How China Came to Dominate the World in Solar Energy

China unleashed the full might of its solar energy industry last year. It installed more solar panels than the United States has in its history. It cut the wholesale price of panels it sells by nearly half. And its exports of fully assembled solar panels climbed 38 percent while its exports of key components almost doubled.

Get ready for an even bigger display of China’s solar energy dominance.

While the United States and Europe are trying to revive renewable energy production and help companies fend off bankruptcy, China is racing far ahead.

At the annual session of China’s legislature this week, Premier Li Qiang, the country’s second-highest official after Xi Jinping, announced that the country would accelerate the construction of solar panel farms as well as wind and hydroelectric projects.

With China’s economy stumbling, the ramped-up spending on renewable energy, mainly solar, is a cornerstone of a big bet on emerging technologies. China’s leaders say that a “new trio” of industries — solar panels, electric cars and lithium batteries — has replaced an “old trio” of clothing, furniture and appliances.

The goal is to help offset a steep slump in China’s housing construction sector. China hopes to harness emerging industries like solar power, which Mr. Xi likes to describe as “new productive forces,” to re-energize an economy that has slowed for more than a decade.

The emphasis on solar power is the latest installment in a two-decade program to make China less dependent on energy imports.

China’s solar exports have already drawn urgent responses. In the United States, the Biden administration has introduced subsidies that cover much of the cost of making solar panels and part of the much higher cost of installing them.

The alarm in Europe is particularly great. Officials are bitter that a dozen years ago, China subsidized its factories to make solar panels while European governments offered subsidies to buy panels made anywhere. That led to an explosion of consumer purchases from China that hurt Europe’s solar industry.

A wave of bankruptcies swept the European industry, leaving the continent largely dependent on Chinese products.

“We have not forgotten how China’s unfair trade practices affected our solar industry — many young businesses were pushed out by heavily subsidized Chinese competitors,” Ursula von der Leyen, president of the European Commission, said in her State of the Union address last September.

The remnants of Europe’s solar industry are now fading away. Norwegian Crystals, an important European producer of raw materials for solar panels, filed for bankruptcy last summer. Meyer Burger, a Swiss company, announced on Feb. 23 that it would halt production in the first half of March at its factory in Freiburg, Germany, and would try to raise money to complete factories in Colorado and Arizona.

The company’s U.S. projects could tap renewable energy manufacturing subsidies provided by President Biden’s Inflation Reduction Act.

China’s cost advantage is formidable. A research unit of the European Commission calculated in a report in January that Chinese companies could make solar panels for 16 to 18.9 cents per watt of generating capacity. By contrast, it cost European companies 24.3 to 30 cents per watt, and American companies about 28 cents.

The difference partly reflects lower wages in China. Chinese cities have also provided land for solar panel factories at a fraction of market prices. State-owned banks have lent heavily at low interest rates even though solar companies have lost money and some went bankrupt. And Chinese companies have figured out how to build and equip factories inexpensively.

Low electricity prices in China make a big difference.

Manufacturing the main raw material for solar panels, polysilicon, requires huge amounts of energy. Solar panels typically must generate electricity for at least seven months to recoup the electricity that was needed to make them.

Coal provides two-thirds of China’s electricity at low cost. But Chinese companies are reducing costs further by installing solar farms in the deserts of western China, where public land is essentially free. Companies then use the electricity from those farms to make more polysilicon.

By contrast, Europe has costly electricity, particularly after it stopped buying natural gas from Russia during the Ukraine war. Land used in Europe for solar farms is expensive. In the Southwestern United States, environmental concerns have slowed the installation of solar farms, while zoning issues have blocked permits for the transmission of renewable energy.

China’s coal consumption has made it the world’s largest annual contributor to greenhouse gas emissions. But the country’s pioneering role in making solar panels less expensive has slowed the increase in emissions.

“If the Chinese manufacturers had not brought down the cost of panels by more than 95 percent, we could not see so…