The global solar panel supply chain is too concentrated in China, the International Energy Agency has warned in a new report.
The report, titled Solar PV Global Supply Chains, notes that China has been instrumental in bringing down solar PV production costs.
However, it has also built its solar supply chain much faster than other countries, and this "level of geographical concentration in global supply chains also creates potential challenges that governments need to address."
Addressing the issue may be difficult, however. As the IEA itself writes, China has invested some $50 billion in new solar PV capacity over the last ten years, which is ten times what Europe has invested in the same capacity.
As a result, to date, more than 80 percent of the world's PV production capacity across the supply chain is in China, the agency noted.
This has been made possible by strong government support for solar power, the report notes. This support has been essential for reducing solar PV costs over the last decade by more than 80 percent. This has also turned China into a huge exporter of solar modules. Related: U.S. Secretary Of State Calls On G20 Countries To Hold Russia Accountable
Last year, China made $30 billion from solar module exports, which represented almost 7 percent of the country's trade surplus over the last five years, the agency also noted in its report.
"This level of concentration in any global supply chain would represent a considerable vulnerability," the head of the IEA, Fatih Birol, told Reuters.
"If there is a fire or a natural disaster it may have implications for the global clean energy transition in terms of pushing the prices up and even availability of solar PV, but if you diversify and take necessary measures, we suggest to governments around the world that this risk will be addressed, maybe even diminished," he added.
By Irina Slav for Oilprice.com
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