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IEA: imbalances in solar PV supply chains slow down the energy transition

Ensuring a secure transition to net-zero emissions will require increased efforts to expand and diversify the global production of solar panels whose global supply chains are currently heavily concentrated in China, the International Energy Agency (IEA) said in a new special report on Solar PV Global Supply Chains.

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, this has also led to imbalances in solar PV supply chains. China’s share in all the key manufacturing stages of solar panels exceeds 80 per cent today, according to the report and for key elements including polysilicon and wafers, this is set to rise to more than 95 per cent in the coming years, based on current manufacturing capacity under construction.

“China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions,” said IEA Executive Director Fatih Birol. “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.”

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. For example, annual additions of solar PV capacity to electricity systems around the world need to more than 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 more than double by 2030 from today’s levels and existing production facilities would need to be modernised.

“As countries accelerate their efforts to reduce emissions, they need to ensure that their transition towards a sustainable energy system is built on secure foundations,” Dr Birol said. “Solar PV’s global supply chains will need to be scaled up in a way that ensures they are resilient, affordable and sustainable.”

Governments and other stakeholders around the world 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 per cent 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 IEA special report argues that these challenges call for even greater attention and efforts by policymakers going forward. 

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