China’s solar panel industry has become the world’s biggest thanks to a simple formula: Produce in China, sell in Europe. Benefiting from generous financial backing at home—which the U.S. Department of Energy says amounted to $30 billion in state support in 2010—Chinese manufacturers have spent years boosting capacity. Since the domestic market for buying and installing solar power systems was tiny, the Chinese focused on exports, especially to Germany and other European countries where subsidies helped fuel demand for panels.
Given Europe’s debt crisis, the Continent is losing its appetite for solar subsidies that benefit China. The U.S. market isn’t promising, either, with the Obama administration investigating alleged dumping of Chinese panels. So mainland companies are looking for alternatives at home. Accelerating the shift, the government has started spending big to make solar power more affordable. About 70 percent of China’s solar module production will likely be exported this year, down from 95 percent in 2010, San Francisco-based researcher NPD Solarbuzz estimates.