In a new monthly column for pv magazinethe International Solar Energy Society (ISES) explains why potential trade disruptions in the global PV supply chain are substantially different from those associated with coal, oil and gas.
China produces the most solar panels in the world. However, this concentration of industry should not be particularly worrying.
Solar panel production cannot become a larger global industry than about $400 billion per year. This is because they are so cheap and last a long time. By comparison, the global auto industry is seven times bigger. Aiming for some local panel production may be pursued for strategic reasons, but will not create a major new local industry. Most of the value of the solar industry is in the host country, not in the imported solar panels. Local content includes project engineering, transportation, land, fencing, support structures, wiring, power conditioning, maintenance, substations, transmission, energy trading and increasing the share of renewable energy sources in the national energy mix. Large scale pumped hydro energy storage is not dependent on imported batteries.
Size of the future solar industry
So how do we estimate the upper limit of the size of the global solar panel industry? The first step is to estimate how much solar energy will ultimately be needed.
Clean electricity from solar and wind energy can be used to decarbonize energy by electrifying transportation through electric vehicles, heating and cooling through heat pumps, and industrial heating through electric furnaces. The chemical industry can be decarbonized by using clean electricity to produce hydrogen for the production of ammonia, metals, plastics, ceramics and synthetic aviation and marine fuel.
For example, solar panels, with the support of wind energy, can replace fossil fuels throughout the economy.
Global average electricity production currently amounts to 3.6 MWh per person per year. Electricity production in Europe, North America, China, Japan, Singapore and Australia is between 6 MWh and 12 MWh per person per year. This will be necessary double or triple to decarbonise transport, heating, industry and aviation.
Let’s assume there are 10 billion people by mid-century, and optimistically assume that all people are both completely carbon-free and prosperous. Let us further assume that clean electricity production reaches 20 MWh per person per year, with a global total of 200,000 TWh per year.
We assume that solar energy provides 80% of this energy, with the remainder provided by wind, hydro and other clean energy technologies. For this task we need approximately 100 TW of solar PV, assuming an average capacity factor of 18%. This capacity factor assumes a combination of rooftop solar, floating solar, ground-mounted solar and tracking, and takes into account that three-quarters of the world’s population lives in the sun belt, below 35 degrees north latitude .
The wholesale price of solar panels has fallen $0.12/W, which equates to approximately $25 per m2. We assume that the cost of solar panels will eventually drop to $0.10/W and that panels have an average lifespan of 25 years. The annual need for solar panels at steady state is therefore $10 trillion divided by 25 years, or $400 billion per year.
For comparison: the global gross domestic product amounts to approximately $100 trillion per year, which is 250 times greater, and could be much greater by mid-century. Divided among 10 billion people, $400 billion per year for solar panels equates to just $40 per person per year. This is a small part of a wealthy person’s annual income. In other words, solar panels are very cheap and last a long time.
Trade disruptions
Electrification of everything through solar and wind energy eliminates vulnerability to disruption of fossil fuel supplies for vehicles, heating and cooling, industry and aviation.
If shipments of solar panels from China were to stop due to trade disruption, war or pandemic, there could be a slowly growing energy shortage. It would take several years before solar panel failure became serious. This is fundamentally different from the disruption of coal, oil and gas supplies, which causes economic disruption on a timescale of weeks.
There would be plenty of time for other countries to start producing their own solar panels, albeit at a slightly higher cost. There is nothing about solar panel production that is inherently Chinese.
Solar energy offers a high degree of economic resilience against trade disruption caused by the transition away from fossil fuels. If the supply of solar panels from China were to abruptly stop, it would be more of an annoyance than a crisis.
The solar advantage
Photovoltaic solar energy and wind energy are moving towards domination of global electricity production. By 2023, solar and wind energy provided 80% of global new generation capacity. Also in 2023, the annual global net new deployment of solar capacity was double the sum of all other energy generation technologies combined. Global solar capacity and solar energy generation double every three years.
Solar energy is actually not limited by cost, availability of land, availability of materials, or ecological and social impact. No other energy technology can match this.
The solar industry is based on the silicon solar cell that was there invented in 1954. After oxygen, silicon is the most abundant element in the earth’s crust (27%) and is inexhaustible. Recently, a new cell efficiency of 27.3% was announced by Longi. Commercial solar cells are improvement by approximately 0.5% per year and the efficiency of full-size solar panels could exceed 26% by around 2030. Improved cell efficiency reduces costs across the value chain by increasing energy production per unit area.
The required power and area of 26% efficient solar panels per prosperous person in our future-oriented scenario (20 MWh per person per year) are 10 kW and 40 m2 respectively. Recycling panels is not a big task as only 1.6 m2 is required2 per person on the panel resigns each year.
Authors: Prof. Ricardo Rüther (UFSC), Prof. Andrew Blakers/ANU
Andrew.blakers@anu.edu.au
rruther@gmail.com
ISESthe International Solar Energy Association is a UN-accredited member NGO founded in 1954 that works towards a world with 100% renewable energy for all, used efficiently and wisely.
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