According to a recent Wood Mackenzie report, China is set to maintain its stronghold on the global solar industry, with over 80% of manufacturing capacity for polysilicon, wafer, cell, and modules expected to be held by the country in the next three years. The report, titled "How will China’s expansion affect global solar module supply chains?" highlights China's robust policy support and substantial investments in solar manufacturing as key factors driving its dominance through 2026.
The report reveals that China has poured approximately $130 billion into its solar industry this year alone. Anticipating the addition of more than 1 terawatt of wafer, cell, and module capacity in the coming year, China is poised to meet global demand until 2032. The surge in China's solar manufacturing, attributed to lucrative margins for polysilicon, technological advancements, and government backing, is expected to widen the technology and cost gap with international competitors.
Wood Mackenzie's senior consultant emphasized, "China’s solar manufacturing expansion has been driven by high margins for polysilicon, technology upgrades, and policy support." Despite government initiatives promoting local manufacturing in overseas markets, China is projected to remain at the forefront of the global solar supply chain.
The forecast indicates that China will not only dominate manufacturing capacity, but its products will also be more cost-effective. The report cites that a module produced in China is priced at half that of its European counterpart and 65% less than the U.S.-made equivalent.
The inevitability of a slow-building supply chain is evident. A little over a year has passed since the enactment of the Inflation Reduction Act (IRA) in the U.S., allocating a substantial $370 billion to bolster the renewable energy sector. Despite this financial injection, industry experts, speaking at the event, emphasized that the United States is still on the journey to establishing a robust downstream solar manufacturing base.
MJ Shiao, the Vice President of Supply Chain and Manufacturing for the American Clean Power Association, noted that the reliance on foreign partners for polysilicon, ingots, and wafers is an ongoing necessity, projecting a three-to-five-year timeline for new polysilicon manufacturing to take root.
The initial focus of U.S. solar manufacturing will center on modules, a strategic approach to meet growing downstream demand before expanding further upstream. However, the consensus among panelists is that upstream manufacturing processes demand considerable time.
"Despite considerable module expansion plans, overseas markets still cannot eliminate their dependence on China for wafers and cells in the next three years," emphasized one of the panelists.
The global landscape reveals a shared quest for wafer and cell capacity, with both Europe and the U.S. trailing in these aspects while excelling in polysilicon and module capacity. Southeast Asia and India emerge as contenders, with India anticipated to surpass Southeast Asia as the second-largest module production region by 2025, driven by robust government policies and PLI incentives.
China, despite facing challenges such as oversupply and competition, maintains its leadership in cell capacity, towering over other regions by an estimated 17 times. However, the report acknowledges China's recent decision to terminate over 70 GW in capacity, particularly older production lines generating lower efficiency p-type and M6 cells. Wood Mackenzie analysts predict a decline in p-type cells to just 17% of the supply by 2026.
From PV Magazine