Diversifying Global Production of Solar Modules Essential for Net-Zero Transition

IEA says China’s dominance in all the key manufacturing stages of solar panels is a concern


Ensuring a secure transition to net-zero emissions will require increased efforts to expand and diversify the global production of solar modules, whose global supply chains are currently heavily concentrated in China, according to a special report published by the International Energy Agency (IEA).

The report examines solar PV supply chains from raw materials to the finished product, covering energy consumption, emissions, employment, production costs, investment, trade, and financial performance.

China’s share in all the key manufacturing stages of solar panels exceeds 80% today. IEA finds that regarding key elements, including polysilicon and wafers, China’s share is set to rise to more than 95% in the coming years, based on the current manufacturing capacity under construction.

Chinese industrial and innovation policies focused on expanding solar panel production and markets have helped solar PV become the most affordable electricity generation technology in many parts of the world. However, according to IEA, this has also led to imbalances in solar supply chains.

“China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions,” said Fatih Birol, Executive Director of IEA. “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 worldwide will put further strain on these supply chains to meet growing demand. However, this also offers opportunities for other countries and regions to help diversify production and make it more resilient.”

Meeting international energy and climate goals requires the global deployment of solar modules 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.

As per the report, annual additions of solar capacity to electricity systems worldwide need to 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 double by 2030 from today’s levels, and existing production facilities would need to be modernized.

Governments and other stakeholders worldwide 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.

The report finds, for example, that the electricity-intensive manufacturing of solar modules is mainly powered by fossil fuels today because of the prominent role of coal in China, where production is concentrated. However, these modules only need to operate for four to eight months to offset their manufacturing emissions. This brief payback period compares with the average solar module lifetime of around 25 to 30 years.

The report concludes that increasing decarbonization of electricity supplies and greater diversification of solar module supply chains should help reduce this footprint in the future.

According to an earlier IEA report, clean energy investment is likely to exceed $2.4 trillion in 2022, accounting for almost three-quarters of the growth in overall energy investment. However, almost half the additional $200 billion in capital investment in 2022 will likely be consumed by higher costs rather than bringing additional energy supply capacity or savings.

Renewable capacity addition in 2022 is expected to grow by 8% and breach the 300 GW mark for the first time. Solar is expected to account for 60% of the increase in global renewable capacity this year with new installations of 190 GW, a 25% increase from last year.