While the vulnerabilities of global supply chains have made themselves felt during the years of the pandemic, all alarm bells have been ringing in the democratic world since the start of the invasion of Ukraine. The risk of dependence on enemy nations for oil and gas supplies is more present than ever.
Instead of reducing dependency, the energy policy of recent years has meant that our energy supply is suddenly on shaky ground. Leading minds are now calling for a realignment of long-term strategies to secure the energy supply and for an accelerated introduction of renewable energies.
The German Finance Minister Christian Lindner put it this way: “Renewable energies free us from dependencies. Renewable energies are therefore freedom energies.”
Lindner and other leading European politicians with similar statements correctly recognized the potential of renewable energies for democracies. Unfortunately, it’s not that easy when the desired independence is based on sourcing renewable fuels or technologies from autocracies.
Solar energy, for example, is a free fuel available to all 27 nations of the European Union. However, solar systems, which are needed to convert the photons into electrons, are not free.
Eight out of ten solar manufacturers are based in China
In fact, the production of solar systems and the entire value chain that makes this production possible is almost entirely in Chinese hands. And China makes no secret of the fact that it has no love for democratic values and is even pursuing its own expansionist aspirations.
Eight out of ten of the world’s largest solar manufacturers are currently based or have their production facilities in China. The country controls much of the world’s production of polysilicon, the semiconductor material that forms the basis for most solar panels. In addition, China controls 99 percent of crystalline silicon wafer production and 80 percent of crystalline silicon cell production.
As a result, Europe, which was once a leader in the global solar industry, now has to rely largely on imports from China or Southeast Asia’s Belt and Road Initiative (BRI) countries, where Chinese manufacturers have set up cheap factories ostensibly to circumvent anti-dumping tariffs.
Importantly, while Europe already had 6.75 gigawatts (GW) of solar panel capacity in 2020, that capacity depended largely on crystalline silicon wafers and cells from Chinese-controlled supply chains.
According to the European Commission, in 2020 the EU spent €8 billion importing solar panels and installed 18.2 GW of new solar capacity. China’s direct share of this import value was 75 percent, and adding BRI imports probably raises the figure to over 80 percent.
According to a report by the China Photovoltaic Industry Association, China exported 98.5 GW of solar modules worldwide in 2021, with 39 percent or around 38 GW going to Europe. In fact, only 25.9 GW were installed in Europe in 2021. Nobody knows what happened to the rest.
Today Europe depends on Russian gas, tomorrow it could be Chinese solar panels
And things aren’t getting any better. With the EU targeting 45 GW of new solar installations per year and 600 GW of installed capacity by 2030, Europe’s dependence on Chinese solar crystalline silicon supply chains looks set to deepen without an industrial policy strategy.
China’s dominance in solar panel manufacturing is no accident. Chinese solar companies have systematically undermined international competition by dumping solar module prices. Their prices would not have been possible without government subsidies for producers and subsidized coal-fired electricity – a violation of current WTO rules.
The Chinese government has effectively created another strategic vulnerability in Europe that it can exploit to its advantage. Today it’s Russian oil and gas, tomorrow it could be Chinese solar panels.
The need to counter China’s dominance in solar production with a sustainable energy policy is now more urgent than ever and seems to be gaining ground in the European Commission as well. Indeed, Kadri Simson, EU Energy Commissioner, declared a few months ago that the European Commission “wants to do everything possible” to bring solar production back to Europe.
We already have the technologies to quickly build up production capacity in the EU. What is missing is a combination of trade and industrial policies that would pave the way for domestic manufacturers and incentivize production. With the right political strategy, Europe could achieve solar self-sufficiency in a short time.
India has shown how to boost domestic solar energy
But how fast? India is the perfect example of how to boost domestic production with comprehensive policies including trade defenses, production incentives and tangible targets.
Today, India is looking at 50 gigawatts of new module capacity, which is expected to be connected to the grid in 2025. That is double the installed solar panel capacity in all 27 EU member states in 2021.
This is a direct result of the effective combination of tariff and non-tariff trade restrictions, the Indian government’s production-related incentive program to boost domestic production and the government’s green energy target, which envisages adding 25 gigawatts of new capacity annually by the end of the decade.
India’s strategy clearly seems to be working. Europe and the USA can learn something from this.
The mess democracies find themselves in today is probably the result of decades of mismanagement and overly short-sighted decisions that have squandered any chance of building a self-sufficient solar economy. Responses to the Russian attack on Ukraine have shown that there is no point in rushing to build independent energy supply chains after the child has fallen in the well.
European leaders need to be aware of the risks and vulnerabilities in renewable energy supply, act decisively and ensure that past mistakes are not repeated.
Because solar energy is only “liberation energy” when politicians realize that the technologies for converting photons into electrons must also reflect our values and principles – and without authoritarian influence.
The author:
Mark Widmar is CEO of First Solar, America’s largest solar manufacturer.
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