The ‘Future Made in Australia’ plan for solar panels relies on a crucial ingredient: Help from China

May 6, 2024
Production of solar cells - working robot in the production line with a finished photovoltaic cell

Twenty-three years ago, a Chinese-Australian solar scientist moved from Sydney to Wuxi to build China’s solar panel manufacturing industry from scratch, using technology developed in Australian universities.

Shi Zhengrong became the world’s first clean energy billionaire, nicknamed “The Sun King”. China went on to dominate global solar panel manufacturing and, thanks to a mix of innovation and cut-throat competition, made solar the cheapest source of electricity in history.

Australian science graduates filled the top technology roles at the biggest Chinese solar companies. And a solar cell design developed in Australia became the global standard.

Meanwhile, Australia mostly stopped building its own solar panels.

Now, with the federal government preparing to ramp up Australia’s own tiny solar manufacturing industry, Dr Shi sees the story coming full circle.

“It’s an exciting opportunity for Australia,” he said, speaking to the ABC from China.

“I think you definitely need collaboration [with China], but I think Australia is in a better position compared to 20 years ago in China.”

Where China once built an industry from Australian innovation, Australia now needs China’s help to do the same.

To build low-cost panels at scale, experts say Australia needs access to the production line technology and manufacturing patents China has developed over the past 20 years.

So, what does it take to build a solar panel?

And why would Chinese companies share their solar-manufacturing secrets?

‘They have a 20-year technological innovation advantage’

When Prime Minister Anthony Albanese last month announced $1 billion in government funding to boost the number of solar panels made in Australia, he chose a deeply symbolic location.

The coal-fired Liddell power station in the Hunter Valley permanently closed last year, the first of four in the area to be shut down over the next decade.

Mr Albanese said the $1 billion Solar Sunshot program would generate clean energy jobs and funnel investment into the traditional coal-mining region by bringing manufacturing back to Australia.

“We’ve created the innovation and seen all the value added offshore,” he said.

“We missed the opportunities. We’re not going to miss the opportunities of this generation.”

The public reaction in the weeks since has been mixed. Many energy experts welcomed the plan as a way to ensure supply of a critical energy resource (solar will soon generate most of Australia’s electricity) and carve out a slice of a growing global industry.

But some economists and the federal government’s own Productivity Commission warned it could lead to the government wasting money by subsidising the production of panels that China can make more cheaply.

At the heart of the debate is an old and familiar question.

How can Australian manufacturers, governed by tighter regulations and paying more for labour, compete with imported goods?

The answer, clean energy experts say, is to change the question.

“It’s about what is the global supply chain and where is it sensible we play a part?” Renate Egan, executive director for the Australian Centre for Advanced Photovoltaics and professor of engineering at UNSW, said.

Australia needs to work with China, including welcoming Chinese solar manufacturers into Australia, Professor Egan said.

“It’s the only way to do it, they have a 20-year technological innovation advantage over the rest of the world.”

Australian solar pioneer Muriel Watt agreed.

“China has spent the last 20 years really pushing hard on their R&D and they have by far the best technology,” Dr Watt said.

“We’ve left it really late, we’re starting from scratch for everything.”

How to make a solar panel from sand

There are broadly four stages to building a solar panel from scratch:

1.Converting rock quartz and sand to highly refined polysilicon
2.Melting the polysilicon into ingots and then cutting them into wafers
3.Cleaning, etching, coating and printing the wafer to create a solar cell
4.Assembling the individual cells into a single module or solar panel
Of these four stages, steps one and three are the most technically advanced.

Australia’s only solar manufacturer, Tindo Solar, designs and makes modules from imported components.

These locally assembled panels represent a mere one per cent of the total number of panels installed in Australia each year.

So where in the supply chain should Australia focus its manufacturing efforts?

The Australian Renewable Energy Agency (ARENA) last year funded the Australian Photovoltaics Institute (APVI), working with Deloitte and a group of key industry stakeholders, to investigate the feasibility of Australia setting up its own solar manufacturing industry.

The resulting Silicon 2 Solar report published in February outlined a “credible and feasible” pathway for Australia to build a domestic supply chain.

It proposed doing this at a relatively modest scale by global standards, with 10GW of polysilicon production and 1GW to 5GW across the other three steps.

All up, this would require $3.2 billion of government financial support over 10 years.

For comparison, global solar PV manufacturing capacity is expected to reach almost 1,000 GW in 2024.

Australia installs about 5GW of solar annually and this figure could increase to as much as 50GW as fossil fuels are phased out and new energy-intensive industries, like green hydrogen, come online.

Australia should initially focus on the first and last steps of the supply chain: polysilicon refining and solar module assembly, Dr Watt, who co-authored the Silicon 2 Solar report, said.

“You can start to get a module assembly line done within two years but for a polysilicon [refinery] you’re looking at at least five years.”

Australia has several advantages in manufacturing solar panels, Dr Watt said.

1.A projected abundance of clean energy, which allows for solar manufacturing with low embedded carbon
2.Lots of raw materials used in solar panels, like the sand and quartz that’s refined to polysilicon
3.Excellent solar research institutions
4.Strong relationships with China’s solar industry, developed through two decades of research collaboration

Another of Australia’s advantages is that it’s not China, Dr Watt said. The US, India and Europe are also ramping up solar manufacturing to reduce their dependence on imported Chinese panels. To do this, they’re looking for sources of polysilicon outside of China.

“The Europeans and the Americans don’t want to buy the Chinese product,” Dr Watt said.

“If we can work with them to set up in Australia then we have a better opportunity in those value streams than the rest of the world does.”

Chinese companies ‘interested’ in manufacturing in Australia: Sun King

To complicate the picture, early last year the Chinese government mooted banning the export of technology used to make solar panels, in order to maintain its global dominance in the solar industry.

The ban would potentially apply to technology used in ingot-casting moulds to construct the wafers that are pieced together to create solar cells.

“We’ll have to work hard to get the confidence of China to import production lines,” Dr Watt said.

“We’re hoping our good relations will be really useful here because so many [in the Chinese solar industry] come and go to Australia.”

Aside from ingot and wafer production, Australia may also need Chinese expertise to refine polysilicon and manufacture solar cells at scale, Professor Egan, also a co-author of Silicon 2 Solar, said.

“I would expect we would do it in collaboration with a partner from China,” she said.

Tim Buckley, director of Climate Energy Finance, agreed.

“I see manufacturing [intellectual property] as a challenge but also an opportunity,” he said.

“This is a way of enhancing collaboration with China.”

So why would China, which appears to be wary of losing its global dominance in solar manufacturing, share its production-line secrets with Australia?

One answer is that Chinese companies are looking to diversify their own supply chains and bypass the tariffs countries like India and the US have placed on Chinese-made panels.

It’s in their commercial interests to not confine their solar manufacturing to China, Dr Egan said.

“I think there’s an appetite in China itself to diversify.

“The companies in China have shareholders and they operate like companies anywhere else in the world. They want security of supply and access to markets.”

Dr Shi said Chinese companies were “interested in analysing the opportunity” of manufacturing in Australia, given Australia already imports most of its solar panels from China and the two countries have a long history of research collaborations.

“When you start from scratch you need support and partners, you need a supply chain and engineering support and talent. Gradually by practising you will start to build local capabilities.”

Chinese manufacturing help may amount to Chinese ownership of solar manufacturers in Australia.

Dr Watt acknowledged this could be politically sensitive.

“You can see the politics the minute someone announces it’s going to be a fully Chinese company,” she said.

“Although we seem to be quite happy having all sorts of other countries own our water supply and pipelines and everything else.”

While preparing the Silicon 2 Solar report, Dr Watt and her co-authors approached Chinese solar manufacturers, to ask them if they’d consider expanding to Australia. After initial surprise, the response was favourable.

“They’ve set up in Vietnam, Malaysia, Indonesia as a means of diversifying, but they hadn’t thought about Australia,” she said.

“They went, ‘Oh well, you didn’t seem to be a manufacturing country. You don’t make anything.'”

Without government support, SunDrive may go offshore

Whether Australia does become a solar manufacturing country could partly depend on the fate of the Sydney-based start-up SunDrive.

Founded in 2015 by two UNSW graduates, it quickly became a jewel in the crown of the Australian solar industry, receiving significant government research funding and winning the backing of high-profile investors, including Atlassian co-founder Mike Cannon-Brookes and former prime minister Malcolm Turnbull. Dr Shi, also an alumni of UNSW, is its chairman.

SunDrive’s key innovation was to develop a patented method to replace the use of silver in solar cells with copper, which is cheaper and more abundant. The result is a solar cell that costs less and generates more electricity, SunDrive said.

It’s built a 20MW solar-cell production line in South Sydney and plans to build a commercial-scale factory at the site of the Liddell power station in the Hunter Valley.

The Liddell factory will have a capacity of “hundreds of megawatts”, the company’s chief commercial officer Maia Schweizer said.

“We’ll go as big as we possibly can, while still being able to sell into the Australian market,” she said.

But the company has even greater ambitions. Partnerships with other manufacturers, including in China, “opens up an addressable market of hundreds of gigawatts for us globally,” Dr Schweizer said.

SunDrive needed at least two things to happen to build its Liddell factory in Australia, she said.

The first was ongoing support from Chinese solar companies.

“We’ve had extremely strong and positive relationships with Chinese companies … and we expect that to continue.

“We will be absolutely be counting on that to make this first factory a success.”

The second factor was government financial support. Without this, Dr Schweizer said, SunDrive may build its first factory overseas.

Countries such as the US are offering hefty subsidies to entice domestic solar manufacturers.

“Ultimately our investors want to see us actually launch and grow and succeed,” Dr Schweizer said

“And so we would look at where would be best to do that.”

If that happens, Australia would have once again created the innovation and seen all the value added offshore.

US investment ‘vortex’ sucking funding away from Australia

On Tuesday this week ARENA opened a six-week process of public consultation on the design of the $1 billion Solar Sunshot program.

Tindo Solar CEO Richard Petterson said Australia should act quickly to set up the scheme. Europe, the US and India are establishing their own solar manufacturing industries and looking to secure supply chains.

If Australia takes too long, “They’ll say, ‘We don’t need you anymore.'”

“I think it’s folly to take any longer than we are.”

Tindo, which has been making solar modules in Australia for 14 years, operates a 150MW factory in Adelaide and recently unveiled plans for a 1GW plant in eastern Australia.

But attracting private investment for the $100m “gigafactory” has proved a challenge, Mr Petterson said.

The US Inflation Reduction Act unleashed billions of dollars in clean energy funding and generated an investment vortex that sucked in capital from around the world. This has made it harder to fund clean energy ventures in Australia.

“It’s not reasonable to ask private industry to compete by itself against other government-supported industries,” Mr Petterson said.

Without financial help from Solar Sunshot, the Tindo gigafactory won’t get built, Mr Petterson said.

He estimates the factory’s economies of scale would allow Tindo to make modules 10–15 per cent cheaper than it does already.

This will make the Australian product about the same price as imported premium-quality Chinese-made panels.

“Why can’t we make our own panels?” he said.

“If you apply the argument that we can’t, as we’ve seen over the past 30 years, you end up making less and less things onshore.

“If we keep applying it we’ll have almost no industry here.”


Republished from ABC Science, April 24, 2024

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