Meeting international energy and climate goals requires the global deployment of solar PV to grow on an unprecedented scale. This in turn demands a major additional expansion in manufacturing capacity, raising concerns about the world’s ability to rapidly develop resilient supply chains. Annual solar PV capacity additions need to more than quadruple to 630 gigawatts (GW) by 2030 to be on track with the IEA’s Roadmap to Net Zero Emissions by 2050. Global production capacity for polysilicon, ingots, wafers, cells and modules would need to more than double by 2030 from today’s levels. As countries accelerate their efforts to reduce emissions, they need to ensure that their transition towards a sustainable energy system is built on secure foundations. For solar PV supply chains to be able to accommodate the requirements of a net zero pathway, they will need to be scaled up in a way that ensures they are resilient, affordable and sustainable.

The world will almost completely rely on China for the supply of key building blocks for solar panel production through 2025. Based on manufacturing capacity under construction, China’s share of global polysilicon, ingot and wafer production will soon reach almost 95%. Today, China’s Xinjiang province accounts for 40% global polysilicon manufacturing. Moreover, one out of every seven panels produced worldwide is manufactured by a single facility. This level of concentration in any global supply chain would represent a considerable vulnerability; solar PV is no exception. 

Solar PV’s demand for critical minerals will increase rapidly in a pathway to net zero emissions. The production of many key minerals used in PV is highly concentrated, with China playing a dominant role. Despite improvements in using materials more efficiently, the PV industry’s demand for minerals is set to expand significantly. In the IEA’s Roadmap to Net Zero Emissions by 2050, for instance, demand for silver for solar PV manufacturing in 2030 could exceed 30% of total global silver production in 2020 – up from about 10% today. This rapid growth, combined with long lead times for mining projects, increases the risk of supply and demand mismatches, which can lead to cost increases and supply shortages.

The long-term financial sustainability of the solar PV manufacturing sector is critical for rapid and cost-effective clean energy transitions. The net profitability of the solar PV sector for all supply chain segments has been volatile, resulting in several bankruptcies despite policy support. Bankruptcy risk and low profitability could slow the pace of clean energy transitions if companies are unwilling to invest because of low returns or are unable to withstand sudden changes in market conditions.

Trade restrictions are expanding, risking slower deployment of solar PV. As trade is critical to provide the diverse materials needed to make solar panels and deliver them to final markets, supply chains are vulnerable to trade policy risks. Since 2011, the number of antidumping, countervailing and import duties levied against parts of the solar PV supply chain has increased from just 1 import tax to 16 duties and import taxes, with 8 additional policies under consideration. Altogether, these measures cover 15% of global demand outside of China.

Currently, the cost competitiveness of existing solar PV manufacturing is a key challenge to diversifying supply chains. China is the most cost-competitive location to manufacture all components of the solar PV supply chain. Costs in China are 10% lower than in India, 20% lower than in the United States, and 35% lower than in Europe. Large variations in energy, labour, investment and overhead costs explain these differences. Still, in the absence of financial incentives and manufacturing support, the bankability of manufacturing projects outside of panel assembly remains limited outside of China and few countries in Southeast Asia. 

Low-cost electricity is key for the competitiveness of the main pillars of the solar PV supply chain. The diversification of highly concentrated polysilicon, ingot and wafer manufacturing would provide security-of-supply benefits. Electricity accounts for over 40% of production costs for polysilicon and nearly 20% for ingots and wafers. Around 80% of the electricity involved in polysilicon production today is consumed in Chinese provinces at an average electricity price of around USD 75 per megawatt-hour (MWh). This is almost 30% below the global industrial price average. Maintaining competitiveness in these segments requires that manufacturers have access to comparable or lower electricity costs.

Building solar PV manufacturing around low-carbon industrial clusters can unlock the benefits of economies of scale. Solar panel manufacturers can also use their products to generate their own renewable electricity on site, thereby reducing both electricity bills and emissions. Electricity-intensive solar manufacturing could be located near emerging industrial clusters (e.g renewable-based hydrogen), enabling them to benefit from cost-competitive renewable electricity. Meanwhile, economies of scale and vertical integration of manufacturing can reduce variable costs and further increase competitiveness.

Recycling of solar PV panels offers environmental, social and economic benefits while enhancing security of supply in the long term. If panels were systematically collected at the end of their lifetime, supplies from recycling them could meet over 20% of the solar PV industry’s demand for aluminium, copper, glass, silicon and almost 70% for silver between 2040 and 2050 in the IEA’s Roadmap to Net Zero Emissions by 2050. However, existing PV recycling processes struggle to generate enough revenue from the recovered materials to cover the cost of the recycling process. 

Diversify manufacturing and raw material supplies

• Move solar PV supply chain diversification up the policy agenda as an integral part of advancing clean energy transitions.
• Consider crafting an industrial policy while maintaining a commitment to principles of open and transparent markets and avoiding barriers to trade.
• Consider integrating solar PV manufacturing facilities in industrial clusters, near traditional energy-intensive plants or other larger renewable electricity consumers (green hydrogen or green steel consortia) to help aggregate demand.
• Diversify raw material and PV import routes to reduce supply chain vulnerabilities.

De-risk investment

• Facilitate investment in manufacturing, e.g. through finance and tax policies, and other measures to de-risk PV manufacturing investment.
• Tailor demand support policies (e.g. auctions) in order to take into account long-term financial sustainability across solar PV supply chain segments.
• Encourage public-private collaborations, e.g. involving research institutions and labs, and public clean energy funding to catalyse private investment.

Ensure environmental and social sustainability

• Strengthen international cooperation on creating clear and transparent standards, taking into account environmental and social sustainability criteria.
• Focus on skills development, worker protection and social inclusion across the solar PV supply chain. Adopt policies promoting employment standards and transparency in order to help improve working conditions.
• Ensure PV manufacturing facilities adopt low-carbon and material-efficient manufacturing practices.

Continue to foster innovation

• Expand research and development funds with the aim of further improving solar cell conversion efficiency and reducing raw material use and costs.
• Promote technology innovation in manufacturing processes that reduce material intensity, especially for critical minerals such as silver and copper.

Develop and strengthen recycling capabilities

• Implement comprehensive regulatory frameworks to define stakeholder responsibilities and establish minimum requirements for collection and recycling.
• Support technology development efforts that improve solar PV panel design for recycling, reusability and greater durability