The global energy crisis triggered by Russia's war in Ukraine exposed Europe's extreme vulnerability due to the continent's over-reliance on Russian energy commodities, especially natural gas. Europe responded with overkill, with the continent managing to store so much gas that it emerged from the last winter season with more than enough gas reserves. Europe has continued stockpiling gas at a record clip: StanChart has reported that gas inventories continue rising despite the current European heatwave and increased electricity demand for cooling. According to Gas Infrastructure, Europe (GIE) data, EU gas inventories stood at 94.52 billion cubic meters (bcm) on 16 July, a good 21.73 bcm higher y/y and 18.46 bcm above the five-year average. The average build over the past week of 330 million cubic meters per day (mcm/d) is nearly 100% higher than the five-year average over the equivalent period. If the current rate of gas injection is maintained, inventories will finish the injection season at just above 120 bcm, more than 10 bcm above the record high.
And now it has emerged that Europe is following a similar playbook with solar energy.
New research by Rystad Energy has revealed that some €7 billion ($7.8 billion) worth of solar panels--or 40 gigawatts direct current (GWdc) of capacity--are currently sitting unused in European warehouses. The stockpile is forecast to grow even larger this year, hitting 100 GWdc in storage by the end of 2023.
Not surprisingly, the vast majority of those panels are coming from China, highlighting a serious risk that Europe is shifting from overlying on Russia for gas to depending too much on China for its solar needs.
China Dominating Global Solar Industry
With China now leading the world in clean energy investments, accounting for nearly half of the $1.1 trillion that poured into the sector last year, the Asian giant is now the undisputed global leader in solar manufacturing, with four out of five solar panels sold worldwide originating from the country.
China has poured over $50 billion into wafer-to-solar panel production lines, 10 times more than Europe, and also controls ~95% of the world's polysilicon and wafers. Last year, the International Energy Agency warned of the dangers the world is exposing itself to by relying so heavily on the Middle Kingdom for its solar needs:
"The world will almost completely rely on China for the supply of key building blocks for solar panel production through 2025. This level of concentration in any global supply chain would represent a considerable vulnerability," the agency wrote in a special report.
Now, Beijing is looking to protect its vast solar investments in a move that's very likely to be inimical to the U.S. solar sector.
China plans to ban the export of several key technologies used in the manufacture of solar panels. Amongst the proposed rules, advanced technologies used in the manufacture of wafers and ingots will be placed in a list of export controls, according to a public consultation process. If the plan is adopted, Chinese solar manufacturers would be required to obtain a license from their provincial commerce authorities to export such technologies.
Polysilicon is used in ingot-casting molds to construct solar wafers. The wafers are then pieced together to create photovoltaic (PV) cells. Although the proposed ban will not restrict the supply of complete wafers for solar panels, it's likely to negatively affect American solar companies because U.S. photovoltaic power generation components are highly dependent on Chinese tech.
The Wall Street Journal has warned that restricting exports of key solar manufacturing technology will disrupt the US' solar ambition. According to Taipei-based market research firm TrendForce, only Chinese companies are capable of making larger 182 and 210-millimeter wafers. That's an alarming revelation because larger wafers--which allow for cheaper and more efficient solar panels to be made--are expected to make up 96% of the world's market share in 2023.
Expanding American Solar Manufacturing
"China's proposed export restraints are Exhibit A on the need to rapidly scale American solar manufacturing," Abigail Ross Hopper, president and CEO of the U.S. business lobby Solar Energy Industries Association, told WSJ after the Biden administration launched the IRA, which has been hailed as a game-changer for the solar sector.
Over the past two years, solar manufacturers have been hampered by supply chain disruptions, including increasing material costs for polysilicon. Indeed, last year, Rystad Energy estimated that rising equipment and shipping costs led to the postponement or cancellation of 56% of worldwide utility-scale solar projects that had been planned for 2022.
Luckily, these challenges have been rapidly fading, with energy prices falling back close to pre-war levels. The same scenario has been unraveling in the solar sector, with polysilicon prices on a steady decline.
Source: PV Magazine
A new report published by the Rocky Mountain Institute has forecast that wind and solar energy will produce more than 33% of total energy in the world by 2030 compared to just 12% currently.
"Exponential growth of clean energy is an unstoppable force. The benefit of rapid renewable deployment is greater energy security and independence, plus long-term energy price deflation because this is a manufactured technology - the more you install the cheaper it gets," RMI said.
The report concludes the COP28 goal for renewable power, which seeks to triple renewable energy capacity by 2030, is achievable as long as adequate grid investment, streamlined permitting, and investments into greater storage are made.
By Alex Kimani for Oilprice.com
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