Manufacturing Integration Technology Ltd Share Price
Candi Ruman
Government policies in China have shaped the global supply, demand and price of solar PV over the last decade. Chinese industrial policies focusing on solar PV as a strategic sector and on growing domestic demand have enabled economies of scale and supported continuous innovation throughout the supply chain. These policies have contributed to a cost decline more than 80%, helping solar PV to become the most affordable electricity generation technology in many parts of the world. However, they have also led to supply-demand imbalances in the PV supply chain. Global capacity for manufacturing wafers and cells, which are key solar PV elements, and for assembling them into solar panels (also known as modules), exceeded demand by at least 100% at the end of 2021. By contrast, production of polysilicon, the key material for solar PV, is currently a bottleneck in an otherwise oversupplied supply chain. This has led to tight global supplies and a quadrupling of polysilicon prices over the last year.
The long-term financial sustainability of the solar PV manufacturing sector is critical for rapid and cost-effective clean energy transitions. The net profitability of the solar PV sector for all supply chain segments has been volatile, resulting in several bankruptcies despite policy support. Bankruptcy risk and low profitability could slow the pace of clean energy transitions if companies are unwilling to invest because of low returns or are unable to withstand sudden changes in market conditions.
Trade restrictions are expanding, risking slower deployment of solar PV. As trade is critical to provide the diverse materials needed to make solar panels and deliver them to final markets, supply chains are vulnerable to trade policy risks. Since 2011, the number of antidumping, countervailing and import duties levied against parts of the solar PV supply chain has increased from just 1 import tax to 16 duties and import taxes, with 8 additional policies under consideration. Altogether, these measures cover 15% of global demand outside of China.
New solar PV manufacturing facilities along the supply chain could attract USD 120 billion investment by 2030. Annual investment levels need to double throughout the supply chain. Critical sectors such as polysilicon, ingots and wafers would attract the majority of investment to support growing demand.
The solar PV industry could create 1 300 manufacturing jobs for each gigawatt of production capacity. The solar PV sector has the potential to double its number of direct manufacturing jobs to 1 million by 2030. The most job-intensive segments along the PV supply chain are module and cell manufacturing. Over the last decade, however, the use of automation and automated guided vehicles has increased labour productivity, thereby reducing labour intensity.
Diversification of supply chains and the decarbonisation of the power sector could rapidly reduce solar PV manufacturing emissions. Domestic manufacturing can reduce manufacturing CO2 emissions if the local electricity mix is less carbon-intensive than in the exporting country. Europe holds the highest potential, given the considerable shares of renewables and nuclear in its power mixes, followed by countries in Latin America and sub-Saharan Africa that have strong hydropower output.
Currently, the cost competitiveness of existing solar PV manufacturing is a key challenge to diversifying supply chains. China is the most cost-competitive location to manufacture all components of the solar PV supply chain. Costs in China are 10% lower than in India, 20% lower than in the United States, and 35% lower than in Europe. Large variations in energy, labour, investment and overhead costs explain these differences. Still, in the absence of financial incentives and manufacturing support, the bankability of manufacturing projects outside of panel assembly remains limited outside of China and few countries in Southeast Asia.
Low-cost electricity is key for the competitiveness of the main pillars of the solar PV supply chain. The diversification of highly concentrated polysilicon, ingot and wafer manufacturing would provide security-of-supply benefits. Electricity accounts for over 40% of production costs for polysilicon and nearly 20% for ingots and wafers. Around 80% of the electricity involved in polysilicon production today is consumed in Chinese provinces at an average electricity price of around USD 75 per megawatt-hour (MWh). This is almost 30% below the global industrial price average. Maintaining competitiveness in these segments requires that manufacturers have access to comparable or lower electricity costs.
Building solar PV manufacturing around low-carbon industrial clusters can unlock the benefits of economies of scale. Solar panel manufacturers can also use their products to generate their own renewable electricity on site, thereby reducing both electricity bills and emissions. Electricity-intensive solar manufacturing could be located near emerging industrial clusters (e.g renewable-based hydrogen), enabling them to benefit from cost-competitive renewable electricity. Meanwhile, economies of scale and vertical integration of manufacturing can reduce variable costs and further increase competitiveness.
The EU strategy on hydrogen (COM/2020/301) was adopted in 2020 and suggested policy action points in 5 areas: investment support; support production and demand; creating a hydrogen market and infrastructure; research and cooperation and international cooperation. Hydrogen is also an important part of the EU strategy for energy system integration (COM/2020/299).
The Fit-for-55 package, presented in July 2021 put forward a number of legislative proposals that translate the European hydrogen strategy into concrete European hydrogen policy framework. This includes proposals to set targets for the uptake of renewable hydrogen in industry and transport by 2030 in the Renewable Energy Directive. It also includes the Hydrogen and decarbonised gas market package to support the creation of optimum and dedicated infrastructure for hydrogen, as well as an efficient hydrogen market. The legislation came into force in 2023 and 2024, respectively.
Investment support has also been provided through the Important Projects of Common European Interest (IPCEIs) on hydrogen. The first IPCEI, called 'IPCEI Hy2Tech', which includes 41 projects and was approved in July 2022, aims at developing innovative technologies for the hydrogen value chain to decarbonise industrial processes and the mobility sector, with a focus on end-users.
In September 2022, the Commission approved 'IPCEI Hy2Use', which complements IPCEI Hy2Tech. It will support the construction of hydrogen-related infrastructure and the development of innovative and more sustainable technologies for the integration of hydrogen into the industrial sector.
The third 'IPCEI Hy2Infra' was approved in February 2024, and supports the development of electrolysers, hydrogen transmission and distribution pipelines, large-scale hydrogen storage facilities and handling terminals.
IPCEI Hy2Move, jointly prepared and notified by 7 EU countries, was approved in May 2024 and will cover a wide part of the hydrogen technology value chain by supporting the development of a set of technological innovations.
With the publication of the REPowerEU plan in May 2022, the Commission complements the implementation of the EU hydrogen strategy to further increase the European ambitions for renewable hydrogen as an important energy carrier to move away from Russia's fossil fuel imports.
The focus of these actions is to accelerate the uptake of renewable hydrogen, ammonia and other derivatives in hard-to-decarbonise sectors, such as transport, and in energy-intensive industrial processes. Scaling up the development of hydrogen infrastructure and supporting hydrogen investments are also identified as key areas to support hydrogen uptake in the EU.
The Clean Hydrogen Partnership (2021-2027) is a joint public-private partnership supported by the Commission, through Horizon Europe. It builds upon the success of its predecessor, the Fuel Cells and Hydrogen Joint Undertaking and includes also the Hydrogen Valleys Platform, an EU led-initiative under Mission Innovation. On 1 March 2023, the Commission and key stakeholders signed a joint declaration on renewable hydrogen research and innovation, committing to step up and accelerate joint action in research, development, demonstration and deployment of Hydrogen Valleys.
The European Clean Hydrogen Alliance was launched alongside the EU hydrogen strategy in 2020 as part of the new industrial strategy for the EU. It brings together industry, national and local authorities, civil society and other stakeholders.
It also hosts the 'Electrolyser Partnership' to bring together electrolyser manufacturers and suppliers of components and materials to achieve a combined annual electrolyser manufacturing capacity of 17.5 GW by 2025 in Europe.
The Hydrogen Public Funding Compass is an online guide for stakeholders to identify public funding sources for hydrogen projects and it provides information on all the EU programmes and funds (2021-2027) that are relevant for the sector.
Hiroki Nakajima, Executive Vice President and Chief Technology Officer, explained Toyota's technology strategy and the direction of future car manufacturing. In addition, he spoke on specific and diverse technologies, including concepts under development, which will help achieve the vision and policies that have been communicated so far. Also speaking were Takero Kato, who has been appointed president of the newly established BEV Factory, and Mitsumasa Yamagata, who is scheduled to be appointed president of the Hydrogen Factory to be launched in July. They elaborated on their respective strategies for the battery EV and hydrogen businesses.
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