NOTES FROM THE SOLAR UNDERGROUND

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Solar Supply chain issues multiply

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The PV industry’s manufacturing shift to China and Southeast Asia happened in plain sight. The industry and its observers celebrated – without questioning them – low module prices, touting these prices as progress while ignoring the government supports that allowed them. Meanwhile, manufacturers in Europe and the US failed, and those in India struggled. In 2021 the solar value chain’s vulnerability is apparent, and its problems harder to solve. 

1. Supply Chain Vulnerabilities

The goal of cheap solar and low-cost manufacturing enabled the industry’s supply chain vulnerabilities. Buyers expected annual significant price declines while ignoring the realities of the situation. In 2021, Ninety-one percent of solar cell capacity is in China and Southeast Asia, with China’s manufacturers dominating cell capacity at 81%.

Over 85% of polysilicon supply is located in China. Over 90% of the solar industry's glass supply is located in China. Wafers, cells, backsheets – most of the components necessary to produce a module are primarily located in China or Southeast Asia.

Because of this, manufacturers outside of China are finding that investors are reluctant to invest, and buyers outside of China have little power over price and technology direction.

The industry’s supply chain vulnerabilities became apparent during the pandemic when distribution channels broke down, accidents at polysilicon facilities in China reduced available supply, and China’s past decision not to ramp solar glass capacity impacted module production.

As production is primarily controlled by one country while demand is spread among many countries, just-in-time production techniques, cost-saving during good times crumpled under the weight of a lopsided global market.

 
In sum, the solar industry’s supply chain is captive to countries in Southeast Asia and China, leaving buyers vulnerable to production and distribution issues and lacking price control.

Reliability Challenges – leaping past pilot scale to early commercialization

Capacity building in China is speeding up, and cell and module production is accelerating past traditional pilot-scale timelines and entering commercial production in as little as three months.

Traditionally, pilot-scale production has taken ten, shrinking to five years and then to three years to produce commercial technology. With accelerating demand, particularly for multi-megawatt installations, the timeline for establishing repeatability and assessing reliability has decreased, and reliance on rapid tests and the assumptions based on them has increased. Meanwhile, compressed margins have pushed manufacturers to streamline quality control measures, assuming rapid tests would pick up the slack.

Outsourcing, always a factor in the PV industry, has compounded problems, as module buyers cannot be sure whose cells are inside the module, no matter the brand, or, in some cases, know what manufacturer assembled the cells into the module. With 30-year warranties becoming the standard, manufacturers are in the position of providing a warranty for a product they may not have produced.

The results of the truncated pilot-scale timeline are poor production in the field and early module failures.

Light-Induced Degradation (LID) continues as a challenge for PERC manufacturers to a greater degree than for manufacturers of traditional back surface field (BSF) cells due to higher doping levels. With LID, modules degrade after being first exposed to light, typically recovering after a few years. Multicrystalline PERC has problems with Potential Induced Degradation (PID).

The rush to commercialize led manufacturers to ignore PID and shunting problems with PERC and push a rapid ramp of a flawed technology.

PERC experiences a drop in electricity production following installation, similar to that experienced with thin-films. Though the technology recovers, the initial drop has led manufacturers to compensate by using n-type material and higher-powered modules (>600-Watts).

In sum, rapid commercialization has impacted module reliability and thus developer revenues. 

2. Social and Environmental Challenges

Over forty-five percent of China’s polysilicon is produced in Xinjiang in the Uyghur Autonomous Region. China’s solar wafer, ingot pulling, cell, and module manufacturers have facilities in Xinjiang. Credible reports of forced labor forced re-education, and forced sterilization became public in 2018. In polysilicon production, energy costs are high, and electricity production is coal-based in Xinjiang and much of China.

Sixty percent of the world’s cobalt supply is produced in the Congo, often using forced adult and child labor. Mining operations in the Congo have led to polluted and undrinkable water and high levels of air pollution. The air in the Congo is considered unhealthy.

In sum, the photovoltaic and li-ion battery industries are not entirely clean in terms of pollution, and their social responsibilities are not entirely met.

3. The Damage Done

Over time, the solar industry accepted unrealistically low prices and constrained margins as progress. Participants ignored the vulnerabilities of the supply chain. Doing so left buyers of solar modules without options when supplies became constrained, and prices rose.

The industry is also culpable for ignoring the ugly side of the photovoltaic and storage supply chains.

The good news – the industry can rectify things. The bad news, it will take time, and prices for components will rise, revealing low bidding on tenders and PPAs as unrealistic and not sustainable.