China plans second solar supply chain without forced labor especially for the West
Created: 12/04/2022 10:59 am
By: Nico Beckert
A worker checks photovoltaic panels used for small solar cells at a factory in Haian, east China's Jiangsu Province.
© AFP
Without raw materials from China, the energy transition can hardly work.
The problem: the materials required for solar cells sometimes come from forced labour.
When it comes to solar technology, the world is dependent on supplies from China.
But in the West there are debates about human rights violations in the supply chain.
The People's Republic is now reacting to this: It is planning its own "clean" supply chains for export.
The West would get solar technology with a clear conscience, but would remain dependent.
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Beijing – In the debate about the West's dependence on China and forced labor in the production of solar technology, the People's Republic is now pursuing a dual strategy: the country is apparently building a second supply chain that is said to be free of polysilicon from Xinjiang.
Beijing, which dominates the global market for solar technology, wants to avoid urgent human rights issues when selling its products in Europe and the USA.
Some Chinese solar companies are adapting to the needs of the West and are manufacturing "Xinjiang-free" products, says Johannes Bernreuter, polysilicon expert at the consulting firm Bernreuter Research.
The production chain can be "tracked and documented from the delivered polysilicon to the finished solar module," says the supply chain expert.
Jenny Chase, an expert at the think tank BloombergNEF, also confirms that the origin of polysilicon that does not come from the problematic province of Xinjiang can be traced by certification companies.
China: Lack of transparency in solar raw material
In this way, the material flows could simply be divided up: "Xinjiang-free" products are manufactured for export.
Solar modules, the raw material of which could have been manufactured using forced labor, continue to be installed in China due to the high domestic demand.
Western sanctions and boycotts of polysilicon from Xinjiang would therefore have little effect on the Uighurs affected by forced labor.
The development shows the close mutual dependency between China and, above all, the western industrialized countries: On the one hand, three quarters of all solar products come from the People's Republic.
They are necessary for the global energy transition and compliance with climate targets.
On the other hand, pressure is increasing in the West for more independence from China and supply chains without human rights violations – to which China in turn is reacting.
However, it is unclear whether these double supply chains are realistic down to the last detail.
For example, the supply chains for metallurgical silicon, the starting material for polysilicon, are not transparent.
Importers can hardly ensure that there is no forced labor for this.
"Of the seven Chinese polysilicon producers among the world's top ten, six obtain significant quantities of metallurgical silicon from Xinjiang," says Bernreuter.
China's manufacturers produce in Vietnam and Malaysia
Chinese manufacturers are already avoiding US import tariffs and human rights rules by outsourcing: They are investing more in countries such as Vietnam and Malaysia.
According to Bernreuter, the first companies no longer buy raw materials in China for production there.
"Xinjiang-free" supply chains are therefore possible.
What remains is the dependency on China: In the event of a conflict, Chinese companies in Vietnam or Malaysia could also threaten to stop exporting to the West.
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Like other industrialized countries, the federal government is in a dilemma.
In order to achieve the climate goals, she wants to massively expand renewables.
At the same time, dependencies on China are to be reduced.
But China dominates the world market in all important production steps.
The People's Republic holds a market share (2021) of:
75 percent for solar modules,
85 percent for solar cells,
97 percent for solar wafers,
97 percent for solar wafers.
Share of Chinese companies in global production of solar systems.
© Table.Media
The share could grow to 95 percent for polysilicon, solar ingots (blocks of semiconductor material from which the wafers are sawn) and wafers, according to the latest World Energy Outlook.
Overall, China accounts for three quarters of world trade in solar products.
A clear picture emerges for European imports.
90 percent of EU imports of solar modules go back to China.
Imports have doubled since the Russian attack on Ukraine.
Europe is buying more solar panels from China.
© Table.Media
Foreign Office threatens to stop imports
In a recently leaked draft of the Federal Foreign Office's China strategy, China is referred to as a "competitor in the green transformation".
Because of China's "strong to dominant position" in the solar sector, for example, "one-sided dependencies could arise," according to the draft.
They want to "reduce these dependencies (...) from the point of view of risk minimization".
Because of the problem of forced labor, the Federal Foreign Office is “also prepared within the EU framework to support import bans from regions with particularly severe human rights violations if supply chains cannot be ensured by other means free of human rights violations”, as the draft states.
The USA are already further along.
They have already imposed an import ban and passed the Uyghur Forced Labor Prevention Act.
The law reverses the burden of proof:
The US assumes that all products from Xinjiang were manufactured using forced labor unless companies can provide "clear and compelling evidence to the contrary".
Hundreds of solar imports from China with a capacity of three GW have been stopped at the US borders as a result of the law.
US solar imports with a capacity of up to twelve gigawatts could be affected by the end of the year.
However, according to Jenny Chase from the think tank BloombergNEF, this will “not slow down the expansion of solar power in the USA too much”.
Economics and Climate Minister Robert Habeck has apparently recognized the explosiveness of the development.
He wants to promote the mass production of solar modules and wind turbines in the EU with a European platform for transformation technologies.
This article appeared on December 1, 2022 in the China.Table Professional Briefing newsletter - as part of a cooperation, it is now also available to the readers of the IPPEN.MEDIA portals.
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