IEA warns global solar supply chains are too concentrated in China

International Energy Agency (IEA) Chief Economist Fatih Birol speaks during a news conference after the opening of the International Energy and Environment Fair and Conference in Istanbul May 12, 2010. REUTERS/ Osman Orsal

July 7 (Reuters) - Countries need to expand manufacturing of solar panels from their current concentrated base in China to ensure secure supply and meet targets for cutting planet-warming carbon emissions, the International Energy Agency said on Thursday.

The world needs to double its current capacity to produce the "key building blocks" of solar panels: polysilicon, ingots, wafers, cells and modules, by 2030, the IEA said in a new report.

Partly thanks to Chinese investment, solar photovoltaic technology, which converts sunlight into electricity, has become the cheapest way to generate power in many parts of the world.

In 2021, China was home to 79% of manufacturing capacity for polysilicon, the IEA said. A full 42% of that is located in the province of Xinjiang, where the country's largest plant accounts on its own for 14% of global capacity.

"This level of concentration in any global supply chain would represent a considerable vulnerability," IEA executive director Fatih Birol told Reuters.

China will soon produce almost 95% of the world's polysilicon and the ingots and wafers further down the value chain, the report said.

"If there is a fire or a natural disaster it may have implications for the global clean energy transition in terms of pushing the prices up and even availability of solar PV, but if you diversify and take necessary measures, we suggest to governments around the world that this risk will be addressed, maybe even diminished," Birol said.

Under pressure to cut reliance on Russian gas imports, the European Union has pledged to do "whatever it takes" to rebuild European capacity to manufacture parts for solar installations. read more

European countries have the potential to manufacture these parts in ways that emit less carbon, thanks to the high shares of nuclear and renewables in their power mixes, the report said.

However, it said only Sweden currently has low enough industrial power prices to manufacture products like wafers competitively.

Reporting by Isla Binnie Editing by Bernadette Baum

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