Western nations need to broaden their supply chains beyond China and ramp up domestic manufacturing or else risk running into scarcity for key energy transition components, executives said Oct. 18 at the FT Energy Transition Summit in London.

Supply chain logjams in Asia and the inflated cost of raw materials have been consistent sources of pain for manufacturers of wind turbines, solar panels and batteries in Europe and the U.S. for multiple quarters.

Manufacturers in the West rely heavily on China, which controls a major section of the global energy supply chain, including steel and minerals such as lithium, nickel and cobalt, and that reliance becomes a risk during periods of volatility, according to Brian Menell, chairman and CEO of mining investor TechMet Ltd.

China is "quite naturally" going to use its supply chain dominance to advantage its domestic industries but could equally use it as leverage in political or trade negotiations, Menell said at the conference.

"That's an enormous source of geopolitical instability and national security complication for Europe and the U.S. and ... for the global energy transition," Menell said.

Domestically, China is racing ahead in the renewables market. Of the 93.6 GW of wind installed onshore and offshore globally in 2021, China accounted for roughly half, according to data from the Global Wind Energy Council, or GWEC. That includes a massive 16.9 GW installed offshore — nearly three times the amount built worldwide in 2020.

The growth of China's wind industry now means Western manufacturers are "at the end of the queue in terms of getting ... materials into Europe," Paulina Hobbs, CEO of wind turbine-maker Siemens Gamesa Renewable Energy SA's service division in northern Europe and the Middle East, said at the conference.

Turbine-makers like Siemens Gamesa continue to be at the sharp end of the supply chain instability. Faced with reduced order intake and significant financial losses, the companies have been forced to raise their prices and lay off staff.

"I have never seen supply chain issues like we have now, ever," Hobbs said. "In my eyes, it's a huge crisis."

But rather than reducing the number of materials imported from China, the level of ambition set by governments in Europe and the U.S. means significant imports will continue to be required — on top of ramping up domestic manufacturing and sourcing goods from other regions.

The European Union's REPowerEU strategy, for instance — its plan to end dependence on Russian gas — includes targets to grow the bloc's wind capacity to 510 GW by 2030, up from 190 GW today. That equates to an annual build-out rate of 39 GW compared with 11 GW installed in 2021.

"We're actually going to need everything China's doing and a bit more," GWEC CEO Ben Backwell said at the conference.

Corporate-level ambitions — for instance by Western automakers in rolling out electric vehicles — are similarly "going to draw in ... every last kilogram of nickel, cobalt and lithium," Menell said. "China is not going to be able to supply [itself], let alone us."

As a result, Western markets "need to get ahead" of the issue, Backwell said, pointing to opportunities to innovate using different materials or manufacturing products in different ways.

Deployment targets will quickly turn into aspirations if something is not done to reshore manufacturing in Western markets, according to Hobbs.

"We need to bring healthy competition to China but for that to happen, the local manufacturers need to be supported more," Hobbs said.

In the U.S., the $369 billion Inflation Reduction Act is "incredibly helpful and is going to provide 10 years of real stability" for multiple industries, Backwell said. The policy includes tax incentives for renewables installations and domestic manufacturing that observers hope will spur a new era of industrial productivity in the U.S., including for wind and solar technologies.

"That's a good approach," Backwell said. "I would like to see Europe doing the same."

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