China Tops the World in Solar Panel Manufacturing

China has long been the world's factory for iPods, cell phones and a host of appliances. Now it can add solar panel manufacturing to the list of industries in dominates.

Five of the top 10 solar panel makers in the world are from China, a trend that took hold last year, according to a report by Massachusetts-based greentech analysts GTM Research.

"More and more consumers in the United States can expect the solar modules placed on their rooftops to be coming from Chinese manufacturers," says Shyam Mehta, a senior market analyst at GTM. "The modules might have an American brand, but they will still be made in China."

Suntech Power (STP) in China ranks No. 2 on the global list. Other Chinese companies in the top 10 are Yingli Green Energy (YGE), Trina Solar (TSL), Solarfun (SOLF) and Canadian Solar (CSIQ), according to GTM Research.

But the individual crown goes to U.S. company First Solar (FSLR), which grabs the laurel for the first time ever. First Solar has factories that can produce more than 1 gigawatt of solar panels from its factories in the U.S., Germany and Malaysia. One gigawatt of solar panels could produce enough power for about 145,000 average homes and save about 1 million metric tons of carbon dioxide emissions every year, says company spokeswoman Melanie Friedman.

What Consumers Want

In California, the largest regional market for solar in the U.S., retailers already are showing more love for panels produced by companies such as Suntech Power, Trina Solar, Yingli and Kyocera, wrote Mark Bachman, a financial analyst with Auriga USA, in April.

Perhaps not surprisingly, these manufacturers are getting more orders because they're able to produce less expensive solar panels. Prices for solar electricity systems vary depending on location, equipment models and labor costs. In general, a 2-kilowatt system, suitable for a single-family home, could cost a homeowner nearly $20,000 -- not counting government incentives.

But those government incentives have played a big role in boosting in consumer demand for solar panels, as have financing plans offered by installers. Some cities and counties also have issued bonds to fund the installation of solar electric systems for their residents and businesses. The property owners then repay their local governments over time through special fees on their property tax bills.

Germany Remains the Biggest Market

Although 2009 was gripped by recession, solar panel production actually grew 41% to 8.9 gigawatts, Mehta says. Particularly strong demand in Germany drove the increase. The country installed 1.3 gigawatts in the fourth quarter alone, says the GTM report.

Germany is the largest solar market in the world because of a government policy that requires utilities to buy solar electricity at prices higher than they pay for power from fossil fuel-burning plants. Those prices are set to decrease this year, so many developers have been hurrying to complete projects. This rush began in the second half of last year.

But earlier in 2009, solar panel makers were shutting down production lines and furloughing their workers because the recession had caused banks to slow or even stop loaning money to project developers.