Beijing, which controls at least 75% of the supply, wants to ban the export of panel technology
The global trade war is taking an unexpected turn. Beijing could ban the export of technology used to make solar panels, an industry China dominates by controlling at least 75% of its global supply chain. This would have an impact on the West’s effort to create its own green energy industry.
Beijing’s proposed ban is inspired by the West’s tactics in the chip war. The United States is trying to curb the technological development of the People’s Republic by restricting the export of computer tools and programs used to make advanced chips.
China’s Ministry of Commerce, along with other departments, said in a note on December 30 that it was seeking public comment on a revised catalog of technologies that will not be allowed to be exported from China. The export restrictions have not been detailed, but would cover technology and machinery used to produce solar panel components, such as super-sized wafers, black silicon and ultra-efficient silicon ingots, according to Chinese media.
However, the ban would not extend to Chinese solar panels themselves, in order to protect an export market valued at $40 billion in the first 10 months of 2022, according to industry data.
Losing access to Chinese solar technology, such as silicon smelting furnaces, would not be an insurmountable problem for the West. It is true that the People’s Republic dominates most of the sector’s supply chain: it manufactures 79% of the polysilicon in solar panels, 97% of solar wafers, 85% of photovoltaic cells, and 75% of manufacturing process for assembling cells into modules, according to a report by the International Energy Agency published in July 2022.
However, several Western companies, such as Applied Materials, Enel or the Norwegian NorSun, still have the experience and intellectual property necessary for the photovoltaic industry, which developed in the United States and Europe before China, with its low costs, increased its production and take over.
A ban, however, would hurt Western efforts to boost domestic manufacturing of solar panels. Washington is granting tax credits to companies willing to produce photovoltaic panels in their country. And the European Union could relax its state aid rules to do the same.
But developing manufacturing capacity without Chinese machinery would require even higher upfront costs. Industry insiders say that Europe, which has less than 10 gigawatts of industrial photovoltaic capacity compared to China’s around 300, would need to spend €1 billion for each additional gigawatt of solar panel manufacturing capacity.
And it would take longer. Building a new factory to produce, say, polysilicon, would take a couple of years, experts say, while creating an entire solar supply chain could take four times as long.
The ban on Chinese exports won’t derail the clean energy drive in the West, but it could certainly slow it down.
