The concentration of solar supply chains in China and Southeast Asia could jeopardize efforts to increase the use of solar power to help meet global climate targets, the International Energy Agency said July 7.

The amount of solar power installed annually needs to more than quadruple by 2030 to put the world on track to achieve net zero greenhouse gas emissions by midcentury and to keep global temperatures from rising by more than 1.5 degrees C above preindustrial levels, the International Energy Agency, or IEA, said in a report. To support that growth, production of the raw material polysilicon as well as of silicon ingots, wafers, cells and solar panels would need to more than double from current levels, the IEA said.

Without intervention by other governments, China is likely to tighten its control of solar manufacturing as demand increases, the IEA said, raising concerns about the ability of importing countries to build solar projects quickly and cost-effectively.

"China has been instrumental in bringing down costs worldwide for solar [photovoltaics, or PV], with multiple benefits for clean energy transitions," IEA Executive Director Fatih Birol said in a news release. "At the same time, the level of geographical concentration in global supply chains also poses potential challenges that governments need to address."

Imbalances in supply and demand are an example of the sorts of problems created by Chinese industrial policies that turned the country into the world's biggest solar manufacturer, the IEA said.

At the end of 2021, global capacity for making silicon wafers and cells and assembling them into solar panels exceeded demand by at least 100%, the agency said. Meanwhile, shortages of polysilicon have created bottlenecks in solar supply chains, contributing to higher prices for solar panels in the past year.

Prices are likely to continue rising this year because there is not enough manufacturing outside of China to meet demand, Paula Mints, chief analyst at SPV Market Research, said in a June 30 report.

China already accounts for more than 80% of solar manufacturing, from polysilicon production through panel assembly, according to the IEA. Based on factories currently under construction, the country soon will control 95% of the production of polysilicon and silicon ingots and wafers.

Building factories outside of China could make solar supply chains more resilient and deliver economic benefits to countries installing solar panels, the IEA said. However, without government aid, manufacturers in other countries will struggle to compete, the agency said, noting that production costs in China are 20% lower than in the U.S. and 35% lower than in Europe.

In the U.S., lawmakers so far have been unwilling to provide targeted incentives for solar manufacturing. Instead, the U.S. government has subsidized project development while imposing tariffs on imports that over the past decade have failed to grow a base of domestic production.

"Meeting international energy and climate goals requires the global deployment of solar PV to grow on an unprecedented scale," the IEA said. "This in turn demands a major additional expansion in manufacturing capacity, raising concerns about the world's ability to rapidly develop resilient supply chains."

Governments should "turn their attention to ensuring the security of solar PV supplies as an integral part of clean energy transitions," the agency added.

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