Title of Dissertation: national renewable energy policy

 
 

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Chapter 7. The evolution of solar policies 
Introduction 
Chapter 5 and 6 explored the diversified national solar policies in the U.S. and 
South Korea. By synthesizing the findings of these two cases, this chapter examines how 
national solar policies have changed through the interactions with industry under rapidly 
changing global market.
 
This chapter starts with describing the changes of the global solar market and the 
domestic solar markets in the U.S. and South Korea. Next, the changes of solar policies 
in two countries and the causal mechanism of policy change are analyzed. Based on this 
analysis, the factors affecting the difference of solar policies in two countries are 
described. The next section discusses the characteristics of the recent changes of 
renewable energy policies. Finally, the limitation of the study is discussed. 
The global solar market and the changes of the domestic solar markets 
The globalization of solar PV industry has accelerated by the rise of Chinese solar 
manufacturers around 2010. Since the Chinese manufacturers have exported enormous 
amount of solar products, the global solar market has deeply changed. Many solar 
manufacturers have gone out of business, and some of them have expanded their business 
to downstream to find another source of revenue. Meanwhile, as Chinese products have 
significantly lowered the cost of solar installation, global solar installation has sharply 
increased in recent years. Under this circumstance, more corporations have entered the 
downstream solar market and this has accelerated the growth of solar installation. 

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Through this recent change, a global solar PV value chain has been created. Many solar 
PV manufacturers export a significant share of their products. Large project developers 
look for projects all around the world. Many solar corporations have become 
multinational corporations. 
Under this rapid change of the global market, domestic solar markets have faced 
risks and conflicts. In the U.S., solar manufacturers perceived much risk under rapidly 
decreasing prices of solar products. This has caused the solar trade dispute between the 
U.S. and China, which was initiated by the petition of the U.S. solar manufacturers. The 
trade dispute has introduced much uncertainty in the solar market because it was hard to 
predict which policy measure would be implemented. Moreover, since the U.S. 
downstream companies have benefitted from low-priced Chinese solar panels, the trade 
dispute has generated conflicts of interests between the upstream and the downstream 
corporations. The efforts of the solar manufacturers to reduce market risks have 
generated additional risks and conflicts in the market.
In South Korea, the impact of the Chinese solar products to the solar market was 
more serious than in the U.S. because Korean solar PV industry has grown based on 
manufacturing. Many corporations have reduced the investments on solar products or 
have gone out of solar business. Although low-priced Chinese solar panels have 
benefitted installers by reducing cost, the installers have not significantly grown in South 
Korea due to a small size of domestic market. Korean solar manufacturers only barely 
engaged in making policy measures to address Chinese solar panels directly like the U.S. 
manufacturers did because for most of them, solar business was only a small part of their 
whole business. Large solar manufacturers have main business other than solar PV, 

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whose products were exported to other countries including China. Therefore, they did not 
find any reason to initiate trade dispute with China. Meanwhile, small solar 
manufacturers did not have sufficient political power to directly engage in initiating a 
policy measure. Moreover, Korean government did not have a strong motivation to raise 
a trade dispute with China on solar panel issue since China is a critical trade partner 
importing many products manufactured in Korea. 
The risks that Korean solar manufacturers have faced were not only from 
domestic market, but also from the markets of other countries. They could not compete 
with Chinese manufacturers in terms of price in the markets of other countries, where 
they exported a significant share of their products. In this sense, the reactions of other 
countries to the Chinese solar panel issue were as important as the reaction of Korean 
government. Many Korean solar manufacturers perceived that the tariff on the Chinese 
solar panels in the U.S. were more helpful for them with surviving in the market than any 
domestic policy measure. 
Domestic solar policies have also introduced risks in domestic markets. In the 
U.S., the extension of the ITC was uncertain until the decision of multiple-year extension 
in 2016. This has generated risks to both upstream and downstream corporations. 
Downstream corporations have difficulty to make a long-term investment plan since they 
could not predict the rate of return. Upstream corporations had difficulty to address 
unstable demand in the market. There was a spike of the demand of solar products just 
before the expiration of the ITC, but solar manufacturers could not invest in capacity 
expansion because the increase of demand was because of the rush of the solar projects to 
take advantage of the ITC before expiration.

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Korean solar corporations have also faced uncertainty caused by domestic 
policies. After the introduction of the RPS in 2012, the profit from a solar project was not 
easy to predict due to fluctuating prices of the RECs. Project developers have difficulty in 
financing due to the uncertainty of the revenue of projects. Under this fluctuating market, 
the Korean government has changed the details of the RPS, and this has caused more 
uncertainty in the market. The change of the rules of the RPS has influenced the market; 
therefore, it became harder to predict the future trend of the solar market.
In sum, both the globalization of solar market and domestic policies have 
introduced risks and uncertainty to the industries in the U.S. and South Korea. The flood 
of Chinese solar products to the global solar PV market has generated much risk to the 
solar manufacturers. The reactions of the U.S. solar manufacturers have generated 
additional risks by introducing trade dispute between the U.S. and China. Since Korean 
solar PV industry is export-driven, it has been significantly affected by the trade dispute 
as well as the flood of Chinese solar panels. Domestic policies have also posed risks to 
solar corporations since they have not been consistent.
Diversified policies and solar industry 
Solar policies have diversified with the changes of the market environment in the 
U.S. and South Korea. In the U.S., the ITC has been extended for multiple years, and the 
tariffs on the solar panels imported from China and Taiwan have been introduced. 
Moreover, the solar industry has engaged in the policymaking process of the CPP. In 
South Korea, the FIT was replaced with the RPS in 2012. In addition, the policies to 

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promote industry and the exports of solar products and services have been implemented 
in recent years.
In the U.S., in the early days of the solar market, two kinds of policies affected the 
solar market: a tax policy and research and development programs. Over time, other 
types of policies also became important. The loan guarantee program has encouraged 
investing in utility-scale solar projects. The tariff on the solar panels from China and 
Taiwan has benefitted the domestic solar manufacturers. Recently, the solar industry has 
engages in designing and implementing the CPP.
Solar industry’s engagement has significantly led to this diversification of the 
policies. It attempted to maintain existing policies, which were favorable to solar 
industry. Solar industry has actively engaged in the extension of the ITC. As well as 
attempting to maintain existing policies, the industry also tried to overcome a market 
challenge through asking governmental measure to address the challenge. The tariff on 
the solar panels from China and Taiwan has introduced through the political activities of 
SolarWorld and other solar manufacturers. As the political power of the solar industry 
has grown, the industry also engaged in non-solar policies, which was expected to affect 
solar industry. The CPP was originally not necessarily favorable to solar industry, but the 
engagement of the solar industry has led to include some rules that were favorable to 
solar energy in the final rule of the CPP. Figure 39 shows the interactions between solar 
PV industry and policies in the United States. 

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