China produces most of the world’s solar panels. However, this concentration of industry should not be particularly concerning.
Solar panel production cannot become a larger global industry than about $400 billion per year. This is because they are so cheap and long-lasting. For comparison, the global car industry is seven times larger. Striving for some local panel production can be pursued for strategic reasons, but it will not create a large new local industry. Most of the value of the solar industry is in the host country, not in the imported solar panels. Local content includes project engineering, transport, land, fencing, support structures, wiring, power conditioning, maintenance, substations, transmission, energy trading, and in increasing the share of renewables in the national energy mix. Large-scale pumped hydro energy storage does not rely on imported batteries.
Size of the future solar industry
So how do we estimate the upper bound on the size of the global solar panel industry? The first step is to estimate how much solar energy will eventually be needed.
Clean electricity from solar and wind can be used to decarbonize energy by electrifying transport via electric vehicles, heating & cooling via heat pumps, and industrial heating via electric furnaces. The chemical industry can be decarbonized by using clean electricity to produce hydrogen for the production of ammonia, metals, plastics, ceramics, and synthetic aviation and shipping fuel.
Thus, solar panels, with support from wind energy, can replace fossil fuels economy-wide.
Global average electricity production is currently 3.6 MWh per person per year. Electricity production in Europe, North America, China, Japan, Singapore and Australia is in the range of 6 MWh to 12 MWh per person per year. This will need to double or triple to decarbonize transport, heating, industry and aviation.
Let us assume that there are 10 billion people in mid-century, and optimistically assume that all people are both fully decarbonized and affluent. Let us further assume that clean electricity production reaches 20 MWh per person per year, with a global total of 200,000 TWh per year.
We assume that solar PV provides 80% of this energy, with the balance being provided by wind, hydro and other clean energy technologies. For this task, we require about 100 TW of solar PV assuming an average capacity factor of 18%. This capacity factor assumes a mix of rooftop, floating, ground-mounted and tracking solar, and takes account of the fact that three-quarters of the global population lives in the sunbelt, lower than 35 degrees of latitude.
The wholesale price of solar panels has fallen below $0.12/W, which is equivalent to about $25 per m2. We assume that solar panel cost eventually declines to $0.10/W and that panels have an average lifetime of 25 years. The steady-state annual requirement for solar panels is, therefore, $10 trillion divided by 25 years, or $400 billion per year.
For comparison, global gross domestic product is about $100 trillion per year, which is 250 times larger, and could be much larger by mid-century. Spread across 10 billion people, $400 billion per year for solar panels amounts to only $40 per person per year. This is a tiny fraction of the annual income of an affluent person. In other words, solar panels are very cheap and long-lasting.
Trade disruptions
Electrification of everything via solar and wind eliminates vulnerability to disruption of fossil fuel supply for vehicles, heating & cooling, industry and aviation.
If shipments of solar panels from China were halted because of trade disruption, war or pandemic then a slowly unfolding shortage of energy could result. It would take several years before failure to supply solar panels became serious. This is fundamentally different from disruption to supplies of coal, oil and gas, which causes economic disruption on a time scale of weeks.
There would be ample time for other countries to commence production of their own solar panels, albeit at a somewhat higher cost. There is nothing about solar panel production that is intrinsic to China.
Solar confers a high degree of economic resilience to trade disruption by getting rid of fossil fuels. If solar panel supply from China abruptly ceased it would be an annoyance rather than a crisis.
The solar advantage
Solar photovoltaics and wind energy are tracking towards the domination of global electricity production. In 2023, solar and wind provided 80% of global new generation capacity. Also in 2023, the annual global net new deployment of solar capacity was double the sum of all the other energy generation technologies combined. Global solar capacity and solar generation are doubling every three years.
Solar is effectively unconstrained by cost, land availability, materials availability, or environmental and social impact. No other energy technology can match this.
The solar industry is based on the silicon solar cell which was invented in 1954. Silicon is the second most abundant element in the Earth’s crust (27%) after oxygen and is inexhaustible. Recently a new cell efficiency of 27.3% was announced by Longi. Commercial solar cells are improving by about 0.5% per year and full-size solar panel efficiency may exceed 26% around 2030. Improved cell efficiency reduces costs throughout the value chain by increasing energy output per unit area.
The power and area of 26% efficient solar panels required per affluent person under our forward-looking scenario (20 MWh per person per year) are 10 kW and 40 m2 respectively. Panel recycling is not a large task since only 1.6 m2 per person of panel will retire each year.
Authors: Prof. Ricardo Rüther (UFSC), Prof. Andrew Blakers /ANU
ISES, the International Solar Energy Society is a UN-accredited membership NGO founded in 1954 working towards a world with 100% renewable energy for all, used efficiently and wisely.
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