This is an extract from a recent report “Silicon to Solar” prepared by the Australian PV Institute.
“Australia’s biggest opportunity for growth and prosperity is the global shift to clean energy” according to the Australian Government. For Australia to turn this opportunity into reality, the shift needs to be bold, decisive and starting now. Building a viable, relevant and timely solar photovoltaic (PV) manufacturing industry can
(i) address the risk of energy dependency
(ii) provide a direct return in the form of investment, jobs, and new exports
(iii) deliver a long-term reward by reversing the trend of Australia’s decline in manufacturing while at the same time increasing Australia’s economic complexity and labour productivity.
Global Manufacturing Capacity
In the last decade, Chinese manufacturers have made remarkable strides in ingot and wafering expertise, and China is committed to protecting these advancements. Currently, the Chinese government is contemplating the implementation of export restrictions on manufacturing equipment for solar wafers, black silicon, and silicon casting. If these categories are included in the Chinese catalogue of restricted technology, manufacturers will be required to obtain technology export licences from provincial departments in order to export these products.
The figure below illustrates the 2023 annual production output in GW for the major players across all segments of the market, together with the share of total global annual production.
Polysilicon: As expected, the major changes in poly-Si capacity by the end of 2023 are concentrated in China. These expansions are financed with Chinese capital, constructed using Chinese equipment, and operated by Chinese-owned public/private entities. The domination of Chinese manufacturing of poly-Si in 2023 remains largely unchanged, with the only notable difference being a reduced proportion of production originating from Xinjiang. At present, Germany’s Wacker Chemie and South Korea’s OCI are the only non-Chinese manufacturers with a relevant manufacturing capacity.
Ingots & wafers: In terms of ingots, the capacity in China is very large, resulting in a situation where very few plants typically operate at utilisation rates exceeding 90%. When it comes to wafering, China currently dominates the market in every aspect. However, there are notable expansions taking place outside of China in 2023, primarily led by Chinese module suppliers targeting the US market. These companies, such as JA Solar, JinkoSolar, and Trina Solar, are establishing ingot/wafer capacity in Vietnam to facilitate customs clearance approval in the US. The three main wafer suppliers continue to be LONGi, GCL-SI, and Zhonghuan, which have a combined market share of around 50%. Currently, there are no non-Chinese players of relevant capacity in the ingot & wafer step. Incentivised by the passing of the IRA there have been a few announcements in the US to build ~30GW wafer capacity by approximately 2025 , however approvals are still pending
Cells: The cell production sector is also heavily dominated by Chinese companies such as Trina Solar, Aiko Solar, JA Solar, Jinko Solar, and LONGi, who collectively hold almost 60% of the market share. For 2023, it is projected that the top four module suppliers, namely LONGi, Trina, JA, and Jinko, will each surpass the 50 GW production mark, an accomplishment that is unlikely to be matched by any other players in the industry. Hanwha Q Cells, headquartered in South Korea, is the only non-Chinese player in this step of the silicon PV value chain with relevant manufacturing capacity. US company First Solar is the main player in the thin-film market segment with manufacturing facilities in the US, Malaysia, Vietnam and in India. However, its combined annual capacity by the end of 2023 will only reach around 12 GW. As of October 2023, announcements for cell production capacity in the US after IRA amount to a total of ~40GW with a target completion date set for 2024
Modules: The domination of Chinese manufacturers is still strong in module manufacturing. However, as a result of the IRA, there has been an unprecedented appetite for module manufacture in the US that has led to over 100 GW of capacity announcements aimed for completion in 2024. An outstanding example comes from Hanwha Q Cells which has revealed plans for the largest investment to date in the US, involving the construction of a fully integrated plant with an annual capacity of approximately 3 GW . In Europe, Enel has also announced a new annual production capacity of 3 GW in Sicily. However, these developments are relatively small compared to the bigger picture. Furthermore, and because of enduring substantial anti-dumping and countervailing tariffs when exporting to the US, Chinese solar cell and module manufacturers opted to shift their production facilities to Southeast Asian countries to access the US market. Nevertheless, the introduction of the IRA has now also enticed major Chinese producers like JA Solar and Jinko Solar to expand their manufacturing capacities inside the US.
Australian Manufacturing Capacity and Interest
The only current PV module manufacturer in Australia is Tindo Solar with an annual production capacity of approximately 160 MW, although current annual production is only in the vicinity of 30 MW. With full utilisation of the production line, this represents only about 4% of the current demand for solar in Australia. Nevertheless, during this study and following extensive engagement with stakeholders, there has been notable interest from parties across the PV value chain from those involved in poly-Si production to module manufacturing. Many of them are currently conducting their own feasibility studies to assess the potential for establishing manufacturing operations in Australia. Some of these prospectives include:
Quinbrook: a specialist investor, developer and operator of renewable energy and related energy transition assets with a focus on large scale solar across the US, UK and Australia. Quinbrook’s operating and development pipeline of solar and solar + storage projects currently exceeds 20 GW of capacity with the recent addition of the Suncable project in the Northern Territory taking this to over 40 GW. Quinbrook is sponsoring the development of a large scale poly-Si plant in Australia to secure green poly-Si for its own needs and also for potential export. The poly-Si plant would be powered by renewables and remove other supply chain risks such as modern slavery. Quinbrook has commenced a process to select a qualified technology operator.
A new Australian company is planning to manufacture ingots and wafers in Australia leveraging excellent relationships with China for equipment and knowhow transfer. The company is also considering using their wafers for Australian modules via cell contract manufacturing overseas.
SunDrive: a solar commercialisation company based in Sydney, has developed cell technology that uses copper instead of silver for cell metallisation. Precursor cells are currently manufactured in China and metallised in Australia. A roadmap to 5 GW cell and module production has been presented. Further upstream, the mg-Si production of Simcoa in WA is sufficient as an input for approximately 19 GW worth of annual poly-Si production for local solar, although it currently has other offtakers. Additionally, other players such as Fortescue Future Industries are also considering PV manufacturing, but using thin-film technology
Stakeholders have indicated that Australia is an attractive location for investment across every step of the value chain, if the right government support and long-term commitment to the solar manufacturing industry is provided. In addition to the value chain-specific comparative advantages highlighted in the sections above, Australia is well-known for its openness to trade and its low sovereign risk. Australia not only has good trade relationships with both the US and China, but also with the EU and Asian-Pacific countries, like Vietnam, Japan and Korea and is developing trade agreements with India
Conclusion: Paving the Way Forward for Australia
The energy transition and shifts in geopolitical settings are bringing in a new era of green industrial policy. Major economies such as the US, EU and India have only recently introduced unprecedented policy support to expand their domestic PV manufacturing capability – this changes the playing field and requires reconsideration of where Australia can and should play a role.
Australia cannot necessarily match or compete with the magnitude of funding support provided by other major economies with significantly larger spending power. However, these economies are developing domestic manufacturing capability for reasons other than market efficiency – reasons such as energy security, supply chain security, and the opportunity to become a first mover and capture value in future low carbon technologies that will be necessary in a globally decarbonised economy. It is highly unlikely that any new solar PV manufacturing capacity in the US, EU and India will be sufficient to meet their own domestic demand, let alone have enough to supply to Australia. Therefore, Australia needs to consider the importance of securing PV supply to meet domestic demand and growth ambitions of becoming a renewable energy superpower.
Recommended Pathway
•At the poly-Si step, Australia can be part of a globally diversified supply chain exporting particularly to the rapidly growing US and EU markets. Australia would export renewable energy-intensive value-added products and take control over poly-Si supply for the needs of the domestic solar market.
• Ingot & wafer manufacturing addresses the most concentrated step in the solar value chain. Australian wafers can be exported to the US, EU and other regions. Contract manufacturing overseas would enable domestically produced wafers to be used in local solar panels in the medium term.
• Rapid development of cell technology and large capacity scale up present a challenge to setting up viable cell production domestically. Australia’s strong track record in cell research could lead to cutting-edge technology, however, R&D, prototyping and pilot lines require additional time.
• Module production represents a “low-hanging fruit” component of the value chain due to the smallest government support needed. However, building globally relevant and competitive module production is very challenging and Australian modules would likely be for the domestic market only.
Policy Recommendations
Developing an economically viable, relevant, and timely solar PV manufacturing supply chain in Australia will require a comprehensive policy strategy. First and foremost, there are critical enabling requirements which need to be addressed to create an attractive investment environment and provide investment certainty during the project development phase. Additionally, demand levers to overcome offtake uncertainty and financial support to bridge the cost gap with imported products will be required to make an Australian industry competitive with international products. Any financial support provided must ensure appropriate policy design and selection/eligibility criteria to align with broader government objectives and ensure benefit sharing with the Australian public.
Access the complete report here
