- Globalized solar supply chain good for solar industry vis-à-vis nationalistic trade policies
- The US, Germany and China saved $67 billion between 2008 and 2020 in solar module production costs with globalized solar supply chains
- If these nations pursue strong nationalistic trade policies for solar, by 2030 solar module prices can go up by some 20% to 25%
As governments across the world clamor for a local solar supply chain in the wake of COVID-19 and the energy crisis in Europe, a Stony Brook University study bats for a globalized solar supply chain that it believes helped save $67 billion in solar module production costs for the US, Germany and China, between 2008 and 2020.
Specifically, the US saved $24 billion, Germany $7 billion and China $36 billion during the time period. However, if they had pursued strong nationalistic trade policies that limited cross-border learning over these years, solar panel prices in 2020 would have been 107% higher in the US, 83% higher in Germany and 54% higher in China.
The authors from the Department of Technology and Society in the College of Engineering and Applied Sciences at the New York based university argue that strong nationalistic policies limit the free flow of goods, talent and capital.
If these countries decide to manufacture solar modules locally and not source from a globalized supply chain, solar modules prices can be expected to go approximately 20% to 25% higher in 2030.
India for instance, has imposed Basic Customs Duty (BCD) on imported solar cells and modules which is creating a shortage of modules for the country to meet its renewable energy targets in a bid to support domestic solar manufacturing. The US too has extended Section 201 tariffs on solar while excluding bifacial solar panels (see US Extends Section 201 Tariffs).
“Nationalistic policies hurt every country and risk missing pressing climate targets,” explain co-author Gang He. “International climate policy benefits from a globalized low-carbon value chain, however, it is important to introduce complementary policies to mitigate welfare distribution effects and potential impacts on technological crowding-out.”
Since the world needs to install more and more solar in the future, having a globalized supply chain will help drive down prices and improve technology. The same rationale is applicable for all other industries as well including wind energy, electric vehicles (EV), among others.
“What this study tells us is if we’re serious about fighting climate change, policymakers need to implement policies that promote collaboration across global value chains with regard to scaling up low-carbon energy technologies,” said Lead author of the study and Assistant Professor of Engineering Management and Systems Engineering at the George Washington University, John Helveston.
The study is published at a time, regions in Asia, Europe and the Americas have been implementing various policy schemes to help establish local solar manufacturing industries across the value chain in order to create both local production jobs and resilient clean energy supply as politicians increasingly understand that solar will be the dominant power generation source in the not too distant future. Such policies include the Inflation Reduction Act in the US and the Production Linked Incentive in India, which have already triggered announcements for gigantic solar investments in these two countries (see India Clears Tranche II Of Solar PV PLI Scheme).
The study has been published in scientific journal Nature under the title Quantifying the Cost Savings of Global Solar Photovoltaic Supply Chains.