Energy security fears over China’s dominance of solar manufacturing

International Energy Agency executive director Dr Fatih Birol said the current energy crisis was “interwoven by many factors, including geopolitics”, referring to skyrocketing gas prices due to the sanctions against Russia.

“We are in the middle of the first global energy crisis,” Dr Birol told the Sydney Energy Forum on Tuesday.

“The world has never witnessed a major energy crisis in terms of its depth and its complexity … I believe we may not have seen the worst of it yet.”

Dr Birol said he also wanted to give a “heads-up” about the energy security implications of China’s global dominance of solar manufacturing, as the energy increases in popularity due to how cheap it is.

He said about 80 per cent of the global supply chain manufacturing for solar comes from China, and this would become 95 per cent by 2025 if all the new manufacturing capacity under construction was considered.

While Dr Birol acknowledged that China had done excellent work in the last 10 to 15 years to bring down the cost of solar, “80 per cent for any country in the world is a big number”.

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“To rely on the entire world, on one single country, is something we all need to think about from an energy security perspective,” he said.

He said one province in China was responsible for about 40 per cent of global manufacturing, with two major factories responsible for about 25 per cent.

“What happens if there is a fire in one of those factories? The entire global supply chain will be affected,” Dr Birol said.

“From that point of view, we think the diversification of the solar supply chains will be important.”

He said three producers around the world were also responsible for more than 75 per cent of the global output of the critical minerals lithium and cobalt.

“These are important for electric cars, for batteries, and again here, diversification will be very important,” he said.
US Secretary of Energy Jennifer Granholm echoed Dr Birol’s concerns.

“We want to make sure that we are not, as nations, under the thumb of petro-dictators,” she said.

“Under the thumb of those who don’t share our values, and under the thumb of those who strategically would like to control aspects of the supply chain.

“We all want to have a large footprint on the supply chain but we also want to make sure we are doing this in partnership with one another.”

Dr Granholm said the global market for products to reduce greenhouse gas emissions was worth around $23 trillion and was an opportunity for making money but could also foster more peaceful relations.

“No country has ever been held hostage to access to the sun, no country has ever been held hostage to access to the wind — they have not ever been weaponised, nor will they be,” she said.

“Therefore our move to clean energy globally could be the greatest peace plan of all.”

Dr Birol said some countries blamed the current energy crisis on clean energy policies.

“This is absolutely wrong, factually and ethically in my view, very wrong and misleading,” he said.

Meanwhile Asian Development Bank president Masatsugu Asakawa said the battle against climate change would be won or lost in the Asia and Pacific, which was now responsible for more than 50 per cent of global greenhouse gas emissions.

He said energy efficiency would be the fastest and lowest cost option for countries to reduce energy demand and to help better manage energy supply disruptions.