Study download: Progress in Diversifying the Global Solar PV Supply Chain (pdf)

TLDR:

Until the end of this decade, China and Chinese manufacturers will retain some domination over the global solar PV chain. However, the global solar PV supply chain is becoming more robust thanks to the diversification of crystalline silicon modules manufacturing capacity in the United States, Europe, Southeast Asia, and India, according to a report by Japan’s Renewable Energy Institute.

In the 2030s, improvements in solar PV recycling and the widespread adoption of new technologies like perovskite cells, which development is led by China (glass substrate) and Japan (film substrate), will provide new opportunities to further diversify the global solar PV supply chain.

This progress will strengthen worldwide energy security and facilitate the much-needed acceleration of the energy transition.

Geographic concentration of the global solar supply chain exposes the supply chain to some drawbacks, the report finds. The potential disruption risks associated with this type of concentration include natural hazards such as earthquakes and fires, and extreme weather events such as drought and flooding. “For instance, in 2020 and 2022, the global production of polysilicon was reduced because of flooding and fire issues at a handful of Chinese plants,” the study says.

The report also mentions both the situation in China’s Xinjiang region and Uyghur forced labour as well as China’s coal intensity as concerns with China’s dominance of global solar supply chain as main drivers of diversification. While citing “human rights violations, unfair trade practices, and environmental pollution,” the study criticizes that “the lack of transparency [across supply chains within China] has made it increasingly difficult to verify whether supply chains are free from risk of Uyghur forced labor and reduces trust in the solar industry.”

Key Findings:

• As of September 2024, 99% of the world’s solar PV modules manufacturing capacity was based on crystalline silicon because this technology is inexpensive, performant, and durable. Approximately three-fourths of the economic value of crystalline silicon modules come from four minerals: silicon, silver, aluminum, and copper, which productions are generally not excessively geographically concentrated.

• Throughout the entire solar PV supply chain (i.e., polysilicon, ingots, wafers, cells, and modules), the shares of China and Chinese manufacturers often largely exceeded 80% and they were sometimes close to 100%. It is undesirable for any supply chain to be so dependent on a single country. This is the reason why diversification efforts are led across the world (e.g., United States, Europe, Japan, Southeast Asia and India).

• The Chinese industry dominates the solar PV supply chain because it has managed to maximize economies of scale and because it is well-organized around vertically integrated companies. Moreover, the Chinese solar PV industry is innovative and effectively supported by its government. Also, it benefits from affordable electricity prices, which is critical as solar PV manufacturing is electricity intensive.

• The Chinese solar PV industry is confronted with harsh criticisms due to human rights violations, unfair trade practices, and environmental pollution due to its reliance on coal power. Furthermore, China’s aggressive export strategy is blamed for solar PV products oversupply resulting in rock-bottom prices and economic losses.

• In the United States, a combination of subsidies (i.e., tax credits) and protectionist measures have been implemented. Many new projects have been announced, they now need to be realized.

• Europe tries to balance its own interests between increasing its manufacturing capacity and taking advantage of cheap Chinese imports. So far, priority has been given to demand over domestic supply as reducing electricity prices and greenhouse gas emissions are deemed more urgent issues.

• Japan puts the emphasis on perovskite cells, a promising technology that is not fully ready for commercial deployment yet. This strategy should, however, not be used as an excuse for not more proactively installing crystalline silicon. Affordable and rapid decarbonization does not need to wait for perovskite to become mainstream.

• Despite catching less attention, Southeast Asia and India significantly contribute to the diversification of the solar PV supply chain. In Southeast Asia, labor costs are low, and energy is subsidized. In India domestic-content requirements and customs duties have been implemented.

• In addition to these efforts, solar PV recycling and new technologies, like perovskite, hold the potential to be alternatives to Chinese crystalline silicon modules in the 2030s. To take off, these solutions need more governmental support.