The EU Parliament has overwhelmingly passed a resolution accusing China of crimes against humanity, mass sterilization, and asserting a risk of genocide in Xinjiang – where nearly half of the world’s polysilicon supply comes from. The resolution also criticizes UN Human Rights Chief Michelle Bachelet, whose recent visit to Xinjiang was inconclusive on the matter.
Within the EU, the Parliament does not wield real power. This Parliament instead calls on EU Commission, which does wield power, to take action – to quote – “18. Calls on the Commission to propose an import ban on all products produced by forced labor and on products produced by all Chinese companies listed as exploiting forced labor; reiterates its position in favor of an ambitious corporate sustainability due diligence directive;”.
So this Parliament resolution is not a definitive or immediate step towards new sanctions or interruption of imports. The decisionmakers of the EU Commission have previously urged caution on banning “forced labor” goods – and so the question is whether the EU Parliament “lawmakers” can pressure them into doing so.
Having seen the EU’s willingness to shoulder the burden of sanctioning Russian gas, the possibility of Xinjiang sanctions has to be taken seriously. It would only be following the example set by the US.
Most wafer, cell and module capacity in China is located in the heartlands of the country, but 45% of existing global polysilicon infrastructure – is located in Xinjiang, with another 35% in the other northern provinces. Since the sanctions threat became evident in recent years, new production capacity has largely been planned for other peripheral provinces such as Inner Mongolia, so Xinjiang could fall to 25% of the world total. If Inner Mongolia is sanctioned, then you are back up to sanctioning at least 65% of world capacity come 2025, probably more. Some factories are planned for Yunnan in the South West, at least.
As such one crucial element of these allegations and sanctions is whether they are levelled against only the Xinjiang Autonomous Region, or whether they are levelled against China’s entire northwestern periphery. An EU Parliament resolution adopted in 2020 included the allegation that forced-labor factories exist outside of Xinjiang, with Uyghurs and other Islamic ethnic groups transported to locations beyond the Autonomous Region, but the new one mentions only Xinjiang itself.
In the first four months of 2022, China exported 49 GW of photovoltaics, of which Europe was the destination for almost exactly 50% – 24.4 GW. That’s more than double the 10 GW from the same period last year, and imports continue to markedly increase on a monthly basis, with 8 GW in April alone. Perhaps Europe will import an astonishing 80 GW of solar from China this year then – or perhaps it would like to, but supply is tight and Chinese domestic demand high, so it will only manage 60 GW – pointing to 2023 installation figures of 60 GW before counting supply from elsewhere. Either way these are monumental figures compared to the 25 GW or so installed back in 2021, marking a 50% increase from the approximately 50 GW demand which Europe has in 2022.
The Green grouping in the EU Parliament supported the anti-forced-labor resolution as much as any, despite the menace it poses to Europe’s supply of photovoltaics. Heidi Hautala MEP, Vice-President of the Parliament and the Greens/EFA member for the Internal Trade and Human Rights Committees, stated that “Under pressure from the Parliament, the Council and the Commission had to withdraw their support for the investment agreement with China. And today, the European Parliament is signaling that it no longer wants the EU to be complicit with the Chinese totalitarian regime, which has been perpetuating a crime against humanity in the Xinjiang province for five years”.
Considering the EU and UK have sanctioned the supply of gas and to some extent oil from Russia, and plan to accelerate solar deployment to 740 GW by 2030 to compensate, it is almost unimaginable that these countries will shut down Chinese solar panel imports entirely in the way that the US’ “rogue” Department of Commerce has just done for two and a half months. There absolutely could however be new attempts at tracing supply chains within China and trying to discriminate between “good Chinese solar” and “bad Chinese solar”.
It will not be easy to trace “bad solar” because polysilicon is the furthest upstream segment of the supply chain, with even the largest players having mismatches in their production capacity on wafers, cells and modules and therefore trading back and forth. The Chinese state has forbidden companies from co-operating with supply chain tracing. An attempt could nonetheless be made as a face-saving exercise, then allowed to gradually peter out without doing too much damage. The EU will leave it to individual nations to apply anti-forced-labor customs actions, which will help.
The EU, US, and Australia have all adopted at least token supply chain tracing measures over the course of the past three years, which have not been exhaustive and have not done much to obstruct imports – though a 40 MW impounding of LONGi modules in the US in the first quarter was noteworthy.
If the EU does pursue strict sanctions on solar panel imports, then the question is whether Europe can build its own full solar supply chain, which will need either domestic polysilicon production or non-Si semiconductors.
The European Solar Initiative proposed by SolarPowerEurope and InnoEnergy aims for 20 GW in 2025, “unlocking” $42 billion in annual GDP activity, with the Solar Manufacturing Accelerator being one foundation of this. The Accelerator is something which clearly needs to be given billions of dollars annually if it is to foster that 20 GW scale, let alone the 100 GW which the “post-Russia” EU needs.
In the meantime, it is China which has invested tens of billions into polysilicon, ingots, wafers, cells, and modules every year. When the biggest Chinese manufacturer LONGi says that annual worldwide installations could reach 1,000 GW per year in 2030, the statement can’t be laughed off – not if you have been watching China’s factory-building efforts. We don’t expect demand or available grid capacity to reach that scale until around ten years later than that, but on the manufacturing end – it could be done.