China ban would slow, not halt, Western solar push

MILAN, Feb 3 (Reuters Breakingviews) – The global trade war is taking an unexpected turn. Beijing may ban the export of technology used to make solar panels, an industry which China dominates by controlling at least 75% of its global supply chain. That has repercussions for the West’s drive to create its own green energy industry.

Beijing’s mooted ban borrows from the West’s own tactics in the chip war. America is trying to slow the People’s Republic’s technological development by restricting the export of tools and software used to make advanced chips. Beijing’s curbs, which have yet to be detailed, would cover technology and machinery used to produce solar panel components such as large wafers, black silicon and ultra-efficient silicon ingots, Chinese media have reported. The ban would not, however, extend to China’s solar panels themselves, protecting an export market worth $40 billion in the first 10 months of 2022, sector data shows.

Losing access to Chinese solar technology, such as furnaces for melting silicon, would not be an insurmountable problem for the West. True, the People’s Republic dominates most of the industry’s supply chain: it manufactures 79% of solar panel polysilicon, 97% of solar wafers and 85% of photovoltaic cells, according to the International Energy Agency. Yet an array of Western companies including Applied Materials (AMAT.O), Enel (ENEI.MI) or Norway’s NorSun still have the expertise and intellectual property used in the photovoltaic industry, which developed in America and Europe before low-cost China scaled up its production and took over.

A ban would nonetheless hurt a Western push to boost domestic solar panel manufacturing. Washington is showering tax credits on companies willing to make photovoltaic panels at home. And the European Union may relax its state aid rules to do the same. Yet building manufacturing capacity without Chinese machinery would require even higher upfront costs. Industry experts say Europe, which has less than 10 gigawatts of photovoltaic industrial capacity against about 300 GW for China, would already need to spend 1 billion euros for each additional GW of solar panel manufacturing capacity. And it would take longer. Building a new factory to make, for instance, polysilicon, would take a couple of years, experts say, while creating an entire solar supply chain could take four times as long.

China’s export ban will not derail the West’s clean energy push, but it could certainly slow it.