Evidence grows that global solar supply chains are diversifying

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Evidence grows that global solar supply chains are diversifying


Heliene's heterojunction solar cell module manufacturing facility in Riviera Beach, Florida (Courtesy: Heliene)

More than a year after global solar energy markets were rocked by allegations of forced labor’s use in parts of in China, evidence is mounting that supply chains are diversifying away from those conflict regions.

The shift is being aided in part by growing global demand for solar energy equipment. New sources of supply across the entire solar production supply chain are being added, offering alternatives to solar developers in the U.S. and elsewhere.

“We are seeing a supply chain realignment,” said Michael Parr, executive director of the U.S.-based Ultra Low-Carbon Solar Alliance (ULCSA). “The pace has been faster than expected.”

For example, in late December Swiss-based Meyer Burger said it would locate a manufacturing facility in Goodyear, Arizona, with an initial production capacity of 400 MW by the end of 2022. The facility could scale to 1.5 GW over time and will produce modules for residential and commercial rooftop installations as well as utility-scale projects.

In announcing the U.S. expansion, Ardes Johnson, president of Meyer Burger Americas, said “it is critical for the U.S. to develop its domestic supply chain and de-risk itself from heavy dependence on Asia.”

And in August, Arizona-based First Solar, Inc. broke ground on its third manufacturing facility in Ohio. The 3.3 GWDC facility is scheduled to start operations in the first half of 2023, and represents a $680 million investment. When fully operational, the facility is expected to scale the company’s Northwest Ohio footprint to a total annual capacity of 6 GWDC, which the company said would make it one of the largest fully vertically integrated solar manufacturing complexes outside China.

Chinese manufacturing commands a market share that would have been the envy of OPEC producers during the height of their influence over global oil markets. A recent report from ULCSA pegged China’s total production capacity in 2020 at around 400 GW, dwarfing the roughly 39 GW of capacity in Europe and North American combined.

The report said that Chinese producers hold 83% of global capacity for polysilicon production, 96% for wafers, 79% for cells, and 70% for modules.

Parr said that as global manufacturing capacity grows, supplies of low-carbon solar modules produced both in China as well as in India, Europe, and North America should be able to meet U.S. and European demand by the middle of the decade.

He said that “significant” capacity growth is taking place outside of China in part because the Beijing government has become more market intrusive. He said the Chinese central government will likely be the biggest hurdle as producers seek to decouple supply chain ties with the Xinjiang region, which is at the heart of forced labor allegations.

The United States and many European countries have identified the region as a source of forced labor by the ethnic Uighur minority. Last June, the U.S. imposed import trade restrictions on goods–including solar modules–that are produced in the region. The U.S. action was based in part on anti forced-labor laws that date from the 1930s.

In late December, President Joe Biden signed into law a bill that bans the import of a range of goods, including solar modules, produced by Uyghur slave labor. The Uyghur Forced Labor Prevention Act bans all imports from China’s Xinjiang region into the United States unless companies can show the U.S. government “clear and convincing evidence” that their supply chains have not used the labor of ethnic Muslims enslaved in Chinese camps.

Beijing has denied the existence of forced labor and has enacted legislation that punishes domestic companies that cooperate with efforts by U.S. importers and others to comply with tracing protocols.

The ongoing trade dispute with China, along with pandemic-related logistical challenges, price increases in the solar supply chain, and the Senate’s failure to pass the Biden administration’s Build Back Better legislation, led the Solar Energy Industries Association (SEIA) and Wood Mackenzie in December to cut their forecast for solar installations in 2022. The two said in their U.S. Solar Market Insight report that deployments this year could be 7.4 GW (25%) lower than what previous forecasts had expected.

SEIA president and CEO Abigail Ross Hopper tied much of the U.S. solar sector’s fortunes to the legislation, saying in a statement released along with the forecast, “We must pass the Build Back Better Act to create quality American jobs, drive transformative solar and storage growth, and overcome supply chain bottlenecks.”

With action on the wide-ranging Build Back Better bill stalled due to objections by Sen. Joe Manchin (D-WV), efforts are under way to craft one or more smaller bills that could include clean energy provisions.

Parr said in an interview with Renewable Energy World that deployments in the range of 20-22 GW of capacity are likely this year. An emerging worry early in 2022 is the extent to which the Omicron variant of the Covid-19 virus will impact China, and the variant’s ability to disrupt manufacturing and exports alike.

Supply chain worries were confirmed in part by a report from analyst firm IHS Markit, which said that the “highly synchronized global supply chain system developed over the past 30 years is under strain like never before.” The firm said that resolving the disruption will likely run well into 2022.

IHS Markit said that while COVID-19 has been a “significant factor” in driving the disruptions—with the current Omicron variant creating new uncertainties—it is not the only factor. Substantial capacity, logistical and labor challenges also exist beyond the pandemic.

But a recent report by the Ultra Low-Carbon Solar Alliance found that since mid-2021 nearly 15 GW of added solar manufacturing capacity has been announced. Among the capacity additions:

First Solar announced financing for a 3.3 GW capacity plant in India, a rapidly expanding market.

Conglomerate Reliance acquired REC Group with plans to expand manufacturing operations in India.

Hanwha invested in REC Silicon to enable the restart of REC Silicon’s Moses Lake, Washington, polysilicon plant. In announcing the investment, REC Silicon said that “a U.S. value chain for solar PV manufacturing will result in the creation of demand for solar grade polysilicon” the company said it could produce at its Moses Lake site.

The new announcements offer tangible evidence that after a decade of concentrating production capacity in low-cost China, the solar sector is wiling both to shorten and de-risk its supply chains. Without naming specific companies, Parr said that at least two major U.S. electric utilities have expressed an interest in specifying low-carbon solar modules in future requests for proposals.

Manufacturing capacity expansions both in Europe and the U.S. help to shorten supply chains, reduce carbon emissions from shipping, and end import risks due to forced labor enforcement actions.

 

Another benefit would flow from locating manufacturing closer to innovation centers in the U.S. and Europe. And, Parr said that some utilities may go so far as investing directly in the manufacturing supply chain as they work to meet renewable energy mandates that, for now at least, continue to face multiple challenges.