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Is the Solar Supply Chain System Broken?

by Jane Marsh Global Commons Mar 30th 20235 mins
Is the Solar Supply Chain System Broken?

Solar panels are eco-friendly, but the process of creating them is not. While solar panels provide a cleaner source of power and are thus an excellent and much-needed alternative to polluting fossil fuels, this type of renewable energy has hidden environmental and ethical issues. Key players must initiate a complete overhaul of the solar supply chain system to ensure the power generated is truly clean and its impact on the environment as insignificant as possible.

The Modern Solar Supply Chain Process

As of 2022, China was the largest producer of solar panels worldwide. Since most countries are reliant on panels produced in China to scale up solar energy, many supply chain issues revolve around how China creates and distributes panels.

The solar supply chain is broken down into a four-part process that involves materials, manufacturing, shipping, and usage. 

1. Material Gathering

Workers have to mine the material that creates solar panels. China’s ability to produce the majority of panels comes from its access to the world’s largest amount of polysilicon, a raw material that makes up the cells and modules in solar panels.

2. Manufacturing

Since China has most of the material used to create solar panels, most of the manufacturing process takes place there. Polysilicon is melted into molten blocks that are then cut into thin strips and made into solar cells and modules.

3. Shipping

China is responsible for the vast majority of solar panel shipping across the world. It keeps little of what it produces and instead acts as the supplier for most other countries.

4. Electricity Production

After mining, melting, crafting, and shipping, solar panels are finally ready to be used. The question of accessibility comes into play at this point because the costs can be very high. Governments might have access to electricity produced by the sun, but regular citizens often do not.

You might also like: What Are the Advantages and Disadvantages of Solar Energy?

What Is Wrong With the Solar Supply Chain?

The main concern most people have is that the supply chain is almost entirely in the hands of one country. Solar energy is only possible with polysilicon, which most nations cannot access directly. Beyond that, there are environmental and ethical concerns surrounding the process.

Ethical concerns are mainly associated with forced labour to mine and melt a significant amount of polysilicon. A majority of it comes from Xinjiang, a region in Northwestern China known for human rights violations that have been designated by the US as genocide.

Beyond that, the production and shipping of solar panels have huge environmental repercussions as China relies mostly on fossil fuels to produce them. Additionally, shipping is also linked to elevated carbon emissions.

Finally, the costs associated with solar panel manufacturing and shipping must also be considered. In 2022, the US extended Trump-era import taxes on cells and modules used in solar panels. The government increased the number of cells that countries can import while excluding some types of cells from the tax, but some argue this tax makes solar power less accessible. When most solar energy comes from somewhere else at a high price, it is less likely that the average person can afford it.

How Can We Fix the Solar Supply Chain System?

While issues with the supply chain are concerning, they are easily fixable with the proper steps, such as labour regulations and financial incentives to step up local production. Among other things, countries should focus on making solar energy affordable.

Since 6% of Americans still resort to oil for energy, they can start by using solar to supplement their energy usage or as backup storage. Making this type of renewable affordable to the average person could even motivate local businesses to invest in their production

Those behind the manufacturing process can overhaul the system by focusing on these crucial aspects of the supply chain:

Only government intervention and local regulations can help countries create a new supply chain. Many places are already doing so. While solar energy accessibility is still limited, many countries incentivise people to use it. 

For example, California requires 50% of the state to use renewable power by 2025, while Germany introduced feed-in tariffs ranging from 12.88 ¢/kWh (cent per kilowatt hour) for small roof-top systems to 8.92 ¢/kWh for large utility-scale solar parks. The UK has recently reduced a 5% value-added tax (VAT) on energy-saving measures to 0% until March 2027. The government has also introduced the ECO4 scheme,  a government-supported initiative that has been put in place to help reduce household carbon emissions and provide energy efficiency measures to homes across the UK, making qualifying for energy grants easier for homeowners.

Moreover, diversifying the supply chain is easier than it sounds. For example, it is possible to have fast manufacturing growth in the United States if it offsets costs with incentives. Indeed, the government could partially fund manufacturers or reduce taxes on their facilities. Moves like these would contribute to scaling up production and stimulate the local economy.

It Is Time to Overhaul the Supply Chain

While solar energy benefits the climate, the supply chain is hurting almost as much as it is helping. But not all hope is lost. As we have seen in this article, the supply chain can be overhauled and changed into a new, more eco-friendly, and sustainable system. It might seem challenging, but countries worldwide are already coming together to find a solution.

You might also like: The Impact of the Global Energy Transition on Mineral-Rich Countries

Tagged: solar energy

About the Author

Jane Marsh

Jane works as the founder and editor-in-chief of Environment.co. She specialises in covering topics in sustainability, renewable energy and environmental policy.

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