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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--"Industrial planning" often gets criticized in the U.S. by free-market purists--who blast most government efforts to shape and support a strategically important industry--as "socialism" under another name, misguided at best and pernicious at worst. But a new report from the International Energy Agency (Paris, France) shows the value of a government's long-term, conscious intent to nurture an industry that is vital to a clean-energy future.
In this case, the industry is solar photovoltaics (PV), and the country is China.
The IEA's first-ever report on the global PV industry supply chain, Special Report on Solar PV Global Supply Chains, released July 7, shows the potential perils of pure free-market capitalism for the PV industry, which is confronting Chinese domination of most phases of the PV supply chain. As a result, the energy agency warns that the road to net-zero carbon emissions now necessarily goes through Beijing.
The report begins on an ominous note: "Global solar PV manufacturing capacity has increasingly moved from Europe, Japan and the United States to China over the last decade. China has invested over $50 billion in new PV supply capacity--10 times more than Europe--and created more than 300,000 manufacturing jobs across the solar PV value chain since 2011."
"Today, China's share in all the manufacturing stages of solar panels (such as polysilicon, ingots, wafers, cells and modules) exceeds 80%. This is more than double China's share of global PV demand," demonstrating that much of the country PV manufacturing capacity is geared to export. In addition, the country is home to the world's top 10 suppliers of solar PV manufacturing equipment.
Click on the image at right to see a diagram of the main stages of the PV manufacturing process.
IEA Executive Director Fatih Biron said: "China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions. 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."
The Biden administration recognizes the challenge that a shortfall of PV components poses to its goal to decarbonize the electricity industry. That's why it recently invoked a Korean War-era law to step up investment in domestic clean energy manufacturing. For more on that, see June 9, 2022 article - U.S. Invokes Korean War-Era Law to Boost Clean Energy.
According to Industrial Info's Global Marketing Intelligence (GMI) Power Project Database, there are about 1,101 active solar projects across North America that are scheduled to begin construction between January 2022 and December 2023. The aggregate value of those projects is about $185.8 billion.
The U.S. states with the largest dollar-value of solar projects scheduled to begin construction over that two-year period are Texas, Nevada, California, Ohio and Arizona.
Click on the image at right to see the states or provinces in North America with the largest value of active solar projects.
But rising costs--for materials, labor and transportation--have caused numerous proposed solar projects to be canceled or placed on hold in recent months. According to IIR's database platform, approximately 181 solar projects valued at $22.9 billion that were scheduled to begin construction between January 2022 and December 2023 have been canceled or delayed. Some may return to active status once problems with costs and supply chains are fixed. For more on the delay in completing renewable energy projects, see April 21, 2022, article - Renewable Power Project Completions Slow Sharply in U.S.
China's government policies have shaped global supply, demand and price of PV components over the last decade, the IEA report noted: "Chinese industrial policies focusing on solar PV as a strategic sector and on growing domestic demand have enabled economies of scale and supported continuous innovation throughout the supply chain. These policies have contributed to a cost decline more than 80%, helping solar PV to become the most affordable electricity generation technology in many parts of the world."
However, these policies also have led to global "supply-demand imbalances in the PV supply chain," the report noted. "Global capacity for manufacturing wafers and cells, which are key solar PV elements, and for assembling them into solar panels (also known as modules), exceeded demand by at least 100% at the end of 2021. By contrast, production of polysilicon, the key material for solar PV, is currently a bottleneck in an otherwise oversupplied supply chain. This has led to tight global supplies and a quadrupling of polysilicon prices over the last year."
Click on the image at right to see a graphic on global PV manufacturing, demand and average module selling price between 2010 and 2022.
In 2010, China had varying levels of market share for four of the stages of PV manufacturing: polysilicon, wafers, cells and modules. But currently, China has a dominant share of all four stages. And while domestic demand has soaked up some of China's PV manufacturing capacity, the IEA report pointed out that more than half of China's PV goods goes abroad--chiefly to the Europe and North America.
Click on the image at right to see a bar chart on how PV manufacturing capacity has shifted since 2010.
One reason why China has gained so much market share in the PV manufacturing business is that PV manufacturing is an energy-intensive process, and Chinese manufacturers make their product using large volumes of coal-fired electricity, which is subsidized.
The PV supply-chain report said that meeting international energy and climate goals requires the global deployment of solar PV "to grow 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. Annual solar PV capacity additions need to more than quadruple to 630 gigawatts (GW) by 2030 to be on track with the IEA's Roadmap to Net Zero Emissions by 2050. Global production capacity for polysilicon, ingots, wafers, cells and modules would need to more than double by 2030 from today's levels." For more on the IEA's net-zero emissions scenario, see May 24, 2021, article - IIR Energy Analysts Question Feasibility of IEA Roadmap to Net-Zero Emissions.
The Paris-based energy agency proposes five clusters of key policy actions that nations need to take to ensure security of supply for PV solar components. These clusters of policy actions, all of which have separate sub-steps, are:
In this case, the industry is solar photovoltaics (PV), and the country is China.
The IEA's first-ever report on the global PV industry supply chain, Special Report on Solar PV Global Supply Chains, released July 7, shows the potential perils of pure free-market capitalism for the PV industry, which is confronting Chinese domination of most phases of the PV supply chain. As a result, the energy agency warns that the road to net-zero carbon emissions now necessarily goes through Beijing.
The report begins on an ominous note: "Global solar PV manufacturing capacity has increasingly moved from Europe, Japan and the United States to China over the last decade. China has invested over $50 billion in new PV supply capacity--10 times more than Europe--and created more than 300,000 manufacturing jobs across the solar PV value chain since 2011."
"Today, China's share in all the manufacturing stages of solar panels (such as polysilicon, ingots, wafers, cells and modules) exceeds 80%. This is more than double China's share of global PV demand," demonstrating that much of the country PV manufacturing capacity is geared to export. In addition, the country is home to the world's top 10 suppliers of solar PV manufacturing equipment.
IEA Executive Director Fatih Biron said: "China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions. 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."
The Biden administration recognizes the challenge that a shortfall of PV components poses to its goal to decarbonize the electricity industry. That's why it recently invoked a Korean War-era law to step up investment in domestic clean energy manufacturing. For more on that, see June 9, 2022 article - U.S. Invokes Korean War-Era Law to Boost Clean Energy.
According to Industrial Info's Global Marketing Intelligence (GMI) Power Project Database, there are about 1,101 active solar projects across North America that are scheduled to begin construction between January 2022 and December 2023. The aggregate value of those projects is about $185.8 billion.
The U.S. states with the largest dollar-value of solar projects scheduled to begin construction over that two-year period are Texas, Nevada, California, Ohio and Arizona.
But rising costs--for materials, labor and transportation--have caused numerous proposed solar projects to be canceled or placed on hold in recent months. According to IIR's database platform, approximately 181 solar projects valued at $22.9 billion that were scheduled to begin construction between January 2022 and December 2023 have been canceled or delayed. Some may return to active status once problems with costs and supply chains are fixed. For more on the delay in completing renewable energy projects, see April 21, 2022, article - Renewable Power Project Completions Slow Sharply in U.S.
China's government policies have shaped global supply, demand and price of PV components over the last decade, the IEA report noted: "Chinese industrial policies focusing on solar PV as a strategic sector and on growing domestic demand have enabled economies of scale and supported continuous innovation throughout the supply chain. These policies have contributed to a cost decline more than 80%, helping solar PV to become the most affordable electricity generation technology in many parts of the world."
However, these policies also have led to global "supply-demand imbalances in the PV supply chain," the report noted. "Global capacity for manufacturing wafers and cells, which are key solar PV elements, and for assembling them into solar panels (also known as modules), exceeded demand by at least 100% at the end of 2021. By contrast, production of polysilicon, the key material for solar PV, is currently a bottleneck in an otherwise oversupplied supply chain. This has led to tight global supplies and a quadrupling of polysilicon prices over the last year."
In 2010, China had varying levels of market share for four of the stages of PV manufacturing: polysilicon, wafers, cells and modules. But currently, China has a dominant share of all four stages. And while domestic demand has soaked up some of China's PV manufacturing capacity, the IEA report pointed out that more than half of China's PV goods goes abroad--chiefly to the Europe and North America.
One reason why China has gained so much market share in the PV manufacturing business is that PV manufacturing is an energy-intensive process, and Chinese manufacturers make their product using large volumes of coal-fired electricity, which is subsidized.
The PV supply-chain report said that meeting international energy and climate goals requires the global deployment of solar PV "to grow 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. Annual solar PV capacity additions need to more than quadruple to 630 gigawatts (GW) by 2030 to be on track with the IEA's Roadmap to Net Zero Emissions by 2050. Global production capacity for polysilicon, ingots, wafers, cells and modules would need to more than double by 2030 from today's levels." For more on the IEA's net-zero emissions scenario, see May 24, 2021, article - IIR Energy Analysts Question Feasibility of IEA Roadmap to Net-Zero Emissions.
The Paris-based energy agency proposes five clusters of key policy actions that nations need to take to ensure security of supply for PV solar components. These clusters of policy actions, all of which have separate sub-steps, are:
- Diversify manufacturing and raw material supplies
- De-risk investment
- Ensure environmental and social sustainability
- Continue to foster innovation, and
- Develop and strengthen PV recycling capabilities
