Chinese innovation and industrial policies that focus on increasing solar panel production and markets have made solar PV the most affordable technology for electricity generation in many parts of the globe. According to the International Energy Agency Special Report on Solar PV Global Supply Chains – the first study of its type, however, this has also led towards imbalances in solar PV supply chain supply chains.
The report examines the supply chain of solar PV from raw materials to the finished product. It covers areas such as energy consumption and emissions, job, production costs, investment costs, trade, financial performance, and financial performance.
It finds, for example, that the electricity-intensive manufacturing of solar PV is mostly powered by fossil fuels today because of the prominent role of coal in the parts of China where production is concentrated – but that solar panels still only need to operate for four to eight months to offset their manufacturing emissions. This is compared to the average solar panel lifespan of 25 to 30 years. This report suggests that increasing decarbonization of electricity supplies, as well as greater diversification of solar PV supply chain chains, could help to reduce this footprint in future.
China has driven down solar PV manufacturing costs, helping spur the vital technology’s success while at the same time resulting in a major concentration of global PV supplies
To ensure a safe transition to net zero emissions, it will take greater efforts to diversify and expand global production of solar panels, whose global supply chains are heavily concentrated in China, according to the IEA.
Over the past decade, the global manufacturing capacity of solar panels has been shifting away from America, Japan, Europe and Japan. This has led to China taking the lead in innovation and investment. China’s share in all the key manufacturing stages of solar panels exceeds 80% today, according to the report, and for key elements including polysilicon and wafers, this is set to rise to more than 95% in the coming years, based on current manufacturing capacity under construction.
“China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions,” says Fatih Birol, IEA’s executive director. “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.”
To meet international energy and climate goals, solar PV must be deployed worldwide on an unprecedented scale. This in turn demands a major additional expansion in manufacturing capacity, raising concerns about the world’s ability to rapidly develop resilient supply chains. For example, annual additions of solar PV capacity to electricity systems around the world need to more than quadruple by 2030 to be on track with the IEA’s pathway to reaching net zero emissions by 2050. Global production capacity for the key building blocks of solar panels – polysilicon, ingots, wafers, cells and modules – would need to more than double by 2030 from today’s levels and existing production facilities would need to be modernized.
“As countries accelerate their efforts to reduce emissions, they need to ensure that their transition towards a sustainable energy system is built on secure foundations,” Dr Birol adds. “Solar PV’s global supply chains will need to be scaled up in a way that ensures they are resilient, affordable and sustainable.”
Governments and other stakeholders around the world have begun to pay increasing attention to solar PV’s manufacturing supply chains as high commodity prices and supply chain bottlenecks have led to an increase of around 20% in solar panel prices over the last year. These challenges – particularly apparent in the market for polysilicon, a key material for making solar panels – have resulted in delays in solar PV deliveries across the globe and higher prices. These issues require greater attention and effort from policy makers, according to the IEA’s special report.
Diversification is one of key strategies to reduce supply chain risks around the world. This special report examines the opportunities and challenges associated with developing solar PV supply chains. It also assesses investment requirements, job creation, manufacturing costs, emissions, and recycling. It estimates that the global supply chain for solar PV manufacturing could attract USD 120 million in investment by 2030. Solar PV has the potential to double the number manufacturing jobs by 2030. The most labor-intensive areas of solar PV manufacturing are the modules and cells manufacturing.
The report highlights the policies taken by governments to support domestic solar PV manufacturing. It also highlights key areas for action to increase security of supply and address key issues such as investment risks, cost-competitiveness, environmental and social sustainability, and cost-competitiveness.