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Special Report

on Solar PV Global

Supply Chains

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies that

will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

10 association

countries and beyond.

Please note that this

publication is subject to

specific restrictions that limit

its use and distribution. The

terms and conditions are

available online at

www.iea.org/t&c/

This publication and any

map included herein are

without prejudice to the

status of or sovereignty over

any territory, to the

delimitation of international

frontiers and boundaries and

to the name of any territory,

city or area.

Source: IEA. All rights

reserved.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

INTERNATIONAL ENERGY

AGENCY

Special Report on Solar PV Global Supply Chains Abstract

Abstract

Solar PV is a crucial pillar of clean energy transitions worldwide, underpinning

efforts to reach international energy and climate goals. Over the last decade, the

amount of solar PV deployed around the world has increased massively while its

costs have declined drastically. Putting the world on a path to reaching net zero

emissions requires solar PV to expand globally on an even greater scale, raising

concerns about security of manufacturing supply for achieving such rapid growth

rates – but also offering new opportunities for diversification.

This special report examines solar PV supply chains from raw materials all the way

to the finished product, spanning the five main segments of the manufacturing

process: polysilicon, ingots, wafers, cells and modules. The analysis covers supply,

demand, production, energy consumption, emissions, employment, production

costs, investment, trade and financial performance, highlighting key vulnerabilities

and risks at each stage. Because diversification is one of the key strategies for

reducing supply chain risks, the report assesses the opportunities and challenges

of developing solar PV supply chains in terms of job creation, investment

requirements, manufacturing costs, emissions and recycling. Finally, the report

summarises policy approaches that governments have taken to support domestic

solar PV manufacturing and provides recommendations based on those.

/126

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SpecialReportonSolarPVGlobalSupplyChainsTheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,10associationcountriesandbeyond.Pleasenotethatthispublicationissubjecttospecificrestrictionsthatlimititsuseanddistribution.Thetermsandconditionsareavailableonlineatwww.iea.org/t&c/Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.Allrightsreserved.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:ArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandINTERNATIONALENERGYAGENCYSpecialReportonSolarPVGlobalSupplyChainsAbstract3AbstractSolarPVisacrucialpillarofcleanenergytransitionsworldwide,underpinningeffortstoreachinternationalenergyandclimategoals.Overthelastdecade,theamountofsolarPVdeployedaroundtheworldhasincreasedmassivelywhileitscostshavedeclineddrastically.PuttingtheworldonapathtoreachingnetzeroemissionsrequiressolarPVtoexpandgloballyonanevengreaterscale,raisingconcernsaboutsecurityofmanufacturingsupplyforachievingsuchrapidgrowthrates–butalsoofferingnewopportunitiesfordiversification.ThisspecialreportexaminessolarPVsupplychainsfromrawmaterialsallthewaytothefinishedproduct,spanningthefivemainsegmentsofthemanufacturingprocess:polysilicon,ingots,wafers,cellsandmodules.Theanalysiscoverssupply,demand,production,energyconsumption,emissions,employment,productioncosts,investment,tradeandfinancialperformance,highlightingkeyvulnerabilitiesandrisksateachstage.Becausediversificationisoneofthekeystrategiesforreducingsupplychainrisks,thereportassessestheopportunitiesandchallengesofdevelopingsolarPVsupplychainsintermsofjobcreation,investmentrequirements,manufacturingcosts,emissionsandrecycling.Finally,thereportsummarisespolicyapproachesthatgovernmentshavetakentosupportdomesticsolarPVmanufacturingandprovidesrecommendationsbasedonthose.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsAcknowledgements4Acknowledgements,contributorsandcreditsThisstudywaspreparedbytheRenewableEnergyDivisionintheDirectorateofEnergyMarketsandSecurity.ItwasdesignedanddirectedbyHeymiBahar,SeniorAnalyst.Thereportbenefitedfromanalysis,draftingandinputfrommultiplecolleagues.Theauthorsofthereportwere,YasminaAbdelilah,HeymiBahar,FrançoisBriens,PiotrBojek,TrevorCriswell,KazuhiroKurumi,JeremyMoorhouse,GreciaRodríguezandKartikVeerakumar.Thereportalsobenefitedfromanalysis,dataandinputfromYaebinKim.PaoloFrankl,HeadoftheRenewableEnergyDivision,providedstrategicguidanceandsignificantinputtothisworkandtorelevantmessaging.Valuablecomments,feedbackandguidancewereprovidedbyotherseniormanagementandnumerousothercolleagueswithintheIEA,inparticular,KeisukeSadamori,LauraCozzi,TimGould,TimurGülandMasatoshiSugiura.OtherIEAcolleagueswhohavemadeimportantcontributionstothisworkinclude:PeterLevi,AraceliFernadezPales,PraveenBains,OliviaChen,Davided’Ambrosio,PabloGonzalez,AshtaGupta,CésarAlejandroHernándezAlva,Tae-YoonKim,RebeccaMcKimm,RyszardPospiech,BrentWanner,DanielWetzel,BiqingYang,andErpuZhu.TimelydatafromtheIEAEnergyDataCentrewerefundamentaltothereport,withparticularassistanceprovidedbyPedroCarvalho,NickJohnstone,JulianPrime,RobertaQuadrelli,ArnauRisquezMartinandPouyaTaghavi-Moharamli.ThisworkbenefitedfromextensivereviewandcommentsfromtheIEAStandingGrouponLong-TermCo-operation,IEARenewableEnergyWorkingParty,membersoftheRenewableIndustryAdvisoryBoard(RIAB)andexpertsfromIEApartnercountriesandotherinternationalinstitutions.TheworkalsobenefitedfromfeedbackbytheIEACommitteeonEnergyResearchandTechnology.SpecialthanksgototheIEAPhotovoltaicPowerSystemsProgramme(PVPS)fortheirvaluablecontributionsandreviewcommentsespeciallyKrystaDummit,RolfIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsAcknowledgements5Frischknecht,ArnulfJaeger-Waldau,IzumiKaizuka,GaëtanMassonandDanielMugnier.ManyexpertsfromoutsideoftheIEAprovidedvaluableinputandreviewedthisreport.Theyinclude:Countries:Australia(CSIRO),Canada(NaturalResourcesCanada),EuropeanUnion(EuropeanCommission–JointResearchCenter),India(MinistryofNewandRenewableEnergy),Japan(MinistryofEconomy,TradeandIndustry),Switzerland(FederalOfficeofEnergy),Türkiye(MinistryofEnergyandNaturalResources),UnitedStates(DepartmentofEnergy).Otherorganisations:AmrockPtyLtd,BecquerelInstitute,BrunelUniversity,CouncilonEnergy,EnvironmentandWater(CEEW),Finance(CEF),FirstSolar,Enel,FraunhoferISE,InstituteofEnergyEconomicsJapan(IEEJ),InternationalRenewableEnergyAgency(IRENA),SolarPowerEurope,SPVMarketResearch,NationalRenewableEnergyLaboratory(NREL),NetEnergy,Soren,TheEnergyandResourceInstitute(TERI),Treeze,PLANAIR,RTSCorporation,UnitedNationsEconomicCommissionforEurope(UNECE),Wacker,WorldBank.TheauthorswouldalsoliketothankKristineDouaudforskilfullyeditingthemanuscriptandtheIEACommunicationandDigitalOffice,inparticular,JadMouawad,HeadofCDO,andJonCuster,AstridDumond,IsabelleNonain-Semelin,MerveErdil,JethroMullen,JuliePuech,RobStone,ThereseWalsh,andWonjikYanfortheirassistance.Questionsorcomments?PleasewritetousatIEA-REMR@iea.orgIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsTableofcontents6TableofcontentsExecutiveSummary.................................................................................................................7Backgroundandcoverage....................................................................................................13Chapter1–SolarPVmanufacturingtoday.........................................................................16Capacityandproduction.......................................................................................................16Trade.....................................................................................................................................29EquipmentforsolarPVmanufacturing.................................................................................34Energyconsumption.............................................................................................................36CO2emissions......................................................................................................................40Jobcreation...........................................................................................................................44Investment.............................................................................................................................47Financialperformance..........................................................................................................48References............................................................................................................................51Chapter2–SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions........................................................................................................54SolarPVsupplysecurityinthepursuitofnetzerotargets...................................................54VulnerabilitiesofthesolarPVsupplychain..........................................................................58References............................................................................................................................74Chapter3–ConsiderationsforPVsupplychaindiversification......................................77CO2emissionsandelectricityprices....................................................................................77Investmentcosts...................................................................................................................85Manufacturingcosts..............................................................................................................86Jobcreation...........................................................................................................................94End-of-lifemanagementandrecycling.................................................................................96References..........................................................................................................................101Chapter4–PolicystrategiesforsolarPVmanufacturingandrecycling......................103PolicyframeworkstopromotelocalsolarPVmanufacturing.............................................103Policyassessmentsforselectedcountries.........................................................................106PoliciestodevelopPVrecycling.........................................................................................115PolicyprioritiesforamoresecuresolarPVsupplychain..................................................117References..........................................................................................................................123IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsExecutivesummary7ExecutiveSummaryChinacurrentlydominatesglobalsolarPVsupplychainsGlobalsolarPVmanufacturingcapacityhasincreasinglymovedfromEurope,JapanandtheUnitedStatestoChinaoverthelastdecade.ChinahasinvestedoverUSD50billioninnewPVsupplycapacity–tentimesmorethanEurope−andcreatedmorethan300000manufacturingjobsacrossthesolarPVvaluechainsince2011.Today,China’sshareinallthemanufacturingstagesofsolarpanels(suchaspolysilicon,ingots,wafers,cellsandmodules)exceeds80%.ThisismorethandoubleChina’sshareofglobalPVdemand.Inaddition,thecountryishometotheworld’s10topsuppliersofsolarPVmanufacturingequipment.ChinahasbeeninstrumentalinbringingdowncostsworldwideforsolarPV,withmultiplebenefitsforcleanenergytransitions.Atthesametime,thelevelofgeographicalconcentrationinglobalsupplychainsalsocreatespotentialchallengesthatgovernmentsneedtoaddress.IEA.Allrightsreserved.GovernmentpoliciesinChinahaveshapedtheglobalsupply,demandandpriceofsolarPVoverthelastdecade.ChineseindustrialpoliciesfocusingonsolarPVasastrategicsectorandongrowingdomesticdemandhaveenabledeconomiesofscaleandsupportedcontinuousinnovationthroughoutthesupplychain.Thesepolicieshavecontributedtoacostdeclinemorethan80%,helpingsolarPVtobecomethemostaffordableelectricitygenerationtechnologyinmanypartsoftheworld.However,theyhavealsoledtosupply-demandimbalancesinthePVsupplychain.Globalcapacityformanufacturingwafersandcells,whicharekeysolarPVelements,andforassemblingthemintosolarpanels(alsoknownasmodules),exceededdemandbyatleast100%attheendof2021.Bycontrast,productionofpolysilicon,thekeymaterialforsolarPV,iscurrentlyabottleneckinanotherwiseoversuppliedsupplychain.Thishasledtotightglobalsuppliesandaquadruplingofpolysiliconpricesoverthelastyear.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsExecutivesummary8SolarPVproductsareasignificantexportforChina.In2021,thevalueofChina’ssolarPVexportswasoverUSD30billion,almost7%ofChina’stradesurplusoverthelastfiveyears.Inaddition,ChineseinvestmentsinMalaysiaandVietNamalsomadethesecountriesmajorexportersofPVproducts,accountingforaround10%and5%respectivelyoftheirtradesurplusessince2017.ThetotalvalueofglobalPV-relatedtrade–includingpolysilicon,wafers,cellsandmodules–exceededUSD40billionin2021,anincreaseofover70%from2020.Today,electricity-intensivesolarPVmanufacturingismostlypoweredbyfossilfuels,butsolarpanelsonlyneedtooperatefor4-8monthstooffsettheirmanufacturingemissions.Thispaybackperiodcompareswiththeaveragesolarpanellifetimeofaround25-30years.Electricityprovides80%ofthetotalenergyusedinsolarPVmanufacturing,withthemajorityconsumedbyproductionofpolysilicon,ingotsandwafersbecausetheyrequireheatathighandprecisetemperatures.Today,coalgeneratesover60%oftheelectricityusedforglobalsolarPVmanufacturing,significantlymorethanitsshareinglobalpowergeneration(36%).ThisislargelybecausePVproductionisconcentratedinChina–mainlyintheprovincesofXinjiangandJiangsuwherecoalaccountsformorethan75%oftheannualpowersupplyandbenefitsfromfavourablegovernmenttariffs.ContinuousinnovationledbyChinahashalvedtheemissionsintensityofsolarPVmanufacturingsince2011.Thisistheresultofmoreefficientuseofmaterialsandenergy–andgreaterlow-carbonelectricityproduction.Despitetheseimprovements,absolutecarbondioxide(CO2)emissionsfromsolarPVmanufacturinghavealmostquadrupledworldwidesince2011asproductioninChinahasexpanded.Nonetheless,solarPVmanufacturingrepresentedonly0.15%ofenergy-relatedglobalCO2emissionsin2021.Aspowersystemsacrosstheworlddecarbonise,thecarbonfootprintofPVmanufacturingshouldshrinkaccordingly.TransportingPVproductsaccountsforonly3%oftotalPVemissions.ConcentrationofPVsupplychainsbringsvulnerabilities,posingpotentialchallengesfortheenergytransitionMeetinginternationalenergyandclimategoalsrequirestheglobaldeploymentofsolarPVtogrowonanunprecedentedscale.Thisinturndemandsamajoradditionalexpansioninmanufacturingcapacity,raisingconcernsabouttheworld’sabilitytorapidlydevelopresilientsupplychains.AnnualsolarPVcapacityadditionsneedtomorethanquadrupleto630gigawatts(GW)by2030tobeontrackwiththeIEA’sRoadmaptoNetZeroEmissionsby2050.Globalproductioncapacityforpolysilicon,ingots,wafers,cellsandmoduleswouldneedtomorethandoubleby2030fromtoday’slevels.AscountriesacceleratetheireffortsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsExecutivesummary9toreduceemissions,theyneedtoensurethattheirtransitiontowardsasustainableenergysystemisbuiltonsecurefoundations.ForsolarPVsupplychainstobeabletoaccommodatetherequirementsofanetzeropathway,theywillneedtobescaledupinawaythatensurestheyareresilient,affordableandsustainable.TheworldwillalmostcompletelyrelyonChinaforthesupplyofkeybuildingblocksforsolarpanelproductionthrough2025.Basedonmanufacturingcapacityunderconstruction,China’sshareofglobalpolysilicon,ingotandwaferproductionwillsoonreachalmost95%.Today,China’sXinjiangprovinceaccountsfor40%globalpolysiliconmanufacturing.Moreover,oneoutofeverysevenpanelsproducedworldwideismanufacturedbyasinglefacility.Thislevelofconcentrationinanyglobalsupplychainwouldrepresentaconsiderablevulnerability;solarPVisnoexception.SolarPV’sdemandforcriticalmineralswillincreaserapidlyinapathwaytonetzeroemissions.TheproductionofmanykeymineralsusedinPVishighlyconcentrated,withChinaplayingadominantrole.Despiteimprovementsinusingmaterialsmoreefficiently,thePVindustry’sdemandformineralsissettoexpandsignificantly.IntheIEA’sRoadmaptoNetZeroEmissionsby2050,forinstance,demandforsilverforsolarPVmanufacturingin2030couldexceed30%oftotalglobalsilverproductionin2020–upfromabout10%today.Thisrapidgrowth,combinedwithlongleadtimesforminingprojects,increasestheriskofsupplyanddemandmismatches,whichcanleadtocostincreasesandsupplyshortages.Thelong-termfinancialsustainabilityofthesolarPVmanufacturingsectoriscriticalforrapidandcost-effectivecleanenergytransitions.ThenetprofitabilityofthesolarPVsectorforallsupplychainsegmentshasbeenvolatile,resultinginseveralbankruptciesdespitepolicysupport.Bankruptcyriskandlowprofitabilitycouldslowthepaceofcleanenergytransitionsifcompaniesareunwillingtoinvestbecauseoflowreturnsorareunabletowithstandsuddenchangesinmarketconditions.Traderestrictionsareexpanding,riskingslowerdeploymentofsolarPV.Astradeiscriticaltoprovidethediversematerialsneededtomakesolarpanelsanddeliverthemtofinalmarkets,supplychainsarevulnerabletotradepolicyrisks.Since2011,thenumberofantidumping,countervailingandimportdutiesleviedagainstpartsofthesolarPVsupplychainhasincreasedfromjust1importtaxto16dutiesandimporttaxes,with8additionalpoliciesunderconsideration.Altogether,thesemeasurescover15%ofglobaldemandoutsideofChina.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsExecutivesummary10DiversificationcanreducesupplychainvulnerabilitiesandoffereconomicandenvironmentalopportunitiesRecentdisruptionshaveraisedimportantsupplychainquestions.TheCovid-19crisis,recordcommoditypricesandRussia’sinvasionofUkrainehaveallfocusedattentiononthehighrelianceofmanycountriesonimportsofenergy,rawmaterialsandmanufacturinggoodsthatarekeytotheirsupplysecurity.Countriescanimproveresiliencebyinvestingtodiversifytheirmanufacturingandimports.NewsolarPVmanufacturingfacilitiesalongthesupplychaincouldattractUSD120billioninvestmentby2030.Annualinvestmentlevelsneedtodoublethroughoutthesupplychain.Criticalsectorssuchaspolysilicon,ingotsandwaferswouldattractthemajorityofinvestmenttosupportgrowingdemand.ThesolarPVindustrycouldcreate1300manufacturingjobsforeachgigawattofproductioncapacity.ThesolarPVsectorhasthepotentialtodoubleitsnumberofdirectmanufacturingjobsto1millionby2030.Themostjob-intensivesegmentsalongthePVsupplychainaremoduleandcellmanufacturing.Overthelastdecade,however,theuseofautomationandautomatedguidedvehicleshasincreasedlabourproductivity,therebyreducinglabourintensity.DiversificationofsupplychainsandthedecarbonisationofthepowersectorcouldrapidlyreducesolarPVmanufacturingemissions.DomesticmanufacturingcanreducemanufacturingCO2emissionsifthelocalelectricitymixislesscarbon-intensivethanintheexportingcountry.Europeholdsthehighestpotential,giventheconsiderablesharesofrenewablesandnuclearinitspowermixes,followedbycountriesinLatinAmericaandsub-SaharanAfricathathavestronghydropoweroutput.DiversifyingsolarPVsupplychainswillrequireaddressingkeychallengesCurrently,thecostcompetitivenessofexistingsolarPVmanufacturingisakeychallengetodiversifyingsupplychains.Chinaisthemostcost-competitivelocationtomanufactureallcomponentsofthesolarPVsupplychain.CostsinChinaare10%lowerthaninIndia,20%lowerthanintheUnitedStates,and35%lowerthaninEurope.Largevariationsinenergy,labour,investmentandoverheadcostsexplainthesedifferences.Still,intheabsenceoffinancialincentivesandmanufacturingsupport,thebankabilityofmanufacturingprojectsoutsideofpanelassemblyremainslimitedoutsideofChinaandfewcountriesinSoutheastAsia.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsExecutivesummary11Low-costelectricityiskeyforthecompetitivenessofthemainpillarsofthesolarPVsupplychain.Thediversificationofhighlyconcentratedpolysilicon,ingotandwafermanufacturingwouldprovidesecurity-of-supplybenefits.Electricityaccountsforover40%ofproductioncostsforpolysiliconandnearly20%foringotsandwafers.Around80%oftheelectricityinvolvedinpolysiliconproductiontodayisconsumedinChineseprovincesatanaverageelectricitypriceofaroundUSD75permegawatt-hour(MWh).Thisisalmost30%belowtheglobalindustrialpriceaverage.Maintainingcompetitivenessinthesesegmentsrequiresthatmanufacturershaveaccesstocomparableorlowerelectricitycosts.BuildingsolarPVmanufacturingaroundlow-carbonindustrialclusterscanunlockthebenefitsofeconomiesofscale.Solarpanelmanufacturerscanalsousetheirproductstogeneratetheirownrenewableelectricityonsite,therebyreducingbothelectricitybillsandemissions.Electricity-intensivesolarmanufacturingcouldbelocatednearemergingindustrialclusters(e.grenewable-basedhydrogen),enablingthemtobenefitfromcost-competitiverenewableelectricity.Meanwhile,economiesofscaleandverticalintegrationofmanufacturingcanreducevariablecostsandfurtherincreasecompetitiveness.RecyclingofsolarPVpanelsoffersenvironmental,socialandeconomicbenefitswhileenhancingsecurityofsupplyinthelongterm.Ifpanelsweresystematicallycollectedattheendoftheirlifetime,suppliesfromrecyclingthemcouldmeetover20%ofthesolarPVindustry’sdemandforaluminium,copper,glass,siliconandalmost70%forsilverbetween2040and2050intheIEA’sRoadmaptoNetZeroEmissionsby2050.However,existingPVrecyclingprocessesstruggletogenerateenoughrevenuefromtherecoveredmaterialstocoverthecostoftherecyclingprocess.GovernmentpoliciesarevitaltobuildamoresecuresolarPVsupplychainHighcommoditypricesandsupplychainbottlenecksledtoanincreaseofaround20%insolarpanelpricesoverthelastyear.Thesechallengeshaveresultedindelaysinsolarpaneldeliveriesacrosstheglobe.Globally,policiestosupportsolarPVtodatehavefocusedmostlyonincreasingdemandandloweringcosts.However,resilientandsustainablesupplychainsarealsoneededtoensurethetimelyandcost-effectivedeliveryofsolarpanelsworldwide.GovernmentsthereforeneedtoturntheirattentiontoensuringthesecurityofsolarPVsuppliesasanintegralpartofcleanenergytransitions.CountriesshouldconsiderassessingtheirdomesticsolarPVsupplychainvulnerabilitiesandrisks–anddevelopingstrategiesandactionstoaddressthem.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsExecutivesummary12TheIEA’sfivekeypolicyactionareastoensuresolarPVsecurityofsupply:Diversifymanufacturingandrawmaterialsupplies•MovesolarPVsupplychaindiversificationupthepolicyagendaasanintegralpartofadvancingcleanenergytransitions.•Considercraftinganindustrialpolicywhilemaintainingacommitmenttoprinciplesofopenandtransparentmarketsandavoidingbarrierstotrade.•ConsiderintegratingsolarPVmanufacturingfacilitiesinindustrialclusters,neartraditionalenergy-intensiveplantsorotherlargerrenewableelectricityconsumers(greenhydrogenorgreensteelconsortia)tohelpaggregatedemand.•DiversifyrawmaterialandPVimportroutestoreducesupplychainvulnerabilities.De-riskinvestment•Facilitateinvestmentinmanufacturing,e.g.throughfinanceandtaxpolicies,andothermeasurestode-riskPVmanufacturinginvestment.•Tailordemandsupportpolicies(e.g.auctions)inordertotakeintoaccountlong-termfinancialsustainabilityacrosssolarPVsupplychainsegments.•Encouragepublic-privatecollaborations,e.g.involvingresearchinstitutionsandlabs,andpubliccleanenergyfundingtocatalyseprivateinvestment.Ensureenvironmentalandsocialsustainability•Strengtheninternationalcooperationoncreatingclearandtransparentstandards,takingintoaccountenvironmentalandsocialsustainabilitycriteria.•Focusonskillsdevelopment,workerprotectionandsocialinclusionacrossthesolarPVsupplychain.Adoptpoliciespromotingemploymentstandardsandtransparencyinordertohelpimproveworkingconditions.•EnsurePVmanufacturingfacilitiesadoptlow-carbonandmaterial-efficientmanufacturingpractices.Continuetofosterinnovation•Expandresearchanddevelopmentfundswiththeaimoffurtherimprovingsolarcellconversionefficiencyandreducingrawmaterialuseandcosts.•Promotetechnologyinnovationinmanufacturingprocessesthatreducematerialintensity,especiallyforcriticalmineralssuchassilverandcopper.Developandstrengthenrecyclingcapabilities•Implementcomprehensiveregulatoryframeworkstodefinestakeholderresponsibilitiesandestablishminimumrequirementsforcollectionandrecycling.•SupporttechnologydevelopmenteffortsthatimproverecyclingprocessesaswellassolarPVpaneldesignforrecycling,reusabilityandgreaterdurability.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsBackgroundandcoverage13BackgroundandcoverageTwomaintechnologiescurrentlydominateglobalsolarPVmarketsandsupplychains:crystallinesilicon(c-Si)modulesaccountforover95%ofglobalproductionwhilecadmiumtelluride(CdTe)thin-filmPVtechnologymakesuptheremaining.1SolarPVmoduleproductionbytechnology,2011-2021IEA.Allrightsreserved.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Forc-Simodules,high-puritysiliconismanufacturedbypurifyingmetallurgical-grade(MG)siliconfromquartziteandquartzpebbleathightemperatures.High-purityorsolar-gradesiliconisthenfurtherpurified,mostoftenthroughtheSiemenschlorination(i.e.gasificationandchemicalvapourdeposition)process,oralternativelybyafluidisedbedreactor(FBR)oranupgradedmetallurgical-grade(UMG)siliconprocess.Next,purifiedsolar-gradesiliconiscrystallisedintomonocrystallinesiliconingotsthroughtheCzochralskiprocessorarecastintomulticrystallineingots,whicharethenslicedverythinlyandcleanedtoformwafers.Siliconwafersarethentransformedintosolarcellsusingmultiplemethods,dependingontheexactcelltechnology(atleast8stepsareinvolvedforheterojunctioncells,and11forTopCONcells).Stepsincludetexturing,cleaning,doping,etching,andprintingsilverpastemetalconnections.Thesolarcellsarethenarrangedonabacksheet,connected,andlaminatedwithanencapsulatingplastic1Afewotherthin-filmtechnologiesexist,suchasCIGS,a-SiandGaAscells,buttheydonotcurrentlyrepresentasignificantorgrowingmarketshareglobally,andsomehaveonlyveryspecificapplications(e.g.spatialforGaAs).0%10%20%30%40%50%60%70%80%90%100%02040608010012014016018020020112012201320142015201620172018201920202021GWMonocrystallinesiliconMulticrystallinesiliconThin-filmCrystallinesiliconshare(%)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsBackgroundandcoverage14material(mainlyethylenevinylacetate[EVA]orpolyolefinelastomers[POE]).Modulesareusuallycompletedwiththeadditionoffrontglass(aswellasbackandsideglass,dependingonthemodel),ajunctionboxandanaluminiumframe.CdTethin-filmPVtechnologydoesnotusepolysiliconasitsmainmaterial.Instead,theprocessstartsbyextractingandrefiningspecificminerals,inparticularcadmiumandtelluriumasby-productsofzincandcopperminingandrefining,andthenproceedstodepositaseriesofthinlayers(transparentconductiveoxide,anabsorberlayer,backcontact,etc.),eachafewmicrometresthick,onasubstrate,usuallyglass.Cellsarethendelimitedbylaserscribingoretchingbeforebeingencapsulated,framedandcovered.Bothsiliconandthin-filmmodulesrequireamountingstructure,cablesandinverterstobeconnectedtothegridtostartproducingelectricity.Simplifiedmanufacturingfromrawmaterialsforc-SiandCdTesolarPVsystemsIEA.Allrightsreserved.Thisreportcoversprimarilysupply,demand,production,energyconsumption,CO2emissions,jobs,manufacturingcosts,equipment,investment,tradeandfinancialperformanceforthefivemainsegmentsofsolarPVmanufacturing:polysilicon,ingots,wafers,cellsandmodules.Thekeyfocusisonc-Sitechnologiesbecauseoftheircurrentlyhighmarketshareandexpecteddominancethrough2030.CrystallinesiliconThin-film(CdTe)MineralextractionMineralextractionandrefiningSilica(SiO2):quartzite,quartzpebble,quartzveinCarbothermicreduction(carbonarcwelding[CAW]),removalofimpuritiesCellsBacksheet,contacts,encapsulation,glassandframeassemblyandsealing,junctionboxconnection,testingMetallurgical-gradesilicon(MG-Si>98%purity)HydrochlorationTrichlorosilanegas(HSiCl3)Silanegas(SiH4)SiemensprocessPolysilicon(6-13Npurity)Czochralski(CZ)processModuleMonocrystallinesiliconingotWafersSawingandslicingCleaning,texturing,doping(diffusion),etching,anti-reflectivecoatingdeposition,contactprintingandsintering,testingFluidisedbedreactor(FBR)Floatzone(FZ)techniqueMolding(heatexchangemethod/electro-magnetocasting/directionalsolidificationsystem),dopingMulticrystalline,mono-likeorquasi-monosiliconingotMounting,inverterconnection,connectiontothegridPVsystemCadmium(Cd),Tellurium(Te),etc.Depositionofatransparentconductingoxide(TCO)(e.g.fluorine-dopedtinoxideorindium-tinoxide)frontcontactlayeronasubstrate(e.g.glass,polymer)Definitionofcellsbylaserscribing,interconnectionbussingEncapsulation,electricalleadattachement,junctionboxconnection,testingDepositionofan-typecadmiumsulfide(CdS)bufferorwindowlayerDepositionofap-typecadminumtelluride(CdTe)absorberlayerDepositionofthebackcontactmetallayers(e.g.zinctelluride[ZnTe],molybdenum[Mo])Junction-activationheattreatmentCellsModuleMounting,inverterconnection,connectiontothegridPVsystemIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsBackgroundandcoverage15LifecycleGHGemissionsrangesforselectedsourcesofelectricity,2020IEA.Allrightsreserved.Notes:CCS=carboncaptureandstorage.CSP=concentratedsolarpower.Rangesreflectregionalvariations.Source:UNECE(2021)calculationsbasedondatafromHertwichetal.(2016),Gibonetal.(2017)andWernetetal.(2016).UNECE(2021)adaptedthesedatasetsbasedonrecentscientificliterature,technicalreportsandexpertconsultation.OuranalysesofenergyconsumptionandCO2emissionsdonotaimtorepeatorchallengelifecycleassessments(LCAs)ofthesolarPVsector.Manyacademicstudieshavealreadyconductedin-depthLCAanalysesandestablishedthatsolarPVachievessomeofthelowestlifecycleGHGemissionsofallelectricity-generatingtechnologies,especiallycomparedwithfossilfuel-basedones.Instead,ourreportfocusesmorespecificallyonenergyconsumptionandCO2emissionswithinthemanufacturingprocess(forpolysilicon,ingots,wafers,cellsandmodules),butonlyfortheproductionstagesthatinvolvethesemiconductormaterial.Thisreportthereforedoesnotanalyseupstreamenergyconsumptionoremissionsfromrawmaterialmining,orfrommanufacturingnon-semiconductorintermediateproductsinvolvedinPVmoduleassembly(glass,cables,etc.).Wedo,however,offeradditionalanalysisofcross-countrytransportofpolysilicon,wafers,cellsandmodulesaspartofourcomparativeassessmentoftradeandmanufacturingemissions.Wealsocoverrawmaterials,includingcriticalminerals,fromtheperspectiveofenergysecurity.010020030040050060070080090010001100WithoutCCSWithCCSWithoutCCSWithCCSc-SiThinfilmOnshoreOffshoreHardcoalNaturalgasHydroCSPSolarPVWindgCO2-eq/kWhIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday16Chapter1–SolarPVmanufacturingtodayCapacityandproductionPolysiliconproductioniscurrentlyabottleneckinanotherwiseoversuppliedPVvaluechainSolarPVsupplychainexpansionhasoutpacedrapiddemandgrowthinthelastdecade,withcrystallinesilicontechnologydominatingthemarketatover95%ofinstalledcapacityinthelastfiveyears.Attheendof2021,globalcapacityformanufacturingwafersandcellsandforassemblingmodulesexceededdemandbyatleast100%.Eventhough30-40%ofcurrentmanufacturingcapacitywascommissionedbefore2018andmaythereforerequiremodernisationtoproducecomponentscompatiblewiththelatestmoduletechnologystandards,marketsforwafers,cellsandmoduleswillstillbesignificantlyoversupplied.Incontrast,thepolysiliconsupplyglutthatbeganin2015hasended,withthesupply-demandbalancebecomingtightonceagainin2021.Basedonthemanufacturingprojectscurrentlyunderconstruction,nameplatepolysiliconproductioncapacityisexpectedtoreacharound400GWbytheendofthisyear.However,consideringproductionramp-uptimesandmaintenanceschedules,onlyaportionofthisnewcapacitywillbeavailablethroughout2022andasaresult,polysiliconsupplycouldremaintight.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday17GlobalPVmanufacturingcapacity,demandandaveragemodulesellingprice,2010-2022IEA.Allrightsreserved.Note:Modulepricereflectsall-inglobalaveragepriceforallsolarPVtechnologies.Valuesfor2022areestimates.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Economiesofscaleandcontinuousinnovationthroughoutthesupplychainhaveenabledsteepdropsinmanufacturingcostsateverystepoftheproductionprocess.Asaresult,modulepricesfellmorethan80%inthelastdecadeandsolarPVhasbecomethemostaffordableelectricitygenerationtechnologyinmanypartsoftheworld.In2021,theaveragesellingpriceofmodulesincreasedforthefirsttime–byaround20%comparedwith2020–duetohighercommodityandfreightprices.Whilemodulepricesremainedelevatedinthefirsthalfof2022,continuousinnovationtofurtherimprovematerialandenergyefficiencyareexpectedtodrivecostreductions.Nevertheless,pricedropsintheshorttermwilldependupontheeasingofcommodity,polysiliconandfreightprices.ChinasignificantlydominateseverysinglesolarPVsupplychainsegmentAmajorgeographicalshifthasoccurredinsolarPVmanufacturingcapacityandproductionoverthelastdecade.ThePeople’sRepublicofChina(hereafter,“China”)furtherstrengtheneditsleadingpositionasamanufacturerofwafers,cellsandmodulesbetween2010and2021,whileitsshareofglobalpolysiliconproductioncapacityalmosttripled.Today,thecountry’sshareinallmanufacturingstagesexceeds80%,morethandoubleits36%shareinglobalPVdeployment.EstimatedavailablecapacityYear-endnameplatecapacity0.00.20.40.60.81.01.21.41.61.80100200300400500600700201020152016201720182019202020212022eUSD/WGWDemandModulesCellsWafersPolysiliconModulepriceIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday18SolarPVmanufacturingcapacitybycountryandregion,2010-2021IEA.Allrightsreserved.Notes:APAC=Asia-PacificregionexcludingIndia.ROW=restofworld.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Forwafers,Chinahasverylittlecompetition,whileforcellsandmodulesSoutheastAsiahasconsiderablemanufacturingcapacity,mostlyinVietNam,MalaysiaandThailand.Forpolysilicon,Germanycontinuestobeamajorsupplierforthec-SiPVmodulesindustry,whiletheUnitedStatesandJapanpossesssignificantcapacitybutfocustheirproductiononsemiconductor-gradeproducts.Consideringmanufacturingplantsunderconstructionandplanned,China’sdominanceinsolarPVmanufacturingisexpectedtopersistorevenexpandintheshortterm.ModuleassemblyismoregeographicallydiversifiedbutalmostallinputsaremanufacturedinChinaInallcountriesexceptChina,demandforsolarPVexceedsmanufacturingcapacity,frompolysilicontomodules.Inthelastfiveyears,onlytheAsia-PacificregionoutsideofChinahasbecomecapableofcoveringanymeaningfulshareofitsneeds,withproductionlocatedmostlyinASEANcountries.AlthoughcountriesinNorthAmericaandEuropehavesignificantmodule-manufacturingcapability,theydependalmostentirelyonChinaandSoutheastAsiaforsolarcells,exceptformanufacturingcapacitylinkedtothin-filmtechnology,whichrelieslessontheChinesesupplychain.Inaddition,Chinaisalsothemainmanufacturerofmodulecomponentsincludingglass,EVA,backsheetandjunctionbox.0%20%40%60%80%100%2010ChinaEuropeNorthAmericaAPACIndiaROW20212015IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday19CumulativesolarPVproductionanddemand,2017-2021IEA.Allrightsreserved.Note:APAC=Asia-PacificregionexcludingIndia.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Rawandprocessedmaterials:JustafewmineralsaccountforthebulkofsolarPVmaterialcostsMaterialrequirementsforrenewableelectricitytechnologiesdiffersignificantlyfromthoseoffossilfuelandnuclearpowerplants.Globalaccelerationinrenewableelectricitydeploymentinthepasttwodecadeshaselicitedconcernaboutrisingnewmaterialrequirementsfortheenergysector,includingforsolarPV.Ourestimatessuggestthatrawmaterialsmakeup35-50%ofthetotalcostofasolarPVmoduleat2021prices.SolarPVmanufacturingrequiresmetals,metalloids,non-metallicmineralsandpolymers,withmaterialneedsdifferingacrosstechnologiesandsegments.Solar-gradeglass(forcovering),aluminium(fortheframeandstructure)andpolymers(particularlyEVAandpolyolefinforencapsulation,barrierfilmssuchasPVDF,PVForPETforbacksheets,andPETforjunctionboxes)constitutemostoftheweightofasolarPVmodule.Incontrast,semiconductorsandconductorsareusedinrelativelysmallquantities,buttheycannonethelessaccountforadisproportionatelyhighshareoftotalrawmaterialcostsinPVmoduleproduction.Forinstance,inc-Simodules,silverandpolysilicontogethermakeuplessthan5%ofamodule’sweight,butat2021pricesthemonocrystallinesiliconwaferandsilverpasterepresentnearlytwo-thirdsofmaterialcosts.Similarly,thetelluriuminCdTemodulesaccountsforlessthan0.07%oftheweightbutmorethan3%ofrawmaterialcontentcosts.Reducingthe020406080100120140160NorthAmericaEuropeAPACIndiaLAMRoWGWDemandModulesCellsWafersPolysilicon0100200300400500600700ChinaGWIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday20materialintensityoftheseexpensivemineralsisthereforecriticaltokeepproductioncostsdownandsoftentheimpactofvolatilecommodityprices.Theuseofselectedmaterialsinc-SiandCdTesolarPVmanufacturingNote:BeyondCdTeandc-Sitechnologies,CIGS,GaAsanda-Sithin-filmtechnologieshavetheirownspecificmaterialrequirements,includinggalliumandarsenicinadditiontoaluminium,copper,indium,etc.Thesetechnologiesarenichemarkets,however,andcurrentlyaccountforanegligibleshareofglobaldemandforthesematerials.InadditiontotheconstitutivematerialsthatmakeupsolarPVmodules,otherrawmaterialsthatdonotappearinthefinalcompositionofamodulearealsousedduringthemanufacturingprocess.Forinstance,carbonatedfeedstockmaterials(coal,woodchipsandcharcoal)areusedinthecarbothermicreductionofquartzTechnologyMaterialMainusesc-SiAluminiumModuleframe;mountingstructure;connectors;backcontact;invertersAntimonySolar-gradeglass(usedtoreducethelong-termimpactofultravioletradiationonthesolarperformanceofglass)andencapsulant(usedasapolymerisationcatalyst)CopperCables,wires,ribbons,invertersGlassModulecoverIndiumTransparentconductinglayer(indiumtinoxide[ITO])insiliconheterojunction(SHJ)LeadSolderingpasteandribboncoatinginc-SimodulesSiliconc-Siwafers;intheformofhigh-purityquartz(HPQ),forcruciblestogrowmonocrystallinesiliconeingotsviatheCzochralskiprocessSilverElectroniccontacts:silverpaste,busbarsandsolderingTinSolder,ribboncoatinginc-SimodulesZincGalvanizedsteelinmountingstructuresTechnologyMaterialMainusesThin-filmCdTeAluminiumModuleframe;mountingstructure;connectors;invertersAntimonySolar-gradeglass(usedtoreducethelong-termimpactofultravioletradiationonthesolarperformanceofglass)andencapsulant(usedasapolymerisationcatalyst)CadmiumAbsorberlayerCopperCables,wires,ribbons,invertersGlassModulecoverIndiumTransparentconductinglayer(indiumtinoxide[ITO])MolybdenumBackcontactlayerSeleniumAbsorberlayerinsomeCdTecellsSilverElectroniccontacts:silverpasteandsolderingTelluriumAbsorberlayer(CdTe)andbackcontact(ZnTe)TinSolder;transparentconductingoxide(indiumtinoxide)ZincGalvanizedsteelinmountingstructures;backcontact(ZnTe)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday21intometallurgical-gradesilicon,andthequartzcruciblesusedintheCzochralskiprocesstomakemonocrystallinesiliconingotsaremadefromhigh-purityquartz(HPQ)andneedtobereplacedeverysixtoeightingotcycles.AstheproductionofsolarPVmodulesscalesup,sowilldemandforthesematerials.MaterialcompositionsharesofcrystallinesiliconandCdTethin-filmsolarPVmodulesbyweightandaveragevalue,2021IEA.Allrightsreserved.Notes:Calculationsofvalue-basedcompositionarebasedonaverage2021marketpricesofmaterials,i.e.aluminium:USD2500/Mt;copper:USD9408/Mt;silver:USD803/kg;crystallinesilicon:USD34/kg;andsolar-gradeglass:USD590/Mt.Value-basedassessmentsaresensitivetocurrentlyhighcommoditypricevolatility.Sources:EstimatesofmaterialcompositionbasedonSoren(2022),Frischknechtetal.(2020),Carraraetal.(2020),Giurcoetal.(2019),IRENA(2017),WorldBank(2017),IRENAandIEA-PVPS(2016),Latunussaetal.(2016),FizaineandCourt(2015),ElshkakiandGraedel(2013),andCandeliseetal.(2011).MaterialpricesarederivedfromUSGS(2022)andBloomberg(2022a).Fortunately,significantimprovementsinmaterialintensityhavebeenachievedinthepasttwodecadesforkeymaterials.Forinstance,thepolysiliconintensityofc-Sicells(ing/W)droppedbymorethansixtimesbetween2004and2020thankstocellefficiencyimprovements,thinnerdiamondwiresawingandwafers,andlargeringots(Fraunhofer,2022).Similarly,thesilverintensityofc-Sicells(ing/cell)was68-72%Glass(containingantimony0.1-0.3%)12-14%Aluminium8-10%Polymers3-4%Silicon2-4%Copper0.03-0.08%Silver0.03-0.1%Zinc0.01-0.05%Lead0.01-0.05%Tin<0.2%Otherc-Si‒Weight-based35-45%Crystallinesilicon9-23%Silver11-15%Glass9-12%Aluminium5-12%Copper7-10%Polymers0.1-0.5%Tin0.03-0.1%Zinc<0.05%Lead<0.5%Otherc-Si−Value-based80-85%Glass11-14%Aluminium2-4%Polymers0.03-0.4%Copper0.05-0.07%Tellurium0.04-0.07%Cadmium0.02-0.8%OtherCdTe‒Weight-based47-54%Glass28-37%Aluminium5-12%Polymers3-6%Tellurium0.3-4%Copper0.1-0.2%Cadmium0.05-3%OtherCdTe−Value-basedIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday22cutbyaboutthreeduring2009-2018,owingpartlytoimprovementsinscreenprintingprocesses(CRU,2018).Materialintensityfortheserelativelyexpensivemineralsisexpectedtocontinuetofalloverthenextdecade,albeitataslowerpace.Polysilicon:CyclesofsupplyglutandmarkettightnessAttheendof2021,annualPV-gradepolysiliconmanufacturingcapacityreached750000metrictonnes,whichshouldbeenoughtomanufacturearound250GWofcrystallinesiliconmodules.Chinaproducedabout80%ofthepolysiliconusedforsolarPVmodulesgloballyin2021,withtheremainingmarketsharesplitamongGermany,MalaysiaandtheUnitedStates.In2010,atthebeginningofthesolarPVdemandboomintheEuropeanUnion,producersfromtheUnitedStates,Germany,Korea,JapanandChinawerecompetingformarketshares,witheachholding15-30%.During2010-2015,Chinaexpandeditsmanufacturingcapacitytwiceasquicklyastherestoftheworld,leadingtoamajorglobalsupplyglutandcausingpolysiliconpricestoplummet70%,pushingmanyproducersoutofthemarket.Globalpolysiliconmanufacturingcapacity,production,averagepriceandmarketshares,2010-2022IEA.Allrightsreserved.Note:ROW=restofworld.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Despiterapiddemandgrowththrough2020,theovercapacitysituationpersistedasChinesemanufacturersfurtherinvestedinnewproductionfacilities.Meanwhile,lowpriceshaveledproducersinJapan,KoreaandtheUnitedStatestodownsizeorclosetheirpolysiliconplants.IntheUnitedStates,lowpricescombinedwithimporttariffslimitingexportstoChinahavereducedPV-gradepolysiliconproductionsince2015.0.000.050.100.150.200.250.300.350.400.45050100150200250300350400450201020152016201720182019202020212022eUSD/WGWPolysiliconmanufacturingcapacity,productionandpriceProductionYear-endnameplatecapacityEstimatedavailablecapacityPrice(USD/W)0%10%20%30%40%50%60%70%80%90%100%201020152016201720182019202020212022ePolysiliconproductionmarketsharesChinaUnitedStatesGermanyMalaysiaKoreaJapanROWIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday23Inthesecondhalfof2020,supplychaindisruptionsduetotheCovid-19pandemic,firesinlargemanufacturingplantsinChina,shutteringofplantsinKoreaandastepincreaseinglobalPVinstallationstransformedtheprevioussupplyglutintotightnesswithpolysiliconpricesquadruplingtoaroundUSD35/kginthelastquarterof2021.AsofJune2022,polysiliconpricesremainedhigh(monthlyaverage(USD35/kg)eventhough60GWofadditionalpolysiliconcapacitywascommissionedinChinalastyear.Whilethecommissioningofnewplantsisexpectedtoincreaseglobalpolysiliconcapacityfromaround220GWin2021toalmost400GWin2022,rapidlygrowingglobalPVdemand,firesandmaintenanceinexistingplantsinChina,andslowramp-upperiodfornewplants,areallexpectedtokeepthepolysiliconmarkettight.Inaddition,350GWofmanufacturingcapacityistobecommissionedinupcomingyears.Consideringdemandprojectionsthrough2025,anotherpolysiliconsupplyglutcycleispossibleifthisadditionalcapacityiscompletedinthecomingyears.Wafers:Lowcapacityutilisation,highestgeographicalconcentrationandincreasingsizesIn2021,globalPV-gradesiliconwafermanufacturingcapacityexceeded360GW,almosttwicetheestimateddemand.Wafermarketcapacityutilisationwasrelativelylowthroughoutthelastdecade,fallingto50%in2021fromapeakof85%in2016.Althoughtechnologicaldevelopmentsallowedwaferproductioncoststodeclinecontinuouslyandovercapacitycontributedtopricestability,waferpriceshaveincreaseddrasticallysincethebeginningof2021duetohigherpolysiliconprices.Wideintroductionofthediamondwiresawin2018enabledasignificantreductionofsiliconconsumptionintheingot-cuttingprocessaswellasanincreaseinwafersize.Theuseoflargerwafersacceleratedin2020,furtherimprovingthematerialandenergyefficiencyofproductionsothataveragepolysiliconuseperwattoffinishedcelldecreasedalmost60%between2010and2021.Furthermore,switchingtomonocrystallinewaferproductionin2019-2020allowedforcost-effectivelarge-scalemanufacturingofhigh-efficiencycells,whichfurtherreducedtheper-wattcostofsolarPVmodules.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday24GlobalPVwaferproductionandcapacityutilisation(left),andwafermarketsharesbysizeandaveragepolysiliconuseperwatt(right),2010-2022IEA.Allrightsreserved.Notes:ROW=restofworld.Valuesfor2022areestimates.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporation,PVInfoLinkandVDMA.Chinacurrentlyaccountsfor97%ofglobalmanufacturingcapacity,arisefromitsalready-highshareof80%in2010.Thankstoeconomiesofscaleaswellassupplychainintegration,innovationandgovernmentsupport,Chinesecompanieswereabletobecomecost-competitiveinwaferproductionrelativelyquickly,preventingothermarketparticipantsfromattainingsignificantmarketshares.Almostallremainingcapacity,althoughsmall,isintheAsia-Pacificregion,makingnearlythewholeworldentirelydependentonimportsforcellproduction.Eventhoughovercapacitywasat80%in2020,Chinaaddedalmost115GWofnewmanufacturingcapabilityin2021,andanother300GWhasalreadybeenannounced.Shouldtheseplansberealisedby2023/2024,Chinawillbecomeevenmoredominantinglobalwaferproduction.However,theupgradesnecessaryformanyexistingplantstobeabletoproducethelargerwafersnowdemandedbycellmanufacturers(M10andG12wafers)mightcausesomefactoriestobeputinidlemodeandtherebyreducetheoversupply.Cells:TechnologyimprovementsraiseefficiencyGlobalsolarcell-manufacturingcapacityreachedalmost410GWattheendof2021,withaverageutilisationoftheglobalfleetataround45%.Meanwhile,cellcapacityutilisationworldwideneverexceeded70%duringthelastdecade.R&D0%20%40%60%80%050100150200250201020152016201720182019202020212022eCapacityutilisationGWCellproductionmarketsharesChinaMalaysiaChineseTaipeiKoreaVietNamThailandIndiaJapanROWUtilisation13%15%17%19%21%23%0%20%40%60%80%100%201020152016201720182019202020212022eCellefficiencyMaarketshareCelltypesharesandefficiencyBSFsharePERCshareTopconshareHJTshareBackcontactshareMulti-sishareMono-sishareAv.Mono-sieff.Av.multi-sieff.Topcon,HJTeff.Backcontacteff.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday25spendinghasresultedinconsecutiveannualimprovementsintheefficiencyofenergyconversionfromsolarirradiationtoelectricityaswellasreductionsinmaterialuse,reducingmanufacturingcostssignificantly.Multicrystallinesiliconbacksurfacefield(BSF)technologyhasbeengraduallyreplacedbymoreefficientPassivatedEmitterandRearCell(PERC)cellssince2015.Improvementsinthemanufacturingprocessandtheshifttomonocrystallinewaferproductionenabledrapidcostreductions,makingthemoreefficientPERCcellthedominanttechnology.Moreefficientcellsallowforahighercapacitywhilekeepingmoduleareathesame,reducingoverallsolarPVgenerationcosts.Inupcomingyears,greatermarketsharesareanticipatedformoreadvancedcelldesigns,notablyheterojunction(HJT),TOPConandbackcontact,promisingfurtherefficiencygains.Modulesusingsuchcellscurrentlyreach22%efficiencyinreal-lifeoperatingconditions,makingthemone-fifthmoreefficientthanstandardmodulesinstalledjust4-5yearsago.Furthermore,massmanufacturingofmultilayerandtandemsilicon-perovskiteorsilicon-CdTehybridsiscurrentlyunderconsideration.Thesesolutionscouldraisecellefficiencytomorethan30%,atcompetitiveproductioncosts.GlobalPVcellproductionandmanufacturingcapacityutilisation(left),andmarketsharesandmoduleefficiencybycelltype(right),2010-2022IEA.Allrightsreserved.Notes:ROW=restofworld.BSF=backsurfacefield.HJT=heterojunction.PERC=PassivatedEmitterandRearCell.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporation,PVInfoLinkandVDMA.0%20%40%60%80%050100150200250201020152016201720182019202020212022eCapacityutilisationGWCellproductionmarketsharesChinaMalaysiaChineseTaipeiKoreaVietNamThailandIndiaJapanROW13%15%17%19%21%23%0%20%40%60%80%100%201020152016201720182019202020212022eCellefficiencyMaarketshareCelltypesharesandefficiencyBSFsharePERCshareTopconshareHJTshareBackcontactshareMulti-sishareMono-sishareAv.Mono-sieff.Av.multi-sieff.Topcon,HJTeff.Backcontacteff.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday26Asthedominantcellmanufacturer,China’sshareinproductionincreasedfrom60%in2010toalmost80%in2021.In2010,thecellmarketwasrelativelydiversified,withsignificantportionssuppliedbyChineseTaipei(14%),Japan(7%),Germany(6%)andtheUnitedStates(5%).However,thesemarketsdidnotinstalladditionalcapacityduringthelastdecade,whileChinaaddedanother300GW.In2012-2016,cellmanufacturingbegantodevelopinSoutheastAsia,firstinKoreaandMalaysiaandlaterinVietNamandThailand.ChineseintegratedmanufacturersestablishedmostofthemanufacturingplantsintheASEANregion,partlybecauseofcostadvantagesbutmainlytocircumventUSimporttariffsonChinesesolarPVcellsandmodules.Today,SoutheastAsiaandKoreahold18%oftheglobalcellmarket,leavingonly2%ofproductiontotherestoftheworld.In2021,Chinesemanufacturersannouncedtheadditionofanother250GWofcellproductioncapacity.Realisationoftheseprojectsplannedfor2022-2023wouldfurthersolidifygeographicconcentrationofthesolarcellmarketandinflatetheoversupplysituation.However,asignificantnumberofexistingplantswillrequiremodernisationtoproducenewcelltypes,possiblyreducingthesupplyglut.Modules:MoregeographicallydiversifiedproducersstilldependonAsiaforallkeyinputsSolarPVmoduleproductioncapacityreached460GWin2021,withcrystallinesilicontechnologyassemblyaccountingfor98%andthin-filmmanufacturingmakinguptheremainder.Moduleassemblyhasregisteredthehighestmanufacturingcapacityandlowestplantutilisationlevelsofallsupplychainsegmentsbecauseitrequiresonlymodestinvestmentandrelativelylimitedtechnologicalknowhow.Lowsolarcellprices,thepossibilityofsourcingseveralpanelcomponentslocally(frame,glass,wiringandpackaging),traderestrictionsandgovernmentsupporthaveencouragedmanycompaniesaroundtheworldtoinvestinmoduleassemblylines.Accordingly,38countrieshadmoduleassemblycapabilitiesin2021,byfarthehighestofallstepsofthePVmanufacturingprocess.Inmanycases,however,investmentswererelativelysmallorstoppedatthepilotstage,withjust19countrieshavingassemblycapacityofatleast1GW.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday27NumberofcountrieswithmanufacturingcapacityacrossthePVvaluechain,2010-2022IEA.Allrightsreserved.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Although38countrieshavemoduleassemblyfacilities,Chinawasstillresponsibleforabout70%ofproductionin2021,upfrom50%in2010.OtherimportantmanufacturersincludeVietNam(5%),Malaysia(4%),Korea(4%)andThailand(2%),butmostmanufacturingcapacityinthesecountrieswasdevelopedbyChinesecompaniesfocusingonexportstotheUnitedStates.Othercountrieswithhighmoduleassemblycapacity,suchastheUnitedStates(4%),Germany(1%)andIndia(1%),producemainlyfortheirdomesticmarkets,althoughtheyoftenlackadequatemanufacturingcapacityforPVcellsandwafers(exceptforthin-filmtechnology,whereinfacilitiesincludetheentiresupplychain).Becausec-SiPVcellmanufacturingisconcentratedintheAsia-Pacificregion,largesolarPVdemandcentresintheUnitedStates,IndiaandEuropedependstronglyonimportsforthemainsolarmodulecomponents.Althoughcountriesinthesemarketsoftenpossessmulti-GWmoduleproductioncapability,mostoftheplantssimplyassemblemodulesfrompartsshippedfrommanufacturerslocatedprimarilyinmainlandChina.Forthin-filmtechnology,however,theUnitedStates,MalaysiaandVietNameachhave2-3GWofmanufacturingcapacityandarerelativelylessdependentonChinaforsupplychaincomponents.Withwafersincreasinginsizesince2019andcellefficiencyimproving,thepoweroutputofindividualPVmoduleshasgrown.Thestandardmoduledesignof72cellsforutility-scaleapplicationshasbeenreplacedby144moreefficienthalf-cells,and60cellsinrooftopapplicationsby120half-cells.Asaresult,thepoweroutputoftypicalsolarpanelsroseto400-500Wforutility-scaleapplicationsin2021.Forrooftopapplicationsusingmostly60cellsor120half-cells,outputreached350-400W.0510152025303540201020152016201720182019202020212022eCountrieswithmanufacturingcapacityPolysiliconWafersCellsModules201020152016201720182019202020212022eCountrieswithmanufacturingcapacity>1GWIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday28GlobalsolarPVmoduleproduction,2010-2022IEA.Allrightsreserved.Notes:ROW=restofworld.Valuesfor2022areestimates.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Thelargest,mostadvancedmodulesonthemarkettodayofferuptoalmost700Wunderstandardtestingconditions,morethandoublethe250-300Wofpanelsusedin2010.Althoughcontinuedincreasesinwafersizeandcelltechnologyadvancesareexpectedtodrivepoweroutputevenhigherinthefuture,logisticalandsysteminstallationlimitationsmaydelayfurthergrowthinmodulesize,especiallyforrooftopapplications.Today,thelargestmodulesofferedforutility-scaleprojectsare3m2insizeandweighmorethan30kg.Companiesinseveralcountriesandregionsarecontemplatingsignificantexpansionstotheirmanufacturingcapacityinupcomingyears,notablyinIndia,VietNam,Thailand,theUnitedStatesandtheEuropeanUnion.However,withover300GWofnewassemblyplantsunderconsiderationinChina,itsmarketshareisexpectedtoremainhighinthemediumterm.Givenongoingandplannedinvestmentsinmanufacturingcapacity,inadditiontoinnovationandfurtherpotentialforefficiencygains,crystallinesilicontechnologyisexpectedtodominatethesolarPVmarketformanyyearstocome.0102030405060708090100110120130140150160170180190200210220230201020152016201720182019202020212022eGWChinaVietNamMalaysiaKoreaIndiaUnitedStatesChineseTaipeiGermanyJapanROWIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday29StandardPVmodulepoweroutput,cellnumberandsize,2010-2022IEA.Allrightsreserved.Notes:PERC=PassivatedEmitterandRearCell.HJT=heterojunction.BSF=backsurfacefield.Source:IEAanalysisbasedonIEAPVPS,SPVMarketResearch,RTSCorporation,PVInfoLinkandVDMA.TradeAlmosthalfofallsolarPVmodulesmanufacturedin2021weretradedbetweencountries,amorethanquadrupleincreasesince2010Takingtogetherpolysilicon,wafers,cellsandmodules,thetotalvalueofPV-relatedtradereachedUSD40billionin2021–anincreaseofover70%from2020.WithsolarPVmanufacturingheavilyconcentratedinChinaandSoutheastAsia,almostallothercountrieswithhighsolarPVdemandremainlargeimporters.Inthelastfiveyears,theEuropeanUnionhasimported84%ofitsinstalledsolarPVmodules,theUnitedStates77%andIndia75%.Moreover,modulesproducedintheseareasdepend60-80%onimportedPVcells.Meanwhile,internationalpolysilicon,waferandcelltraderemainedsignificantlylowerthanformodules,reachingjust22-34GWin2021duetothehighconcentrationofintegratedmanufacturinginChina.Followingthe2011-2013PVinstallationboominEuropepromptedbygenerousFITs,thevalueofsolarPVtraderemainedrelativelystableataroundUSD25billionuntil2021duetoasharpdeclineinmoduleprices,eventhoughtradeinPVproductswasgrowing.In2021,higherpolysiliconandmoduleprices,togetherwithrisingdemand,boostedPVtradetoarecordvalueofalmostUSD40billion.145150155160165170175150200250300350400450500201020152016201720182019202020212022e60cells72cells144half-cellsCellsize(mm)Modulepoweroutput(W)Cellsize(rightaxis)MultiPERCHJTMonoPERCMultiBSFIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday30Globalexports/importsofPV-gradepolysilicon,wafers,cellsandmodules,andtotaltradevalue,2010-2021IEA.Allrightsreserved.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.InternationalsolarPVtradevolumesdependstronglyonChina’sdomesticdemandbecausethecountryisboththelargestproducerandconsumerofpolysilicon,wafers,cellsandmodules.Furthermore,inthelastfiveyearsithasbeenthemainimporterofPV-gradepolysilicon,mainlyfromGermany,MalaysiaandJapan,asitsdomesticproductionhasfallenshortoflocaldemandforwaferproduction.FinishedwaferswereexportedmostlytoAsia-Pacificcellmanufacturers,withtheprimaryimportersbeingMalaysia,VietNam,ThailandandKorea.Thesecountrieswereinturnresponsibleforover60%ofcellexports,asChina’sproductionwasusedmostlydomestically.ThemainimportersofsolarcellsfromSoutheastAsiaweremajormoduleassemblersinthesameregion,fromVietNam,SingaporeandKorea.UScellimportsalsocamemainlyfromSoutheastAsia,largelyduetorestrictionsonimportsfromChina.TherestofthelargemoduleassemblersinIndia,theRepublicofTürkiye(hereafter,“Türkiye”),theEuropeanUnion,CanadaandMexicoweresuppliedbyremainingSoutheastAsianexportsandChina.In2017-2021,SoutheastAsianmodulemanufacturerswereresponsibleforone-thirdofglobalPVmoduleexports,directedmostlytowardstheUnitedStatesandtheEuropeanUnion,whereChinesemodulesweresubjecttovarioustraderestrictions.TherestofthemarketwasdominatedbyChina,withitssharesinIndiaandBrazilexceeding90%.020406080100120140160180200220240201020152016201720182019202020212022eGWInternationaltradeintermsofcapacityequivalentModulesCellsWafersPolysiliconDemand051015202530354045502010201120122013201420152016201720182019202020212022eblnUSDInternationalnettradevalueIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday31CumulativeinternationalshipmentsofPV-gradepolysilicon,wafers,cellsandmodulesinGW-equivalentbyregion,2017-2021IEA.Allrightsreserved.Notes:APAC=Asia-Pacific.ROW=restofworld.Thefigureprovidesdataforinternationalshipmentsonly.DiagramswerecreatedusingtheSankeyMATICsystem.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporation,PVInfoLinkandUNComtrade.European,USandIndiansolarPVtradedeficitreachedmorethanUSD20billionin2021AlthoughEuropeimportedanunprecedented26GWofPVmodulesin2021,thebillwasjustone-thirdtherecordcostof2010,whenitimportedonly15GWatveryhighprices.Forinstance,in2009-2011,GermanyandItalywerethefirstcountriestoadoptsolarPVonalargescaleandpurchasedmodulesatfivetimestheaveragePolysiliconWafersCellsModulesIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday322021price,payingasmuchasUSD25billionin2010-2011.Withdemandincreasingsince2018,however,Europehadthelargestnettradedeficitofallregionsin2021.NetimportvalueofPV-gradepolysilicon,wafers,cellsandmodulesbyregion,2010-2021IEA.Allrightsreserved.Source:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporation,PVInfoLink,andUNComtrade.-30-25-20-15-10-5052010201120122013201420152016201720182019202020212022eblnUSDEurope-10-8-6-4-20242010201120122013201420152016201720182019202020212022eblnUSDNorthAmerica-6.0-5.0-4.0-3.0-2.0-1.00.01.02.02010201120122013201420152016201720182019202020212022eblnUSDIndia-5.0-4.0-3.0-2.0-1.00.01.02010201120122013201420152016201720182019202020212022eblnUSDLatinAmerica-10-505101520253035402010201120122013201420152016201720182019202020212022eblnUSDChinaPolysiliconWafersCellsModulesNet-6-4-2024682010201120122013201420152016201720182019202020212022eblnUSDAsia-PacificIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday33InNorthAmerica,thenettradedeficitreachedarecordUSD8billionin2021whenitimporteditshighest-evernumberofPVmodules.Atthesametime,India’simportsalsoreachedarecord-breakingUSD4billionasinstallationlevelsreboundedin2021-2022andprojectdevelopersrushedtostockpilemodulesbeforehigherimportdutiescameintoforceinApril2022.InLatinAmerica,recordinstallationsexpectedin2022ledtounparalleledmoduleimports,whichtogetherwithelevatedpricesin2021resultedinamorethandoublingofitsnetimportbillthatyear.Unsurprisingly,ChinaandAsia-Pacificcountriesbenefitedsignificantlyfromhigherdemandandprices,experiencingrecordornear-recordincomesfromPVequipmentsalesin2021.InAsia-Pacific,however,theneedtoimportlargequantitiesofsolarwafersforcellproductionreducedtheregion’snettradevalueconsiderably.PVexportscontributetooveralltradebalancesinChinaandSoutheastAsiaSolarPVtradeisresponsibleforasignificantshareofmanycountries’overallnationaltradebalances.InChina,exportsofmodules,wafersandcellsmadeupanaverageover6%ofthecountry’stradesurplusoverthelastfiveyears.ForthesmallerexportingcountriesofMalaysiaandVietNam,thePVsectorisevenmoreimportantfortheeconomy,asitwasresponsiblefor10%ofMalaysia’stradesurplusand5%ofVietNam’s.ForthelargestPVcomponentimporters,impactsontradebalancehavebeensignificantinthelastfiveyears:Brazil’ssolarPVimportsreducedthecountry’stradesurplusby12%andAustralia’sdropped4%.Incountrieswithnegativenettradebalance,massivePVcomponentimports(mainlymodulesandcells)furtherincreasedtheirdeficit.SharesofPVintradedeficitsover2017-2021were1%fortheUnitedStates,2%forFranceandasmuchas4%forIndia.Thesevaluesaresignificantintermsofoverallnationaltradebalances,indicatingthatmanycountriesarevulnerabletopriceandvolumerisksassolarPVbecomesacriticalelementofpowerinfrastructureowingtomanycountries’ambitiousnetzeropledges.Inthecurrentmanufacturingmarketstructure,PV-relatedtradeflowsareexpectedtocontinueexpanding,whichmayenlargesolarPV’sroleinnationaltradebalances.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday34CumulativePV-gradepolysilicon,wafer,cellandmoduletradebalances,andnationalnettradebalancesingoodsandservicesformajorPVexportersandimporters,2017-2021IEA.Allrightsreserved.Notes:CAB=currentaccountbalanceSource:IEAanalysisbasedonBNEF(2022a),IEAPVPS,SPVMarketResearch,RTSCorporation,PVInfoLink,UNComtrade,OECDandWorldBank.EquipmentforsolarPVmanufacturingChinanowleadsthemarketoncedominatedbyEurope,theUnitedStatesandJapanBoththescaleandgeographicaldispersionofthePVequipmentmanufacturingmarkethavechangeddramaticallyoverthepastdecade,withleadershipshiftingfromEurope,theUnitedStatesandJapantoChina.Drivenbytheexponentialexpansionofglobaldemand,thetotalnumberoffirmsenteringthePVequipmentmanufacturingmarketsurged150%during2007-2020toalmost1900,withthenumberofChinesefirmsalmostquadruplingduringthisperiodtomorethan700(RTS,2021).ThePVequipmentmarkettodayisoneofthemostdiversifiedmarketswithinthesolarPVsupplychainbutisbecomingincreasinglyconcentratedinChina.In2008,thetenmainsolarPVequipmentmanufacturersaccountedforalmost90%ofglobalmarketshares,andtheyoperatedinjustfourcountries(Germany,theUnitedStates,SwitzerlandandJapan)(KDB,2010).Incontrast,by2021thetoptenmanufacturers’sharehaddroppedbyhalf,mainlybecausemanynewfirmshadenteredthemarket,leadingtoconsiderablediversification.Today,alltoptenequipmentmanufacturersareinChinaandclaimover45%oftheglobalmarketshare(QYResearch,2022).-15%-10%-5%0%5%10%-30-20-1001020MalaysiaVietNamKoreaThailandBrazilGermanyNetherlandsSpainPolandAustraliaUSAIndiaFranceCountrieswithnettradesurplusCountrieswithnettradedeficitUSDbillionPositivePVtradebalanceNegativePVtradebalanceShareoftotalnettradesurplus%Decreaseoftotalnettradesurplus%Shareoftotalnettradedeficit%0%1%2%3%4%5%6%7%8%9%0102030405060708090ChinaUSDbillionIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday35Toptencompanies’sharesofPVmanufacturingequipmentrevenueIEA.Allrightsreserved.Source:IEAanalysisbasedonKDB(2010)andQYResearch(2022).GlobalPVmanufacturingequipmentsalesrose80%during2017-2021toexceedUSD8billion.Asiancountriesdominatesales:Chinaaccountsforalmost50%,followedbyKorea,ChineseTaipeiandJapan,whichhasexpandedtocoveranotherquarterinthelastfiveyears(QYResearch,2022).KeyPVmanufacturingprocessesbysegmentIEA.Allrightsreserved.EachsegmentofPVmanufacturingrequiresvarioustypesofspecialequipment(e.g.forsiliconpurification,ingot-growing,waferandcellproduction,andmoduleassembly).EquipmentformanufacturingcellsfromwafersaccountsforalmosthalfofglobalPVmanufacturingequipmentsales.Thesophistication,precisionandadvancedautomationentailedinmanufacturingsolarcellsimplymoreexpensiveequipment.Forinstance,assemblylinestoproducemodulesfromcellsusuallyrequirehighlyautomatedmachineryandaccuratequality-testingequipmentatmultiplestages.0%10%20%30%40%50%60%010002000300040005000600070008000900020172018201920202021Revenue(millionUSD)RestofthemarketToptencompaniesShareoftoptencompanies(rightaxix)0%10%20%30%40%50%60%70%80%90%100%200820172021GermanyUnitedStatesSwitzerlandJapanChinaRestofthemarketSegmentKeyprocessesPolysiliconSiliconpurificationIngotsCrystallineingotgrowing;materialpropertyanalysis;ingotcuttingWafersWiring;pre-washing;waferseparation;mainwashing;waferinspectionandsortingCellsWetstation;diffusion;chemicalvapourdeposition(CVD)/sputtering;screenprinting;baking;celltransfer;inspectionModulesCellwiring(string);layup(moduleassembly);laminatingandsealing;curing;frameandterminalassembly;moduletransfer;inspectionIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday36PVmanufacturingequipmentrevenuebycountry(left)andbysegment(right),2017-2021IEA.Allrightsreserved.Source:IEAanalysisbasedonQYResearch(2022).Equipmentpricesdependonlevelofautomationandmoduleassemblyplantcapacity,whichcanrangefrom50MWto20000MWperyear.Meanwhile,polysiliconandingotproductionprocessesusesimpler,moreconventionalequipmentsuchasvacuumchambersandmeltingfurnacestoproducehigh-puritymaterials:theannualpolysiliconproductioncapacityofeachvacuumreactorvariesfrom150to700tonnesdependingonthemanufacturer(TaiyangNews,2017).EnergyconsumptionElectricity-intensivesolarPVmanufacturingisfuelledmostlybycoalManufacturingcrystallinesiliconsolarPVpanelsisanenergy-intensiveprocess.Theamountofenergyconsumedgloballytoproducepolysilicon,ingotsandwafers,andcellsandmodulesreached364PJin2021,roughlyequivalenttoCroatia’stotalprimaryenergydemand.Atcurrentproductionlevels,however,thisconsumptionislowcomparedwithotherlargeindustriesandmakesuplessthan0.2%ofglobalindustryenergyuse.Polysiliconproductionaccountsfor40%ofallenergyconsumedtomanufacturesolarPVmodules,thelargestportionofallsupplychainsegments.Polysiliconisthemostenergy-intensivesegmentduetothehightemperatureoftheheatandlengthytimeitneedstobeappliedtomeltquartz,extractsiliconandrefineittothelevelofpurityrequiredforsolarcells.Thefirststepistoproducemetallurgical-grade0%10%20%30%40%50%60%70%80%90%100%20172018201920202021ChinaKoreaChineseTaipeiJapanIndiaUnitedStatesGermanyOthers0%10%20%30%40%50%60%70%80%90%100%20172018201920202021FromrawmaterialtosiliconFromsilicontoingotFromingottowaferFromwafertocellFromcelltomoduleIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday37silicon(Mg-si)bymeltingquartzsilicainanarcfurnaceataround1700°C,andthesecondstepistoremoveimpuritiestoproducesolar-gradepolysilicon(So-si).SeveraldifferenttechnologiescanbeusedtoproduceSo-si,buttheSiemensprocessisemployedformorethan90%ofpolysiliconproducedtodaybecauseitdeliversthehigher-puritypolysiliconneededformonocrystallinehigh-efficiencycellsatalowercostperunit.TheSiemensprocessisthemostmaturetechnologyforsiliconpurification,butitisalsohighlyelectricity-intensive.Theless-utilisedFBRprocessuseslessenergybutalsoresultsinlower-puritysilicon.InvestmentcostsarealsohigherfortheFBRmethod,andscalingupfluiddynamicsatlargerscalesischallenging.EnergyconsumptionofsolarPVmanufacturingbysegment,2015-2021(left),andenergyintensitypersegment(right)IEA.Allrightsreserved.Notes:Mg-si=metallurgical-gradesilicon.So-si=solar-gradesiliconusingtheSiemensprocess.sc-si=monocrystallinewafers.mc-si=multicrystallinewafers.Source:Rightgraph:IEA-PVPS(2020).Ingotandwaferproductionisalsoelectricity-intensivebecauseitrequireshigh-temperatureheatforlongperiodsoftime;infact,ithasthesecond-highestenergyconsumptionafterpolysiliconproduction.Energyuseforwafermanufacturinghasbeengrowingsince2015becauseofrisingdemandformonocrystallinewafers,whicharethreetimesmoreenergy-intensivetoproducethanmulticrystallinecellsbutalsohavehigherefficiencies.Finally,accountingforlessthanone-thirdofenergyconsumptionarecellsandmodules.Theirproductionprocessesrequirelessheatandlowertemperaturesfordryingandcooling,andmostoftheelectricityisusedforautomatedmechanicalwork.0501001502002503003504002015201620172018201920202021PJModulesCellsWafersPolysilicon0255075100125150175200Mg-siSo-sisc-simc-siPolysiliconIngots&wafersCellsModuleskWh/kWOilCoalNaturalgasElectricityIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday38Electricitysuppliesover80%oftotalenergyconsumedinsolarPVmanufacturing.Polysiliconandingotproductiontogethermakeuptwo-thirdsoftotalelectricityconsumptionduetotheirhighheatrequirements:heatmustbeappliedcontinuouslyataprecisetemperatureoveraperiodof100-200hours.Coalfuels62%oftheelectricityusedforsolarPVmanufacturing,significantlymorethanitsshareinglobalpowergeneration(36%),largelybecauseproductionisconcentratedinChina–mainlyintheprovincesofXinjiangandJiangsu.Intheseprovinces,coaloftenaccountsformorethan75%ofthepowersupply,partlybecausethegovernmentoffersfavourabletariffs.ReducingthecarbonintensityofmanufacturingcouldthusbeaprimeopportunityforthePVsectortofurtherdecreaseitscarbonfootprint.Usingrenewables-basedelectricityinproductionprocessescouldreduceemissionsfromPVmanufacturingsignificantly.GlobalelectricitysupplybysourceandforsolarPVmanufacturing(left)andinChineseprovincesbyfuel(right),2021IEA.Allrightsreserved.Sources:Leftgraph:IEA(2022b).Moreefficientpolysiliconproductionhasachieved50%energysavingssince2011,decouplingmoduledemandfromenergyconsumptionEnergyconsumptionformanufacturinghasincreasedmoreslowlythanmoduleproductionsince2011thankstogreaterenergyefficiencyinpolysiliconproduction.Inthelasttenyears,moduleproductionhasexpandedbymorethansix–fromaround30GWto185GW–butonlyfourtimesasmuchenergywasneededtomeetincreaseddemandthankstoenergysavingsinpolysiliconproductionprocessesachievedinthepastdecade.36%62%0%20%40%60%80%100%GlobalelectricitygenerationSolarPVmanufacturingShareofelectricityconsumptionOtherNuclearRenewablesGasCoalShareofcoal0%20%40%60%80%100%048121620ShareofelectricityconsumptionTWhIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday39Infact,totalsavingswouldhavebeenevenhigherhadenergyconsumptionforwafersremainedstableinsteadofincreasingbyafactorof11duetohigherdemandformoreenergy-intensivemonocrystallinewafers.Comparedwiththemulticyrstallinewafersthatdominatedthemarketuntil2018,monocrystallineonesrequirethreetimesmoreenergytomanufacture.Thus,withmonocrystallinewafersinhighdemandsince2018,energyconsumptionforwaferproductionhasgrownexponentially.GlobalenergyconsumptionforsolarPVmanufacturingandmoduleproduction(left)andpolysiliconenergysavingssince2011(right)IEA.Allrightsreserved.Source:Frischknechtetal.(2020).Despitebeingenergy-intensive,theenergyandmaterialefficiencyoftheSiemensprocesshasimprovedsignificantlyoverthelastdecadeandachievedalmost50%energysavingsoverthelasttenyears.Thesesavingsresultfromtheelectricityintensityoftheprocessdecliningfromover70kWh/kgin2011toroughly50kWh/kgin2021thankstolargerfurnaces,upgradedfurnacewallmaterials,agreaternumberofsiliconrodsandadjustmentofthegasmixusedduringsiliconpurification.Theseimprovementssavedanestimated12%ofenergyconsumptionoverthelasttenyears,andanadditionalsavingsof39%camefrommaterialefficiencyinnovationstoreduceandreusewaste.Withouttheseimprovements,energyconsumptiontomeetpolysilicondemandin2021couldhavereached430PJ–morethantwicetheactual150PJconsumed.024681012201120132015201720192021Indexed(2011=1)ModuledemandPolysiliconWafersTotalenergy01020304050607080080160240320400480201120132015201720192021kWh/kgPJEnergyconsumptionw/oenergyefficiencyw/omaterialefficiencyElectricityintensity(rightaxis)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday40CO2emissionsCO2emissionsfromPVmanufacturingalmostquadrupledasdemandexpandedandproductionmovedtoChinaGlobally,CO2emissionsfromsolarPVmanufacturingalmostquadrupledtomorethan51900kilotonnesofcarbondioxide(ktCO2)overthelastdecade,2accountingforalmost0.15%oftotalenergy-relatedglobalemissionsin2021.ThisgrowthresultedfromanalmostsevenfoldproductionincreaseinthelastdecadeandfrommanufacturingcapacitymovingtoChina.Emissionsincreaseshave,however,beencounterbalancedbyenergyandmaterialefficiencyimprovementsanddecliningelectricitygenerationemissionsintensityinmanycountries.AbsoluteemissionsandemissionintensityofPVmanufacturinggloballyIEA.Allrightsreserved.Notes:RoW=restofworld.ThisreportdoesnotconsideremissionsderivedfrommanufacturingintermediateproductsinvolvedinPVmoduleassembly(glass,cables,etc.).TotalenergyemissionsreferstoCO2emissionsfromenergycombustionandindustrialprocesses.Sources:Rightgraph:IEA(2021a;2022d).Leftgraph:IEA(2021a).IEAanalysisalsobasedonBNEF(2022a),PVPS,InfoLinkandUNComtrade.PolysiliconproductionisthemostCO2-intensivesegmentofthesolarPVsupplychain,eventhoughitsshareinoverallPVmanufacturingemissionshasdeclined2CO2emissionsfrommanufacturingacrosstheentirePVsupplychainarecalculatedbyaccountingforallelectricityandotherfuelsusedduringtheproductionprocess.Forelectricity,weusedgridemissionfactors(CO2/KWh)fromtheEnergyDataCenter.ThenumeratorrepresentsabsoluteCO2emissionsfromfossilfuelsconsumedforelectricitygeneration,whilethedenominatorrepresentstotalelectricitygenerated.Asaresult,emissionsperkWhvaryacrosscountriesandfromyeartoyear,dependingonthegenerationmix(IEA,2021a).Forprimaryenergyemissions,wereliedonIPCCCO2emissionfactors(IPCC,2006).IEA.Allrightsreserved.0.00%0.05%0.10%0.15%0.20%0100002000030000400005000060000200520112021ktCO2EmissionsfrommanufacturingbycountryChina0100002000030000400005000060000200520112021ktCO2EmissionsfrommanufacturingpersegmentPolysiliconWafersCellsModules01002003004005006007008009001000200520112021kgCO2/kWEmissionsintensityovertimepersegmentSpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday41continuouslyfrommorethantwo-thirdsin2011tojustover39%lastyear.Meanwhile,thetechnologyshiftfrommulticrystallinetomore-energyintensivemonocrystallinetechnologyboostedtheshareofwaferproductioninoverallsolarPVmanufacturingemissionsby17percentagepoints.Today,Chinaisresponsiblefor87%ofglobalemissionsfromsolarPVmanufacturinginvolvingpolysilicon,ingots,wafers,cellsandmodules,comparedwithonlyover59%in2011.Inthelastdecade,China’sincreaseinproductioncapacitysurpassedglobalgrowthinallsegments.Asaresult,enlargementofitsproductionandCO2emissionssharesoutpacedevenglobalexpansion.Nevertheless,theamountofCO2emissionsPVplantsareabletodisplaceduringtheiroperationallifetimefaroutweighsthevolumeemittedduringmodulemanufacturing.Forinstance,1GWofinstalledsolarPVcapacitycouldoffset1.5milliontonnesofcarbondioxide(MtCO2)annuallyfromcoal-firedgeneration(IEA,2020a).Inmostcountries,domestically-producedsolarPVmodules(includingpolysilicon,ingots,wafers,cellsandmoduleassembly)needtooperateonlythreetofivemonthstomakeupforalltheirmanufacturing-relatedemissions.Thismeasurementisonlyindicative,however,asacomprehensivelifecycleassessmentshouldalsoconsiderallupstreamanddownstreamemissions,includingfrombalance-of-systemcomponentmanufacturingandPVpowerplantconstruction.Nevertheless,althoughthepaybackperiodcoulddoubleortriplewhenlifecycleemissionsaretakenintoaccount(dependingonthetypeofsystem),itwouldstillbeveryshortconsideringaPVsystem’stypicallifetimeof25-30years.SolarPVmanufacturingemissionsintensityandpaybackperiodIEA.Allrightsreserved.Notes:Eachdatapointrepresentsacountry.TheanalysisassumesthatrenewableelectricitygenerationfromsolarPVcapacitydisplacesfossilfuelsintheelectricitymix,basedontheircurrentshare.0246810120100200300400500600700MonthsSolarPVmanufacturingintenstity(kg-CO2/kW)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday42TheemissionsintensityofPVmanufacturinghasfallen45%since2011withprocessimprovementsandaswitchtolow-carbonelectricitygenerationContrarytoabsoluteemissions,theemissionsintensityofsolarPVmanufacturinghasdecreasedalmost45%inthelastdecadethankstomaterialandenergyefficiencyimprovementsaswellasdecliningelectricitygenerationfromfossilfuels.3Withouttheseimprovements,totalCO2emissionsin2021wouldhavemorethandoubledtoover116000ktCO2,correspondingto0.32%oftotalglobalenergy-relatedemissions.Threefactorscanbecreditedforthistrend.First,materialefficiencyinpolysiliconmanufacturingcontributedalmosttwo-thirdsofoverallCO2emissionsreductions.Second,energyefficiencyimprovementsinproducingpolysiliconreducedemissionsby9500ktand,finally,agreatershareoflow-carbonelectricityinChinaandotherproductioncentreswasresponsiblefor20%ofthereduction.Inmostkeymanufacturinghubs,includingChina,GermanyandtheUnitedStates,theshareoffossilfuelsinelectricitygenerationhasdecreasedby5to14percentagepointssince2011.SolarPVmanufacturingCO2emissionssavingsin2021(left)andshareoffossilfuelsinelectricitymixpercountry(right)IEA.Allrightsreserved.Note:Leftfigureindicatespossibleemissionslevelsin2021withoutmaterialandenergyefficiencyimprovements,ifelectricitymixeshadremainedunchangedsince2011.Sources:Rightgraph:IEA(2021a).Leftgraph:IEA(2022b;2021e).IEAanalysisalsobasedonBNEF(2022a),PVPS,InfoLink,UNComtrade.3EmissionsintensityinkgCO2/kWrepresentsthenumberofkilogrammesofCO2emittedwithproductionofonekWofpolysilicon,wafers,cellsormodules.020000400006000080000100000120000Withoutsavings2021MaterialefficiencyEnergyefficiencyRenewablesincrease2021ktCO20%20%40%60%80%100%200520072009201120132015201720192021%offossilfuelsinelectricitygenerationChinaMalaysiaUnitedStatesGermanyBrazilWorldIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday43Transportaccountsforonly3%oftotalCO2emissionsfromsolarPVmanufacturingTransportingsolarPVproductsproducesfarlessemissionsthanmanufacturingthemdoes,especiallybecausethetransportsharehasbeendecliningsince2011.Weight,distanceandmeansoftransportarethekeyvariablesthatdetermineemissionsassociatedwithtransportingPVgoods.4Accountingforanestimated95%ofPVtransport-relatedemissionsin2021,assembledmodulesaretheheaviestofallPVcomponentsshipped,travellingprimarilyfromChinatovariousglobalmarkets.AlthoughCO2emissionsfromtransportingmodulesfell35%from2011to2013,theyclimbedagainin2015despitetradevolumestability.First,China’sdomesticdemandincreaseddrasticallywiththecountry’sshareinglobalannualinstallationsgrowingfrom12%in2012toalmost45%in2016.Meanwhile,traderoutesforsolarPVmodulesshiftedawayfromEuropeandtowardsJapan,IndiaandAustraliainstead,meaningthatChineseexportstravelledshorterdistances,reducingoveralltransport-relatedemissions.AbsoluteCO2emissionsassociatedwithtransportofPVcomponentsIEA.Allrightsreserved.Sources:IEA(2022a).IEAanalysisalsobasedonBNEF(2022a),PVPS,InfoLinkandUNComtrade.4Forthisreport,calculationsarebasedonemissionsresultingfromtransportationwithinthevarioussupplychainsegmentsandfromtransportingfinishedmodulesfrommanufacturingcountrytoinstallationdestination.Transportemissionsarecalculatedindividuallybysegmentandyear,andfromcountryoforigintodestination.Foreachentry,theweightofgoodstransportedandpackagingmaterialwerecalculated,thendistributedintocontainersofforty-footequivalentunitsandtwenty-footequivalentunits.TheIEAGlobalEnergyandClimateModel(IEA,2022a)provideddataondistancesbetweencountryoforiginanddestinationandonemissionsintensityforeachtransportmode.Themainmodeoftransportwasdecidedbasedondistance,switchingandmixingamongmaritimeshipping,railfreightandheavy-dutytruck.0%2%4%6%8%10%12%14%020040060080010001200140016001800200020052006200720082009201020112012201320142015201620172018201920202021ktCO2ModulesCellsWafersPolysiliconShareoftransportintotalemissionsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday44In2021,however,long-distanceexportingincreasedagain–withdistancesdoublinginmostcases–asproductsmovedfromVietNamandMalaysiatotheUnitedStates,andfromChinatoIndia,Germany,Brazil,SpainandFrance.TheUnitedStateshadthehighestemissionsfrommoduleimports,accountingforover31%oftotalmoduletrade-relatedemissionsglobally.AlthoughtheUnitedStateshasdomesticmoduleproduction,itmeetsonly30%ofthecountry’sdemand,whichroseanaverageof30%peryearinthelastthreeyears.DuetothehighnumberofpanelsChinatransportedandthedistancestheytravelledbeforereachingdestinationssuchasEurope,BrazilandIndia,transport-relatedemissionsoriginatingfromChineseexportsaccountedforover62%ofallmoduleexport-relatedemissionsworldwide.AbsoluteCO2emissionsassociatedwithmoduletransportinhigh-importcountriesIEA.AllRightsReserved.Sources:IEA(2022a).IEAanalysisalsobasedonBNEF(2022a),PVPS,InfoLinkandUNComtrade.JobcreationChinaandASEANcountriesholdalmost90%ofglobalPVmanufacturingjobsSolarPVisoneofthemostemployment-intensivesectorsofallrenewableandfossilfuelenergytechnologies.MostsolarPVjobsworldwideinvolveconstructingplantsandinstallingpanelsonresidentialandcommercialrooftops–providingmoreemploymentthanisassociatedwiththeirmanufacture.However,localdownstreamjobsthatinvolvemostlyelectricians,engineersandsalesprofessionalsarehighlydependentonlocaldemandthatcanfluctuateannuallyduetopolicy01002003004005006002018201920202021201820192020202120182019202020212018201920202021201820192020202120182019202020212018201920202021NetherlandsBrazilGermanyIndiaPolandSpainUnitedStatesktCO2OthersPhilippineSingaporeThailandVietNamKoreaMalaysiaChinaIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday45changesandmarketdevelopments.Meanwhile,manufacturingjobs,althoughsmallerinnumber,contributetolocaleconomicdevelopmentandareperceivedbymanygovernmentsassustainablelong-termemployment.Weestimatethatthetotalnumberofjobsworldwideassociatedwithmanufacturingpolysilicon,wafers/ingots,cellsandmodulesmorethandoubledinthelastdecadetonearly600000in2021.Inaddition,manufacturingotherequipmentassociatedwithsolarPVsystems(e.g.inverters,rackingandmounting)alsoprovidedemployment.Forinstance,inverterproductionaccountsfornearly50%ofPVmanufacturingjobsinEurope(SolarPowerEurope,2021),whilerackingandmountingmakeupnearly20%ofPVmanufacturingjobsintheUnitedStates.However,alackofcountry-leveldatapreventscomprehensiveanalysisofjobsassociatedwithsolarPVmanufacturing.Renewabletechnologytotalmanufacturingjobsbytechnology(left)andPVmanufacturingbyupstreamanddownstreamsegments(right)IEA.Allrightsreserved.Notes:EmploymentestimatesarebasedonIEAenergyinvestment,capacityandproductiondata,andarecalibratedusingamalgamateddatafromnationalstatistics,internationalgovernmentalorganisationdatabases(includingtheInternationalLabourOrganisation),companyreportsandacademicliterature.Energyemploymentencompassesalldirectjobsinenergyfacilityconstructionandoperation,andjobsrelatedtomanufacturingdirectinputsspecifictotheenergyindustry.Indirectemploymentassociatedwithgeneralgoods(e.g.cementproduction)isnotcountedasenergyemployment,andneitherisinducedemploymentincluded.Asmuchaspossible,theseestimatesalsoattempttocaptureinformalemployment.Source:IEA(2022c).Ofthemainprocesses,moduleproductioncreatesthemostPVmanufacturingjobs(46%),followedbythemakingofcells(33%),wafers/ingots(15%)andpolysilicon(just4%).Themanufactureofothermaterialssuchasglass,EVAandbacksheetrepresentsanadditional2%ofemploymentinthisdomain.In2021,overthree-quartersofallsolarPVmanufacturingjobswereinChina,followedbytheAsia-Pacificregion(14%),Europe(3%)andtheUnitedStates(1%).ManufacturingjobsbyrenewablespowertechnologySolarPVWindHydroOther0%20%40%60%80%100%Utility-scalePVDistributedPVSolarPVjobsbyeconomicactivityManufacturingOtherIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday46TheconsolidationofmanufacturingjobsinChinaandSoutheastAsiaacceleratedinthepastdecadetotakeadvantageofrelativelylowlabourcosts,subsidiesforequipmentandenergy,costefficiencygainsofferedbyautomationandcompany/plantintegration,andbankruptciesinEuropeandtheUnitedStates.Furthermore,processesthatwerehistoricallymanualhavebecomeincreasinglyautomatised,increasingoutputandreducinglabourrequirements.During2005-2011,globalsolarPVmanufacturingjobsincreasednearlyeightfoldtomeeta20-folddemandincrease.Whilein2005theUnitedStatesandEuropeheldnearlyone-quarteroftotalglobalPVmanufacturingjobs,incentiveschangedafterthe2011deploymentboominEuropeandproductionmovedrapidlytoChinaandtheASEANregiontobenefitfromlowercostsandtocomplywithtraderestrictions.Thus,EuropeancountriesandtheUnitedStateslostover20%ofemploymentinthisareafrom2011to2014.TotalPVmanufacturingjobspersegment(left)andbyregion(right)IEA.Allrightsreserved.Notes:APAC=Asia-Pacific.Jobspersegmentarecalculatedbasedonpubliclyavailabletotalsandplant-levelgovernmentandcompanydatafor2005-2021.In2021,nearly85%oftheworld’spolysiliconmanufacturingjobswereinChina.InadditiontoitsindustrialpolicysupportingdomesticsolarPVsupplychainsegments,theChinesegovernmentimposedantidumpingimportdutiesonAmericanandKoreanpolysiliconin2010/11.Thesetrademeasurescontributedtoanearly35%increaseinpolysiliconjobsinChinafrom2013to2014.Greaterautomationandlowlabourcostshavealsohelpedmovewafer,cellandmodule-manufacturingjobstoChinaandSoutheastAsia,wheretheaveragehourlywagefortheseemployeescanbearound90%lowerthaninEuropeandtheUnitedStates.Chinahasthemost050000100000150000200000250000300000ModulesCellsWafers/ingotsPolysilicon0100000200000300000400000500000600000700000ChinaAPACUSEuropeRestofworldIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday47employmentassociatedwithwafers,cellsandmodulesatnearly80%,followedbyMalaysia,ThailandandVietNam.In2021,nearly85%ofallPV-relatedmanufacturingjobswereinjustfourcountries.Inparttohelpstimulatelocallabourmarkets,16countrieshavepoliciesinplacetoreshoremanufacturing,creatingover19000jobsintotalinnascentmarketssuchasBrazil,India,TürkiyeandSouthAfrica.However,countrieswithreshoringpoliciesarehometolessthan4%oftotalglobalsolarPVmanufacturingjobs.InvestmentMismatchedPVsupplyanddemandleadstovolatileannualinvestmentinsolarPVmanufacturingplantsGlobalcumulativeinvestmentinsolarPVmanufacturingfacilitiesmorethandoubledinthepastdecadetoalmostUSD100billionin2021.Overall,polysiliconandingots/waferstogetheraccountforalmost70%ofallinvestmentinsolarPVmanufacturingduetheirhighcapitalrequirements.WhileannualsolarPVinstallationshaveincreasedconsistentlysince2006,yearlyinvestmentvolumesformanufacturingPVproductshavebeenvolatile,rangingfromlessthanUSD1billiontoashighasUSD15billion.Thisinconsistencyresultsmainlyfromperiodsofoverinvestmentbeingfollowedbyyearsofunderinvestment,wideningthesupplyanddemandbalancesofseveralproductsinthePVsupplychain.SolarPVmanufacturingfacilityinvestmentbysegment(left)andbycountry/region(right),2006-2021IEA.Allrightsreserved.Notes:ASAEN=AssociationofSoutheastAsianNations.Investmentnumbersareassociatedwiththemanufacturingfacilities’commissioningdates.Thepartialcommissioningoflargeplantsistakenintoaccount.020000400006000080000100000120000020004000600080001000012000140002006200720082009201020112012201320142015201620172018201920202021USDmillionPolysiliconIngots&wafersCellsModulesCumulativeinvestment(rightaxis)0100002000030000400005000060000700002006-132014-21NorthAmericaEuropeJapanKoreaASEANChinaLatinAmericaIndiaOtherAsiaIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday48Forpolysilicon,investmentsroserapidlyduring2008-2011becauseescalatingdemandforsolarPVinstallationsresultedinpolysiliconshortagesasearlyas2005,withthespotpricereachingarecordofalmostUSD400/kg5–morethantentimestoday’sprice.Havingpeakedin2011,investmentinpolysiliconproductionplantsdeclinedsignificantlydueto50%overcapacity,followedbythespotpricefallingbelowthehistoricallowofaroundUSD10/kg.Investmentlevelsfrom2017to2021wererelativelymodest,mainlybecauseoftheeconomiesofscaleachievedinChina,wherelargerproductionfacilitieswereinstalledatverylowinvestmentcosts.Annualinvestmentsacceleratedagainin2016toreachanewpeakin2021aswafer,cellandmoduleproductionexpandedmassivelytomeetgrowingdemandinChinafollowingintroductionofthegovernment’sgenerousFITscheme.Over2014-2021,globalinvestmentinsolarPVmanufacturingincreased50%fromthepreviousseven-yearperiod.ItalsoshiftedfromEurope,JapanandKoreatoChinaandASEANcountries.Duringthisperiod,ChinainvestedmorethanUSD50billioncumulativelyinsolarPVmanufacturingfacilities,mostlyforwaferandcellproduction,whichhasboostedinvestmentvolumes.FinancialperformanceIntegratedPVcompaniesfinanciallyoutperformpure-playcompanies,butstilllagbehindothersimilarindustriesSolarPVindustryprofitabilityinthepastdecadehasbeenvolatile,showingloweraverageprofitmarginsthantheoil,coal,chemicalandsemiconductorindustries.Asprofitabilityofcompaniesinanysectorisakeyindicatortomeasurethefinancialhealth/performanceofanindustry,itiscriticalforthelong-termsustainabilityofanysector,particularlythoseexpectedtoexpandrapidlysuchassolarPV.Verticallyintegratedsolarindustrymanufacturingcompanieshaveconsistentlybeenthemostprofitablebusinesssegmentsince2014.Theyoutpacepure-playcompaniesactiveinonlyonespecificsolarPVsupplychainsegmentbecausetheyareabletocompensateforlossesinonesegmentthroughprofitsinanother.In5Long-termpurchasecontractswellbelowtheUSD400/kgspotpricewerealsocommon,sonotallmanufacturerswereexposedtohighprices.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday49addition,80%ofmedium-sizedintegratedcompanies6inChinaarealsosolarPVpowerplantdevelopersreceivingstablerevenuesthroughlong-termcontracts.Thepolysiliconbusiness,whichisasubsectorofthechemicalindustry,hasbeenthesecondmostfinanciallyunderperformingpartofthePVsupplychaincomparedwiththechemicalindustry,whichhadanaverageprofitmarginof6%inthelastdecade.Similarly,wafermanufacturinghashadprofitmarginsrangingfrom-5%toamaximumof10%,significantlylowerthanthoseofsemiconductorproduction.Cellsandmoduleshaveunderperformedthemostfinancially,astheyaccountforthelargestshareofmanufacturingcosts,andcompetitionamongsuppliersisfierce.ProfitmarginsofsolarPVsupplychainsegments(left)andofotherindustries(right)IEA.Allrightsreserved.Notes:Companiescoveredforeachsegment:Polysilicon:WackerChemieAG,OCICoLtd,GCL-PolyEnergyHoldingsLtd,RECSiliconASA,LDKSolarCoLtd,TokuyamaCorp,DaqoNewEnergyCorp,TongweiCoLtd,XinteEnergyCoLtdandOsakaTitanium.Ingots&wafers:Sino-AmericanSiliconProductsInc,ComtecSolarSystemsGroupLtd,BeijingJingyuntongTechnologyCoLtd,ShuangliangEco-EnergySystemsCoLtd,GoldenSolarNewEnergyTechnologyHoldingsLtdandWoongjinEnergyCoLtd.Cells&modules:MotechIndustriesInc,GintechEnergyCorp,ChinaSunergyCoLtd(CSUN),UnitedRenewableEnergyCoLtd,ShanghaiAikoSolarEnergyCoLtd,GCLSystemIntegrationTechnologyCoLtd,TSECCorp,TainergyandVikramSolarPvtLtd.Integratedcompanies:JASolarTechnologyCoLtd,JinkoSolarHoldingCoLtd,LongiGreenEnergyTechnologyCoLtd,TianjinZhonghuanSemiconductorCoLtd,RisenEnergyCoLtd,CanadianSolarInc,TrinaSolarCoLtd,SolargigaEnergyHoldingsLtdandFirstSolar.(FirstSolarisathin-film-basedcompanywithintegratedmanufacturingthatcoverstheprocessingofrawmaterialstomoduleassembly.)Wind:SiemensGamesaRE,VestasWindSystms,SuzlonEnergyLtd,ChinaLongyuanPowerGroupCorpLtd,Boralex,DongfangElectricCorpLtd,XinjiangGoldwindScience&Technology,SinovelWindGroupCoLtdandGuodianTechnology&Environment.Oilmajors:BP,Chevron,ExxonMobil,ShellandTotal.Sources:BasedonBloomberg(2022b).Damodaran(2022)forhistoricaltopresentglobalaveragesfor“chemicalbasic”,“coal&relatedenergy”and“semiconductor”categories.6AnintegratedcompanymanufacturesinatleastthreesegmentsofthePVvaluechain.Medium-integratedcompaniesproduceaminimumof5000MWinonesegment.-45%-35%-25%-15%-5%5%15%25%WeightedaveragenetmarginPolysiliconIngots&wafersCells&modulesIntegratedcompanies-45%-35%-25%-15%-5%5%15%25%WindOilmajorsChemicalbasicCoal&relatedenergySemiconductorIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday50SupplyglutsinthesolarPVsectorhavecreatedconsiderableprofitmarginvolatilitysincethelate2000swhenChinabegantostrengthenandexpanditsdomesticsolarPVindustrythroughfinancialsupport,innovationandR&Dspending.Naturally,China’spoliciesspurredmanymanufacturersinthecountrytoexpandtheirproduction.Between2011and2013,erraticglobaldemandimpactedtheprofitabilityandinvestmentcyclesofsolarPVmanufacturers.DecliningdemandinEurope,thelargestmarketatthetime,ledtoglobalovercapacityinallsupplychainsegments.Polysilicon,cellandmodulepricesdroppeddrastically,resultinginlower-than-expectedrevenuesandbankruptcyformanysolarPVmanufacturerswithhighexposuretodebt.Asimilartrendaffectedthewindindustryin2012,butlowerlosseswereincurredbecausewindturbinemanufacturerswereregionallydiversifiedcomparedwithsolarPVcompanies,whichareconcentratedmainlyinChina.Bytheendof2013,localsolardemandinChinahadrecoveredwithsustainedfinancialsupportfromtheChinesegovernment,leadingtoaprofitabilityincreaseforallsolarindustrysegments.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday51ReferencesBloomberg(2022a),LondonMetalExchangedatabase,https://www.bloomberg.com/professional/solution/bloomberg-terminal/(accessedApril2022).Bloomberg(2022b),FinancialIndicators(database),https://www.bloomberg.com/professional/solution/bloomberg-terminal/(accessedApril2022).BNEF(2022a),BNEFinteractivedatabase,https://www.bnef.com/(accessedMay2022).Candelise,C.etal.(2011),Materialsavailabilityforthinfilm(TF)PVtechnologiesdevelopment:Arealconcern?,RenewableandSustainableEnergyReviews,Vol.15(9),pp.4972-4981,https://doi.org/10.1016/j.rser.2011.06.012.Carrara,S.etal.(2020),RawmaterialsdemandforwindandsolarPVtechnologiesinthetransitiontowardsadecarbonisedenergysystem,EuropeanCommissionJointResearchCentre(JRC),http://dx.doi.org/10.2760/160859%20.CRU(2018),TheRoleofSilverintheGreenRevolution,https://www.silverinstitute.org/wpcontent/uploads/2018/07/Role_of_Silver_Green_Revolution_28Jun2018.pdf.DamodaranOnline(2022),Data(onlinedatasets),https://pages.stern.nyu.edu/~adamodar/New_Home_Page/data.html(accessedApril2022).Elshkaki,A.andT.E.Graedel(2013),Dynamicanalysisoftheglobalmetalsflowsandstocksinelectricitygenerationtechnologies,JournalofCleanerProduction,Vol.59,pp.260-273,https://doi.org/10.1016/j.jclepro.2013.07.003.Fizaine,F.andV.Court(2015),Renewableelectricityproducingtechnologiesandmetaldepletion:AsensitivityanalysisusingtheEROI,EcologicalEconomics,Vol.110,pp.106-118,https://doi.org/10.1016/j.ecolecon.2014.12.001.Fraunhofer(2022),PhotovoltaicsReport,https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/Photovoltaics-Report.pdf.Frischknecht,R.etal.(2020),LifeCycleInventoriesandLifeCycleAssessmentofPhotovoltaicSystems,IEAPVPSTask12,ReportT12-19:2020,https://iea-pvps.org/key-topics/life-cycle-inventories-and-life-cycle-assessments-of-photovoltaicsystems.Gibon,T.etal.(2017),Healthbenefits,ecologicalthreatsoflow-carbonelectricity,EnvironmentalResearchLetters,Vol.12(3),https://iopscience.iop.org/article/10.1088/1748-9326/aa6047.Giurco,D.etal.(2019),Requirementsformineralsandmetalsfor100%renewablescenarios,https://link.springer.com/chapter/10.1007/978-3-030-05843-2_11.Hertwich,E.etal.(2016),GreenEnergyChoices:Thebenefits,risks,andtrade-offsoflow-carbontechnologiesforelectricityproduction,https://www.resourcepanel.org/reports/green-energy-choices-benefits-risks-and-trade-offs-low-carbon-technologies-electricity.IEA(InternationalEnergyAgency)(2022a),IEAGlobalEnergyandClimateModel(GEC-Model)(accessedApril2022).IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter1-SolarPVmanufacturingtoday52IEA(2022b),ElectricityMarketReport-July2022,ParisIEA(2022c),WorldEnergyEmployment–July2022,ParisIEA(2022d),GlobalEnergyReview:CO2Emissionsin2021,IEA,Parishttps://www.iea.org/reports/global-energy-review-co2-emissions-in-2021-2IEA(2021a),EmissionsFactors2021,https://www.iea.org/data-and-statistics/data-product/emissions-factors-2021.IEA(2021b),WorldEnergyOutlook2021,https://www.iea.org/reports/sustainable-recovery.IEA(2021c),WorldEnergyStatistics(database),https://www.iea.org/reports/key-world-energy-statistics-2021(accessedApril2022).IEA(2021d),TheRoleofCriticalMineralsinCleanEnergyTransitions,https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions.IEA(2021e),Renewables2021,https://www.iea.org/reports/renewables-2021.IEA(2020a),SustainableRecovery,IEA,Parishttps://www.iea.org/reports/sustainable-recoveryIEA-PVPS(IEAPhotovoltaicPowerSystemsProgramme)(2020),LifeCycleInventoriesandLifeCycleAssessmentsofPhotovoltaicSystems,https://iea-pvps.org/wp-content/uploads/2020/12/IEA-PVPS-LCI-report-2020.pdf.ILO(InternationalLabourOrganization)(2022),Statisticsonwages,https://ilostat.ilo.org/topics/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portonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions55arecord150GWin2021.7Productioncapacitywouldneedtoreach750-850GWby2030tosupplyenoughpanels,sinceproductionplantscannotalloperateat100%capacityallthetime.Materialprovisionwillneedtoexpandaswell:infact,criticalmineraldemandwouldriseto4000ktperyearby2030,upfrom1000ktin2021.8SolarPVcapacityadditions(left),supplychaininvestment(centre)andmineraldemand(right),2021and2030undertheIEANetZeroby2050ScenarioIEA.Allrightsreserved.Sources:Leftgraph:IEA(2021f).Centregraph:IEAanalysisbasedonBNEF(2022b),PVPS,PVInfoLink,SPVandRTSPV.Rightgraph:IEA(2021d).DefiningsecurityofsupplyThisreportiscentredaroundsecurity-of-supplyconcernsassociatedwithmanufacturingpolysilicon,wafers,cellsandmodules,althoughitalsoprovidessomediscussiononminingandinstallations.Manufacturingistheprimaryfocusbecausesecurity-of-supplyaspectsofcriticalmineralshavealreadybeenconsideredindetailinTheRoleofCriticalMineralsinCleanEnergyTransitions(IEA,2021d),andPowerSystemsinTransition(IEA,2020b)addressedelectricityprovision.7Capacityadditionscoverutilityanddistributedsolartechnologies.8Amineralisconsideredcriticalfortheenergytransitionwhenenergysectordemandforthismaterialisanticipatedtorepresentasignificantshareofglobaldemandundercleanenergytransitionscenarios.Copperisincluded,forexample,becauseitisnecessaryforcleanenergytransitionsandtheenergysectorislikelytoberesponsibleformorethan40%ofglobaldemandby2040inacleanenergytransitionscenario.Steelisalsonecessaryforcleanenergytechnologiesbutisnotincludedbecauseeveninanetzeroscenariotheenergysectorwouldrequireonlyasmallshareofglobaldemand.ForsolarPV,thefocusmineralsaresilver,indium,silicon,copper,selenium,galliumandtellurium.010020030040050060070080090020212030netzeroAnnualdeploymentcapacity(GW)PVcapacityadditionsAnnualcapacityadditionsManufacturingcapacity0200004000060000800001000001200001400002012-212021-30netzeroInvestment(USDmillion)PVsupplychaininvestmentPolysiliconIngots&WafersCellsModules05001000150020002500300035004000450020212030netzeroCriticalmineraldemand(kt/year)PVcriticalmineraldemandCriticalmineraldemandIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions56InthecaseofsolarPV,asecuresupplychainabletoaccommodatetheneedsofanetzeropathwaywouldbeadequate,resilient,affordableandsustainable:Adequate:Thesolarsupplychainhastheproductioncapacitytomeetgrowingdemandinthelongandshortterm.Resilient:Thesupplychaincanabsorb,accommodateandrecoverfrombothshort-termshocksandlong-termchanges,includingmaterialshortages,climatechange,naturaldisastersandotherdisruptions.Affordable:PVproductionremainscost-effectiveinmeetinglong-termclimategoalsinmostmarkets.Sustainable:Productionissustainableintermsoffinancial,socialandenvironmentalviability.Oilandnaturalgashavebeenattheheartofglobalenergysecuritydiscussionssincethe1970s.Theyhaveattractedmuchanalysis,leadingtotheformulationofseveralpolicyframeworksgloballyaswellascreationoftheInternationalEnergyAgency.Whilemineralandmaterialsupplyconcernsstillexistinthecontextofcleanenergytransitions,theydifferinanumberofwaysfromthosethatapplytooil-andgas-basedenergysystems:Natureofimpacts:WhilesuddensupplydisruptionsalongthePVsupplychainwouldimpactPVdeployment,theywouldnotaffectproductionfromexistingsolarinstallations.Thisisfundamentallydifferentfromoilandgassupplydisruptions,whichhaveimmediateandbroadimpactsonpriceandavailability.Materialvsenergyflows:Assolarpanelsaredurablematerialgoodsthatenablefreesolarenergytobeconvertedintoelectricity,thisstudyfocusesontheprovisionofsolarmodules.Globalview:Whileeachcountrywillhaveitsownsecurity-of-supplyconcernsandpriorities,ouranalysisaddressessupplysecurityattheglobalratherthanindividualcountrylevel.EachsectionbelowexaminesprincipalvulnerabilitiesandrisksalongthePVsupplychainasdeterminedthroughdiscussionswithgovernments,industryandcivilsociety,aswellasthroughIEAanalysis.Anystateofthesupplychainthatleavesitsusceptibletosupplyrisksisconsideredavulnerability.Eachsectionprovidesexamplesofrisksthathavealreadyormayyetimpactsecurityofsupply,orpriceincreasesthatcouldslowdeployment.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions57Principalsecurity-of-supplyvulnerabilitiesandriskexposureVulnerabilityfactorConsiderationPotentialassociatedsupplychaindisruptionrisksJurisdictionalconcentrationTowhatextentistheshareofproductionconcentratedinonesinglejurisdiction?•Domesticpolicychanges•GeopoliticaleventsGeographicconcentrationTowhatextentistheshareofproductionconcentratedinonesinglegeographicarea?•Naturalhazardssuchasearthquakesandfires,andextremeweathereventssuchasdroughtandflooding•Technicalfailuresofelectricity,gasgridsorotherinfrastructureFacilityconcentrationTowhatextentistheshareofproductionconcentratedinonesinglefacility?•Aboverisks,plus:•OnsiteequipmentfailureMarketconcentrationTowhatextentistheshareofproductionconcentratedinonesinglecompany?•Riskofcollusion,pricefixinganddumpingPaceandscaleofgrowthArematerialsuppliesandproductionharmonisedwithdemand?•Longleadtimesforminingcapacityandmanufacturingfacilities•Non-substitutabilityofsomematerials•LowlabourandskillsavailabilityFinancialhealthofthePVsectorTowhatextentaremanufacturersandintegratedcompaniesexposedtofinancialandbankruptcyrisks?•Bankruptcyriskfromvolatileprices•ChangestosubsidiesorothermarketchangesTraderestrictionsHowglobalisedanddependentoninternationaltradeandtradepoliciesisthePVsupplychain?•NeworchangingtradepoliciesrestrictingthefreeflowofsolarPVmaterialsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions58VulnerabilitiesofthesolarPVsupplychainSupplychainconcentrationThesolarPVsupplychainishighlyconcentratedintermsofjurisdictions,geographies,individualfacilitiesandcompaniesConcentrationalongthePVsupplychainatthejurisdictional,geographical,plantandcompanylevelmakethesupplychainvulnerabletosingleincidents,whethertheybeacountry’sindividualpolicychoices,anaturaldisaster,awar,apandemic,technicalfailuresorindividualcompanydecisions.Historically,alltheseriskshavematerialised,leadingtohigherpricesandlikelyslowingthepaceofsolarPVdeployment.Jurisdictional,geographicandfacilityconcentrationPolysilicon,wafer,cellandmodulemanufacturingareconcentratedinChina,withasmuchas42%ofthevaluechain’smanufacturingcapacityinonesingleChineseprovinceandupto14%inonesinglemanufacturingfacilityin2021.Whilepolysiliconandwafermanufacturingaregenerallymoreconcentratedthancellandmoduleproductionatthecountry,provinceandplantlevel,asurveyofplantsunderconstructionandplannedindicatesthatconcentrationsmayincreaseinthenextfiveyearsformostsupplychainsegments.Chinawashometo79%ofglobalpolysiliconcapacityin2021,with42%ofitinXinjiangprovince.Thisprovincealsohasthecountry’slargestpolysiliconplant,whichaloneaccountsfor14%ofglobalproductioncapacity.SeveralnewpolysiliconplantsareplannedforChina,likelyincreasingthecountry’smarketshare,buttheyareoutsideofXinjiang,whichwillhelpreduceconcentrationinthatprovince.Wafermanufacturingisthemostconcentratedsupplychainsegment,withChinaaccountingfor97%ofglobalcapacity.However,itismoreprovinciallydistributedthanpolysilicon,withsignificantcapacitiesintheJiangsu,Yunnan,InnerMongolia,TianjinandJiangxiprovinces.Thesinglelargestmanufacturingfacilityaccountsfor14%ofglobalproductioncapacity.Cellproductionconcentrationislowerthanforwafers,with85%locatedinChina,andmostofthiscapacityisinthethreeprovincesofJiangsu,ZhejiangandSichuan.Cellproductionislessconcentratedinonesinglefacilitythanpolysiliconandwafermanufacturing,butitisstillsignificantat8%.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions59Country,provinceandsingle-plantconcentrationassharesofglobalmanufacturingcapacityIEA.Allrightsreserved.Note:2025valuesbasedonprojectsunderconstruction,proposedandplanned.Source:IEAanalysisbasedonBNEF(2022b),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Module-manufacturingcapacityismoredistributedgloballyandacrossproductionfacilities,butitisstillrelativelyconcentratedprovinciallyinChina.In2021,thecountryheld75%oftheworld’smodule-makingcapacity,with30%locatedinJiangsuprovince.Atthefacilitylevel,however,modulesaretheleastconcentrated,withjust4%ofproductioncapacityinthesinglelargestplant.VietNam,Malaysia,KoreaandIndiaarehometo12%oftheglobe’smoduleproductioncapacity.RawmaterialsusedinsolarPVmanufacturing–forinstancethesilverusedincrystallinesiliconcells,thetelluriumusedinthin-filmtechnologies,thecopperusedforcellandmoduleconnections,andtheantimonyusedinsolar-gradeglass–arealsoconcentratedinasmallnumberofcountries.Foreachoftheseminerals,thecollectiveshareofthetopthreeproducingcountriesis50%ormoreofglobalsupply.Furthermore,justahandfulofcountriesarethetopproducersofmultiplerawminerals,asexemplifiedbyChina,whichsuppliesthevastmajorityofaluminium,antimony,cadmium,molybdenum,tellurium,tinandzincusedinthesolarPVindustry,andalsodominatescopperrefining.AlthoughsolarPVdemandaccountedforlessthan5%oftotalglobalconsumptionofthesematerialsin2021(withtheexceptionsofsilicon[6%],silver[11%]andtellurium[47%]),assolarPVproductionexpands,sowillmaterialdemand.Whilesomeofthesematerialscanbepartlyorcompletelysubstituted,thisgenerallyentailsmoduleperformanceormanufacturingcosttrade-offs.Plus,adapting0%20%40%60%80%100%2010201620212025Single-countryconcentrationPolysiliconWafersCellsModules0%10%20%30%40%50%2010201520212025Single-provinceconcentration0%4%8%12%16%20%201020152021Single-plantconcentrationIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions60manufacturingprocessestousealternativematerialscantaketime.Thislack/slowpaceofsubstitutabilityisadeploymentrisk,sincemoduleproducerscannotswitchquicklytoothermaterialswhenpricesarehigh.Topthreeproducingcountries’sharesinglobalproductionofselectedmineralsusedforsolarPVmanufacturing,2021IEA.Allrightsreserved.Notes:(s)=smelterproduction.(r)=refineryproduction.Othervaluescorrespondtomineproduction.Source:USGS(2022).Highprovincialandfacility-levelconcentrationspresentthegreatestnaturalandtechnicaldisasterrisks.Forinstance,a2020explosionatapolysiliconfacilityinChinaput8%ofglobalpolysiliconproductioncapacityoutofoperation.Thisisthelargestoffourpolysiliconplantclosuresin2020resultingfromfloodingandtechnicalissues.Whileeachincidentoccurredatadifferenttime,togethertheyledtoanestimated4%declineinannualproductioninanalready-tightpolysiliconmarket,contributingtotheneartriplingofpricesbetween2020and2021.In2021,siliconandwaferproductioninChinawerealsocurtailedwhenregulatorsrequiredproducerstocutproductionaspartofenergy-savingmeasures.AsofearlyJuly2022,afireatpolysiliconfacilityinXinjiangandtheensuingmaintenancerequirementsreducedglobalproductionby0.5%.Eventhiscomparativelysmalldisruptioncontributedtopriceincreases.Concentratingproductionwithinasinglegeographicalregionorcountryalsoexposesthesupplychaintorisksfromchangesindiplomaticrelationsamongcountriesaswellasalterationsindomesticpoliciesandinfrastructure.Forinstance,shippingtimesfromChinatoUSandEuropeanportsincreasedfromaround40ChinaChinaChileChinaChinaSouthAfricaChinaChinaChinaIndonesiaChinaMexicoChinaChinaBelgiumChinaChinaIndiaRussiaPeruChileKoreaKazakhstanKoreaAustraliaChilePhilippinesMoroccoChinaIndiaJapanRussiaIndonesiaPeruRussiaTajikistanChinaCongo(Kinshasa)JapanTurkeyCanadaUnitedStatesUnitedStatesRussiaUnitedStatesPeruJapanRussiaUnitedStatesPeruAustralia0%10%20%30%40%50%60%70%80%90%100%(s)AluminiumAntimonyCopper(r)Copper(r)CadmiumChromium(r)IndiumLeadMolybdenumNickelPhosphateSilverRawsteelTellurium(r)TelluriumTinZincCountryshareinglobalproductionIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions61daystomorethan100followingtheCovid-19outbreak.Infact,shippingdelaysalsocontinuetoplaguedeliveriestoJapanandKorea,whichmayslowdeploymentin2022.Overall,polysilicon,wafer,cellandmoduleproductioncapacitiesareallbecomingmoreconcentrated,leavingthesupplychainmorevulnerabletorisks.MarketconcentrationTheproductioncapacityofsolarPVsupplychainsegmentsisalsoconcentratedatthecompanylevel,introducingvulnerabilitiestoanothersetofrisks.Similartogeographicconcentration,asmallsetofcompaniesaccountsforanever-largershareofglobalcapacity.Wafersarethemostcompany-concentrated,withover75%ofmanufacturingconcentratedinthetopfiveenterprisesandthelargestproduceraccountingfor29%ofglobaloutput.Forpolysiliconproduction,companyconcentrationissimilarandjustonecompanyaccountsfor18%.Companyconcentrationforcellsandmodulesislower,butithasbeenincreasinginthepastfiveyears.Concentrationbythetop,threetopandfivetopcompaniesassharesoftotalcapacityIEA.Allrightsreserved.Source:IEAanalysisbasedonBNEF(2022b),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.Concentratingproductioncapacityamongjustafewcompaniesintroducestheriskofhavingasmallsetofcompaniesworkingtogethertoincreaseprofitsatthecostofhigherconsumerpricesandquickerdissemination.Thissituationcanleadtocollusion,pricefixing,dumpingandotherbehavioursthatreducecompetitionandultimatelyboostpricesandretarddeployment.Waferproductioncapacityisconsideredmoderatelyconcentrated,accordingtoUShorizontalmergerguidelinesthatindicatethatmergersaboveacertainthreshold0%10%20%30%40%50%60%70%80%90%100%201120162021201120162021201120162021201120162021PolysiliconWafersCellsModulesTopcompanyTopthreecompaniesTopfivecompaniesRestofcompaniesIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions62couldraisecompetitivenessconcerns(DOJ,2010).Polysiliconmarketsharesaremoredistributedamongthetopfivecompanies,soproductionislessatriskofcompetitivenessimpactsthanthatofwafers.Meanwhile,cellandmodule-manufacturingcapacityismoredistributedthanthatofpolysiliconandwafers,implyingfewercompetitivenessrisks.9Todate,theUnitedStates,theEuropeanUnion,IndiaandTürkiyehaveleviedantidumpingdutiesonspecificfirmsbasedonevidenceofdumpingandimpactsondomesticcompanies(FederalRegister,2015;GazetteofIndiaExtraordinary,2019;OfficialJournaloftheEuropeanUnion,2018;Türkiye,MinistryofEconomy,2017).However,thesecasesdonotdemonstratecollusionamongcompanies,astheyimplicateindividualcompaniesonly.Expertiseisanothercommoditythatcanbeconcentratedamongasmallnumberofcompanies,limitingthepaceoftechnologytransfer.PaceandscaleofgrowthCurrentandplannedmanufacturingcapacityisinsufficienttomeettheIEANetZerotrajectoryForproductiontoexpandatthestrongpaceandsustainmanufacturelevelsprescribedbytheIEANetZeroScenario,thesolarPVsupplychainwillneedtoexpandinstepwithsolarPVdemand.However,initiatingfasterandlargergrowthexposesthesupplychaintotherisksofmaterialunavailabilityandindustrycapacityinsufficiency.Projectleadtimespresentonecriticalrisk,asminesandproductionfacilitiescanbebuiltonlysoquickly.Additionally,miningoperationsareexposedtoclimaterisksaswellasincreasingenvironmentalandsocial-performancescrutiny.Polysiliconproductioncapacitycanbealimitingfactoringlobalproductioncapacityexpansion,followedbyingotandwafermanufacturing.Infact,polysiliconproductionwouldhavetomorethantriplefromtoday’slevelby2030tosupporttheIEANetZerotrajectory.Asof2022,expectedpolysiliconcapacityadditionswouldclosejustone-quarterofthisgap.Theproductionofingotsandwafers,andofcellsandmodules,wouldallneedtonearlydoubleby2030fromtoday’slevels.Inadditiontoplantsalreadyunderconstruction,Chinesecompanieshaveannouncedambitiousexpansionplans9OnemeasureofmarketconcentrationistheHerfindahl-HirschmannIndex(HHI).IntheUnitedStates,inmarketswithHHIscoresabove1500,mergersthatincreasetheHHIby100warrantscrutinyforpotentiallyseriouscompetitivenessimpacts(DOJ,2010).IntheEuropeanUnion,regulatorsareunlikelytoidentifycompetitionconcernsinmarketswithHHIsbetween1000and2000ifmergersincreasetheHHIbylessthan250(OfficialJournaloftheEuropeanUnion,2004).In2021,thewafermarket’sHHIwasnear1600andpolysilicon’swas1300.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions63acrossthesupplychain,whichwouldfurtherclosethegaptoachievetheIEANetZerotrajectory.However,realisationoftheseplansremainsuncertain,andinvestmentdecisionswilldependonanumberoffactors,includingdemand,subsidyrates,prices,internationalcompetitionandtradepolicies.SolarPVsupplychaincapacityinoperationandunderconstruction,andgaptoNetZeroby2050Scenario,2021to2030IEA.Allrightsreserved.Sources:Underconstruction:IEAanalysisbasedonPVPS,PVInfoLink,SPVandRTS.2030NetZero:basedon(IEA,2021g),manufacturingcapacitytosatisfy630GWofannualcapacityadditions.RampingupsolarPVproductionwillalsorequireadequatecriticalmineralsupplies.In2021,solarPVdemandalreadyclaimed11%ofglobalsilverproduction,over6%ofmetallurgical-gradesiliconandover40%ofallrefinedtelluriumproduced.WeestimatethatPVindustrydemandforcriticalmaterialswouldhavetoexpand150-400%by2030fromthe2021levels(dependingonthematerial)toattaintheIEANetZerotrajectory.ThislevelofgrowthmayincreasethePVshareoftotalcriticalmaterialdemand:forinstance,solarPVsilverdemandin2030undertheIEANetZeroScenariowouldbeequivalenttoover35%of2021production.Thisassessmentaccountsforongoingincreasesinmaterialefficiency,stemmingfrombothgreaterpanelefficiencyandlessmaterialusageperpanel.Forexample,silvercontentpercelldecreasedone-thirdbetween2009and2018(CRU,2018),andweassumethesilverintensityperkWofsolarPVtofurtherdeclinebyone-quarterthrough2030.01002003004005006007008009002021Expected2022additions2030NetZero2021Expected2022additions2030NetZero2021Expected2022additions2030NetZero2021Expected2022additions2030NetZeroPolysiliconIngots&wafersCellsModulesProductioncapacity(GW)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions64PVindustrydemandforselectedmineralsin2021aspercentagesofglobal2021production,andin2030intheIEANetZeroby2050ScenarioIEA.Allrightsreserved.Notes:Mg-silicon=metallurgical-gradesilicon.Forthisfigure,weassumeCdTemodulestorepresent4-5%oftheglobalsolarPVmarketbetween2021and2030andthemarketsharesofCIGSmodulestodeclinefrom1%in2021to0.8%in2030.Duringthesameperiod,thesilverintensityofcrystallinesiliconPVisassumedtodeclinebyone-quarterandpolysiliconintensityisassumedtodeclinebyone-fifth.Sources:BasedonIEA(2021d;2021g)andUSGC,2022.AssolarPVproductionscalesup,risingdemandforrawmaterialsmaysurpassminingandrefiningproductioncapacity,especiallygivensimultaneousdemandgrowthfromothercleanenergytechnologies.LongleadtimesmayproveahindrancetosupplyexpansionLeadtimesforminingoperationsaveraged17yearsbetween2010and2019,fromdiscoverytofirstproduction,althoughtheexactdurationvariesbymineral,locationandminetype(IEA,2021a).Explorationandfeasibilitystudiesoftenrequired13years,andconstruction4years.Suchlongleadtimescanresultintimingmismatchesbetweenmineraldemandandsupplycapacity.SolarPVisjustonesourceofdemandformaterialssuchascopper,andoverallcleanenergytechnologyconsumptionanditsshareoftotaldemandisexpectedtoincreaseontheIEANetZerotrajectory(IEA,2021a).Thus,anymismatchesinsupplyindemandmayhaveanimpactonsolarpricingandmaterialavailability.Furthermore,antimony,cadmium,tellurium,indiumandselenium,usedprimarilyinthin-filmtechnologies,arerecoveredasby-productsofminingorrefiningprimarymineralcommoditiessuchascopper,zinc,leadandgold.Forsomeminerals,suchastellurium,thiscanimplyamarginforhigherrecoveryratesinexistingproduction0%5%10%15%20%25%30%35%40%2021203020212030202120302021203020212030SeleniumCopperIndiumMg-siliconSilverShareof2021production20212030-NetZeroScenario0%20%40%60%80%100%120%140%160%20212030TelluriumIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions65routes.10However,italsomeansthattheproductionoftheseby-productsdependsonthatoftheprimarymineralcommodities,sinceitisoftennoteconomicaltoproducethemseparately.Asaresult,itcanbedifficulttoadapttorapidlychangingdemandfortheseby-productminerals.Bothlongleadtimesandby-productuncertaintycancontributetopricevariability,sincesupplycanoftenlagbehinddemandforyears.AverageminingprojectdevelopmentleadtimesforsilverandcopperIEA.Allrightsreserved.Note:SilverandcopperminingleadtimesincludeforusesotherthansolarPVmanufacturing.Source:IEA(2021d),TheRoleofCriticalMineralsinCleanEnergyTransitions.Leadtimesformanufacturingplantsareshorterthanforminingprojects.However,theycanvarysignificantlyamongdifferentsupplychainsegmentsandfromonecountry/regiontoanother.Newpolysiliconmanufacturingplantshavelongerleadtimesthanwafer,cellandmodulefacilities,withdurationsrangingfrom12to40monthsdependingontheregion.Inadditiontothelengthyperiodneededforconstruction,polysiliconfacilitiesrampupslowlytoreachtheirfullcapacity.Chinahasboththeshortestconstructiontimesandquickestramp-upperiods.Foringotandwaferplants,developmenttimelinesareusuallyshorterandleadtimesarerelativelyconsistentamongkeycountries/regions.Cellandmodulefactoriescanbedeployedin3-12-monthsinmostpartsoftheworld.Forallsegments,leadtimesintheEuropeanUnionandtheUnitedStatesaresignificantlylongerthaninothercountriesandregions,mainlyduetolengthierdevelopment,permitting,landacquisitionandconstructiontimelinesinadditiontoslowerramp-up.10Recentestimatessuggestthatmorethantwo-thirdsoftelluriumcontainedincopperanodeslimesgeneratedduringelectrolyticcopperrefiningiscurrentlynotrecovered,indicatingsignificantpotentialtoincreasesuppliesforthin-filmPVtechnologiesandotherapplications(Nassaretal.,2022).02468101214161820Globalaverageleadtimes2010-19YearsDiscovery,explorationtofeasibilityConstructionplanningConstructiontoproduction02468101214161820CopperSilverYearsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions66RelativelylongerdevelopmenttimelinesforpolysiliconfacilitieshaveledtosupplyshortagesinthesolarPVindustry.Forinstance,annualsolarPVinstallationsdoubledfrom2003to2004andincreasedanother30%in2005,butglobalpolysiliconsuppliescouldnotkeeppacebecausemanufacturersinEurope,theUnitedStatesandJapanwerenotabletoexpandproductionforanother2-4years.Asaresult,thepolysiliconpricegraduallyclimbedfromaroundUSD30/kgin2003toalmostUSD400/kgin2008,soshortagesandhighpricesreducedthesolarPVinstallationratein2005and2006.ThesolarPVindustryiscurrentlyfacinganotherpolysiliconshortageduetoplantfiresinChinaandannualadditionsexpandingmorethan20%from2019to2020andanother12%lastyear.Asaresult,polysiliconpricesmorethantripledfromUSD10/kginJanuary2021toUSD34/kginApril2022.Asthepriceincreased,polysilicon’sshareinmodulecostsrosefrom10%inearly2020toalmost30%in2022.Thesepriceincreaseswerehighenoughtoraisesolarmoduleprices,reversinga20-yeartrendofdecliningcosts.RelativelyshorterleadtimesinChinaareexpectedtobridgethegapbetweendemandandsupplyby2023asnewplantsarecommissioned.Nevertheless,overallrisingmodulepricesremainachallengetofastersolarPVexpansion,increasingtheriskofdelaysandcancellations,especiallyfordevelopersthatsubmittedlowerbidsinauctionsanddidnotanticipatemodulepriceincreases.LeadtimesforsolarPVmanufacturinginvestmentbysupplychainsegmentandcountry/regionIEA.Allrightsreserved.Notes:ASEAN=AssociationofSoutheastAsianNations.IEAanalysis,basedonleadtimesofprojectsalreadyimplementedaswellasthoseannouncedbycompaniesandgovernments,covers2018-2022.Leadtimescoverthenumberofmonthsfromtheannouncementofprojectstotheircommissioning.051015202530354045ChinaEU/USIndiaASEANChinaEU/USIndiaASEANChinaEU/USIndiaPolysiliconIngots&WafersCell&ModuleLeadtime(months)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions67Miningoperationsarefacedwithahostofotherrisksaswell.Forinstance,copperminesareaffectedbydecliningorequalityandreserveexhaustion,ortheyarenearingpeakproduction.Miningassetsarealsoexposedtoincreasinglyintenseclimaterisks,waterstressandgreaterscrutinyofsocialandenvironmentalperformance(IEA,2021a).Thiscombinationofrisingdemand,longleadtimesandrelianceonby-productsincreasestheriskofsupplyanddemandmismatches,whichcanleadtocostincreasesandshortages.CouldskilledlabourandexpertiseshortagesslowgrowthinPVmanufacturing?Globally,laboursuppliesarenotkeepingupwithdemand,andthegapiswideningforcleanenergysectorsglobally(ILO,2019).However,thescaleoftherisktoPVsupplychainsisunclearbecausecountry-levelandinternationalassessmentsofemploymentneedsandgapsalongthePVsupplychainarelacking.Nevertheless,therearesignsthatlabourshortagescouldreducethepaceandscaleofgrowthaswellasproductionqualityoutsideofChinaandtheAsia-Pacificregion.OntheIEANetZeropathway,employmentinPVmanufacturingwouldneedtonearlydoubleoverthenextdecade,tosupportexpandedpolysilicon,wafer/ingot,cellandmodulemanufacturing.AlongthesolarPVsupplychain,almost40%ofworkersrequireformaltraining(e.g.electricalengineersandtechnicians),while60%requireminimalformaltraining(IRENA,2021).Thereare,however,overlapswithexistingjobs:forinstance,electricalengineerscanworkonsolarprojectsaswellasother,moretraditionalemployment.Nevertheless,thescaleofgrowthwillrequireanetincreaseincertainskillsandmoretrainingprogrammesforsolar-specificjobssuchasinstallation.Globalemploymentbysegmentin2010and2020,andforecastto2030IEA.Allrightsreserved.Sources:BasedonpublicemploymentreportsandIEA(2021f).20000040000060000080000010000001200000201120212030Employment(FTE)ModulesCellsIngots&WafersPolysiliconIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions68TheUnitedStates,EuropeandIndiaareallinterestedinbuildingdomesticsolarPVsupplychains,buttheycurrentlyemployjustasmallshareoftheglobalworkforceinthisdomain.Shouldtheseregionsshunimportswhileneglectingtoinvestintheirownlabourmarkets,labourconstraintscouldimpairglobalPVdeployment.IntheUnitedStates,labourforecastsshowashortfallinworkerssuchassemiconductor-processingtechnicians,structuralmetalfabricatorsandfittersandelectriciansthatwouldbeneededtosupportgreatermanufacturingcapacity(TheWhiteHouse,2021b).TheDepartmentofEnergyalsonotesthatalthoughtheUnitedStateswaspreviouslyaleaderinsiliconcellproduction,mostofthisarea’sintellectualpropertyhasmovedtoChina,SoutheastAsiaandEurope.ExpandingcellproductionwouldthereforerequiretheUnitedStatestoinvestintechnologydevelopmentandtoforgepartnershipswithcompaniesandinstitutionsfromregionswiththenecessaryintellectualcapacity(DOE,2022a).Expandingcriticalmineralsupplieswouldalsobechallenging,astheUSminingworkforceisageing,retiringorworkingabroad.TheEuropeanUnionalsosuffersfromalackofspecialisationinthesolarindustryacrossthesupplychain(SolarPowerEurope,2020),andIndiaislikewiseshortofworkers,especiallyforresearchanddevelopment(JMKandIEEFA,2021).Nevertheless,thishurdleissurmountable.Universityandcollegeprogrammes,certificationcourses,awarenesscampaignsandon-the-jobtrainingcanallhelpenlargethequalifiedworkforce.Itisessential,however,thatgovernmentsalignsupportfortheseprogrammeswithproductionambitions.Furthermore,althoughnotthefocusofthisstudy,ashortageofinstallershasbeenreportedacrossmajormarkets,includingtheUnitedStates,Europe,AustraliaandIndia,butdirectpriceandsupplyimpactsaredifficulttoestablish.IntheUnitedStates,92%ofprojectdevelopersreportdifficultyfindingqualifiedlabourforconstruction(DOE,2022b).Meanwhile,thesolarindustryinEuropeiswarningofaloominginstallerbottleneck(SolarPowerEurope,2020),andinIndia,labourshortages(exacerbatedbyCovid-19restrictions)slowedsolarPVdeploymentacrossthecountryin2020(JMKandIEEFA,2021).InAustralia,labouravailabilityisalreadybecomingamajorchallengeforsolarinstallationcompanies,asoneinthreeindustryjobs(includingelectricianandinstallerjobs)isatriskofremainingunfilledin2023(InfrastructureAustralia,2021;PVMagazine,2022).IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions69FinancialhealthofthesolarPVsectorOne-thirdofPVproductioncapacityisatmediumorhighriskofbankruptcyHighcompanyconcentrationinthesolarPVsupplychainmakesthefinancialhealthoflargecompanieskeytothesector’slong-termsustainability,especiallyconsideringtheformidableinvestmentsandexpansionsneededby2030.Basedonkeyfinancialindicatorssuchasprofitability,leverage,liquidityandsolvency(alsocalledAltman-Zscores11),aconsiderableshareoflargecompanieswithineachsolarPVsupplychainsegmenthavebeenatriskofbankruptcysince2015.In2021,integratedcompanieswithahighriskofbankruptcyoperated15%ofglobalsolarPVproductioncapacity,downfrom26%in2018.Today,integratedsolarPVcompaniesmakeuptwo-thirdsofthemarketshareforingots,wafers,cellsandmodules,andhaveoperationsinatleastthreesegmentsofthevaluechain(polysilicon,ingots,wafers,cellsandmodules).Owingtohighpolysiliconprices,thebankruptcyriskofpolysiliconbusinessesdroppedconsiderablyin2021.Areturntolowpolysiliconpricescouldhowever,reversethischange.Despitecurrenthighprices,polysiliconremainsthePVsupplychainsegmentathighestrisk,with49%ofglobalcapacityconsideredatmediumriskofbankruptcyin2021and11%athighrisk.Incontrast,only2%ofcompaniesinvolvediningot,wafer,cellandmodulemanufacturingwereathighriskofbankruptcyin2021.Bankruptcyrisksofpolysiliconcompaniesandintegratedenterprisesbymarketshare,2015-2021IEA.Allrightsreserved.Source:IEAanalysisbasedonBNEF(2022b),PVPS,PVInfoLinkandRTS.11Altman-Zscoresbelow1.8areconsideredathighriskofbankruptcy;between1.8and3areatmediumrisk;andscoresabove3havealowriskofbankruptcy.0%20%40%60%80%100%201520182021201520182021PolysiliconIntegratedCompaniesMarketsharesHighriskMediumriskLowriskUnknownorcoveredinothersegmentsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions70Inadditiontohighbankruptcyrisks,theconsiderablefinancialsupportChinesepolysiliconcompaniesreceiveintheformofgrantsandsubsidiesmakesthepolysiliconsegmentfinanciallyvulnerable.Forinstance,thelargestpolysiliconcompanypostednet-lossesbetween2018and2020despitegovernmentsupport.Fromasecurity-of-supplyperspective,consistentlypoorfinancialperformancewithinandacrossthesolarPVvaluechainreinforcessupplychainvulnerabilitytobankruptciesandunderinvestment,whichcanreduceitsresiliency,raisepricesandlimitPVdeployment.Indeed,weakfinancialperformancehascontributedtobankruptciesinthepast.Forinstance,followingamajorproductioncapacitybuildoutinChina,solarpricesplummetedbetween2011and2013assupplyfaroutstrippeddemand,causingaraftofbankruptciesacrosstheindustry.AlthoughlargecompaniessuchasSuntechPowerHoldings(3%ofproductioncapacityatthetime)wereforcedintobankruptcy,thesebankruptciesdidnotslowglobaldeploymentbecauseglobalproductioncapacityremainedhigherthandemand.Theoveralllong-termfinancialsustainabilityofthesolarPVmanufacturingsectoriscriticalforthetimelyandcost-effectiveachievementofcleanenergytransitions.Bankruptciesandconsolidationarepartofindustrymaturationasmoreefficientcompaniesoutperformlessefficientones,andthisprocesscanindeedhelpreducecostsandstrengthenPVsupplychains.However,companiesalongthePVsupplychaindependheavilyonsubsidiestomaintainprofitability,especiallyinChina.Thus,suddenchangestosubsidieswouldincreasethebankruptcyriskforallcompanies,eventhemostcompetitive.Shouldcompetitivecompaniesgobankrupt,thiscouldleadtobroaderpriceincreasesandsupplyimpacts,inadditiontolossofthesubsidy.TraderestrictionsTradebarriersmayslowdeploymentPoorlydesignedandimplementedtradepolicies,anduncertaintyaroundthem,canleadtopriceincreases,delayedinvestmentandslowsolarPVdeployment.Astradeiscriticaltoprovidethediversematerialsneededtomakesolarpanelsanddeliverthemtofinalmarkets,supplychainsarevulnerabletotradepolicyrisks.ChinahasbecometheprimaryexporterinthePVsupplychain,asitnowsendsproductsto42countries.12Chinaalsoimportsmaterials,primarilypolysilicon,when12Basedontotalpolysilicon,ingotandwafer,andcellandmoduleexportsabove200MWinagivenyeartoasinglecountry.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions71domesticsuppliesareunabletomatchdemand.However,thenumberofcountriesitimportsfromdecreasedtojustfivein2021.OutsideofChina,thereisanexpandingtradenetworkamongothercountriesthatdoesnotdirectlyincludeChina.Forexample,tradefromVietNam,MalaysiaandKoreatotheUnitedStateshasmorethandoubledsince2017,followingUSpolicychangesandmanufacturingcapacityincreasesinthesecountries.Whilethisreportfocusesonmanufacturing,tradeisalsorequiredforothermaterialsandcomponentsusedinthePVsupplychain(e.g.steel,aluminiumandsilver,andfinishedequipmentsuchasinverters).Totaltrade,toptradepartnersandtotalnumberoftradepartners,2017-2021IEA.Allrightsreserved.Note:Totaltradeiscalculatedbasedonamountsofatleast200MWacrossthesupplychain.Sources:IEAanalysisbasedonBNEF(2022b),PVPS,SPVandPVInfoLink.Since2011,thenumberofantidumping,importandcountervailingdutiesleviedagainstpartsofthesolarPVsupplychainhasincreasedfromjustoneimporttax(inBrazil)to16dutiesandimporttaxes,withanother8otherpoliciesunderconsideration.Forinstance,toprotectitspolysiliconindustry,ChinastartedimposingantidumpingandcountervailingdutiesonpolysiliconproducersintheEuropeanUnion,theUnitedStatesandKoreain2014.Similarly,IndiaintroducedantidumpingandcountervailingdutiesonglassforsolarpanelsfromChinain2016andfromMalaysiain2019.In2021,antidumpingandcountervailingdutiesandimporttariffsonsolarmodulescovered8%ofsolarmoduledemand,excludingChina’sdomesticdemand.However,thisshareissettoclimbto15%thisyearbecauseIndiahasbeguntoimposeacustomsdutyonmodulesfromChina.423225975193842020000400006000080000100000120000201720192021201720192021201720192021OthertradepartnersChinaimportsfromChinaexportstoPolysilicon,wafer,cellandmoduletrade(MW)IndiaVietnamGermanyMalaysiaJapanVietnamtoUnitedStatesMalaysiatoUnitedStatesKoreatoUnitedStatesOtherIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions72Numberofantidumping,importandcountervailingduties,2011-2022IEA.Allrightsreserved.Note:PoliciesincludedfortheEU,UnitedStates,India,TürkiyeandBrazilrepresentingtwo-thirdofglobaldemand.Antidumpingandcountervailingdutiesarecountedasone,importtaxesorotherdutiesarecountedseparately.Source:Basedongovernment-announcedantidumping,importandcountervailingdutiesapplicabletoallsegmentsofthePVsupplychain.Tradeactionscanalsoextendbeyondcosttoaddresssocialandenvironmentalconsiderations.Forinstance,bothFranceandKoreahaveintroducedcarbonemissionthresholdsforsolarpanelstoqualifyforsubsidiesandtenders.Concerningsocialwelfare,inJune2021theUSCustomsandBorderProtectionagencyissuedaWithholdReleaseOrderonshipmentscontainingpolysiliconfromseveralproducersinXinjiang,China.TheUSDepartmentofEnergyestimatesthatthisactionledto7GWlesssolarpanelimports,including4.5GWthatwereneverproducedand2.5GWthatwereredirectedtoothermarkets(DOE,2022).AttheendofMarch2022,theUnitedStatesalsolaunchedaninvestigationintothecircumventionofantidumpingandcountervailingdutiesonimportsfromVietNam,Malaysia,CambodiaandThailand.TheseactionshavecontributedtotheUnitedStatesbeing“unabletoimportsolarmodulesinsufficientquantitiestoensuresolarcapacityadditionsnecessarytoachieveclimateandcleanenergygoals,ensureelectricitygridresourceadequacy,andhelpcombatrisingenergyprices”(TheWhiteHouse,2021a).Toensuresufficientelectricitycapacity,theUSgovernmenthasremoveddutiesoncellsandmodulesfromCambodia,Malaysia,ThailandandVietNamstartinginJune2022foramaximumof24months.0%10%20%30%40%50%60%70%0481216202428201120122013201420152016201720182019202020212022ShareofdemandNumberofpoliciesIndiscussionImplementedShareofmoduledemand(excl.China)subjecttocell/moduleduties(rightaxis)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions73Selectedtradepoliciesinforce,2021Whileindividualtrademeasuresmayappeartoreducethenumberofinstallationsinonejurisdictiononly,theircombinedeffectcouldbehigherpanelcostsandcompromisedsupplies,leadingtofewerinstallationsglobally(Wangetal.,2021).CountryTradeactionDutyUnitedStatesAntidumpingandcountervailingdutiesoncrystallinesiliconPVproductsproducedinChina(2015-2025)(USInternationalTradeCommission,2019)andChineseTaipei(2015-2026)(USInternationalTradeCommission,2020)Antidumping:18.32-249.96%Countervailingduty;14.78-49.79%IndiaBasiccustomsdutyof25%oncellsand40%onmodulesstartingin2022(India,MinistryofNewandRenewableEnergy,2021)andantidumpingandcountervailingdutiesonsolarglassandethylenevinylacetate(EVA)fromChina,Malaysia,SaudiArabiaandThailand.Timingdependsoncountry,butpoliciesgenerallyextendto2023(GazetteofIndiaExtraordinary,2019)Dutydependsoncountry,butrangesareUSD537-1559/MtforEVAandUSD52-136.21/MtforglassEuropeanUnionAntidumpingandcountervailingdutiesonimportsfromChina,MalaysiaandChineseTaipeiforsolarglass,initiatedin2013andextendedto2025(OfficialJournaloftheEuropeanUnion,2020a;2020b)Antidumpingrangesfrom17.5%to75.4%.Countervailingdutyis3.5-17.1%ChinaAntidumpingdutyonsolar-gradepolysiliconfromtheUnitedStatesandKoreastartingin2014andextendedto2025.(FederalRegister,2015)Antidumpingrangesfrom4.4%to113.8%forKoreaand30%to57%fortheUnitedStatesTürkiyeImporttaxonallimportsandantidumpingdutyonsolarmodulesfromChinastartingin2017;nostatedenddate(Türkiye,MinistryofEconomy,2017)ImporttaxsetatUSD25/kgandantidumpingdutyatUSD20-25/m2BrazilImporttaxonPVequipmentwithsomeexemptions(Brazil,MinistériodaEconomia,2022)Upto12%formodulesand14%forinvertersIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter2-SolarPVsupplychainvulnerabilities:Security-of-supplyimplicationsforcleanenergytransitions74ReferencesBNEF(2022b),BNEFinteractivedatabase,https://www.bnef.com/(accessedMay2022).Brazil,MinistériodaEconomia(2022),NomenclaturaComumDoMercosul(NCM)ETarifaExternaComum(TEC)2022,https://www.gov.br/produtividade-e-comercio-exterior/pt-br/assuntos/camex/atas-e-resolucoes/gecex/resolucoes-compiladas/resolucao-gecex-no-272-anexo-i-20220701.pdf.CRU(2020),Silver’sImportantRoleinSolarPower–MarketTrendReportforTheSilverInstitute,London,https://www.silverinstitute.org/wp-content/uploads/2020/06/SilverSolarPower_CRU2020.pdf.DOE(USDepartmentofEnergy)(2022a),SolarPhotovoltaicsSupplyChainReviewReport,https://www.energy.gov/eere/solar/solar-photovoltaics-supply-chain-review-report.DOE(USDepartmentofEnergy)(2022b),UnitedStatesEnergy&EmploymentReport2022.https://www.energy.gov/sites/default/files/2022-06/USEER%202022%20National%20Report_0.pdfDOJ(USDepartmentofJustice)(2010),HorizontalMergerGuidelines.https://www.justice.gov/atr/horizontal-merger-guidelines-08192010#5cFederalRegister(2015),CertainCrystallineSiliconPhotovoltaicProductsFromthePeople'sRepublicofChina:AntidumpingDutyOrder;andCountervailingDutyOrder,https://www.govinfo.gov/content/pkg/FR-2015-02-18/html/2015-03183.htm.GazetteofIndiaExtraordinary(2019),FinalFindingsNotification-Case.:O.I.6/2018,https://www.dgtr.gov.in/sites/default/files/Final_Finding_Notification_English.pdf.IEA(InternationalEnergyAgency)(2021d),TheRoleofCriticalMineralsinCleanEnergyTransitions,https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions.IEA(2021f),NetZeroby2050,https://www.iea.org/reports/net-zero-by-2050.IEA(2020b),PowerSystemsinTransition,https://www.iea.org/reports/power-systems-in-transition.ILO(InternationalLabourOrganization)(2019),SkillsforaGreenerFuture:AGlobalView,https://w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silicon,ingotsandwafers.Keycountriesandregionswithambitiousdecarbonisationtargets(includingtheUnitedStates,EuropeandIndia)arethereforeconsideringoralreadyimplementingpoliciestoattractinvestmenttolocalisemanufacturinginmultiplesolarPVsupplychainsegments.DiversificationofthesolarPVsupplychainhasbothcostsandeconomicbenefitscountriesneedtoassesswhendesigningandimplementingpolicies.Toassessthese,countriesshouldconsidermultiplefactorssuchasjobcreation,investmentrequirements,electricityprices,CO2emissions,manufacturingcostsand,finally,recycling.Thischapterprovidesacomparativeanalysisoftheseelements,thoughallgovernmentshavetheirownspecificpolicygoalsandmaythusemphasisejustone,severalorallfactorsindesigningincentivesfordomesticsolarPVmanufacturing.CO2emissionsandelectricitypricesCountrieswithalow-carbonelectricitymixcanofferdecarbonisationaswellasdiversificationbenefitsAmoregeographicallydiversifiedsolarPVsupplychaincouldofferopportunitiestoreducemanufacturingemissionsifnewfacilitiesarebuiltinplaceswithaccesstoelectricitythatislesscarbon-intensivethanwherecurrentproductionis.Atpresent,manufacturingmodulesgeneratesfarmoreemissionsthantransportingthemtodemandcentresdoes.Infact,thesinglelargestsourceofsolarPVindustryemissionsisindirectemissionsfromelectricityconsumedinmanufacturing.In2021,theelectricityusedtoproducesolarpanelswasresponsiblefor89%ofPVindustryemissionsglobally,comparedwithjustover8%fromdirectconsumptionofIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification78fossilfuelsandover3%fromtransport.Thus,ambitiouselectricitydecarbonisationgoalsinmanycountrieswillhelpreduceoverallglobalsolarPVmanufacturingemissions.GlobalPVindustryemissionsfrommanufacturingandtransportin2021(left)andelectricitygenerationbyfuelsourcevssolarPVmanufacturingemissionsintensityforselectedcountries(right)IEA.Allrightsreserved.Notes:Transportemissionsincludestheemissionsfromthetradeofpolysilicon,wafers,cells,andmodules.US=UnitedStates.UAE=UnitedArabEmirates.“Emissionsintensity”onrightgraphreferstotheemissionsfactorformanufacturingpolysilicon,wafers,cells,andmodulesforthesolarPVindustry.Sharesintheelectricitymixareforgenerationin2021.Transportemissionsincludestheemissionsfromthetradeofpolysilicon,wafers,cells,andmodulesSource:Rightgraph:IEA(2022a).Asaresult,theprimaryfactorinfluencingthecarbonintensityofsolarPVmanufacturingistheshareoffossilfuelsinacountry’selectricitygenerationmix.Inotherwords,countriesthathavehighersharesofcoalintheirelectricitymixwouldhavehigherindirectmanufacturingemissionsintensitiesthanthosethatemploylower-carbonenergysources.Forexample,thehypotheticalemissionsintensityofproducingallfourPVmanufacturingsegmentsofthesupplychainishighinSouthAfrica,Indonesia,IndiaandAustraliabecausecoalmakesupover50%oftheirpowersupply.Naturalgas-dominatedpowergrids,suchasinEgyptandtheUnitedArabEmirates,wouldmanufactureproductsatslightlylowerintensitiesbasedontheirelectricitymixestoday.Globally,theaveragecarbonintensityofsolarPVmanufacturingisestimatedat270kgCO2/kW.However,thereareover100countrieswherehostingtheentiresolarPVsupplychainwouldemitlessCO2comparedtowhereproductiontakesplacetoday.Lowermanufacturingintensitiescanbeachievedifnewproductionplantsarebuiltinplaceswheretheelectricitymixhashighersharesoflow-carbonsourcessuchasrenewablesornuclear(e.g.Norway,Germany,Ethiopiaand0100002000030000400005000060000TransportManufacturingktCO₂ElectricityNaturalgasCoalTransport01002003004005000%20%40%60%80%100%SouthAfricaIndonesiaIndiaAustraliaMalaysiaVietNamSaudiArabiaChinaUAEJapanMexicoEgyptUSGermanyArgentinaSpainCanadaBrazilFranceNorwayCostaRicaEthiopiakgCO₂/kWShareingenerationRenewablesNuclearOthersGasCoalEmissionsintensity(rightaxis)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification79Brazil).Forinstance,producingtheentirePVvaluechaininNorwaytoday,wherethemanufacturingemissionsintensitywouldbearound25kgCO2/kW,couldresultin90%lowermanufacturingemissionsthaninChina.HypotheticalsolarPVmanufacturingemissionsintensityforselectedcountriesIEA.Allrightsreserved.Notes:Emissionsintensitiesarebasedonestimatedcountry-levelenergymixesin2021forpolysilicon,wafer,cellandmoduleproduction.Theydonotincludeemissionsfrommining,extractingorprocessingrawmaterials,northoseassociatedwithinstallingandconstructingsolarPVplantsordistributedsystems.Theyalsoexcludeemissionsfromtheproductionofmodulecomponentsincludingglass,backsheet,EVAandframes.Electricityprices,gridreliabilityandotherkeymetricsforprojectviabilityarenotconsidered.Source:IEA(2021d).Self-sufficiencyisemergingasanoptionfordiversificationparticularlyamongcountriesthataimtoincreasetheshareofsolarPVintheirelectricitysystemsignificantly.Inthissense,atrade-offbetweenproducingandimportingcouldbeconsidered.Forinstance,domesticmanufacturingcanreducetotalCO2emissionsifthelocalelectricitymixislesscarbon-intensivethanintheimportingcountry.13ThiswouldbethecaseforGermany,theUnitedStatesandBrazil,wherelocallymanufacturedmoduleswouldbeassociatedwith40-80%lessemissionsthanthoseimportedfromChina,MalaysiaandVietNam.Emissionsfromtransportingmodulesarerelativelylowcomparedwiththosefrommanufacturing,sothiswouldbeadecidingfactoronlyiftheenergymixintheothercountryorprovinceissimilar.However,domesticsolarPVmanufacturingisnotalwayslesscarbon-intensivethanimportingfromChina.Forexample,attoday’spowermixes,producingtheentiresupplychaininIndiaorAustraliawouldgeneratemoremanufacturingemissionsthanimportingthefinishedmodulesfromChina.India’ssolarPVambitionsforboth13Hypotheticalmanufacturingemissionsintensitiesarecalculatedatthecountrylevel,basedonyearlyelectricityconsumption.However,moreprecisecalculationsofmanufacturingintensitycouldbeachievedifsubnationalandregionalanalysesweremoregranularandiftemporalproductionvariationswereconsidered.050100150200250300350400450kgCO₂/kWModulesCellsWafersPolysiliconGlobalaverageIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification80demandandsupply,supportedbyconcretepolicies,arecriticalforsolarPVsupplychaindiversificationandresiliency.Intheshortterm,however,manufacturingtheentiresolarPVsupplychaininIndiawouldbealmost15%moreemissions-intensivethaninChina.Therefore,acompromisebetweentotalorpartialself-sufficiencyandloweremissionswillneedtobereachedwhilehigh-emissions-intensitycountriesworktowardsdecarbonisingtheirdomesticpowergeneration.Lesscarbon-intensivemanufacturingisalsopossibleinChina.WhileChina’soverallemissionsintensityofsolarPVmanufacturingisrelativelyhigh,itvariessignificantlydependingonwhichprovincesolarPVsupplychainsegmentsaremanufacturedin.Forinstance,Shaanxiemitsalmost360kgCO2perkilowattproduced,whereasinQinghaiandSichuan,hydropoweraccountsforthemajorityofpowergenerationandtheirproductionintensityisaround105kgCO2/kW.Thus,solarPVimportsfromthesetwoprovinceswouldbeassociatedwithlowermanufacturingemissionsthanimportsfromGermany,JapanortheUnitedStates.Thesespatialvariationswillbepresentinmanycountries.Inaddition,thesehypotheticalcomparisonsdonottaketheexacttimeofgenerationandconsumptionintoaccount.HypotheticalemissionsintensitycomparisonsoflocalsolarPVmanufacturingvsimportsfromChina(left),andemissionsintensitiesofChineseprovinces(right)IEA.AllrightsreservedNotes:Emissionsintensitiesbasedonestimatedcountry-andprovincial-levelenergymixesin2021forpolysilicon,wafer,cellandmoduleproductionThegraphrepresentstheemissionintensityifallsegmentsareproducedlocally.Transportemissionscoveronlyemissionsrelatedtoshippingthefinalproduct(modules).EmissionsintensityvaluesforChinaareaverages.SourceLeftfigure:IEA(2021a;2021d).Rightfigure:IEA(2021a).ManufacturingandtransportemissionscouldbeakeycriterionforcountriesimplementingcarbonfootprintassessmentsforsolarPVproductsinstalledlocally.Forinstance,FranceandKoreahavealreadybeguntoincludetheembodiedcarbonfootprintofsolarPVpanelsasacriterionintheircompetitivetender050100150200250300350LocalChinaLocalChinaLocalMalaysiaVietNamLocalChinaLocalChinaBrazilGermanyUnitedStatesIndiaAustraliakgCO₂/kWPolysiliconWafersCellsModulesTransport050100150200250300350400ChinaSichuanQinghaiNingxiaXinjiangI.MongoliaJiangsuHenanShaanxiIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification81evaluationsfornewpowerplants.Countrieswithambitiousclimatetargetsarealsoconsideringpoliciesforimportedrenewableenergygoods,includingsolarPV(EUandtheUnitedKingdom).Dependingonpolicydesign,greaterscrutinyoftheemissionsintensityofmanufacturingcouldencouragedomesticmanufacturing,whichwouldcontributetosupplychaindiversification.DiversifyinganddecarbonisingrequireelectricitytobebothaffordableandcleanAmongallsupplychainsegments,thelargestscopeforreducingmanufacturingemissionsintensitythroughdiversificationisinpolysiliconandwafers.Theaveragecarbonintensityofwafermanufacturingiscurrentlyaround82kgCO2/kW,andthatofpolysiliconproductionis109kgCO2/kW.Thereareover100countriesintheworldthatfallbelowtheemissionsintensitythreshold,wheremanufacturingcreateslessemissions.Europeholdsthehighestpotential,giventheconsiderablesharesofrenewablesandnuclearinitspowermixes,followedbycountriesinLatinAmericaandsub-SaharanAfricathathavehydropower-dominatedpowersystems.GlobalemissionsintensityfromPVmanufacturingbysegment,2021(left),andcountriesbelowemissionsintensitythresholdvsaverageelectricitytariffsforproduction(right)IEA.Allrightsreserved.Notes:Leftgraph:Wafermanufacturingincludesingots.Emissionsintensitiesrefertoglobalemissionsbasedon2021productionvalues.Waferintensitycoverscombinedglobalproductionofbothmulti-andmono-crystallinetechnologiesin2021.Moduleintensityrepresentsenergyconsumedtoassemblecellsandequipmentintoamodule,nottoproduceeachofthecomponents(backsheet,glass,frame,etc.).Rightgraph:MENA=MiddleEastandNorthAfrica.SSAFR=sub-SaharanAfrica.Avg.powerprice=averageretailindustrialpowerprice.Electricitypricesaretheweightedaverageofindustrialretailpricesin2021,includingVATinpolysilicon-andwafer-producingcountries.However,maintainingcompetitivenessinthesesegmentswillalsorequirethatmanufacturershaveaccesstoelectricityatcostscomparablewithorlowerthantoday’sglobalaverages.Forinstance,theaveragepriceofindustrialelectricityisclosetoUSD90/MWhforpolysiliconandwaferproduction.Whenthisistakeninto80838689929598020406080100120140PolysiliconWafersPolysiliconWafersCO2intensitythresholdPricethresholdUSD/MWhNumberofcountriesEurope&N.AmericaLatinAmericaMENAAsiaPacificEurasiaSSAFRAvg.powerprice(rightaxis)0255075100125ModulesCellsWafersPolysiliconkgCO₂/kWElectricityFossilfuelsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification82account,thenumberofpotentiallocationswherenewmanufacturingiscompetitivelylesscarbon-intensivedropsfrom100toaround30.Givencurrentelectricitymixes,thenumberofpotentiallocationsforcleanermanufacturingcouldbehigherifpowerpriceswerelowerinEuropeandLatinAmerica.ExceptforPoland,everysingleEuropeancountrycouldmanufacturewafersbelow75kgCO2/kW,whichislessintensivethancurrentproduction.However,onlySwedencurrentlyhaslowenoughindustrialpowerpricestomanufacturetheseproductscompetitively.Norway,Türkiye,Finland,theNetherlandsandHungarycouldalsobecandidatesiftheirshareofVATandexcisetaxinindustrialelectricitypriceswerelower.InLatinAmerica,about20countriescouldhavemanufacturingintensitiesbelowtheglobalaverageforwaferandpolysiliconproduction,butonlyParaguay,EcuadorandArgentinahaveindustrialelectricitytariffsbelowUSD90/MWh.IndustrialelectricitytariffsforselectedcountriesinEuropeandNorthAmericain2021andemissionsintensityofwafermanufacturingIEA.Allrightsreserved.Note:BreakdownsofelectricitypricesintoenergytariffsandtaxesarenotavailablefortheUnitedStatesandMexico.Sources:IEA(2022c),EnergyPricesandTaxesforOECDcountries1Q2022(database).InNorthAmerica,theUnitedStatesoffersaffordablelow-carbonpower,butretailpricesinMexicoarecurrentlytoohigh.Fromacarbon-intensityperspective,manufacturingallPVsegmentsinCanadawouldbesuitable(70kgCO2/kW),butthepriceofelectricityisatthethreshold,whichmaybechallengingconsideringcost-competitiveness,dependingontheprovince.IntheAsia-Pacificregion,relativelylowelectricitypricesinIndonesiaandMongolia(belowUSD80/MWh)presentopportunitiesforcost-competitivesolarPVmanufacturing.However,todaythesecountrieshaveemissionsintensitiesfor020406080100050100150200250kgCO₂/kWUSD/MWhTaxPricesexcl.taxesPricethreshold(USD90/MWh)Emissionsintensity-wafers(rightaxis)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification83manufacturingthatexceedtheglobalaverageduetohighsharesofcoalintheirpowermixes.InIndia,newpolysiliconorwaferproductionmaybemoreeconomicallychallengingthaninothercountriesintheregionduetohigherindustrialelectricityprices(USD100/MWh).ConsideringIndia’selectricitymixtoday,anynewpolysiliconandwafermanufacturingplantsbuildinthecountrywouldalsoproducemanufacturingemissionshigherthantheglobalaverage.WhileindustrialelectricitypricesinChinaareintherangeofUSD60-80/MWhexcludingsubsidies,whichenablescost-competitivemanufacturinginmanyprovinces,onlyfivehavecarbonintensitieslowerthantheglobalaveragetodayforpolysiliconandwafers.Sharesoflow-carbongenerationandindustrialelectricitypricesinselectedcountrieswithsolarPVmanufacturingintensitiesbelowtheglobalaverageandelectricitypricesbelowUSD90/MWh(left)andinselectedprovincesinChina(right)IEA.Allrightsreserved.Note:I.Mongolia=InnerMongolia.Sources:Left:IEA(2022a).Roughly30countriesoffercompetitiveindustrialelectricitypricesfornewpolysiliconandwaferproductionwhileatthesametimepresentinglowmanufacturingemissionsintensities.Thegreatestnumberisinsub-SaharanAfricaandEurasia,whereseveralcountrieshavelow-carbonsharesexceeding60%thankstorelativelyhighhydropoweruse.Hydropowercouldbekeytoloweremissionsfromwaferandpolysiliconmanufacturingbecauseitoffersaffordable,carbon-freeelectricitytomanufacturetheseproductscompetitively.Infact,Angola,Ethiopia,ZambiaandMozambiquealloffercleanerandless-expensiveelectricitythaniscurrentlybeingusedtoproducewafersandpolysiliconinXingjian,InnerMongoliaandJiangsu.0204060801001200%20%40%60%80%100%USD/MWhShareoflow-carbongeneration(%)OtherrenewablesNuclearWindSolarSeries2GasCoalElectricitytariff(rightaxis)0204060801001200%20%40%60%80%100%USD/MWhShareingeneration(%)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification84WithinChina,however,hydropoweralsomakesQinghaiandYunnanprovinceseconomicallyattractivesiteswithlow-carbonintensities.Currently,severallargemanufacturersaremovingpolysiliconandwaferproductiontotheseprovincesfrommorecarbon-intensiveXinjiang.InEurasia,hydropoweroffersclean,affordableelectricityinTajikistan,KyrgyzstanandGeorgia.AnumberofcountriesintheMiddleEastandNorthAfrica,wheregasmakesupalargeshareofelectricityproduction,alsohaveaffordableelectricitytariffsforpolysiliconandwaferproductiondiversification.Ofthemultiplepathwaysandbusinessmodelsavailabletodecarboniseindustrialelectricityconsumptionandoffercompetitiveelectricityprices,somemayalsobeapplicabletopolysiliconandwafermanufacturing.Industrialconsumerscangeneratetheirownrenewableelectricityon-siteforself-consumptionandreducetheirpowerbills,asthegenerationcostsofmostrenewableelectricitytechnologiesarecurrentlylowerthanretailindustrialtariffs.Themostcommontechnologyforself-consumptionissolarPV,butotherssuchaswind,hydropowerandbiomassarealsobeingused.Theseplantscanbeconnectedtothedistributiongridor,alternately,becompletelydisconnectedfromthemainnetwork,inwhichcasetheyaresometimesreferredtoascaptiveoroff-gridplants.Large-scalecaptivesolarPVandwindplantscanproduceelectricityatUSD30-50/MWh–significantlybelowindustrialretailprices.However,polysiliconandingotproductionusuallyrequireaconstantloadformorethan24hours.Thus,theeconomicviabilityofthesecaptiveplantswilldependonhowlongaconstantloadwillbeneededforproductionandwhetheritneedstobecollocatedwithstorage,whichwouldincreasegenerationcosts.OtheroptionsincludesitingsolarPVmanufacturingfacilitiesnearotherindustrialconsumersofrenewableelectricity(muchlikegreenhydrogenclustersorgreensteelconsortia)tohelpaggregatedemandandachieveeconomiesofscaletocutcosts.Forinstance,therenewableelectricitydemandofalarge-scaleelectrolyserwouldbesignificantlyhigherthanforpolysiliconandingotproduction,soco-locatingthesefacilitieswouldhelpreduceelectricitycosts.Inaddition,manufacturerscouldsigncorporatePPAsthatallowindustrialconsumerstopurchaseelectricitydirectlyfromrenewablepowerplants.However,somecorporatePPAsarevirtualinthesensethatthepowerisstillsourcedfromthegridandcanbeprovidedbynon-renewablesourcesatthetimeofdemand,thusnottrulyoffsettingemissionsinrealtime.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification85InvestmentcostsHighinvestmentcostsforpolysiliconandwafermanufacturingchallengethebusinesscaseforprojectsoutsideofChinaCapitalrequirementsareakeyconsiderationwhencompaniesconsiderinvestinginsolarPVmanufacturingandwhenpolicymakersdesignincentivestosupportbusinesses.Highinvestmentrequirementsforcertainsegmentsofthesupplychain–especiallypolysilicon,ingotsandwafers–usuallyincreaseprojectrisksandreducetheirbankability.TheamountofinitialcapitalneededtoestablishasolarPVmanufacturingfacilityvariessignificantlybycountry/region,typeofequipmentused,andcostsassociatedwithland,constructionandfinancing.Amanufacturingfacility’ssizehasadirectimpactontheeconomiesofscalethatcanberealised,affectinginvestmentpermegawatt.Accordingtorecentlycommissionedplantandequipmentpricedata,polysiliconplantsandingotandwaferfactoriesaresignificantlymoreCAPEX-heavythancell-andmodule-manufacturingfacilities.Inaddition,becauseoftheconsiderableinfrastructureinvestmentsneeded(USD200-400million),greenfieldpolysiliconplantsarenotusuallybankableforcapacitiesoflessthan10000Mt(around3GW).Forpolysilicon,ingotandwafermanufacturing,benefittingfromeconomiesofscaleiscrucialtorealiselowerper-megawattinvestmentcosts.RecentgreenfieldpolysiliconplantsinChinarangeinsizefrom40000Mtto100000Mt,almosttriplinghistoricalaverages.Fortheseprojects,investmentcostsarearoundUSD60millionpergigawatt,withsimilarcostsforingotandwaferplantsthathavenameplatecapacitiesof5-20GWperyear,fivetimesthecapacityoffacilitiesinothercountries.Costsforenergy-intensivepolysilicon,ingotsandwafersinSoutheastAsiancountriesareestimatedtobesimilartoChina’s,partlybecausetheyaredevelopedmostlybyintegratedChinesemanufacturers.InvestmentcostsintheUnitedStates,theEuropeanUnionandIndiaarethreetofourtimeshigherpermegawattthaninChinaandASEANcountriesforpolysilicon,ingotandwaferproduction.Longerconstructionanddevelopmenttimelines,considerablelabourandmaterialcosts,thehighercostofcapital,alackofeconomiesofscaleandadearthofknowhowindevelopingmega-scalePVmanufacturingfacilitiesremainkeyreasonsforhighercosts.Forinstance,IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification86experienceindevelopinglarge-scaleingotandwafermanufacturingfacilitiesisverylimitedoutsideofChina,asthecountryholdsover95%ofthemarketshare.Investmentcosts(left)andminimuminvestmentrequirements(right)byPVmanufacturingsegmentIEA.Allrightsreserved.Notes:ASEAN=AssociationofSoutheastAsianNations.Investmentcostsarebasedoninvestmentestimatesannouncedbycompaniesformorethan100manufacturingprojectsinvarioussupplychainsegments.Forcountriesthatdonothaveanycommissionedmanufacturingfacilitiesforcertainsupplychainsegments,datafromfeasibilityprojectsorestimateswereused.Forcellsandmodules,minimuminvestmentrequirementsarelowcomparedwiththeenergy-intensivepartofthePVsupplychain.Cellandmodule-manufacturingplantscouldbeassmallas100MW,requiringverylowminimuminvestmentsofaroundafewmillionUSdollars.Forsolarcells,thescaleofproductionremainsimportanttoachievelowerinvestmentcostspermegawatt,withcostsestimatedtobesignificantlyhigheroutsideofChinaduetomuchgreaterequipment,landandconstructioncostsinEuropeandtheUnitedStates.Plus,thecostofEuropeanandAmericanmanufacturingequipmentisthreetofourtimeshigherthanformachinerymadeinChinaandSoutheastAsia,whichexplainstheinvestmentcostdifferentialsbetweencellandmodulemanufacturing.ManufacturingcostsEnergy,labourandinvestmentcostdifferentialsdictatecost-competitivenessinsolarPVmanufacturingManufacturingcostparityacrossregionsandcountriesiscriticalforsolarPVsupplychaindiversification.Whilecostdifferentialsdictatewhetheracountry’ssolarPVproductsarecost-competitive,theyarealsocriticalforpolicymakerstodesign020406080100120140160PolysiliconIngots&wafersCellsModulesInvestmentperGWUSDmillion/GWChinaEurope/USIndiaASEAN050100150200250300350PolysiliconIngots&wafersCellsModulesMinimuminvestmentneededUSDmillionIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification87policiesthateffectivelysupportthesolarPVsector,includingmanufacturingplants.SolarPVproductioncostscurrentlyvarywidelyacrossbothcomponentsandlocations.Basedonmodelledassumptionsforeachsupplychainsegment,thetotalcostofproducingmodulesinkeycountriesandregionsvariesfromUSD0.24/WinChinatoUSD0.33/WinEurope,excludingprofitmargins,taxesandtransportfees.Althoughthecostofmaterials,whichaccountsforthelargestportionoffinalmodulecosts,canvarybycountry/regiondependingonpurchaseagreementsandprices,mostmaterialinputsusedinsolarPVmanufacturingaretradedgloballyascommodities,whichexplainssmalldifferencesacrosscountriesandregions.Relativelylowenergyandinvestmentcosts(whichleadtolowerdepreciationcosts)andinexpensivelabourmakeChinathemostcost-competitivelocationtomanufactureallcomponentsofthesolarPVsupplychain.IntheASEANregion,totalmodule-manufacturingcostscanbearound5%morethaninChina,mainlyduetoslightlyhigheroverheadandlabourcosts.Largevariationsinenergy,labouranddepreciationinputs(duetorelativelyhighinvestmentcosts)makePVmanufacturing9%costlierinIndiaandaround20-35%moreexpensiveintheUnitedStates,EuropeandKorea.TotalproductioncostsformonoPERCc-Sisolarcomponentsbyinput,2022IEA.Allrightsreserved.Notes:ASEAN=AssociationofSoutheastAsianNations.Valuesexcludesubsidiesaswellasadditionalcostssuchastransportation,companyprofits,taxesandtariffs.Thus,totalcostinputsmaynotmatchfinalmarketsaleprices.Polysiliconpricesincludetheprocessingofmetallurgical-gradesilicon.ThefollowingpricesfromJune2021-May2022wereusedinthisanalysis:glass,USD590/Mt;aluminium,USD2875/Mt;polymers,USD6000/Mt;silicasand(quartz),USD100/Mt;copper,USD9680/Mt;silver,USD760/kg;zinc,USD3520/Mt;lead,USD2330/Mt;tin,USD38950/Mt;other,USD18700/Mt.Intheabsenceofsubsidiesandmanufacturingsupport,achievingsignificantreductionsinenergyandlabourcostsremainschallenging.Thus,diversifyingsolar0.000.050.100.150.200.250.300.35ChinaASEANIndiaUnitedStatesKoreaEuropeUSD/WMaterialsEnergyManufacturinglabourDepreciationOtheroverheadcostsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification88PVmanufacturingwilldependontheabilityofnascentandnewmarketstomatchthecostefficienciesevidentinChina.Forinstance,realisingeconomiesofscaleandintegratingplantsandprocessescanreducevariablecoststoincreasecompetitivity.HigherpricesongloballytradedcommoditiesimpactallsolarPVmodulemanufacturersModuleassemblymakesup40-50%oftotalmanufacturingcostsbecauseitincludesmultiplekeyprocessedmaterials(e.g.glass,copper,aluminiumframes,backsheets,EVAandjunctionboxes).Theseinputproductsaretradedglobally,limitingtheamountofmanufacturingcostvariationamongmarkets.Despiterequiringlessmaterialintermsofweight,cellmanufacturingisingeneralthesecond-largestcostcomponentbecauseitreliesonrelativelyexpensivesilverinadditiontozinc,leadandtin.However,manufacturingcostsvaryamongkeymarketsduetodifferencesindepreciation,overheadexpensesandlabourcosts.Meanwhile,therawmaterialsusedtoproducemetallurgical-gradesilicon,polysiliconandwafersremaininexpensive(e.g.silicasand/quartz).RelativelylowelectricitypriceshavemadepolysiliconproductionlesscostlyinChinathaninotherregions,withexpensestotallingroughlyUSD0.04/W(USD14/kg)includingoverheadanddepreciationcosts.Excludingthese,marginalcostsinChinaarearoundUSD0.02/W(USD7/kg).InEuropeandKorea,higherelectricitypricespushpolysiliconproductioncoststoalmostdoublethoseofChina.IntheUnitedStates,highlabour,overheadanddepreciationcostsoutweighlowindustrialelectricityprices,resultinginnearly20%highercoststhaninChina.CommoditypriceincreaseshaveraisedoverallsolarPVmodulecostssignificantlyoverthelastyear.Themarketpriceofpolysiliconincreasedthemostquickly,almostquadruplingsince2019toUSD35/kgin2022duetothetightsupplysituation.Thepriceofpolysiliconincommoditymarketsissignificantlyhigherthantheestimatedcostofmanufacturingitinallmarkets,enablingpolysiliconproducersinbothEuropeandChinatoannouncehealthyprofitsinthefirstquarterof2022.Incontrast,during2015-2019polysiliconmanufacturersinEurope,Japan,KoreaandtheUnitedStatesrecordedreducedprofitabilityandlosseswhenpolysiliconpriceswerearoundUSD14/kg,lessthanhalfthecurrentlevelduetoaglobalsupplygutandaggressivepricingthatcausedseveralcompaniestoclosetheirplantsorhaltsolar-gradepolysiliconproduction.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification89TotalproductioncostsformonoPERCc-Sisolarcomponentsbysupplychainsegment,2022IEA.AllrightsreservedNotes:ASEAN=AssociationofSoutheastAsianNations.Valuesexcludesubsidiesaswellasadditionalcostssuchastransportation,companyprofittaxesandtariffs.Thus,totalcostinputsmaynotmatchfinalmarketsaleprices.Polysiliconpricesincludetheprocessingofmetallurgical-gradesilicon.Source:IEAanalysisbasedonNREL(2018);Fraunhofer(2021);BNEF(2022c);TERI(2019);andCSTEP(2018).Asingotandwafermanufacturersusuallypaythemarketpriceforpolysilicon(theirmainmaterialinput),highpricesareresultinginaround25%higherfinalmodulecostsofalmostUSD30/WinChinaandUSD35/WinEurope.IndexedmonthlypricesformainsolarPVmodulematerialinputsIEA.Allrightsreserved.Source:Bloomberg(2022a).Inadditiontopolysilicon,pricesforotherkeymaterials,includingsilver,tin,copperandaluminium,haverisen50-80%since2019,boostingoverallmoduleproduction0.000.050.100.150.200.250.300.350.40ChinaASEANIndiaUnitedStatesKoreaEuropeUSD/WPolysiliconWafers/ingotsCellsModulesTotalmodulepriceatUSD35/kgforpolysiliconTotalmodulepriceatUSD45/kgforpolysilicon0255075100125150175200225250275300325350375400Jan-2019Mar-2019May-2019Jul-2019Sep-2019Nov-2019Jan-2020Mar-2020May-2020Jul-2020Sep-2020Nov-2020Jan-2021Mar-2021May-2021Jul-2021Sep-2021Nov-2021Jan-2022Mar-2022May-2022Priceindex(Jan.2019=100)AluminiumCadmiumCopperIndiumSeleniumPolysiliconSilverTinZincIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification90costs25-35%overthelastyear.SolarPVmanufacturersarepassingthesecostincreasesontotheircustomers,leadingtohigherauctionandcorporatePPApricesinmultipleregions.Low-costelectricityiskeyforcompetitivepolysiliconandingotproductionEnergycostsremainanimportantreasonfortotalmodulecostdifferencesamongkeycountriesandregions.RetailelectricitypricesareoneofthefactorsthatdeterminewhethermarketscanproducesolarPVsupplychainelementscompetitively,especiallyenergy-intensivepolysilicon,ingotsandwafers.Forwafers,electricityaccountsfornearly20%ofproductioncosts,andforpolysiliconover40%.Infact,manufacturingwafersandpolysiliconcanconsumeuptotwotothreetimesmoreenergyperwattofproductionthanmakingcellsandmodulesdoes,dependingontheprocess.Around80%oftheelectricityinvolvedinpolysiliconproductionisconsumedinChineseprovincesatanaveragepriceofUSD76/MWh,almost30%belowtheglobalindustrialaverage.Hence,theaveragepriceofelectricityusedtomakepolysiliconandwafersisjustunderUSD90/MWh,orabout10%belowtheglobalindustrialpriceaverage.Electricityintensityandshareofelectricityinproductioncostsbysegment(left),andregionalindustrialelectricitypricesforeachcountryofproductionbysegment(right)IEA.Allrightsreserved.Notes:Eachdotintheright-handgraphrepresentstheelectricitypriceinacountry,oraprovinceinChina,wherethesegmentisproduced.PricesincludeVATanddemandcharges.Sources:Rightgraph:IEA(2021c),WorldEnergyPrices(database);BNEF(2022d),PowerPrices.3%11%16%41%0%5%10%15%20%25%30%35%40%45%050100150200250ModulesCellsWafersPoly-siliconkWh/kWElectricityintensityElectricityshareoftotalcost(rightaxis)94938887050100150200250USD/MWhModulesCellsWafersPolysiliconGlobalaverageWeightedaveragesIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification91LowelectricitypricesinChinaarearesultofaccesstorelativelylow-costcoal,particularlyinXinjiang,InnerMongoliaandJiangsu,whereitmakesupthree-quartersofthegenerationmix.However,thesepricesmaynotrepresentthetruecostofpower,asadditionalsubsidiesorpreferentialratescanapplyattheprovinciallevel.PolysiliconproductiondoesoccurathigherpricesinJapanandGermany,buttheseproducersfinditdifficulttocompetewiththoseinChinaandSoutheastAsia,especiallywhenpolysilicondemandorpricesfall.Polysiliconelectricityconsumptionbyregionandelectricityprice,2021IEA.Allrightsreserved.Sources:ElectricitypricesfromIEA(2021g),WorldEnergyPrices(database);BNEF(2022d),PowerPrices.Forwafers,electricitypricesalsoinfluenceregionalcostdifferentials,buttoalesserextentthanforpolysilicon.MarketsoutsideofChinaandtheASEANregionhavehigherdepreciation,overheadandlabourcosts,makingitmoredifficultforthemtobecompetitive.HigherinvestmentcostsinKorea,theUnitedStates,IndiaandEuropeleadtoelevateddepreciationcostscomparedwithChinaduetoalackofeconomiesofscale.SupplychainintegrationcanoffercostadvantagesandincreasecompetitivenessMorethaninanyotherregion,companiesinChinahaveincreasinglyconsolidatedmanufacturingineachsegmentofthesupplychainoverthelastdecade,suchthattheynowprovidealmost80%oftheworld’sintegratedsolarPVsupplies.Largeandmedium-sizedintegratedsolarPVmanufacturersproducethreeoutoffoursupplychainproducts,accountingfor80%ofglobalpolysiliconproductionand50-60%ofwafer,cellandmodule-manufacturingcapacity.050100150200250048121620QinghaiXinjiangInnerMongoliaYunnanShaanxiJiangsuHenanSichuanQatarUSAMalaysiaJapanGermanyChinaOthersUSD/MWhTWhCoalGasNuclearHydropowerOtherrenewablesOtherUSD/MWh(rightaxis)Weightedavg.excl.GermanyIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification92Thecostefficienciesresultingfromintegrationandtheconsequentabilitytoabsorbpriceshocksallowthesefirmstoproducethelowest-costsolarPVequipmentwhilealsointroducinglabourandmanufacturingefficienciestoreducevariablecosts.Accordingly,companiesoutsideChinamayalsoneedtointegratevarioussegmentstoimprovetheircompetitiveness.Integratingsupplychainsegmentsmustbemadeapriority,asthefragmentednatureofcomponentmanufacturingcouldleadtohighercostsineachsegment.IntegratedsolarPVmanufacturermarketsharesbysupplychainsegment(left)andbycountry/region(right)IEA.Allrightsreserved.Note:AverticallyintegratedcompanymanufacturesproductsinatleastthreesegmentsofthePVsupplychain.Ofthe62integratedcompaniesatpresent,49areinChina.Elevatedfreightpricesareclosingthegapbetweenlow-costimportsanddomesticallymanufacturedmodulesSince2019,overseasshippingpriceshaveincreasedmorethansixfold.PriortotheCovid-19pandemic,transportationcostshadlittleinfluenceonthecost-competitivenessofdomestically-producedsolarPVmodulesversusimportedones.However,transportchargeshavenowclosedthegapinIndiaandASEANcountries,wherethecostofdomestically-producedsolarPVmodules(includingpolysilicon,waferandcellmanufacturingaswellasassembly)isonparwithChineseimports.InEurope,thecostdifferentialhasshrunkto8%becauseofthelongdistancesinvolvedinimportingfromChinaandtheASEANregion,andintheUnitedStatesthedifferenceisonly3%.0%20%40%60%80%100%2008201020122014201620182020Marketsharesofmedium-integratedcompaniesPolysiliconIngots&wafersCellsModules78%11%11%ChinaDevelopedeconomiesEmergingeconomiesIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification93Costofimportedmodules,includingoverseasshipping,vsdomesticmodules,2022IEA.Allrightsreserved.Note:ASEAN=AssociationofSoutheastAsianNations.SolarPVmanufacturingcostsvarysignificantly,buttheydonotstronglyaffectoverallPVgenerationcostsForgovernments,policiessupportingrenewableenergytechnologiesmustconsideroverallelectricitygenerationcosts.ThesearelargelydictatedbytheinvestmentcostoftheentirePVsystem,whichiscomprisedofexpensesforbothmodulesandnon-moduleelementssuchasinverters,cables,mountingstructures,installationandfinancing.AlthoughdomesticallymanufacturedmodulesmaycostmorethanChineseorASEANimports,themajorityofupfrontexpenditurescomefrombalance-of-systemcosts.Thus,theadditionalexpenseofdomesticmoduleswillhaveonlyalimitedimpactonthecostofinvestmentand,consequently,ongenerationcosts.Infact,balance-of-systemcostscanrepresentasmuchas71%ofutility-scalesysteminstallationcostsintheUnitedStatesoraslittleas58%inIndia,withmodulesmakingupamuchlowersharefordistributedapplications.Forexample,manufacturingtheentiremodulesupplychainintheUnitedStates,theEuropeanUnionorJapanmayresultin20-35%highermodulecoststhaninChina,butonly5-11%higherinvestmentcostsforutility-scaleand2-7%fordistributedPVprojects.InIndiaandASEANcountries,asimilartrade-offwouldleadtoonlya1-4%increaseinoverallutilityPVsystemcosts.0.000.050.100.150.200.250.300.350.40ImportedDomesticImportedDomesticImportedDomesticImportedDomesticImportedDomesticEuropeUnitedStatesKoreaIndiaASEANUSD/WImportedmodulecostsShippingcostsDomesticallymanufacturedmodulecostsIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification94Costincreasefromdomesticvslowest-cost(Chinese)moduleuseandshareofmoduleexpenseintotalPVinvestmentcostIEA.Allrightsreserved.Note:ASEAN=AssociationofSoutheastAsianNations.Source:IEAanalysisbasedonIRENA(2022).JobcreationThesolarPVindustrycouldcreate1300manufacturingjobsforeachgigawattofproductioncapacityJobcreationisoneofthemainargumentsforexpandingdomesticmanufacturingofanyproduct,asmanygovernmentsconsidermanufacturingjobstobesustainable.Thus,givensolarPV’scriticalroleintheenergytransitionanditsjob-creationpotential,itisakeyindustryfortheglobalexpansionofmanufacturingjobs.TobeontracktomeetIEANetZeroby2050Scenariodemandgrowth,thesolarPVmanufacturingsectorneedstonearlydoublethenumberofjobsgloballyby2030.Plus,themanufacturingofcomponentssuchasglass,EVA,backsheets,invertersandmountingsystemswouldcreateoveranotherquarter-millionjobsatthesametime.Forpolicymakers,thejobintensityofvarioussolarPVsupplychainsegmentscanbeanimportantfactor,especiallywhendesigningincentivestosupportthemanufacturingsector.Forinstance,weestimatethatproducing1GWofc-Sisolarmodulecapacityperyearcouldcreateasmanyas1300full-timemanufacturingjobs,coveringpolysilicon,ingots,wafers,cells,modulesandothermaterialssuchasglass,backsheetandEVA.Thin-filmmodulemanufacturing,whichislessjob-0%5%10%15%20%25%30%35%40%UnitedStatesEuropeIndiaASEANKoreaCostchangeModulecostincreaseTotalPVinvestmentcostincreaseUtility-scale0%5%10%15%20%25%30%35%40%UnitedStatesEuropeIndiaASEANKoreaDistributedIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification95intensivethanc-Sitechnology,createsonlyaround200jobspergigawattbecauseitentailsfewerproductionstepsandtheyaremostlyautomatised.JobsperGWofmanufacturingcapacityandshareofjobspersupplychainsegmentIEA.Allrightsreserved.Notes:Valuesareweightedaveragesbasedonproductioncapacitiesandemploymentlevelspublishedingovernmentstatisticsandcompanyreportsfrom2005to2021.MarketsincludeBrazil,Cambodia,Canada,China,ChineseTaipei,theUnitedKingdom,France,Germany,India,Indonesia,Japan,Malaysia,Mexico,Norway,thePhilippines,Singapore,SouthAfrica,Korea,Sweden,Thailand,theUnitedStatesandVietNam.InChinaandSoutheastAsiancountries,establishedsolarPVmanufacturingmarketscreatefewerjobs(1000-1100pergigawattofpolysilicon,ingots,wafers,cellsandmodulesproducedannually)becausetheimmensityofnewmanufacturingplants(i.e.10-20GW)allowsforhigherlevelsofautomationandefficiency.Forsmallermanufacturingfacilitiesthatcannotrealisethesameeconomy-of-scalebenefits,labourrequirementscouldincreaseuptonearly60%.Themostjob-intensivesegmentsalongthePVsupplychainaremoduleproduction(requiring600-900jobs)andcellmanufacturing(450-650jobs).Overthelastdecade,however,jobautomationandautomatedguidedvehiclesreducedthejobintensityofsolarPVmanufacturingsignificantly,especiallyforcellsandmodules.Nevertheless,despitetheirrelativelyhigh-efficiencylevels,moduleandcellmanufacturinghavegreaterjobintensitybecausethemultiplestepsinvolvedinassemblyandqualitycontrolstillrequiremanuallaboureventhoughotherstagescanbehighlyautomated.Polysiliconandwaferproductionarethemostgeographicallyconcentratedsegments.Althoughtheirdiversificationwouldprovidesecurity-of-supplybenefits,theirjob-creationpotentialisrelativelylowcomparedwiththemanufacturingofothercomponents.Forinstance,1GWofpolysiliconproductioncancreate50-100jobs,whilewaferandingotmanufacturingcangenerate180-400(thehighendsof05001000ModulesCellsWafers/ingotsPolysiliconJobs/GWModules44%Cells32%Wafers/ingots15%Polysilicon4%Glass3%EVA1%Backsheet1%Other5%IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification96theserangesreflectthegreaterlabourneedsofmarketsthathavelowcapacitypermanufacturingplant).Lowjobintensityinthepolysiliconandingotdomainsstemsfromthelongproductiontimesrequiredforlargebatchesthatdonotrequireextensivemanualwork.However,akeyadvantageofthesemanufacturingsegmentsisthattheycanservemultiplekeysectors,includingthesemiconductorindustry.PVmanufacturingrequiresadiversityofworkers,includingproductionengineers,materialhandlersandassemblers.DuetothecurrentgeographicalconcentrationofthesolarPVsupplychain,themajorityofskilledpersonnelisbasedinChinaandSoutheastAsia,sodiversificationwillrequireaconcertedefforttotrainnewemployees.Thus,anystrategytoincreasePVmanufacturingcapacitymustincludeaworkforcetrainingcomponent.Whilegovernmentsandemployershavealreadyintroducedtrainingprogrammesfornewemployees,trainingmustbeco-ordinatedandscaleduptoprovidetheamountoflabourneededtosecureinvestmentinlocalmanufacturingfacilities.ThereisnotcurrentlyenoughtrainedlabourforPVmanufacturing,especiallyinsmalloremergingmanufacturingmarkets,giventhelowamountofjobopportunitiesavailable.End-of-lifemanagementandrecyclingAcceleratingsolarPVgrowthintroducesnewchallengesforend-of-lifemanagementandopportunitiesforrecyclingAsever-increasingamountsofsolarPVequipmentwillreachtheendoftheirlifetimeinupcomingyears,recyclingcouldmakeasignificantcontributiontomaterialsupplychaindiversificationinthemediumandlongterm.SolarPVmodulescurrentlyhaveanestimatedaverageservicelifetimeof25-30years,afterwhichtimetheirperformancecandeteriorateandtheycanbesubjecttofailures.Consideringhistoricalcapacityadditions,weestimatethattheglobalcumulativeflowofdecommissionedsolarPVcapacitywillreacharound7GWby2030andcouldincreasetoover200GWby2040.Thisrepresents400-600ktofembodiedmaterialscumulativelyby2030and11-15Mtby2040.Assettingupeffectivepolicyframeworksandvaluechainscantaketime,itiscrucialthatgovernments,industriesandotherstakeholderspreparenowtomanagethefuturesurgeofsolarPVwastefromasystemic,circular-economyperspective.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification97ExpectedflowsofdecommissionedsolarPVcapacity,2020-2050IEA.Allrightsreserved.Notes:ValuesarebasedonhistoricalcapacityadditionsaswellasadditionsmodelledinIEANetZeroby2050Scenario.SolarPVmodulelifetimesbeforedecommissioningareassumedtofollowaWeibulldistributionpattern,withmedianlifetimesof25yearsforutility-scaleinstallationsand30yearsfordistributed.Source:CalculationsbasedonIEA(2021f).SolarPVrecyclingcanofferenvironmental,socialandeconomicbenefitswhileenhancingenergysecurityManagingend-of-life(EoL)flowsofsolarPVequipmentisanenvironmentalchallenge.Inadditiontocontradictingcircularityprinciples,puttingPVpanelsinlandfillscancauseenvironmentalpollutionandhealthissuesduetothepresenceofhazardousmaterialssuchaslead.14Inthiscontext,thebenefitsofrecyclingaremanifold:itprovidesnotonlyanalternativetolandfilling,butalsotheopportunitytorecovervaluableelementsandsecureareliablesecondarysourceofrawmaterialsforthePVindustryandothersectors.Thus,byrelievingpressureonprimarysupplyrequirementsandofferingarelativelypredictablesupplyflow,recyclingcanreducethepricevolatilityofrawmaterials.Furthermore,becauseitprovidesadomesticsupplyalternative,recyclingcanalleviateenergysecurityconcernsforcountriesheavilydependentonimports.Italsohelpsavoidnegativeenvironmental,socialandhealthimpactsassociatedwithraw-materialmining,andcanreducetheenergyandenvironmentalfootprintofsolarPV.Moreover,reconditioningandrecyclingcangenerateemploymentopportunitiesandsupportlocaleconomicactivity.14EoLsolarPVpanelmanagementisalreadybecominganimportantissueinsomedevelopingcountries,whereagrowingnumberofsmallstandalonesolardeviceswithrelativelyshortlifetimesarebeingimproperlydisposedofduetoalackofappropriatecollectionandrecyclinginfrastructure,leadingtoadverseenvironmentalandpublichealthimpacts(ACE,2021).0%5%10%15%20%25%30%0200400600800100012001400160018002021-20302031-20402041-2050GWFlowofend-of-lifesolarPVcapacityDecommissionnedcapacityas%ofgrossadditions(rightaxis)IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification98AssumingsystematiccollectionofEoLmodulesandamaterialrecoveryrateof85%,cumulativesecondarysuppliesfromrecyclingallEoLsolarPVmodulescouldmeet3-7%ofthesolarPVindustry’sdemandforaluminium,copper,glass,siliconandsilverrequiredundertheIEANetZeroScenarioduring2031-2040,andover20%during2041-2050.Presumingthatthesilverintensityforc-Simodulescontinuestodecreaseinlinewiththecurrenttrend,solarPVrecyclinghasthepotentialtosupplyabouttwo-thirdsofthesilverneededfornewsolarPVadditionsduring2041-2050.PotentialcontributionofmodulerecyclingtosolarPVmaterialdemandundertheNetZeroby2050Scenarioforselectedmaterials,2022-2050IEA.Allrightsreserved.Note:CalculationstakeintoaccountthehistoricalevolutionofmaterialintensityinthedifferentgenerationsofsolarPVmodulesputonthemarketsince1990andassumefurthermaterialintensityimprovementsof10%over2020-2050forglass,30%forsiliconand75%forsilver.Forthesakeofsimplicity,calculationsassumearecoveryrateof85%forallmaterials.However,recoveryratesabove90%forsilverandupto95%forsilverandcopperareconsideredachievable(Huangetal.,2017).Sources:CalculationsbasedonIEA(2021d;2021f).Despiteitsstrongpotentialtooffermultiplebenefits,recyclingcanbetechnicallyandeconomicallychallengingSolarPVrecyclingisrelativelycomplexfromatechnicalstandpoint.TheEoLsolarPVmoduleflowisnothomogeneousinsize,technology,compositionorcondition.Moreover,existingsolarPVpanelswerenotdesignedtoberecycled:durabilityandperformancerequirementshaveledtosandwich-like,sealedandencapsulatedstructures,makingtheseparationofconstituentmaterialsdifficult(IEA-PVPS,2021).Nevertheless,variousrecyclingprocesseshavebeendevelopedinthepasttwodecadesforbothcrystallinesiliconandthin-filmPVpanels(Lunardietal.,0%10%20%30%40%50%60%70%2022-20302031-20402041-2050ShareofsolarPVrawmaterialrequirementsAluminiumCopperGlassSiliconSilverIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification992018).Whilesomearestillattheresearchordemonstrationstage,othershavealreadybeenimplementedatindustrialscale,forinstanceintheEuropeanUnionandtheUnitedStates.PVmodulerecyclinggenerallystartswithmanualremovalofthecables,junctionboxandframe,fromwhichcopperandaluminiumcanberecoveredeasily.Itthenproceedswithmechanical,thermaland/orchemicaltreatmenttoseparatethemodule’sotherconstituents.Thepresenceofcertainelements,suchasfluoropolymersusedinsomebacksheets,canrequirespecialhandlingorcanconstraintechnicaloperations,increasingrecyclingcosts.Inadditiontocopperandaluminium,recoverablematerialscanincludeglass,silverandsemiconductors(e.g.siliconfromc-SiPVtechnologies,andcadmiumandtelluriumfromCdTepanels),whichcanthenbereprocessedorrefined,whilepolymersaresometimesusedasrefuse-derivedfuel.15Recoveryratesandvalorisationroutesforeachmaterialdependontheexactprocessemployed.Overall,includingdowncycling,thevalorisationrateofaframedc-Simodulecanexceed94%byweight(Soren,2022).However,existingPVrecyclingprocessesareencounteringeconomicchallenges.Currentrecyclingtechnologiesforc-Simodulesstruggletogenerateenoughrevenuefromtherecoveredmaterialstocoverthecostoftherecyclingprocess(IEA-PVPS,2021).Moreover,thevolumeofEoLPVmoduleswasrelativelylowuntilnow,limitingopportunitiestoachieveeconomiesofscale.Recyclingrevenues‒aswellasthetechnicalrelevanceoftheprocess‒dependlargelyontheabilitytolimitcontaminationbetweenmaterials,isolatehazardoussubstancesandrecoverhomogeneousandhigh-purityfractionsofscarce,energy-intensiveand/orhigh-valuematerials.Researcheffortsareongoingtoenhancematerialvalueretention,forinstancebydevelopingtechnologiesandprocessescapableofrecoveringintactwafers,glassandframestobereusedforthefabricationofnewmodules(e.g.Xuetal.,2022).Inparallel,properrecyclingdesigniscriticaltoenablehigher-valuerecyclingandreduceprocesscomplexityandcostsinthelongterm(IEA-PVPS,2021).However,furtherresearchisneededtobettercharacterisethecomplextrade-offsthatcanarisebetweenmodulerecyclabilityanddurability(servicelife),performance,cost,andpossiblematerialrevenuesfromrecycling.Itmustalsoberememberedthat15Inpractice,incineratingcellsandpolymersisstillcommonplaceinc-Sirecycling,whereashigh-valuerecyclingtorecoversemi-conductormaterialiswellestablishedforCdTepanels(Stolzetal.,2017).IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification100effortstoreducethematerialintensityofhigh-valuematerialsinPVmoduleswillalsocompromiserecyclingrevenuepotential.Assumingthatimprovedrecyclingprocessescanrecover85%(byweight)ofsolar-gradesilicon,silver,aluminium,glassandcopperwithhighpurityforreuseinthePVindustry,revenuesofmorethanUSD15-16permodulecouldbeachievedat2021marketprices,withsiliconandsilvercontributingthemajority.Thiscouldenablethedevelopmentofaprofitablec-Simodulerecyclingbusinesswithoutadditionalfinancialsupport(Huangetal.,2017).Lastbutnotleast,inadditiontorecycling,circularapproachesaimedatimprovingsolarPVdesignsforreuse,enhancingproductlongevityanddevelopingremanufacturingwillbepivotaltodiversifythesolarPVsupplychainandshrinkitsenvironmentalfootprint(IEA-PVPS,2021).Whileareemploymentmarketformodulesisalreadyemerging,thesolarPVreusesectorisstillmostlyunregulatedandwouldbenefitfromtheestablishmentoftechnicalguidelinesandqualitystandardstoensurehomogeneousproductqualityandbuildcustomertrustinsecond-handpanels.Importantly,currentmarketsforsecond-handmodulesarelocatedmostlyinlow-incomeregionssuchasAfrica,WesternAsiaandSoutheastAsia,whereappropriaterecyclingregulationsandinfrastructureareofteninsufficientorlacking(PVCycle,2021).ThisraisesenvironmentalconcernsaboutthemanagementofsolarPVmodulesreachingtheendoftheirsecondlifetimeintheseregionsandcallsforrapidimplementationofadequateandholisticpolicystrategies.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification101ReferencesACE(AfricaCleanEnergy)(2021),Understandinghowtohandlee-wasteinthestandalonesolarsector,https://www.ace-taf.org/how-important-is-it-to-understanding-how-to-handle-e-waste-in-the-stand-alone-solar-sector/.Bloomberg(2022a),LondonMetalExchange(database),https://www.bloomberg.com/professional/solution/bloomberg-terminal/(accessedApril2022).BNEF(BloombergNewEnergyFinance)(2022c),BNEFinteractivedatabase,https://www.bnef.com/(accessedMay2022).BNEF(2022d),BloombergNewEnergyFinancePowerPrices2022,https://www.bnef.com/(accessedApril2022).CSTEP(CenterforStudyofScience,TechnologyandPolicy)(2018),Feasibilityanalysisforc-SiPVmanufacturinginIndia,https://cstep.in/drupal/sites/default/files/2020-08/WP_SiPV%20Manufacturing_0.pdf.Fraunhofer(2021),ProductionofphotovoltaicsinEurope,http://solarindustryforum.com/wp-content/uploads/2021/10/SIF1_Bett.pdf.Huang,W.-H.etal.(2017),Strategyandtechnologytorecyclewafer-siliconsolarmodules,SolarEnergy,Vol.144,pp.22-31,https://www.sciencedirect.com/science/article/pii/S0038092X17300105.IEA(InternationalEnergyAgency)(2022c)EnergyPricesandTaxesforOECDcountries1Q2022(database),https://www.iea.org/data-and-statistics/data-product/oecd-energy-prices-and-taxes-quarterly(accessedApril2022).IEA(2021d),TheRoleofCriticalMineralsinCleanEnergyTransitions,https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions.IEA(2021f),NetZeroby2050,https://www.iea.org/reports/net-zero-by-2050.IEA(2021g),IEAWorldEnergyPrices2021(database),https://www.iea.org/data-and-statistics/data-product/energy-prices(accessedMay2022).IEA(2022a),ElectricityMarketReport-July2022,ParisIEA-PVPS(IEAPhotovoltaicPowerSystemsProgramme)(2021),PVModuleDesignforRecyclingGuidelines,https://iea-pvps.org/wp-content/uploads/2021/10/T12_2021_PV-Design-for-Recycling-Guidelines_Report.pdf.IRENA(InternationalRenewableEnergyAgency)(2022),RenewableTechnologyInnovationIndicators:MappingProgressinCosts,PatentsandStandards,https://www.irena.org/publications/2022/Mar/Renewable-Technology-Innovation-Indicators.Lunardi,M.M.etal.(2018),Areviewofrecyclingprocessesforphotovoltaicmodules,inB.Zaidi(ed.),SolarPanelsandPhotovoltaicMaterials,https://www.intechopen.com/chapters/59381.NREL(2018),CrystallineSiliconPhotovoltaicModuleManufacturingCostsandSustainablePricing:1H2018BenchmarkandCostReductionRoadMap,https://www.nrel.gov/docs/fy19osti/72134.pdf.PVCycle(2021),RE-USEofPVmodules,challengesandopportunitiesofthecirculareconomy,https://pvcycle.org/2021/07/12/study-of-re-used-pv-modules/.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter3-ConsiderationsforPVsupplychaindiversification102Soren(2022),Sorenmetenoeuvrelafilièredetraitementdespanneauxphotovoltaïquesusagés,https://www.soren.eco/re-traitement-panneaux-solaires-photovoltaiques/Stolz,P.etal.(2017),LifeCycleAssessmentofCurrentPhotovoltaicModuleRecycling,IEAPVPSTask12,https://iea-pvps.org/wp-content/uploads/2020/01/Life_Cycle_Assesment_of_Current_Photovoltaic_Module_Recycling_by_Task_12.pdf.TERI(TheEnergyandResourcesInstitute)(2019),PolicyPaperonSolarPVManufacturinginIndia,https://www.teriin.org/sites/default/files/2019-08/Solar%20PV%20Manufacturing%20in%20India.pdf.Xu,X.etal.(2022),Asystematicallyintegratedrecyclingandupgradingtechnologyforwastecrystallinesiliconphotovoltaicmodule,Resources,ConservationandRecycling,Vol.182,106284,https://www.sciencedirect.com/science/article/pii/S092134492200132X#!.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling103Chapter4–PolicystrategiesforsolarPVmanufacturingandrecyclingTheincreasinggeographicconcentrationofsolarPVmanufacturingandongoingsupplychainchallengessincetheCovid-19crisisarepromptinggovernmentstoimplementpoliciestostimulatedomesticmanufacturing.However,mostglobalpolicydiscussionhashistoricallybeenfocuseddownstream,onhowtobolsterthebusinesscasetosellsolarPVelectricity.Thesepolicieshavebeensuccessfulinachievingcostreductionsandrapiddeploymentoverthelastdecade,butlittleattentionhasbeenpaidtoupstreampolicyoptionstostimulatelocalmanufacturing,ortotheroleofrecyclinginsupplyingfuturematerialneeds.PolicyframeworkstopromotelocalsolarPVmanufacturingAcountry’spolicyandmacroeconomicenvironmentiscriticaltoattractinvestmentinmanufacturingfacilitiesforanyindustry.ForsolarPV,governmentsworldwidehaveimplementedmultiplepoliciesandincentiveschemes,withvaryingsuccess.Insimpleterms,solarPVmanufacturingpoliciescanprovidedirectsupporttomanufacturinginvestors,ortheycanindirectlystimulateinvestmentsbycreatinganattractiveinvestmentenvironment.Supportpoliciescanbeappliedonthesupplyside(upstream)orthedemandside(downstream),throughfourpossiblecombinationsdescribedbelow.TheIEA’sproposedpolicyframeworkaimstocategorisedistinctpolicytypeswhilealsoprovidinganon-exhaustivelistoftoolswithineachcategory.Historically,governmentshavesupportedPVmanufacturingthroughacombinationofsupplyanddemandpolicies,butwithinthesebroadpolicycategoriestheychoosefromamongmanydifferenttools.Althoughmanyindirectpoliciesareexcludedfromthelist(suchasthosetargetingthegeneralmacroeconomicenvironment,financingorforeigndirectinvestment),theymayaffecthowwellmanufacturinginvestmentcanbeattractedtovarioussegmentsofthesolarPVsupplychain.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling104PoliciesthatdirectlyorindirectlysupportsolarPVmanufacturinginvestmentIEA.Allrightsreserved.Directsupplypolicies:SubsidiestransferreddirectlytomanufacturersPoliciesprovidingincentivesdirectlytoasolarPVmanufacturingfacilitycanimproveitsbusinesscase,dependingonthelevelofsupport.Thefirstoftwogeneralformsofsupportareincentivesthatdirectlyreducetheinvestmentcostburdenthroughgrants,freeorlow-costlandandpreferentialfinancing,orthatreducethepriceforimportedequipmentthroughlowertaxesorimporttariffs.Thesecondtypeconsistsofincentivesthatdirectlyreducemanufacturingfacilities’operationalcoststhroughinvestmenttaxcredits(whichreducefuturetaxexpenses),subsidisedelectricityorotherenergycosts(offeringrelativelylowretailtariffs),fundstoreducelabourcosts,andsubsidiestoencouragetheexportofsolarPVgoods.DirectsupplypoliciesthusdirectlybolsterthebusinesscaseforsolarPVmanufacturingbyreducingtheinitialinvestmentrequirementwhilemakingdomesticallymanufacturedgoodsmorecompetitive.Whilepoliciessuchasgrants,low-costfinancingorgovernmentloanguaranteesareusuallyprovidedduringtheinitialinvestmentperiod,otherincentivesmaybeofferedovermultipleyears.Theeffectivenessofdirectsupplypoliciescanoftendependuponhowlongsupportisprovided,especiallyforincentivesdesignedtoreducetheoperationalcostsofmanufacturingfacilities.Ifinvestorsdonotusedirectsupplyincentivestoinvestinthelong-termcompetitivenessoftheirproducts,theymaylosetheirdomesticorinternationalmarketsharesoncesubsidisationends.Demand•ImporttariffsortradedutiestoraisethecostofimportedsolarPVequipmentandrelatedproducts.•ImportbansonsolarPVproductsnotmeetingcertainsustainabilitystandardsorregulations,tosetstandardsforimportedPVequipment.•BorderCO2taxadjustmentforimportedsolarPVproducts.•Carbonfootprintstandardformodulesintenders.•R&Dandinnovationfunds,orfundsforacademicsandtheprivatesectortodevelopsolarPVtechnologies.•TaxincentivestoemployhighlyskilledlabourforR&D.•Nationalorsub-nationalfundstoeducateskilledlabourforsolarPVmanufacturing.•Governmentinvestmenttoupgradeinfrastructure,includingforlogistics,wastemanagementandpower,includingindustrialclusters.•ManufacturingtaxcreditsforoneormultiplesolarPVsupplychainsegmentmanufacturingfacilities.•GrantsforoneormultiplesolarPVsupplychainsegmentmanufacturingfacilities,includingtocoverlandandinfrastructurecosts.•Low-costfinancingforgreenfieldsolarPVmanufacturingfacilities,orfortheirexpansionoroperation.•Lowerenergypricesforenergy-intensivePVmanufacturingfacilities.•LowerincometaxratesforsolarPVmanufacturingcompanies.•LowerimporttariffsandVATratesforimportedmanufacturingequipment.•Governmentfundstoreducelabourcoststhroughlowercharges.•Incentivesfortoexportedgoodsmanufactureddomestically.•Local-contentrequirementsfordomesticallymanufacturedequipmentattachedtopoliciestostimulatesolarPVdemand.•SolarPVpowerplantauctions/tenderslinkedtocommissioningnewmanufacturingfacilities.•PoliciestostimulatedomesticsolarPVdemand(taxcredits,FITs,auctions).•Local-contentpremiumsfordomesticallymanufacturedequipmentattachedtopoliciestostimulatesolarPVdemand.•Low-costfinancingfordomesticallymanufacturedequipmentattachedtopoliciestostimulatesolarPVdemand.SupplyDirectIndirectIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling105Indirectsupplypolicies:IncentivesandregulationsthatfacilitatePVindustryinvestmentIndirectsupportpoliciesaimtocreateaninvitingenvironmentforinvestmentbyeitherestablishingconditionsforgrowthoreliminatinginvestmentchallenges.TheformercategoryincludesincentivesconnectedtoR&D,innovationandskills.Thesehelpindustriesaccelerateinnovation,whichcouldinturnincreasetheircompetitiveness.FundsforR&Dcanhelpimprovetheefficiencyoftechnologiesalreadyonthemarketorbedirectedtotechnologiesthathavenotyetreachedthecommercialisationstage.WhilenotallR&Dfundingresultsinscalablecommercialactivity,innovationandskilldevelopmenthelpscreateabetterinvestmentenvironment.Indirectsupplypoliciesaimtocreateaninvestment-enablingenvironment,whichmaynotalwaysbeavailabletoaninvestor,particularlyinplaceswherepricedifferentialsbetweendomesticandimportedproductsaredeemedunfair.Themostcommonindirectsupplypoliciesarethustradepolicies,astheyaimtocreatealevelplayingfield.Meanwhile,theabilityofimporttariffsordutiesalonetoattractdirectinvestmentinmanufacturingfacilitiesislimited,especiallyincountrieswhereexistingdomesticsupplyissignificantlylowerthandemand.Asimporttariffsorcountervailingdutiesincreasethepriceofimportedgoodswhileneitherimprovingthebusinesscasefornewmanufacturinginvestmentsnoreliminatingotherpotentialobstacles,usingthesetoolswithoutotherpolicymeasuresmayjusttranslateintomoreexpensivesolarPVproductsonthedomesticmarket.Tradepolicieshave,however,helpedattractinvestmentinsolarPVmoduleassemblylines,asmanufacturersusuallyimportmostvalue-addedsupplychainelementssuchascellsandthenassemblethemintomodulesthataresoldinthedomesticmarket.Directdemandpolicies:PowerplanttendersthatrequiredomesticmanufacturinginvestmentThiscategoryreferstothelinkingofincentivesfornewsolarPVpowerplantswitharequirementtousedomesticallymanufacturedequipment,forexamplethroughlong-termpowercontractsthatrequiredeveloperstobuildasolarPVmanufacturingfacilityforoneormultiplesupplychainsegments.Althoughpowerpurchasecontractsassociatedwiththispolicyremunerateenergyproducedfrompowerplants,partofthetariffisdirectlytransferredtothemanufacturingfacility.Usually,thedeveloperandthemanufacturercreateaconsortiumtoallocateremunerationIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling106fairlyforconstructionofboththepowerplantandthemanufacturingfacility(seethesectionsonIndiaandTürkiyebelow).Indirectdemandpolicies:IncentivesdirectedtopowerplantdevelopersCreatingdomesticdemandforsolarPVthroughFITs,auctionsorrenewableportfoliostandardscanindirectlyleadtothedevelopmentoflocalsolarPVmanufacturingformultiplesegments.However,becausethesepoliciesremunerateonlytheelectricityfromsolarPVpowerplants,developersareoftenincentivisedtopurchasethecheapestmoduleoptionstomaximisetheirprofits,andthesemodulesmightnotbefromthedomesticmarket.Thus,thesepoliciesalonemaynotbesufficienttostimulatelocalmanufacturing,particularlyifimportedproductsaremoreaffordableoroperatingcostsarehigh.Thesepoliciescanalsoincludealocal-contentpremiumontopofthebasepowerpurchasetariffforoneormultiplecomponentsofthesolarPVsystem,oracarbonfootprintevaluation.Inthiscase,localcontentisnotrequiredbutoptional.ThesizeandcontinuityoflocaldemandandthecompetitivenessofdomesticmanufacturingarekeyfactorstoattractinvestmentinthedomesticsolarPVindustry.PolicyassessmentsforselectedcountriesTheeffectivenessofpoliciesthatdirectlyorindirectlytargetsolarPVmanufacturingisdifficulttoassessduetothecomplexityofmultiplepolicyinteractionsandcontext-specificmarketdevelopments.However,forgovernments,themainindicatorthatitsincentiveshavebeensuccessfulistheestablishmentofmanufacturingcapabilitiestoproduceoneormultipleproductswithinthesolarPVsupplychain(polysilicon,ingots,wafers,cells,modules,glass,trackingormounting).Inthebest-casescenario,domesticorforeigninvestmentshouldcreatejobs,expandlocalskillsandknowhow,stimulatetechnologytransfer,reduceimportsandenabletheexportofadded-valueproductswhileraisingtaxrevenuesinthelongterm.WhatisthesecrettoChina’sdominantpositioninsolarPVmanufacturing?Intheearly2000s,theChinesegovernmentselectedsolarPVasakeyindustrytoenrichitseconomyandexports.Inits10thFive-YearPlanfor2001-2005,China’sStateEconomicandTradeCommissionreleasedavisionforexpandingtheindustrialisationofrenewableenergytechnologies,includingbyscalingupsolarPVIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling107cellandmodulemanufacturing.Thisvisionandstrategythusmarktheintroductionofcentralandprovincial-levelincentivesforsolarPVmanufacturing.Inits11thFive-YearPlan,ChinaidentifiedPVmanufacturinghindrancessuchasitslackofpolysiliconcapacity(atthattime,Chinaimported95%ofthepolysiliconitusedforPVmanufacturing)anddependenceonimportedmanufacturingequipment.Thegovernmentthereforedecidedtopromotedomesticpolysiliconandequipmentmanufacturingthroughgrants.Becauseoftheconsiderableexportopportunitiesavailable,China’sincentivesinitiallytargeteddirectsupplyratherthandomesticdemandcreation.Grants,low-costloansfromstatebanksandfundsfromtheScienceandTechnologyMinistrythusledtotheestablishmentofseveralpioneeringdomesticmanufacturers.TheChinesegovernmentalsoprovidedgrantsandtaxincentivestoimportmanufacturingequipmentfromEuropeandtheUnitedStates,buttheywerediscontinuedafterafewyearsbecauseChinesecompaniesthendevelopedtheirownequipmenttechnology.Intheabsenceofdomesticdemand,Chinesemanufacturershadtoimprovetheircompetitiveness.Theythereforefocusedoneconomiesofscaleandintegrationofsupplychainsegmentstoreducecosts,increaseexportsandexpandtheirglobalmarketshare.SupplyanddemandpoliciestargetingsolarPVmanufacturinginChina,2005-2022IEA.Allrightsreserved.Notes:Lightgreen=indirectdemand.Darkgreen=directdemand.Lightblue=indirectsupply.Darkblue=directsupply.Chineseincentivesdirectlytargetingsupplyhavealsobeensustainablebothcentrallyandprovincially.Grants,low-costfinancingandpreferentialenergypriceshavebeeninplacesince2005,andfollowingtheglobalfinancialcrisisin2008,thegovernmentintroducedeconomicrecoverypackagesforprovincesthroughlow-costfinancingfromtheChinaDevelopmentBank(CDB).SolarPVmanufacturing2005-20102010-20152015-2022China2015:TopRunnerProgramme,requiringhigh-efficiencycellsproducedinChina2011:Feed-intariffsforutility-scaleandlargecommercialsystemswith20-yearcontracts2019:CompetitivesolarPVtenders2012:Antidumpingdutyonimportsofsolar-gradepolysiliconfromtheUnitedStatesandKorea1999:InnovationfundandR&Dfundforsmallfirms2004:PreferentialloansforsolarPVmanufacturingcompanies2004:Lowerelectricitypricesforenergy-intensiveindustries,includingpolysiliconandingotproduction2004:SubsidiesandtaxexemptionsforimportedsolarPVmanufacturingequipment2004:Provincialgrantsandlow-costorfreelandforsolarPVmanufacturingfacilitiesIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling108wasamongtheindustriestargeted,withtheaimofexpandingChina’smanufacturingcapabilitiesthroughouttheentiresupplychain.China’sinitialindustrialsolarPVstrategyfocusedonwafers,cellsandmodulesmanufacturedfromimportedpolysilicon(in2007,Chinaimportedaround75%ofitspolysiliconfromEuropeandtheUnitedStates).However,financingfromtheCBD,taxbreaks,provincialsubsidiestargetingenergy-intensiveindustriestoreduceenergycosts,andgrantstoexpandmanufacturingenlargedChina’smanufacturingtoincludepolysiliconin2009.In2012,ChinaintroducedanantidumpingdutyonpolysiliconimportsfromtheUnitedStatesandKoreatoreduceimportsandfurtherexpanditsownmanufacturingcapabilities.Chinesedependencyonimportedpolysiliconthusfellto40%in2014becausedomesticmanufacturingcapabilitieshadincreasedsevenfoldsince2009.Meanwhile,ChinahasalsobecomethelargestdemandcentreforsolarPVowingtotheFITsandcompetitiveauctionpoliciesthatshelteritsmanufacturingindustryfromvolatiledemandoutsideofthecountry.Thefirstmajorsubsidyprogrammesupportingdemand(theGoldenSunprogramme)wasintroducedin2009.Itprovidedgrantsfor650MWandrequiredChinesemanufacturerstoinstallefficientandproventechnologies.From2005to2011,modulepricesfellfromUSD4.5/WtoaroundUSD1.5/Wasmanufacturingcapacityexpandedmassivelythankstotheincentives.WithlowerPVcosts,ChinaintroducedaFITin2011toboostdomesticdemandtosupportclimatechangemitigationeffortsandtocreatesustainabledemandforitsdomesticmanufacturingindustry.Atthesametime,thegovernmentcontinuedtoincentivisenewandmoreefficientcelltechnologythroughtheTopRunnerProgramme,whichallocatesdemandincentivestodevelopersthatprovidethemostefficienttechnologies.TheprogrammehasalsopromptedChinesemanufacturerstoshifttheirfocusfrommulticrystallinetomoreefficientmonocrystallinetechnology.HowfarcandemandandR&DpoliciesadvancedomesticsolarPVmanufacturinginGermany,KoreaandJapan?Japan,KoreaandGermanybecamethelargestmanufacturersofpolysilicon,wafers,cellsandmodulesgloballyinthelate1990sandearly2000sowingtoacombinationofdirectdemandandindirectsupplypolicies.Themixtureofgeneralindustrialpolicyformanufacturing,governmentfundsforsolarPV-specificRD&D,anddemand-sideincentiveshassuccessfullysupportedsolarPVmanufacturingcompanies.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling109TheearliestpoliciesthesethreecountriesintroducedwereR&DincentivesspecifictosolarPVforpublicandprivateinstitutionsasearlyasthelate1970sand1980s,spurredbythe1973oilcrisis.ThissupporthasbeenmoreorlesscontinuousinallthreecountriesandresultedingreatersolarPVcellefficiencyandhigh-endequipmentandmachinerydevelopmentforsolarPVmanufacturing.Germany,KoreaandJapanalsohavedistinctindustrialpoliciesinplace:nationalorfederalgrants,taxincentives,andloanprogrammesforthemachineryandhigh-technologymanufacturingsectors.InJapanandKorea,industrialstrategyhashistoricallytargetedlarge,verticallyintegratedconglomeratecompaniesactiveinmultiplesectors,whileinGermanysmallandmedium-sizedcompanieshavebeenthemainrecipientsofgovernmentsupport.Inallthreecountries,regionalandindustrialdevelopmentfundswerealsousedtosupportsolarPVcomponentandequipmentmanufacturers.InGermany,theJointTaskCashGrantsandInvestmentAllowanceprogrammessupportedsolarPVcompaniesactiveinpolysilicon,wafer,cellandmodulemanufacturingthroughgrantsforCAPEXandoperatingcosts,withtherequirementthatsubsidisedequipmentremainintheinvestmentlocationforatleastfiveyears.Similarly,JapanandKoreaprovidecomparableindustrialincentivesforthemanufacturingsector.Allthreecountrieshavedevelopedcompaniesthatmanufactureequipmentforpolysilicon,wafer,cellandmoduleproduction,andadvancedautomationindustriesinthesecountrieshavealsocontributedtothesolarPVmanufacturingequipmentindustry.Germany,KoreaandJapanwerealsoattheforefrontinprovidingsubsidiesfordemandcreationintheearly2000sthroughFITsorlong-termremunerationtocreatelocaldemand.Risingdomesticdemand,supportiveindustrialpoliciesandexportopportunitiesmadeitfinanciallyattractiveformanyGermanSMEsandlargeJapaneseandKoreancompaniestolaunchbusinessesinmultiplesegmentsofsolarPVmanufacturing,makingthemgloballeadersuntil2012/13.InGermany,domesticdemandbegantodeclinein2011followingadownwardrevisionoftheFIT,atthesametimeasChinawasinvestingheavilyinsolarPVmanufacturingcapabilitiestargetingexports.TheoversupplyofsolarPVmodulesandaggressivepricingofChinesemanufacturerspushedpricesdownsignificantlyandreducedtheprofitabilityofGermanmanufacturerswhohadhigherlabourandenergycoststhantheirChinesecounterparts.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling110SupplyanddemandpoliciesdirectlyorindirectlytargetingsolarPVmanufacturinginGermany,JapanandKorea,2005-2022IEA.Allrightsreserved.Notes:Lightgreen=indirectdemand.Darkgreen=directdemand.Lightblue=indirectsupply.Darkblue=directsupply.Sources:BasedonKorea,MOTIE(2009;2018;2019a;2019b;2020;2021);TheKoreaIndustryDaily(2009);SolarToday(2010);TodayEnergy(2012);Lee(2021);andHankyoreh(2021).AsimilartrendoccurredinJapan,wheremajormanufacturersdivestedthemselvesofsolarPVsupplychainproductsbecausetheycouldnotcompetewithChinesepolysilicon,wafer,cellandmoduleproducers.WhileallthreecountriesraisedtheirdeploymenttargetsandcontinuedtostimulatePVdemand,manufacturing2005-20102010-20152015-2022Germany2010:SpecificR&Dfundingtoreducecosts–PhotovoltaicsInnovationAlliance1970s-present:Governmentfundingforresearchprojects2008:Industrialclustersupport–SolarvalleyMitteldeutschlandInvestmentgrantsforregionaldevelopment,generalindustry:JointTaskCashGrants,InvestmentAllowanceReduced-interestloansforgeneralindustrythroughnationalandstatedevelopmentbanks1990s-present:Feed-intariffsforresidentialsystems2000:Feed-intariffsforutility-scaleandlargecommercialsystemswith20-yearcontracts2014:Feed-inpremiumsforutility-scaleandlargecommercialsystems2017:UtilityPV–competitivetenders2005-20102010-20152015-2022Japan2009-2012:ResidentialPVremunerationforexcessgeneration(10-yearcontracts)1970s-present:R&DsupportprogrammeforadvancedPVtechnologies(e.g.high-efficiencyPVproductiontechnology,perovskite)2003-2012:RenewablesPortfolioStandard2012-present:Feed-intariffswith20-yearcontracts(residentialPVwith10-yearcontracts)2022-present:Feed-inpremium2005-20102010-20152015-2022Korea2002-2011:Feed-intariffs2005-2015:R&DfundingforPVequipmentindustry2011-present:R&Dfundingforadvancedmoduletechnology2004-2012:SubsidiesforrooftopPVin10000homes2012-present:RenewablePortfolioStandard2018-2022:Feed-intariffsforsmallPVprojectswith20-yearcontracts2020-present:Local-contentpremiumattachedtoRECpricing2020-present:Certificationoflocallymanufacturedmodules2020-2022:Subsidiesforinstallationsinpublicinstitutions2021-present:CarbonFootprintAssessmentstandardformodulesIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling111capabilitiesdeclinedorplateauedduetobankruptciesandloss-makingPV-relatedbusinesssegments,mainlybecausedirectsupplypoliciesandprivatecapitalinvestmentswerelacking.TheUnitedStateshaslongofferedfederalsupportforR&Danddemand,butresultsofsupplypoliciesaremixedTheUnitedStateshasoneofthelongest-livedR&DprogrammesforsolarPVworldwide.TheUSfederalgovernmenthasincentivisedR&Dthroughtwoprogrammes:theSolarEnergyTechnologiesOfficeandtheInfrastructureInvestmentandJobsAct.TheSolarTechnologyOfficeprovidesgrantsandloanstodeveloplow-cost,high-efficiencyPVtechnologies,suchthattodayUScompaniesareworld-leadingmanufacturersofcadmiumtelluridethin-filmtechnology,holdingnearly80%ofglobalcapacity.PoliciestoincreasedemandhavebeentheprimarydriverofsolarPVexpansiongrowthintheUnitedStates.Amonetaryproductionincentivewasintroducedin1992andlatertransformedintoataxcreditin2006,andthesefederalinvestmenttaxcreditshavebeensubsequentlyextendednumeroustimes.USsolarPVdemandincreasedtenfoldoverthelastdecade,whichhelpedspurthecreationofthin-filmmodulemanufacturingandc-Simoduleassemblycapacitythroughoutthecountry.ThetwodirectsupplypoliciesincentivisingsolarPVmanufacturingtheUnitedStateshasintroduced–loanguarantees(2009-2011)andadvancedmanufacturingcredits(2009-2011)–havehadvaryingdegreesofsuccess.Ofthe16projectscoveredbySection1705federalloanguarantees,4weremanufacturingfacilitiesandonly1(awafermanufacturer)isstillinbusiness.Fortheotherthree,onesolarcompanydefaultedonitsUSD535-millionloan,anotherreceivedonlypartofitsloanbeforeclosing,andthelastonenevermettheprogrammerequirements(CongressionalResearchService,2015).Overall,theUSfederalgovernmenthasguaranteedalmostUSD750millionforsolarPVmanufacturing.Meanwhile,theAdvancedEnergyManufacturingTaxCredit(MTC)programmeprovideda30%taxcredittoadvancedenergymanufacturersthatinvestedinnew,expandedorre-equippedfacilitieslocatedintheUnitedStates.Theprogrammeselectedaround30projectswithoverUSD700millionworthoftaxcredits.1616Somecompanieswereunabletomonetisetheirtaxcreditsduetheirinsufficienttaxbase.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling112Polysiliconproducersandcadmiumtelluridethin-filmmanufacturerswereamongthelargestrecipientsoftheMTC,mostlytoexpandtheirexistingfacilities.However,theprogrammealsosupportedc-Sicellandmodulemanufacturersaswellasglass,inverterandcoatingmaterialproducers.TheUnitedStatesrecentlyannounceditintendstoboostsolarPVmanufacturingthroughtheDefenceProductionAct,thoughitistooearlytoassessitsimpact.WhiletheMTChashelpedenlargeUSmanufacturingcapacity,itdidnotdeliveramajorincreaseinproductioncapabilities.Today,USpolysiliconmanufacturersprovidelimitedoutputandservemostlythesemiconductorindustrybecauseChinahasintroducedimporttariffs.Forwafers,thecountryhasnegligiblemanufacturingcapacity,andforcellsitcanmeetlessthan10%ofdemand.TheproposedSolarEquipmentManufacturingforAmericaActwouldcreatetaxincentivespermanufacturedoutputforeachsupplychainsegment.TheUnitedStatesalsohastraderestrictionsandtariffsinplaceonsolarPVequipmentmanufacturedinChinaandotherSoutheastAsiannations.Since2012,ithasimposedantidumpingandimportdutiesoncompaniesinChina,Malaysia,ThailandandVietNam.SupplyanddemandpoliciesdirectlyorindirectlytargetingsolarPVmanufacturingintheUnitedStates,2005-2022IEA.Allrightsreserved.Notes:Lightgreen=indirectdemand.Darkgreen=directdemand.Lightblue=indirectsupply.Darkblue=directsupply.Incentivesalsoexistatthenon-federal(state)level,includingtaxandlocal-contentincentivestomanufactureandsourceequipmentincertainmarkets.2005-20102010-20152015-2022UnitedStates2009-2011:AdvancedManufacturingTaxCredit2005-2011:Section1705LoanGuaranteeProgram1974-present:SolarR&Dgrants2012-present:antidumpingandimportdutiesonPVequipmentfromChinaandSoutheastAsia2005-present:Investmenttaxcreditforutility-scale,commercialandresidentialsystems1992-2005:ProductionincentiveforsolarPVproductionIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling113HastheswitchfromdirectdemandtodirectsupplypoliciesincreasedPVmanufacturingcapabilitiesinIndiaandTürkiye?IndiaandTürkiyehavefollowedasimilarpolicypathwayastheUnitedStatestosupportsolarPVmanufacturing.Bothcountriesinitiallyinstituteddemandpoliciesthatweresuccessfulinincreasingannualcapacityadditions.In2013,Türkiyeintroducedalocal-contentpremiumontopofitsbaseFITtostimulatemanufacturing.Thepremiumincreaseddependencyonlocallymanufacturedcomponentsbasedontheiraddedvalue,andlocalmoduleassemblyplantsbegantoemerge.Low-costcellsimportedfromChinawereassembledwithimportedorlocallyproducedglassandframestobeeligibleforthepremium,andsince2013moduleassemblycapacityinTürkiyehasincreasedtoaround7GW.Indiaalsointroduceddomestic-contentrequirementsforseveralgovernmentpurchasingprogrammes,andthispolicyaswellasrisinglocaldemandhaveledtoaround12GWofmoduleassemblycapacity,withgrowinguseoflocallyproducedglassandframes.Afterhavingestablishedasmallmanufacturingbase,bothTürkiyeandIndiaintroducedtrademeasuresagainstChinesecellsandmodulestoprotecttheirownindustriesfromdumping.However,ratherthanstimulatinglocalcellmanufacturing,thisadverselyaffectedthemarketbycausinglocalpricestoincreaseduetoinadequatecell-manufacturingcapabilities.In2017,Türkiyelaunchedacompetitivetenderfora1000-MWsolarPVplantandrequiredthecorrespondingconstructionofanintegratedplanttomanufactureallcomponents,fromwafersthroughmodules.Afewyearslater,in2021,Indiaorganisedasimilartenderfor12000MWofcapacity,thelargestofitskindglobally.Atthesametime,bothTürkiyeandIndiaalsobegantointroducedirectsupplypoliciesintheformofadditionalfinancialincentivestomakemanufacturinginvestmentsbankable.Forthemanufacturing-linkedtenderheldin2017,Türkiyeintroducedadditionalfinancialenticements–i.e.multipledirectincentivesintheformofgrants,low-costloans,energysubsidies,taxbreaksandfundsforexportedgoods.In2020,followingtheseincentives,TürkiyecommissionedEurope’slargestintegratedwafer-to-modulemanufacturingplant(1200MW).IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling114SupplyanddemandpoliciesdirectlyorindirectlytargetingsolarPVmanufacturinginIndiaandTürkiye,2005-2022IEA.Allrightsreserved.Notes:Lightgreen=indirectdemand.Darkgreen=directdemand.Lightblue=indirectsupply.Darkblue=directsupply.Sources:IEA(2022),PoliciesandMeasuresDatabases;India,MNRE(2022).:Meanwhile,India’sproduction-linkedincentive(PLI)programmeforsolarPVprovidesgrantstocompaniesmanufacturinghigh-efficiencycellsfromlocallyproducedsupplychaincomponents,frompolysilicontomodules.Asthegovernmentreceivedsignificantinterestfromcompaniesinthefirstphaseofthisschemeowingtothelevelofincentivesandrisingdomesticdemand,in2022itannouncedadditionalfundingthatcouldincreaselocalmanufacturingcapacitybyfourtimes.AlthoughsubsidiesandindustrialpolicyframeworkscombiningdemandandsupplyincentiveshaveledtomanufacturinginvestmentsinbothTürkiyeandIndia,existingandproposedmanufacturingcapacityisstilltoolowtoachievethehigheconomies2005-20102010-20152015-2022India2008:Generation-basedincentives;2009:RETariffregulations;2010:FITsforsolarPVfor25yearsandcompetitivesolarPVauctions(NVVN);2010:RenewableEnergyCertificatessystemandRenewableEnergyPurchaseObligation2014:Accelerateddepreciation(80%);2017:Accelerateddepreciation(40%)2017:StandardbiddingguidelinesforcompetitivesolarPVauctions(SECIandstate-level)Domestic-contentrequirementsunder:theNVVNsolarPVauctions(2010);theGrid-ConnectedRooftopSolarProgramme(2014);theCentralPublicSectorUndertakingScheme(2015);andthePradhanMantriKisanUrjaSurakshaevamUtthaanMahabhiyanScheme(2019)2018:SafeguarddutyonPVmodulesandcellsimportedfromChina,MalaysiaandTaiwan(25%in2018and14.5%in2021)2019:Projecttendersrequirethebuildingof3GWofsolarPVmanufacturingtosetup12GWofsolarPVpowerplants2014:Indianstatesstartnetandgrossmeteringforgrid-connectedsolarrooftopprojects2021:Production-LinkedIncentive(PLI)SchemetoprovidegrantsforsolarPVmanufacturing2022:Basiccustomsdutyoncells(25%)andmodules(40%)2005-20102010-20152015-2022Türkiye2017:YEKA-1tenderfor1000GWofsolarPVwiththerequirementtobuildanintegratedPVmanufacturingplant2011:Feed-intariffswith15-yearcontracts2013:Local-contentpremiumattachedtotheFIT2017:AntidumpingfeeofUSD25/m2onChinesemodules2019:Low-costloans,grants,energysupport,taxincentives,andexportsupportforYEKA-1integratedmanufacturingplantIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling115ofscaleattainedinChinaandSoutheastAsia.Asaresult,raisingthecompetitivenessofmanufacturingfacilitiesinbothTürkiyeandIndiaremainsachallengeinthelongterm.Whileprocessimprovements,furthercapacityexpansionandgrowingdemandcouldreducemanufacturingcosts,thesustainabilityoftheirsolarPVmanufacturingindustriesmayrequirecontinuoussupportintheformofbothsubsidiesandtrademeasures.PoliciestodevelopPVrecyclingTheshareofend-of-life(EoL)PVmodulesbeingrecycledvariesconsiderablybyregionandcountry,dependingonthepolicyenvironment.Currently,lessthan10%ofEoLmodulesarerecycledintheUnitedStates,whereasthisshareisnear95%intheEuropeanUnion,wherespecificnationalpoliciesmandatePVmodulerecycling(NREL,2021).SupportivepolicyframeworkscansignificantlyboostPVrecyclingVariousvoluntaryschemeshavebeendevelopedforsolarPVrecycling.Someconsistofindividualvoluntarytakebackorproductstewardshipprogrammessetupbymanufacturers,whoeithermanagethecollectionandrecyclingprocessthemselvesorcontractthird-partyserviceproviderstodoit.Othersconsistofcollectiveinitiativesfinancedbyindustrymembersandpossiblydevelopedinpartnershipwithregulators,suchasthePVCycleinitiativeestablishedinEuropein2007andlaterrestructuredtocomplywithnewEuropeanregulations.Whilesuchvoluntaryapproachesofferindirectbenefits(includingreputational)tomanufacturersandtheindustry,thenon-profitabilityofcurrentrecyclingprocessesisanobstacletotheirdiffusion.RegulatoryframeworksarethereforekeytoscaleupPVrecyclingcapabilitiesbydefiningstakeholderresponsibilitiesaswellasfinancingmodelsforEoLmanagement,andestablishingtargetsandminimumrequirementsforcollectionandrecycling.RegulatoryapproachescanbecategorisedaccordingtowheretheyplaceresponsibilityforEoLmoduledisposalandtreatment:onsociety(taxpayers);onfinalowners(consumerresponsibility);oronmanufacturersorsellers(theextended-producer-responsibilityprinciple)(IRENAandIEA-PVPS,2016).Financingmodelsoftenrelyonthecollectionofrecyclingfees,eitherupfrontwhenthemoduleisfirstplacedonthemarketordownstreamatthetimeofdisposal(pay-as-you-go).Upfrontfeescanbesetbasedonestimatesofwhatrecyclingcostswillbewhenthemodulereachestheendofitslifetime,orcanreflectthecosttorecycleIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling116currentvolumesofEoLpanelsatthetimeofpurchase.Dependingonthefinancialscheme,specificarrangementsmayberequiredtocoverthecostofrecyclingmodulesplacedonthemarketbeforetheregulationwasinforce(i.e.historicalmodules)orthosemanufacturedbycompaniesthatnolongerexistandthuscannotbeheldliable(i.e.orphanedmodules).Specificitiesofdifferentfee-basedfinancingschemesforsolarPVrecyclingTimeoffeecollectionIndexingoffeesResponsibility/liabilitySpecificissuesoradvantagesUpfrontfee(whenthemoduleisfirstplacedonthemarket)BasedonestimatedfuturecostsofrecyclingthemoduleatendoflifeConsumerorproducer•Difficulttoestimatefuturecostsofrecycling.•Needstoalsoaccountfortherecyclingofhistoricalmodules(i.e.placedonthemarketbeforetheregulationwasinforce).•NoissueoforphanedEoLmodules.•Canincentiviseproducerstoimprovemoduledesignforrecycling.Setuptocoverrecyclingschemecostsatthetimeofpurchase(atcurrentEoLvolumes)•Guaranteesthefinancialbalanceoftheschemeatanytime.•NoissueoforphanedEoLmodules.Pay-as-you-go(end-of-lifedisposalfee)BasedonactualcostsofrecyclingConsumer(lastowner)•Usinglater-yearprojectcashflowscanbefinanciallyeasierthanpayinganupfrontfee.•Riskofimproperdisposalfromownerstryingtoavoidthecostofrecycling.•Nodirectmotivationforproducerstoimprovemoduledesignforrecycling.Extendedproducerresponsibility(EPR)•Producershaveanincentivetoimprovemoduledesignforrecyclingsincetheydirectlybearthecostsoftheprocess.•Needstoaccountfororphanedmodules(forwhichproducersnolongerexist)bysharingtheirrecyclingcostamongremainingproducers.Theschememaybecomplementedby“last-man-standing”insurance,orajoint-and-severalliabilityscheme.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling117Althoughdomesticmarketsareexpandingrapidly,manycountries(includingChina,Japan,India,AustraliaandtheUnitedStates)stilllackspecificregulationsformanagingEoLPVmodules,whichareoftentreatedunderageneralregulatoryframeworkforhazardousornon-hazardoussolidwaste(Sharma,PandyandKolhe,2019;Lunardietal.,2018).17TheEuropeanUnionwasthefirstjurisdictiontoadoptaPV-specificwasteregulationmandatingtherecyclingofallsolarPVmodulesandsettingupminimumrequirementsandtargetsforcollectionandrecycling.Thismandatewasimplementedunderthe2012revisionoftheWasteElectricalandElectronicEquipment(WEEE)Directive(2012/19/EU),andithassincebeentransposedintonationallawsinEUmemberstates.TheEuropeanframeworkfollowsanextended-producer-responsibilityapproach,makingproducersorsellerswhoputPVmodulesontheEUmarketliableforthecostsofcollection,handlingandtreatmentoftheirproducts,eitherthroughtheirowntakebackandrecyclingprogrammeorthroughproducercomplianceschemes.PolicyprioritiesforamoresecuresolarPVsupplychainInIEANetZeroby2050Scenariomodelling,solarPVexpandsmorethananyothercleanenergytechnology,providingone-thirdofglobalelectricitygenerationby2050.However,quicklyexpandingsolarPVcapacitytothelevelrequiredwillbepossibleonlyifstablepolicyframeworksareestablishedandbarrierstodeploymentarelifted.Aresilientandsustainablesupplychainensuringthetimelyandcost-effectivedeliveryofsolarPVmodulesworldwidewillalsobeneeded.Globally,policiestodatehavefocusedmostlyonincreasingdemandandloweringcosts,withonlylimitedattentionpaidtosolarPVsupplies.RapidsolarPVtechnologydeploymentimpliesasignificantincreaseinrawmaterialusageandinvestmentinmanufacturingcapacityalongwithothercleanenergytechnologies.However,severalweakspotsalongthesolarPVsupplychainmakeitvulnerabletorisks.Forinstance,itisthemostgeographicallyconcentratedofallcleanenergytechnologysupplychains,andcurrentinvestmentplansindicatefurtherconcentrationby2025.ThePVsupplychainisalsovulnerabletorisingcommodityandrawmaterialprices,traderestrictionsandsupplychainbottlenecks,whichhaveallresultedinhigher17IntheUnitedStates,whilenospecificsolarPVregulationexistsatthecountryleveltodate,initiativesareemergingatthelocallevel,suchasthelocalsolarpanelrecyclinglawimplementedbyNiagaraCounty(NY)in2021(NiagaraCounty,2022).IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling118pricesinthepast,aswellastodelaysinmoduledelivery.Plus,alackoftransparencyalongthePVsupplychainraisesconcernsaboutenvironmental,socialandfinancialsustainabilityrisks.ThegoalshouldbetoenhancethesecurityandresilienceofthesolarPVsupplychainwhilemaintainingacommitmenttoprinciplesofopenandtransparentmarketsandavoidingbarrierstotrade.Securingadequatesupplieswillrequireanumberofactions,includingadvancingunderstandingandtrackingofsecurity-of-supplyrisks;diversifyingthesupplychain;improvingtheenvironmental,socialandfinancialsustainabilityoftheindustry;investingininnovation;andmainstreaminghigh-valuerecyclingofPVpanels.TurnpolicyattentiontowardssolarPVsupplysecurityaspartofcleanenergytransitionsThisreportisafirstattempttoidentifyprincipalvulnerabilitiesandrisksgloballyalongthesolarPVsupplychain.However,allcountrieshaveuniquepolitical,economicandenergycontexts,sotheywillalsohavedifferentvulnerabilitiesandrisk-mitigationcapabilities.Asaninitialstep,governmentsshouldconsiderassessingtheirdomesticsolarPVsupplychainvulnerabilitiesandrisks.Basedonassessmentresults,governmentsmaythenconsiderdevelopingstrategiesandactionstoaddresstheircountry’sparticularvulnerabilities.Forinstance,PVsupplychainconcentrationcouldbemitigatedbyinvestingindomesticmanufacturingforcertainsegmentsofthesolarPVsupplychainorbydiversifyingsupplysources.Internationalco-ordinationandcollaborationonregularvulnerabilityassessmentsandthesharingofpracticesandexperiencesamongcountriescouldalsohelpraisepolicyattentionandhelpgovernmentsreducerisks.IncreasediversificationtoimprovePVsupplychainresilienceDisproportionategeographical/jurisdictionalandfacility-levelconcentrationsofrawmaterialprocessingandmanufacturingmakethesolarPVsupplychainvulnerabletosupplychaindisruptions.Supplysourcediversification–throughinternationalco-ordinationandtradethatavoidsrestrictiveimport/exportpolicies–isthusessentialtoreducethisvulnerability.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling119Polysiliconandingot/wafermanufacturingshouldtakepolicypriorityindiversificationeffortsbecausetheyhavethehighestmarketconcentrations,requirethelargestinitialcapitalinvestments,andneedlowelectricitypricestobecost-competitive.However,diversifyingthesolarPVsupplychainwillalsorequireindustrialpolicytoolsbeyondgovernmentincentivestosupportdemand,andacollaborativeeffortbetweenthepublicandprivatesectorswillbeneededtosecurethesolarPVtechnologysupplychain.Forinstance,China’sroleinsolarPVmanufacturinghingesuponnotonlyitsindustrialprioritiesandtargets,buttheincentivesthegovernmenthasprovidedcontinuouslyformorethanadecade.Whiletheseincentiveshavecontributedtotherapidscale-upofglobalPVmanufacturingcapacityandreducedmodulecosts,somepolicieshavealsopromptedinvestigationsintodumpingandresultedinmultipletraderestrictions.Thus,internationalco-ordinationonsubsidydesignandfinancialsupporttoencouragedomesticproductionwhileavoidingtraderestrictionsiscriticaltodiversifythesolarPVsupplychainandimproveitsresilience.ExpandingdomesticsolarPVmanufacturingcapacityisanoptiontoincreasesolarPVsupplychainresiliencyatthecountrylevel.Consideringthemultiplestepsinvolvedinmanufacturingsegmentsandthegeographiclocationofrawmaterials,fullself-sufficiencyisnotusuallyapracticaloption(norisiteconomical,exceptinafewcountries).Thus,regionalco-ordinationwillbeessentialtosecuretherawmaterials,manufacturinginvestmentsandtraderequiredforsupplychaindiversification.Manycountrieswillneedtorelyonimportsalonetosatisfydomesticdemand,inwhichcasediversifyingimportsourceswillbecriticaltoreducesupplyrisks.De-riskinvestmentAcompetitiveandfinanciallyhealthyindustryrequiresarangeofconditions,includingclear,long-termandpredictabledemandpoliciesinlinewiththeIEANetZeroby2050Scenario,internationalco-operationonsubsidiesandtrademeasures,andtransparentandtraceablepricingmechanismsforcomponentsandrawmaterials.OverthelasttwodecadeschanginggovernmentpoliciesandcompanydecisionshaveledtosupplyglutsanddemandvolatilityleadingtothepoorfinancialhealthofsolarPVmanufacturingcompaniesinmanyPVsupplychainsegments.Governmentcouldconsidertailoringdemandsupportpolicies(e.g.auctions)inordertotakeintoaccountlong-termfinancialsustainabilityacrosssolarPVsupplychainsegments.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling120Consideringthestrategicimportanceofpolysilicon,ingotsandwafers,directsupplypoliciesthroughfinanceandtaxpolicies,andothermeasurestode-riskPVmanufacturinginvestmentcouldsupportdiversification.Governmentscouldencouragepublic-privatecollaborationsinvolvingresearchinstitutionsandlabsandincreasepubliccleanenergyfundingtocatalyseprivateinvestment.EnsureenvironmentalandsocialsustainabilityEnvironmentalandsocialsustainabilityarefundamentalforPVsupplychainsecurity.Fortunately,increasingsupplychainresiliencythroughdiversificationprovidesgovernmentsnewopportunitiestoconcurrentlyachievetheirsustainabilitygoals.Differingstandardsandalackoftransparencyinmanycountriesdo,however,continuetohindertheachievementofsustainabilityobjectives.SolarPVisoneofthelowest-GHG-emittingelectricitytechnologies.TotallifecycleGHGemissionsofsolarPVmodulesaretwentytimesloweronaveragethanthoseofcoal-firedpowerplants.Plus,asolarPVmodulewillgenerate20to30timesmorerenewableenergyoveritslifetimethantheamountoffossilfuel-basedenergyconsumedduringitsmanufacturing.Nevertheless,asanenergy-intensivemanufacturingsector,thereisconsiderablepotentialtoreduceitsemissions.DecarbonisingpowergridsisonewaytoreducesolarPVmanufacturingemissions,especiallyincountriesthatalreadyproducepanels.Newmanufacturingfacilitiescouldalsobebuiltincountrieswithrelativelyhighcleanenergypenetration,helpingtoreduceemissionsanddiversifythesupplychain.Takingadvantageofthelatestinnovationscanalsoimprovetheenergyandmaterialefficiencyofbothcellsandthemanufacturingprocess.ThegrowthinthePVsupplychainofferslong-termemploymentopportunitiesforbothskilledandlow-skilledworkers.Policiescanhelpensurethesearequality,wellpaidjobsthatprotectandbenefitworkersandcommunities.TheGlobalCommissiononPeople-CentredTransitionsrecommendsafocusonskillsdevelopment,workerprotection,socialinclusionanddirectengagementwithcitizens(IEA2021).Theseactionsbenefitnotonlyworkers,butalsohelptoestablishasecuresupplychain.Afocusonskillsdevelopment,workerprotectionandengagementcanensureanample,educatedandsupportiveworkforce.Employmentstandardsandtransparencyaswellascorporateandgovernmentpoliciescouldhelpimproveemploymentconditionsandreducetradeconcerns.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling121ConsiderthesolarPVsector’sfinancialhealthinpolicymakingOverthelasttwodecadeschanginggovernmentpoliciesandcompanydecisionshaveledtosupplyglutsanddemandvolatilityleadingtothepoorfinancialhealthofsolarPVmanufacturingcompaniesinmanyPVsupplychainsegments,withlowprofitabilityandhighbankruptcyrisks.Thissituationcouldslowthepaceofthetransitionifcompaniesareunwillingtoinvestbecauseoflowprofitabilityorareunabletowithstandsuddenchangesinmarketconditions.Amixoflong-termandpredictabledemandandsupplypoliciescanhelpsecureinvestmentbasedoncountryexperiencestodate.However,governmentsshouldalsoconsiderhowbesttoavoidsupplyglutsandrestrictivetradepolicyreactions.Oneapproachistocoordinateonbothdemandandsupplypolicydesigntodrivediversifiedinvestmentwhilemaintainingtradeandcompetition(OECD,2022).Inaddition,transparentandtraceablepricingmechanismsforcomponentsandrawmaterials,canalsoreduceriskbyimprovingknowledgeoncosts.ContinuetofosterinnovationInnovationcanmakethesupplychainlessvulnerabletorisksbyreducingcriticalmaterialdependencyandgenerallysupportingcostreductions.Innovationiskeyfortechnologicaladvancesacrossandalongcleanenergysupplychains.TechnologicalinnovationthroughoutthesolarPVsupplychainhasincreasedtheconversionefficiencyofsolarcells,reducedmaterialusageandimprovedenergyefficiencypermodule.Since2010,solarPVcellshavebecomenearly60%moreefficientandgenerationcostshavefallenalmost80%.WithoutpublicandprivateinvestmentsinR&Dallalongthesupplychain,solarPVwouldnotbethemostaffordableelectricitygenerationtechnologyinmanypartsoftheglobe.Today,monocrystallinesilicontechnologydominatesthesolarPVmarketowingtoitshighefficiencyandcost-competitiveness.Technologyinnovationinmanufacturingprocessestoreducematerialintensity,especiallyforcriticalmineralssuchassilverandcopper,remainkeytominimisesupplychainvulnerabilities.However,newsolarcelldesignsarealsoessentialtoachievefurtherefficiencygainswhilereducingmaterialintensityandmanufacturingcostssignificantly.Tandemandperovskitetechnologiesarebeingdevelopedbymultiplecompanies,butfurtherinvestmentininnovationwillbeneededtobringIEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling122themtofullcommercialisation.Regardlessofthetechnology,effortstoimprovepaneldesignforrecyclingandreusabilityaswellasgreaterdurabilitycanalsohelpreducematerialdemand.DevelopandstrengthenrecyclingcapabilitiesAscapacityadditionsrampupworldwide,sowillthevolumeofend-of-lifetime(EoL)solarPVequipmentinupcomingyears.WhilemanagingEoLflowsofsolarPVmodulesisanenvironmentalchallenge,recyclingoffersopportunitiestosecureareliablesecondarysourceofmaterialsforthePVindustryandothersectors;avoidthenegativeenvironmental,socialandhealthimpactsassociatedwithraw-materialmining;shrinktheenergyandenvironmentalfootprintofsolarPV;andgenerateemploymenttosupportlocaleconomicactivity.Tocapturethesemultiplebenefits,governments,industriesandotherstakeholdersmustpreparenowtomanagethefuturesurgeinsolarPVwastefromacircular-economyperspective.Itisparticularlycrucialtodevelopandimplementcomprehensiveregulatoryframeworkstodefinestakeholderresponsibilities,financingmodelsandminimumrequirementsforcollectionandrecycling,asPVrecyclingisnotcurrentlyaprofitablebusiness.TheseframeworksmustmitigatetherisksofimproperPVwastedisposal,coverthediversityofEoLmodulesituations(e.g.historical,orphanedandreusedmodules,etc.),andprioritisehigh-valuerecyclingoverdowncycling.Moreover,PVrecyclingisstilltechnicallychallenging,andfurtherresearchisneededtoboostrecoveryratesandimprovematerialvalueretention.PolicyeffortsshouldtargetnotonlydownstreamrecyclingprocessesbutalsoupfrontmoduledesigntohelpreducethecomplexityandcostofrecyclingfutureEoLequipment.Finally,recyclingpoliciesshouldbecomplementedbystrategiestoextendoverallmoduleservicelifetimethroughreuse,repairandremanufacturing.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling123ReferencesCongressionalResearchService(2015),U.S.SolarPhotovoltaicManufacturing:IndustryTrends,GlobalCompetition,FederalSupport,https://sgp.fas.org/crs/misc/R42509.pdf.Hankyoreh(2021),한화큐셀,한계효율44%차세대태양광모듈개발나선다[HanwhaQ-CellparticipatinginnationalR&Dprogrammetodevelopadvancedmodules],https://www.hani.co.kr/arti/economy/economy_general/1024883.html.IEA(InternationalEnergyAgency)(2022),PoliciesandMeasuresDatabases,https://vipo.iea.org/policiesandmeasures/.India,MNRE(MinistryofNewandRenewableEnergy(2022),Solarmanufacturing,https://www.mnre.gov.in/Solar.IRENA(InternationalRenewableEnergyAgency)andIEA-PVPS(IEAPhotovoltaicPowerSystemsProgramme)(2016),End-of-LifeManagement:SolarPhotovoltaicPanels,https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_IEAPVPS_End-of-Life_Solar_PV_Panels_2016.pdf.Korea,MOTIE(MinistryofTrade,IndustryandEnergy)(2021),2021년도제3차신재생에너지핵심기술개발사업신규지원연구개발과제공고[RenewableEnergyTechnologyR&DProgramme2021],https://www.motie.go.kr/motie/ne/announce2/bbs/bbsView.do?bbs_seq_n=67036&bbs_cd_n=6&currentPage=1&search_key_n=&cate_n=&dept_v=&search_val_v=&biz_anc_yn_c=Y.Korea,MOTIE(2020),저탄소태양광모듈확대위한탄소인증제시행[CarbonCertificateforPVModules],https://motie.go.kr/motie/gov3.0/gov_openinfo/sajun/bbs/bbsView.do?bbs_seq_n=163159&bbs_cd_n=81.Korea,MOTIE(2019a),‘20년부터태양광모듈17.5%최저효율제도입[MinimumEfficiencyStandardforSolarModules],https://www.korea.kr/news/pressReleaseView.do?newsId=156363153.Korea,MOTIE(2019b),재생에너지산업경쟁력강화방안[MeasurestoEnhancetheRenewableEnergyIndustry'sCompetitiveness],https://www.korea.kr/archive/expDocView.do?docId=38959.Korea,MOTIE(2018),소규모태양광발전사업자를위한한국형발전차액지원제도(FIT)본격시행[Feed-inTariffforSmall-ScalePVProjects],https://www.motie.go.kr/motie/ne/presse/press2/bbs/bbsView.do?bbs_seq_n=160642&bbs_cd_n=81.Korea,MOTIE(2009),2013년장비산업강국에도전한다[ToStrengthentheNationalEquipmentIndustryin2013],http://www.motie.go.kr/motiee/presse/press2/bbs/bbsView.do?bbs_seq_n=53609&bbs_cd_n=81.IEA.Allrightsreserved.SpecialReportonSolarPVGlobalSupplyChainsChapter4-PolicystrategiesforsolarPVmanufacturingandrecycling124Lee,J.-G.(2021),Photovoltaicpolicyandtechnologytrendanalysis,https://www.kais99.org/jkais/springNfall/spring2021/poster/2021_spring_260.pdf.Lunardi,M.M.etal.(2018),Areviewofrecyclingprocessesforphotovoltaicmodules,inB.Zaidi(ed.),SolarPanelsandPhotovoltaicMaterials,https://www.intechopen.com/chapters/59381.NiagaraCounty(2022),NiagaraCountySolarPanelRecyclingLocalLaw,NiagaraCountyNewYork,https://www.niagaracounty.com/County-Information/NIAGARA-COUNTY-SOLAR-PANEL-RECYCLING-LOCAL-LAW.NREL(NationalRenewableEnergyLaboratory)(2021),ACircularEconomyforSolarPhotovoltaicSystemMaterials:Drivers,Barriers,Enablers,andU.S.PolicyConsiderations,https://www.nrel.gov/docs/fy21osti/74550.pdf.OECD(2022),Subsidies,Trade,andInternationalCooperation.https://www.oecd-ilibrary.org/docserver/a4f01ddb-en.pdf?expires=1656682387&id=id&accname=ocid177496&checksum=085B56FCE9C6FE15C1B9E36151435445Sharma,A.,S.PandyandM.Kolhe(2019),Globalreviewofpolicies&guidelinesforrecyclingofsolarPVmodules,InternationalJournalofSmartGridandCleanEnergy,Vol.8(5),pp.597-610,http://www.ijsgce.com/uploadfile/2019/0806/20190806115026619.pdf.SolarToday(2010),태양광,제2의반도체신화창출,2015년까지총40조원투자,세계5대신재생에너지강국도약[Governmentpoliciestostrengthentherenewableenergyindustryby2015],https://www.solartodaymag.com/news/articleView.html?idxno=347.TheKoreaIndustryDaily(2009),정부,신성장동력장비산업전략육성[Thegovernment'snewmomentumstrategy],http://kidd.co.kr/news/125517.TodayEnergy(2012),그린홈100만호보급사업현황과전망[10,000rooftopPVhousingprogramme],http://www.todayenergy.kr/news/articleView.html?idxno=77113.IEA.Allrightsreserved.ThispublicationreﬂectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreﬂectthoseofindividualIEAmembercountries.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthepublication’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thepublication.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.IEA.Allrightsreserved.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/about/contactTypesetinFrancebyIEA-July2022Coverdesign:IEAPhotocredits:©Shutterstock

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