Supply Chain | China Energy: There’s no cheap way to sidestep China’s energy supply chains



China dominates clean energy supply chains and has enough manufacturing capacity to meet global demand for most of the solar market to 2030. But as the US and Europe decarbonize their economies, Western governments are seeking to meet their own needs with new, local facilities capable of producing photovoltaic panels and storage.
It won’t be easy or cheap.
Building plants to manufacture solar panels, batteries and electrolyzers to meet domestic demand in 2030 would cost Europe $149 billion and the US $113 billion, according to an analysis from BloombergNEF released Tuesday. While those up-front costs hedge against future geopolitical and natural disaster risk by making supply chains more resilient, “the bleeding-edge knowledge” of PV, battery and electrolyzer manufacturing resides in China, BNEF analyst Antoine Vagneur-Jones wrote in the report. Some of this knowledge could be more quickly transferred outside of the country if Chinese companies faced less resistance setting up manufacturing sites in the US and EU.

“Western governments are wielding subsidies and protectionism to expand clean energy manufacturing,’’ Vagneur-Jones wrote. “The sprint to localize may diversify the supply of critical products, but represents a wrenching departure from the unfettered free trade of recent years.’’
China has invested for decades through low-interest loans, free land, cheap energy and other subsidies, to build the world’s most integrated and efficient clean energy supply chains. The country hosts 90% of production capacity for six vital parts of the photovoltaic panel and battery storage value chain and more than 75% of several other segments, according to the BNEF.
“No other country has done as much to burnish the energy transition’s economics,’’ Vagneur-Jones wrote.
But the sweeping $374 billion climate act signed into law by US President Joe Biden earlier this year is expected to boost development of solar, wind and big batteries by at least 20% through this decade. BNEF said earlier this month that the law would trigger enough manufacturing of solar plants from this year through 2030 to generate 364 gigawatts of electricity, which is three times the capacity of US solar plants in operation last year.
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