China’s dominance in the worldwide solar panel supply chain could inhibit a faster transition cleaner energy, as stated by the International Energy Agency.
The first IEA report to address the issue found that China has a greater share of the manufacturing stages of solar panels, including the production of polysilicon and the actual panels. It could even reach 95% by 2025. The report stated that the world would almost entirely rely on China to supply key building blocks for solar panel production. “This concentration in any global supply chains would be a significant vulnerability.” The agency’s report stated that panel prices have risen by 20% over the past year due to high commodity prices and bottlenecks in the supply system. This has caused delays in delivery around the globe. Fatih Birol (head of the IEA), stated that the report was made to “underline this critical weakness in the solar PV supply chains, and to call for governments to diversify, to reduce supply chain vulnerabilities.”
Concentrated solar panel supply chains in China pose risks that are not just geopolitical. It could cause major fires. Floods can also occur. Birol stated that disruptions to the solar PV supply chain could have huge consequences for our clean energy transition, and energy security. The IEA scenario for a world with net zero emissions by 2050 includes solar energy as a key component. This energy source will account for 33% of the global electricity generation. The European Union is pressingly requiring a faster shift to solar energy. It is also facing the challenge of reducing its dependence on Russian gas. The “RePowerEU” plan of the bloc aims to have more than 320GW solar PV installed by 2025 and nearly 600GW by 2030. The US solar industry is offered a relief by Recommended Energy Source Biden Premium content Birol previously stated to the Financial Times that Europe must prepare for a complete shutdown of Russian gas exports. Birol stated that countries and groups like the EU need to create their own investment policies to encourage investment in solar panel manufacturing. According to the IEA chief, China has a significant advantage in solar panel manufacturing due to its lower labor and energy costs.
Birol stated that tax incentives for manufacturers and the construction of a manufacturing plant in clusters to lower land costs could be implemented to give China a competitive advantage over low-cost manufacturing. Report also stated that 40% of global polysilicon production was concentrated in China’s Xinjiang Province. China has been accused of widespread human rights violations in China, and the US began imposing a ban on imports from that region, including solar panels materials, in June. Although the report didn’t mention forced labor in Xinjiang it stated that the world must “enhance international cooperation on creating clear standards, taking into consideration environmental and social sustainability criteria.”
