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Global solar supply chains are diversifying

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

—Renewable Energy World.

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