Opinion: Creating an alternative PV supply chain is no cakewalk

By Johannes Bernreuter, Head of Bernreuter Research

On September 22, 2020, the House of Representatives demonstrated rare unanimity: With an overwhelming bipartisan vote of 406-3, the lower house of the U.S. Congress passed the Uyghur Forced Labor Prevention Act.

The bill seeks to ban goods from the Xinjiang Uyghur autonomous region in northwestern China unless importers can provide “clear and convincing evidence” that forced labor was not used in production. The U.S. Senate had already drafted a softer version in March 2020.

After the inauguration of new President Joe Biden, updated versions of both bills were reintroduced into Congress in late January and mid-February, respectively. The new House bill adds polysilicon to cotton and tomatoes on a list of high-priority sectors for which the government would have to create specific enforcement plans.

Thus, polysilicon from Xinjiang has landed high on the political agenda in Washington, D.C.; consequently, PV project developers and installers in the U.S. have good reason to prepare for new restrictions on solar module imports.

Last December the Solar Energy Industries Association (SEIA) launched a campaign against forced labor, announced the development of a supply chain traceability protocol for materials used to produce solar modules and said it was “strongly encouraging member companies to move their supply chains out of Xinjiang.”

In early February, SEIA and 175 member companies signed a pledge opposing forced labor in the solar supply chain. In an interview with pv magazine USA, SEIA president and CEO Abigail Ross Hopper announced a goal for companies to readjust their supply chains by June.

Just a matter of blending polysilicon volumes

Global solar wafer production is almost completely in Chinese hands, but mostly not located in Xinjiang (with the notable exception of Xinjiang Jinko Solar, one of JinkoSolar’s ingot and wafer production subsidiaries). What will likely happen is this: Wafer manufacturers, who usually blend polysilicon volumes from different suppliers, will exclude feedstock from Xinjiang from the mix for part of their production in order to offer “Xinjiang-free” wafers.

Those can then be used for solar cells and modules destined for export to the U.S.; European customers will probably demand products untainted by forced labor as well. Service providers, such as Senergy Technical Services or Clean Energy Associates, will conduct supply chain audits that ensure the necessary evidence at customs.

In terms of volumes, this shift in wafer production will not pose a major challenge. PV installations in the U.S. and Europe together made up roughly 30% of the global market in 2020. In contrast, around 45% of the global solar-grade polysilicon output in 2020 came from the four Xinjiang-based manufacturers: Daqo, Xinte, Xinjiang GCL and East Hope. Conversely, this means that 55% was produced outside Xinjiang (35% in other Chinese regions and 20% outside China).

That’s more than enough to supply the PV markets in the U.S. and Europe. Should international project developers jump on the anti-forced-labor bandwagon, however, the PV supply chain could experience major friction.

While the western PV industry will likely be able to cut its ties to forced labor in Xinjiang, it is also true that this move will hardly change the situation of the Uyghur population. In a common statement issued on January 20, the China Photovoltaic Industry Association and the Silicon Branch of the China Non-ferrous Metals Industry Association harshly condemned a study by the consultancy Horizon Advisory on the existence of forced labor at PV companies in Xinjiang as a “lie of the century fabricated out of thin air” and SEIA’s campaign as an attempt to “interfere in China’s internal affairs.”

Apart from such speak, which echoes the communist state doctrine, China will soon consume almost as much polysilicon as Xinjiang produces for its domestic PV installations alone. Moreover, it is still an open question whether Uyghurs are forced to work at PV companies elsewhere in the country, too – as is the case in other industry sectors.

The base for a western supply chain is modest

Michael Parr, executive director of the western Ultra Low-Carbon Solar Alliance, has now suggested that excess polysilicon production capacities in the U.S. and Europe could support the shift of supply chains away from Xinjiang. Such a contribution – if realistic at all – would be very small, though.

Apart from a tiny 1,600-ton facility in Germany, it is not clear where Parr sees dormant polysilicon factories in Europe. In the U.S., REC Silicon’s mothballed plant in Moses Lake, Washington, and decommissioned reactors at Hemlock Semiconductor might provide an additional capacity of 40,000 metric tons. Compare this to a capacity of 330,000 tons which the four players in Xinjiang are aiming to achieve by the end of this year.

Even if an additional 40,000 tons was available in the U.S., a wafer production capacity of 14 GW outside China would be required to process these volumes. This magnitude is not yet in sight. Creating an alternative supply chain will be no cakewalk – it is a monumental task.

A shorter version of this analysis has been published on pv-magazine-usa.com