China’s solar supply chain domination a threat to net-zero, says IEA

The International Energy Agency has warned that China’s across-the-board domination of the global solar supply chain stands in threat to the smooth transition to net zero emissions, in a first of its kind study by the group.

The IEA Special Report on Solar PV Global Supply Chains puts China’s current share in all the key manufacturing stages of solar panels at greater than 80%, and says that for key components like polysilicon and wafers, China’s share is on track to rise to more than 95%.

This extreme concentration of solar supply and production revealed its potential to disrupt global markets over the course of the Covid-19 pandemic, with parts of China still – today – going in and out of lockdown in response to virus outbreaks.

Prices for shipping container-loads of panels increased exponentially and logistics became increasingly fraught as demand was frustrated by export limits from China, as well as shortages of raw materials like polysilicon, glass, EVA and silver.

Solar will play a huge role in the world’s effort to reach net zero emissions by 2050 – annual additions of PV capacity will need to more than quadruple by 2030 to be on track, the IEA says – and so further supply crunches like this one are not an option.

“China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions,” said IEA Executive Director Fatih Birol. 

“At the same time, the level of geographical concentration in global supply chains also poses potential challenges that governments need to address. 

“Accelerating clean energy transitions around the world will put further strain on these supply chains to meet growing demand, but this also offers opportunities for other countries and regions to help diversify production and make it more resilient.”

In terms of the opportunity, the IEA report finds that new solar PV manufacturing facilities along the global supply chain could attract $US120 billion of investment by 2030 – and PV sector has the potential to double the number of manufacturing jobs in the sector to 1 million by 2030, it says.

The special report summarises policy approaches that governments have taken to support domestic solar PV manufacturing and highlights priority areas for action to improve security of supply and to address key challenges such as environmental and social sustainability, investment risks and cost competitiveness.

In the US, the Biden administration has put in place policies to upscale its domestic clean energy manufacturing capabilities, with a new action targeting the country’s solar production capacity, as well as green hydrogen and fuel cell production

In Australia, prime minister Anthony Albanese on Friday pointed to the potential for Australia to step up industry policy and manufacturing in the renewable sector, and to work in collaboration on this with New Zealand.

Last month the Albanese government committed $45 million in federal funding to help accelerate the push to cheaper and more efficient solar technologies, led by the Australian Centre for Advanced Photovoltaics.