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The pandemic brought to light how fragile our global supply chain is. Between bare grocery shelves, a lack of COVID-19 protection equipment and delayed solar projects, no industry has been left untouched. Risks to the solar supply chain in particular are compounded by the overconcentration of the industry in China. Many have reported on the high levels of carbon pollution, labor issues, and supply bottlenecks associated with the Chinese industry, all of which threaten the rate of solar deployment and the global transition to clean energy

Overconcentration of solar manufacturing in China presents significant risk

Through national policy, China has come to dominate solar manufacturing across the supply chain in the last decade. Chinese manufacturers make about three quarters of the solar panels we use in the US today, and they have almost total control over some critical components of the supply chain. This gives them extensive influence over our fastest growing energy source and has exposed us to the deeply unsustainable practices in Chinese solar manufacturing. We are buying tainted solar.

Unless we make changes in the solar supply chain, embodied carbon emissions from solar PV manufacturing are forecasted to rise to almost 2 gigatons of CO2e annually by 2040, with cumulative emissions of some 14-18 gigatons CO2e over that period, primarily in China. This rivals the emissions of the global aluminum industry, currently the 4th largest industrial commodity emitter.

Clean Energy Buyers Institute (CEBI) is a group of clean energy experts, researchers, large energy customers, clean energy providers, NGOs, and philanthropies coming together to accelerate customer-driven clean energy for all. The CEBI Decarbonizing Industrial Supply Chain Energy (DISC-e) Low-carbon Solar Initiative provides educational tools to optimize the environmental impact of new solar installations.

Meeting growing global demand for solar energy requires a global expansion of solar manufacturing capacity, and we have a unique opportunity to influence how clean that growth is. That will mean expansion in low-carbon economies like the US and EU, and a clear demand signal from solar buyers for better solar will play a key role.

Where are we today? While China dominates solar manufacturing, there is meaningful production capacity elsewhere, with a much smaller carbon footprint and more sustainable manufacturing practices. Solar manufacturing starts with polysilicon, the semiconductor at the heart of PV. There is low-carbon “poly” production capacity in the US and EU equivalent to their current solar demand, and clean poly production is growing in Malaysia.

The next step is solar wafers. This is where China really has a near stranglehold, but even that is changing. EU wafer producers are looking to expand, wafer capacity is growing in Vietnam, companies are eyeing investment opportunities in the US, and innovative companies are perfecting technologies that will make wafer manufacturing cleaner and cheaper. Once you have a wafer it becomes the basis for solar cells. We are seeing cell manufacturing restart in the US and expand in the EU and southeast Asia. Cells are the basis for PV modules, and PV module production is expanding globally including in the US, the EU, Mexico, SE Asia, Turkey and elsewhere. It is on track to double in the US alone by 2024. While it will still be shy of US demand, it is more growth than we have seen in a long time – the trend is positive. And India is on track to develop a massive solar manufacturing base across the entire supply chain in coming years.

This is a decent starting point. We are seeing a more sustainable, resilient solar supply chain begin to emerge in response to the risks inherent in the current system. How do we accelerate this growth? Market signals and policy.

Buyers play a significant role in this better supply chain by sending a clear market signal

Solar purchasers have unique agency in this matter. Purchasers can protect their climate and ESG goals by sending a strong demand signal for better solar to the marketplace. Clear demand for sustainable, low-carbon sourced solar will significantly de-risk investments in solar manufacturing in clean economies like the US. That’s how market economies work – demand a better product and someone will make it.

A new tool is under development that will make it easy for solar purchasers to send that market signal and have confidence that they are sourcing sustainable solar. The Global Electronics Council is adding criteria for embodied carbon to its Type I EPEAT PV sustainability ecolabel, providing a simple and convenient tool for solar purchasers on future projects and PPAs. EPEAT ecolabels are already used in the private and public sectors globally to simplify the sourcing of billions of dollars of sustainable electronics products annually. The low-carbon EPEAT PV ecolabel will be available later in 2022. Until then solar buyers can begin to assess the low-carbon solar market simply by asking suppliers for information regarding the carbon footprint of their modules – data they likely have from complying with regulatory programs in France and South Korea. Even that “ask” will send a powerful market signal.

Policy can help

The Indian government has launched an ambitious and successful Production Linked Incentive scheme to expand solar manufacturing across the solar supply chain. Their current program will add on the order of 19GW of polysilicon manufacturing, 32GW of wafer production and 54.8GW of cells and module capacity. This would allow India to both meet domestic demand and export solar products, and the Indian government is looking to expand the program. In Europe, manufacturers and governments are eyeing 100GW capacity in the solar value chain by 2030.

The US Congress has before it the Solar Energy Manufacturing for America (SEMA), a production tax credit approach very similar to the Indian government’s program. It would create incentives for significant investments in establishing and expanding US solar manufacturing capacity. The Federal Government has also recognized that it has a role in sending clear signals with its purchasing power and has both issued an Executive Order and established a Buy Clean Task Force to make that happen.

Myths about cost

Now, let’s talk about cost. There is a lot of chatter about how the US can’t compete with China. Like much chatter, there is more than meets the eye. The cost of solar panels has dropped 90% since 2009, and multiple solar panel manufacturers are expanding in the US. We are seeing investments throughout the solar supply chain in the US, including polysilicon and its raw material supplies, solar cells and modules, solar glass, materials like encapsulants and metallization pastes used in modules, solar racking and so-called “balance of system” components. Major solar buyers like Lightsource bp are placing multi-gigawatt long term orders with US solar panel producers. Either there are a lot of naive companies in the solar sector, or US manufacturing competitiveness is being undersold.

And solar panels represent less than ½ the cost of a solar system. While there is innovation underway to reduce these other costs, they so far have fallen much more slowly than module costs. The Willie Sutton principle suggests more focus on these costs and less on pennies per watt in modules, because that’s where the money is. Rather than wonder about theoretical cost differences, buyers should simply ask their suppliers: “What is the price and embodied carbon of your modules?” Get some real data and let the market know it matters.

Our solar future requires a better supply chain with a more reliable supply of sustainably manufactured panels. Buyers, policy makers and manufacturers all have roles to play — and they’re stepping up to the plate. A better solar supply chain is emerging. Now let’s turbo charge it and secure our solar future.