Zhao Yong
In recent years, Europe and the United States have accelerated the diversification of the photovoltaic supply chain and the localization of the industrial chain, and the competitive landscape of global photovoltaic companies may change. The mainland should accelerate the strategic transformation from "export-oriented" to "technology for market", increase support for the research and development and application of photovoltaic cell technology, optimize the global layout of the photovoltaic supply chain industrial chain, and provide good service support for photovoltaic enterprises to go global.
Europe and the United States are promoting the diversification of the photovoltaic supply chain and the localization of the industrial chain
In the past two years, economies such as Europe and the United States have taken a series of measures to reduce their dependence on the mainland PV supply chain and improve their local PV manufacturing capacity for the purpose of maintaining energy security, accelerating the net-zero carbon transition, and improving the competitiveness of the energy economy.
From the perspective of the United States, it has adopted a "stick + carrot" approach, restricting mainland PV products from entering its market through measures such as imposing high tariffs, and incentivizing local PV manufacturing through high tax credits and subsidies. The U.S. imposes an average of about 40% anti-dumping and countervailing duties on mainland PV products, and the Inflation Reduction Act, passed in August 2022, proposes to invest US$369 billion over the next 10 years to support local PV manufacturing.
From the perspective of the EU, local PV investment is encouraged by restricting supply sources and increasing tax subsidies. The EU's Net Zero Industry Act, published in March 2023, stipulates that at least 40% of the EU's clean technology needs will be met by local production by 2030, of which more than 65% of the single-source supply of specific net-zero technology needs will be treated differently when participating in public projects. At the beginning of 2023, the European Union proposed in the Green Deal Industrial Plan that it would invest $270 billion in tax breaks for companies investing in zero-carbon technologies.
India, from its point of view, has adopted a package of policy initiatives to try to reduce its dependence on the mainland's PV supply chain. India has used a combination of tariffs, solar module type and manufacturer approval lists, anti-dumping duties and other measures to prevent mainland PV modules from entering the Indian market. India has announced a national plan for high-efficiency solar photovoltaic modules and introduced a "production-linked incentive scheme" to encourage the development of local photovoltaic manufacturing. Among them, in 2022, the Indian Ministry of Finance allocated US$2.602 billion to support the development of the local photovoltaic industry, giving new enterprises a preferential tax rate of 15% in the first year.
In addition, Europe and the United States have strengthened policy coordination and cooperation with "friendly countries" to reduce dependence on the mainland's photovoltaic supply chain. The United States provides financing support to relevant countries overseas through global infrastructure and investment partnerships. The EU has set up a loan pool of around 300 billion euros to finance clean energy supply chain projects overseas.
In general, Europe and the United States promote the diversification of the photovoltaic supply chain and the localization of the industrial chain, in addition to meeting the goal of "de-Chinaization" of their supply chains, there is also a certain inevitability. First, in response to the increasing energy crisis and climate risks, Europe and the United States must inevitably develop the photovoltaic industry; Second, the photovoltaic industry has become a new growth point in the world, and all countries are promoting the occupation of the commanding heights; Third, from the historical experience of the development of important industries such as fuel vehicles, when a country's export products occupy a large market share in the host country, the host country usually restricts the proportion and source of imports, and requires foreign manufacturers to localize production.
Europe and the United States promote the diversification of the photovoltaic supply chain and the localization of the industrial chain, which affects the layout of the global photovoltaic industry
It is estimated that within 10 years, the United States, the European Union and India are more likely to achieve localization in the middle and downstream links of the photovoltaic industry chain. From the perspective of the United States, after giving long-term and high subsidies to the entire photovoltaic industry chain, the cost of photovoltaic modules produced in the United States has been reduced by about 1/4, which is basically close to the price of imported photovoltaic products, and local production is basically economically viable, which has attracted a large number of project investment. It is estimated that within 10 years, most of the middle and lower reaches of the US photovoltaic industry chain can basically achieve localized manufacturing. From the perspective of the EU, the high cost of energy and labor has made it unfeasible for the EU to localize production in upstream links such as silicon ingots and silicon wafers, but it has a good foundation in polysilicon and inverters, and has announced a large number of module and cell investment projects, and it is expected that there is a greater possibility of localized manufacturing in modules, polysilicon, inverter manufacturing and other links within 10 years. From India's point of view, after the implementation of the "production-linked incentive plan", the investment in photovoltaic module projects has accelerated, but due to the lack of technology and skilled labor, imperfect infrastructure and industrial support, etc., the localization process will be slower than the planning target, and it will be possible to achieve independence in the module and cell sector in the next 10 years, but it will take longer for polysilicon and silicon wafers and other links.
The production and supply of downstream links such as PV modules and cells will become increasingly diversified, but upstream links such as polysilicon and wafers will still be highly concentrated in the mainland. With the rapid increase of module and cell production capacity in major economies such as Europe and the United States, the diversification trend of the global PV module and cell supply chain will accelerate. However, due to factors such as high costs and a shortage of skilled labor, overseas polysilicon and wafer investment and capacity growth are expected to be limited, and polysilicon and wafer production will remain highly concentrated in the mainland. It is estimated that by 2030, the proportion of local cell production capacity in mainland China will drop to about 80%, the proportion of module production capacity will drop to about 78%, and the proportion of polysilicon and wafer production capacity in the world will remain at about 90%.
It will be more difficult to export photovoltaic products directly from the mainland. From the perspective of the United States, after the imposition of tariffs in 2021, the direct export of mainland photovoltaic products to the United States has decreased significantly, and the proportion of exports to the United States of the four Southeast Asian countries has increased by nearly 80%. With the improvement of local PV production capacity, the United States is expected to strictly implement restrictive policies, and it will become more and more difficult for mainland PV products to be exported directly and indirectly to the United States. From the perspective of the EU, the mainland's exports to the EU will not be affected in the short term, but due to the restrictions on the proportion of single-source supply not exceeding 65%, the improvement of carbon footprint verification standards, and the increase in carbon border adjustment taxes, it will also be more difficult for the mainland to export directly to the EU. From India's point of view, after the adoption of basic tariffs, anti-dumping and other measures, the mainland's photovoltaic exports to India have declined rapidly, with the increase in the production capacity of India's photovoltaic industry chain and the increase in market access thresholds, the difficulty of mainland photovoltaic products to enter the Indian market will be further increased.
The mainland should optimize the global layout of the photovoltaic supply chain and industrial chain
In view of the new measures and their impact on the US photovoltaic industry policy, the mainland should optimize the global layout of the photovoltaic supply chain industry chain and provide good service support for photovoltaic enterprises to go global.
Increase support for the research and development and application of photovoltaic cell technology. Leading battery technology is the key to determining the global competitiveness of the solar PV industry. Increase the proportion of N-type cells in government centralized procurement bidding, accelerate the pace of industrialization of N-type crystalline silicon cells, and drive the upgrading of key basic materials, processes, equipment and components. Accelerate the construction of application demonstration areas, strengthen user-side demand incentives, and vigorously support the industrialization demonstration and application of perovskite and tandem cells. Increase the research and development of recycling and processing technologies for photovoltaic cells and modules, and comprehensively improve the supporting capacity of the industrial chain.
Optimize the layout of the photovoltaic supply chain and industrial chain. For the U.S. market, considering the high policy risks, shortage of skilled labor, and high labor costs, only the module link is deployed in the United States, and the battery link is deployed in Mexico, Canada, Brazil, Southeast Asia and other countries and regions. For the EU market, due to the high cost of energy and the limitation of the proportion of a single source, the EU has deployed downstream links such as modules, and in Southeast Europe, North Africa, Turkey and other places that are close to the EU and have cost competitiveness. For the Indian market, considering policy constraints and imperfect industrial support, priority can be given to the module and cell segments, and then the midstream and upstream segments such as polysilicon and wafers when the policy environment and industrial support are mature.
Provide good service support for photovoltaic enterprises to go global. Simplify the approval process for foreign investment by photovoltaic enterprises, and relax the quota for foreign exchange use by enterprises. Support industry associations to take the lead in establishing and improving self-discipline and coordination mechanisms for overseas competition of photovoltaic enterprises, and jointly respond to labor, environment, and patent negotiations and litigation. Accelerate the promotion of the carbon footprint accounting system for photovoltaic products, green and low-carbon certification standards in line with international standards, and implement an ESG system that adapts to international rules.
(Author's Affiliation: Industrial Economics Research Department, Development Research Center of the State Council)