Special Report on Solar PV Global Supply Chains

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.

China currently dominates global solar PV supply chains

Global solar PV manufacturing capacity has increasingly moved from Europe, Japan and the United States to China over the last decade. China has invested over USD 50 billion in new PV supply capacity – ten times more than Europe − and created more than 300 000 manufacturing jobs across the solar PV value chain since 2011. Today, China’s share in all the manufacturing stages of solar panels (such as polysilicon, ingots, wafers, cells and modules) exceeds 80%. This is more than double China’s share of global PV demand. In addition, the country is home to the world’s 10 top suppliers of solar PV manufacturing equipment. China has been instrumental in bringing down costs worldwide for solar PV, with multiple benefits for clean energy transitions. At the same time, the level of geographical
concentration in global supply chains also creates potential challenges that governments need to address.

Government policies in China have shaped the global supply, demand and price of solar PV over the last decade. Chinese industrial policies focusing on solar PV as a strategic sector and on growing domestic demand have enabled economies of scale and supported continuous innovation throughout the supply
chain. These policies have contributed to a cost decline more than 80%, helping solar PV to become the most affordable electricity generation technology in many parts of the world.

Background and coverage

Two main technologies currently dominate global solar PV markets and supply chains: crystalline silicon (c-Si) modules account for over 95% of global production while cadmium telluride (CdTe) thin-film PV technology makes up the remaining.

For c-Si modules, high-purity silicon is manufactured by purifying metallurgical-grade (MG) silicon from quartzite and quartz pebble at high temperatures. Highpurity or solar-grade silicon is then further purified, most often through the Siemens chlorination (i.e. gasification and chemical vapour deposition) process, or alternatively by a fluidised bed reactor (FBR) or an upgraded metallurgical-grade (UMG) silicon process. Next, purified solar-grade silicon is crystallised into monocrystalline silicon ingots through the Czochralski process or are cast into multicrystalline ingots, which are then sliced very thinly and cleaned to form wafers.

Simplified manufacturing from raw materials for c-Si and CdTe solar PV systems

This report covers primarily supply, demand, production, energy consumption, CO2 emissions, jobs, manufacturing costs, equipment, investment, trade and financial performance for the five main segments of solar PV manufacturing: polysilicon, ingots, wafers, cells and modules. The key focus is on c-Si technologies because of their currently high market share and expected dominance through 2030.

Polysilicon production is currently a bottleneck in an otherwise oversupplied PV value chain
Solar PV supply chain expansion has outpaced rapid demand growth in the last decade, with crystalline silicon technology dominating the market at over 95% of installed capacity in the last five years. At the end of 2021, global capacity for manufacturing wafers and cells and for assembling modules exceeded demand by at least 100%. Even though 30-40% of current manufacturing capacity was commissioned before 2018 and may therefore require modernisation to produce components compatible with the latest module technology standards, markets for wafers, cells and modules will still be significantly oversupplied.

Economies of scale and continuous innovation throughout the supply chain have enabled steep drops in manufacturing costs at every step of the production process. As a result, module prices fell more than 80% in the last decade and solar PV has become the most affordable electricity generation technology in many parts of the world. In 2021, the average selling price of modules increased for the first time – by
around 20% compared with 2020 – due to higher commodity and freight prices. While module prices remained elevated in the first half of 2022, continuous innovation to further improve material and energy efficiency are expected to drive cost reductions. Nevertheless, price drops in the short term will depend upon the easing of commodity, polysilicon and freight prices.

Material composition shares of crystalline silicon and CdTe thin-film solar PV modules by weight and average value, 2021

Fortunately, significant improvements in material intensity have been achieved in the past two decades for key materials. For instance, the polysilicon intensity of c-Si cells (in g/W) dropped by more than six times between 2004 and 2020 thanks to cell efficiency improvements, thinner diamond wire sawing and wafers, and larger ingots (Fraunhofer, 2022). Similarly, the silver intensity of c-Si cells (in g/cell) was cut by about three during 2009-2018, owing partly to improvements in screen printing processes (CRU, 2018). Material intensity for these relatively expensive minerals is expected to continue to fall over the next decade, albeit at a slower pace.

Polysilicon: Cycles of supply glut and market tightness
At the end of 2021, annual PV-grade polysilicon manufacturing capacity reached 750 000 metric tonnes, which should be enough to manufacture around 250 GW of crystalline silicon modules. China produced about 80% of the polysilicon used for solar PV modules globally in 2021, with the remaining market share split among Germany, Malaysia and the United States.

Global polysilicon manufacturing capacity, production, average price and market shares, 2010-2022

Despite rapid demand growth through 2020, the overcapacity situation persisted as Chinese manufacturers further invested in new production facilities. Meanwhile, low prices have led producers in Japan, Korea and the United States to downsize or close their polysilicon plants. In the United States, low prices combined with import tariffs limiting exports to China have reduced PV-grade polysilicon production since 2015.

Standard PV module power output, cell number and size, 2010-2022

We estimate that the total number of jobs worldwide associated with manufacturing polysilicon, wafers/ingots, cells and modules more than doubled in the last decade to nearly 600 000 in 2021. In addition, manufacturing other equipment associated with solar PV systems (e.g. inverters, racking and mounting) also provided employment. For instance, inverter production accounts for nearly 50% of PV
manufacturing jobs in Europe (Solar Power Europe, 2021), while racking and mounting make up nearly 20% of PV manufacturing jobs in the United States. However, a lack of country-level data prevents comprehensive analysis of jobs associated with solar PV manufacturing.

Renewable technology total manufacturing jobs by technology (left) and PV manufacturing by upstream and downstream segments (right)

Of the main processes, module production creates the most PV manufacturing jobs (46%), followed by the making of cells (33%), wafers/ingots (15%) and polysilicon (just 4%). The manufacture of other materials such as glass, EVA and backsheet represents an additional 2% of employment in this domain.

Top three producing countries’ shares in global production of selected minerals used for solar PV manufacturing, 2021

Low-cost electricity is key for competitive polysilicon and ingot production

Energy costs remain an important reason for total module cost differences among key countries and regions. Retail electricity prices are one of the factors that determine whether markets can produce solar PV supply chain elements competitively, especially energy-intensive polysilicon, ingots and wafers. For
wafers, electricity accounts for nearly 20% of production costs, and for polysilicon over 40%. In fact, manufacturing wafers and polysilicon can consume up to two to three times more energy per watt of production than making cells and modules does, depending on the process. Around 80% of the electricity involved in polysilicon production is consumed in Chinese provinces at an average price of USD 76/MWh, almost 30% below the global industrial average. Hence, the average price of electricity used to make polysilicon and wafers is just under USD 90/MWh, or about 10% below the global
industrial price average.

Low electricity prices in China are a result of access to relatively low-cost coal, particularly in Xinjiang, Inner Mongolia and Jiangsu, where it makes up threequarters of the generation mix. However, these prices may not represent the true cost of power, as additional subsidies or preferential rates can apply at the provincial level. Polysilicon production does occur at higher prices in Japan and Germany, but these producers find it difficult to compete with those in China and Southeast Asia, especially when polysilicon demand or prices fall.

For wafers, electricity prices also influence regional cost differentials, but to a lesser extent than for polysilicon. Markets outside of China and the ASEAN region have higher depreciation, overhead and labour costs, making it more difficult for them to be competitive. Higher investment costs in Korea, the United States, India and Europe lead to elevated depreciation costs compared with China due to a lack of economies of scale.

Policy priorities for a more secure solar PV supply chain
In IEA Net Zero by 2050 Scenario modelling, solar PV expands more than any other clean energy technology, providing one-third of global electricity generation by 2050 However, quickly expanding solar PV capacity to the level required will be possible only if stable policy frameworks are established and barriers to deployment are lifted. A resilient and sustainable supply chain ensuring the timely and cost-effective delivery of solar PV modules worldwide will also be needed. Globally, policies to date have focused mostly on increasing demand and lowering costs, with only limited attention paid to solar PV supplies.

Source: IEA

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