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Solar crossroad

The solar industry finds itself at an intriguing crossroads in 2021. There is an urgent need to accelerate PV industry expansion to set economies on the path to net zero emissions by 2050, but supply chains have been jolted this year and last.


The reasons for the supply disruption are numerous. Supply chains were shaken up by the global Covid-19 pandemic, sending commodity and shipping prices surging, and accusations of forced labor in the Xinjiang region of China cast a shadow over module shipments, some of which have now been seized by border officials in the United States.


The result has been a rethink to the global PV supply chain as it relates to the key building block of the solar industry: solar modules. It’s not a new discussion, and not the first over the last decade in which the modern PV industry emerged, a decade that has seen trade disputes as to the dumping of modules, Intellectual Property (IP) disputes, not to mention the various tariffs and duties implemented in one market and having knock-on effects for many others.


And yet, such trade barriers and protectionist measures had little impact on the rise of China’s solar manufacturers, or Chinese subsidiary operations in Southeast Asia. These manufacturers produce the vast bulk of solar wafers, cells and modules, with the exception of a handful of non-Chinese manufacturers, such as Hanwha Q Cells, First Solar, LG and SunPower subsidiary Maxeon.


Chinese quality and efficiency


In noting China’s manufacturing dominance in solar, however, it should be added that the rapidly industrialized country's PV manufacturers have played a key role in the growth of the solar industry – to the point where solar is the cheapest form of new generation capacity in many parts of the world. Moreover, Chinese PV producers have rightfully shed the tag of being low-cost and low-quality producers. The coordinated endeavor of the Chinese solar industry to produce good PV for ever-declining prices has been exceptional.


But since major markets like Europe, the U.S. and the Asia Pacific source PV modules from China’s enormous volume, supply chains are long and exposed to disruption – as the Covid-19 pandemic has made clear. For items such as consumer electronics this is already challenging, but for a strategic good, like energy, governments get involved.


What is more, the mounting accusations of forced labor being used in the Xingjiang region may prove pivotal to the solar industry’s development. The accusations are particularly biting for polysilicon producers – polysilicon is the feedstock for every crystalline silicon PV module. Such accusations are difficult to prove, but equally difficult to disprove. This is because polysilicon from different sources can be blended before the wafers are made into cells, and finally modules. Though it is not yet clear how this proxy trade war between the U.S. and China will turn out, it is clear that a lack of transparency in supply chains needs to be addressed.


Whatever the case, modules suspected of forced labor involvement, rightful or not, have not been released for import into the U.S., and other developed PV markets are considering similar sanctions.


The way forward


Nevertheless, the concatenation of circumstances over the last two years has prompted calls for the major markets of Europe and the U.S. to re-establish domestic PV module and cell production industries. Spain, Germany, the U.S. and Japan were all leading PV producers in the early years– from the late 1990s to the early 2010s. But as Chinese solar manufacturing grew these producers declined in competitiveness.


This leaves the PV industry at a critical juncture, but which direction it will take is entirely unclear. As noted, tariffs and trade barriers have proven largely ineffectual in protecting European and U.S. manufacturers in the past and are likely to only slow solar’s growth if reintroduced on a widespread basis. On the other hand, national governments appear reluctant to provide the significant subsidies that could see European or U.S. manufacturers scale to the multiple gigawatt size required to take on Chinese competitors.


However, some non-Chinese PV manufacturers are seizing on the opportunity. U.S. thin film PV producer First Solar is expanding its manufacturing facilities in Ohio and recently announced plans to build a 3.3 GW production facility in India – a country that will put tariffs on Chinese PV cells and modules next year, to protect its domestic producers. And in Europe, former production equipment producer Meyer Burger is building the first phase of its eventual gigawatt-scale PV cell and module facilities in Germany.


While notable, these plans are a mere drop on the ocean when compared to the 10-20 gigawatt plans regularly announced by Chinese producers. It is difficult to imagine a solar industry without the might, innovation and relentless pursuit of cost reductions that the Chinese industry exemplifies.


Perhaps the solution is for policymakers to clear the way for solar developers and installers to ramp up their activities across all PV market segments, including the niches which are only becoming more important as countries struggle with hard to decarbonize industries. T


his could provide a range of opportunities for suppliers of high-tech, high efficiency PV modules for rooftops, floating PV, agri-PV, BIPV and even vehicle integrated applications. At the same time it would allow large scale developers to construct PV power plants of all sizes with more cheap-but-effective modules. The added benefit of the “PV floodgates” approach is the acceleration of the transition to net zero – a goal to which we can all subscribe.

While notable, these plans are a mere drop on the ocean when compared to the 10-20 gigawatt plans regularly announced by Chinese producers. It is difficult to imagine a solar industry without the might, innovation and relentless pursuit of cost reductions that the Chinese industry exemplifies.

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