideas for how to set up a plant, he realised the business could be a winner. “There was already a great demand for solar panels.”

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Read more: https://www.smh.com.au/national/arise-the-sun-king-20060912-gdoddr.html

I’m not criticising Shi Zhengrong’s choices or actions. In Shi’s place, if I had his skills and background, I might have made similar choices. He is undoubtably a brilliant scientist and a Chinese patriot who made a good decision for himself personally and for China, which made lots of Chinese people, including Shi, very rich – “the right person at the right spot at the right time”.

What I am criticising is the economic incompetence of Australia’s politicians. Shi had sound economic reasons, in addition to the subsidy cash, to relocate to China. But what is the competitive advantage which suddenly makes solar in Australia a good idea?

China dominates solar manufacturing because they have cheap coal energy. Low wages helped their competitive advantage, but the real key advantage is their low cost energy.

But Australia still has higher wages, higher energy costs, more environmental regulations and higher taxes than China. None of the economic advantages which convinced Shi to move to China have changed – China is still the more cost effective location to manufacture solar panels.

Even if you believe Australia is the better place to deploy solar panels, and there are arguments for and against this position, this doesn’t change whether China is the best place to manufacture solar panels.

If there was a real economic opportunity to manufacture solar panels in Australia, Australian businesses would be jumping all over it, leaping to fill the gap in the market. No government subsidy would be required to convince Aussie businesses to take advantage of a big profit opportunity.

The only competitive advantage Australia is publicly offering right now is lots of free money. But free government money is not enough to build a sustainable business, because solar manufacturing in Australia will dry up the moment the money stops. Giving away subsidy money with every sale of subsidised Australian manufactured goods would impoverish Australia, not give us a competitive advantage.