I remember the CEO of a Chinese solar company saying to me over a decade ago that “China has no choice but to dominate global solar.” At the time, they were already well on the way to becoming the major player in global solar production but it’s only now that I really understand what he meant. China Inc has always seen solar as a strategic technology that could revolutionize the energy world. They understood that nearly all of the useful energy available to mankind comes from the sun. They also realized that harnessing the sun’s energy in a more effective way, rather than just extracting the fossil fuel that took millions of years to create with the sun’s help, is critical for not only pushing economic growth but also sustainability. Meanwhile, back in the traditional world of energy, Siemens and GE, who have both dominated power generation equipment for the last century, and who are now being forced to restructure their power divisions, are only now starting to grasp the significance of what the Chinese have done.

A decade ago, a solar installation cost €5m per megawatt. Today those costs are in at around €0.6m, a 90% reduction making solar increasingly cost effective and the power generation technology of choice. This was made possible by massive scaling by Chinese producers as well as intense competition which has also driven significant technology improvements. The result is that solar is now only beating other renewables, such as wind, but also fossil fuels such as gas and coal. For instance, at the recent solar tender in Saudi Arabia one of the winning bids was at a price slightly below 1.8 cents per kWh, noting that current wholesale power prices in most of Europe and the US are 3 times that level. At 1.8 cents per kWh it is impossible for a Siemens or a GE turbine to compete.

The ease, flexibility and speed at which solar can be installed as well as its low cost is the reason why China will install over 50GW of new solar capacity this year, which is more than the global installations of any other power generation technology be that coal, nuclear, diesel, hydro, geothermal, gas or wind. The growth in Chinese solar installations is actually so fast, that over the last two years China will have installed more solar than the US has done to date! Talk about exponential growth. Over the last ten years Chinese solar installations have grown at over 100% a year, and the result is that China is now not only the number one producer of solar panels in the world but also the biggest producer of electricity from the sun. This is of course great news for the whole world, as thanks to China, solar is increasingly the most cost competitive power generation technology in the world. Sadly many of the incumbents in global energy are only realizing the significance of solar which is a large part of the reason why Siemens announced 6,900 job losses in power generation last week, and GE the goal of saving $1bn in costs in their power division.

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