A government-backed study has concluded that Australia can successfully establish domestic manufacturing capabilities of 10 GW of polysilicon and 5 GW across wafer, cell and module production each by 2030. This will be credible and feasible, provided the right government policy support is in place.
The Australian PV Institute's (APVI) Silicon to Solar (S2S) study sees this capacity development as credible and feasible to meet domestic demand and for the local industry to remain internationally relevant.
This, the writers argue, is a must if the country wishes to avoid the risk of energy dependency. It will also enable Australia to replace its current exports of coal and LNG with green products. The benefits also include setting up a new state-of-the-art manufacturing industry.
Funded by the Australian Renewable Energy Agency (ARENA), the study provides a roadmap for a credible future state of PV manufacturing in Australia.
Despite the fact that the country has excellent quality solar technology research capabilities, Australia's current solar supply chain capabilities include 52,000 tons/annum of metallurgical silicon (mg-Si) smelting capacity operated by Simcoa and Tindo Solar's 160 MW/annum module manufacturing capacity.
However, according to the study, establishment of 25,000 tons poly-Si domestic and export capability and 5 GW per annum integrated solar PV manufacturing capability from ingot to solar module would create over 4,000 direct, high-skilled, long-term jobs and see investments of around AUD 2.4 billion in new state-of-the-art manufacturing capacity.
It will also stimulate related manufacturing industries such as solar glass, energy storage and recycling.
The study examines challenges and solutions for Australia to establish manufacturing across the 4 key steps of solar supply chain, from polysilicon to modules.
At the manufacturing level, Australian companies face cost barriers with high electricity prices, high upfront capital costs and overheads, high cost of labor, material and shipping costs.
At the project development level, they face barriers in the form of permitting and approval uncertainty and timeline, lack of skilled workers, and uncertainty on foreign equity position.
Additionally, the dominance of Chinese companies in this space will ensure a 'significant economic disparity at every stage of the value chain' for Australian manufacturers, according to the techno-economic analysis outlined in the report.
Referring to the success of production-linked incentive schemes of the Inflation Reduction Act (IRA) in the US, and Production Linked Incentive (PLI) in India, APVI sees this tool as very effective at attracting industry investment and scaling solar PV production.
Calling these an effective mechanism to stimulate industry growth, the study sees production credits as helping narrow the cost gap to imported products for Australian manufacturers across the value chain.
However, for the Australian context, it recommends the government to introduce a production credit mechanism, on the lines of the country's Hydrogen Headstart Program. Here, it can be combined with concessional finance at every step of the value chain.
"When applied to the Australian solar PV manufacturing context, quantitative assessment indicates a production credit can be sized to fully close the cost gap to the imported cost from China for all four value chain steps over a 10-year production period," explain the report writers. "This would imply a subsidy equal to $9.30/kg for poly-Si, $8.7/m2 for ingot/wafer, $5/cW for cells and $3.4c/W for modules in the absence of other financial support."
They further state that even at a 0% interest rate, concessional loans are not effective at bridging the cost gap for any of the supply chain segments. However, concessional finance does address investment uncertainty for businesses and provides access to capital which may otherwise be hard to raise.
While there is no 'silver bullet policy solution,' Australia can and must provide an enabling policy ecosystem for domestic PV manufacturing industry to flourish with a combination of supply, demand and policy levers, recommend the report writers.
To begin with, the government needs to declare solar PV manufacturing industry a strategic priority. Setting up a solar manufacturing taskforce to deliver the next steps and recommendations is crucial too.
Going forward, it can implement concessional finance and production credit support for 10 years of facility operation. It can prioritize the roll out of enabling support for people, permits and partners. Setting up an enabling supportive policy ecosystem entails direct or indirect financial support to bridge the cost gap to comparable imported products over a set period to remain cost-competitive with other economies.
An offtake or demand certainty is also critical to provide longer-term investment certainty for the industry.
ARENA CEO Darren Miller said, "A number of Australian companies have already stated their ambitions to develop local manufacturing of solar PV at scale, and 'Silicon 2 Solar' illuminates the policy and investment pathway to make these bold plans a reality."
Other key stakeholders that contributed to the S2S study are The Australian Centre for Advanced Photovoltaics (ACAP), AGL, Aspiradac, Energus, Siemens, SunDrive, Tindo Solar and 5B.
The complete S2S report is available for free download on ARENA's website.