2022 was a disruptive year for energy. The invasion of Ukraine, disruptions to energy production and the reopening of economies following years of COVID-induced lockdowns saw coal, gas and oil prices rise dramatically.
Despite being a major energy exporter, Australia likewise saw an energy crisis in mid 2022 when wholesale electricity prices on the National Electricity Market exploded. High energy costs in Australia are having a significant downstream effect on households as a result of rising inflation, exacerbating the cost of living, and putting a pinch on domestic manufacturing and production. A key proposed solution to the ongoing energy crisis is the creation of a domestic renewable energy industry in Australia. Australia is blessed with high-quality natural resources and has some of the highest average solar radiation levels in the world.
In order to meet global decarbonisation goals, the International Renewable Energy Agency estimates that approximately 90 per cent of global electricity generation will come from renewable sources. Total solar generation capacity will need to increase 18-fold (from approximately 0.8 terawatts to approximately 15.5 terawatts) by 2050 to meet the International Energy Agency’s Net Zero Emissions Scenario. To help Australia achieve its renewable generation goals, CRU was recently involved in creating the Australian Silicon Action Plan, published by CSIRO and PwC, which details the potential for Australia to develop its own solar PV supply chains. The study identified that there is an excellent opportunity for Australia to not only build up its domestic renewable energy generation capacity, but to also improve its own energy security and create new economic opportunities by investing in a domestic solar supply chain.
The key raw material for the production of solar panels is quartz. Quartz is abundant and cheap to mine; however, in order to be used for solar modules, it must first be smelted into silicon metal using a submerged arc furnace, and then further refined into polycrystalline silicon (polysilicon), which is produced in batch reactors using the Siemens process. Both these steps in the silicon chain are highly energy intensive, with silicon smelting requiring about the same amount of electricity per tonne as aluminium (approximately 13 megawatt hours per tonne) and polysilicon processing requiring an additional four to five times that amount (approximately 60 megawatt hours per tonne).
New market entrants are not only faced with very high energy demands, but also with securing a supply chain of suitable reductants to be used in silicon processing. Silicon metal production requires reductants with very low ash content. The presence of ash can introduce deleterious impurities such as phosphorous and boron, which are difficult to remove and place a higher burden on the purification process, so reductant quality and consistency requirements are extremely high. Silicon metal production in Australia is limited to Simcoa’s Kemerton plant in Western Australia. To meet its demand for high-quality reductant, Simcoa uses a blend of charcoal from local native timbers and lowash coal from Colombia. Despite the stringent quality requirements for raw materials, the hurdles faced by new silicon metal producers are not insurmountable and could easily be overcome in Australia.
The true hurdle to the solar value chain lies in the production of solar-grade polysilicon, which presents a significant barrier to entry for new producers. Polysilicon is among the purest man-made substances, with solar-grade polysilicon being above 99.9999 per cent (or six nines) purity. Semiconductor-grade polysilicon requires even higher grades – above 99.9999999 per cent (or nine nines) purity. Due to the speed of innovation and development in the industry, new polysilicon producers would be wise to target their purity design at 10 nines and above to remain competitive from a quality standpoint. Australia currently produces no polysilicon, so its production will be a key challenge for Australia moving forward, compounded by the lack of expertise to build a polysilicon industry domestically.
Current production of polysilicon is dominated by Chinese producers, who account for approximately 80 per cent of global polysilicon production. The other 20 per cent are mainly producers located in the United States, Japan, South Korea and Germany, who could represent highly experienced partners for the development of a polysilicon sector in Australia. In addition to dominating polysilicon production, Chinese companies also dominate the supply chains for the specialist equipment required by polysilicon plants, giving China a high degree of control over the industry today.
Germany’s ‘Q Cells’ once dominated the global solar supply chain, employing thousands of people and ancillary businesses in an area known as Germany’s Solar Valley. This changed with China’s entrance into the World Trade Organization, which, coupled with favourable government incentives and loans to new domestic solar companies, saw a large influx of American capital into China. To their credit, these Chinese companies made significant leaps in research and development, creating large efficiency gains (such as reductions in kerf losses), which have led to substantial cost reductions across all stages of the solar value chain.
Today, China’s dominance over solar supply chains is being seen in a negative light. New legislation such as the Uyghur Forced Labor Prevention Act 2021, which restricts the importation of goods from Xinjiang, China, where approximately 50 per cent of Chinese polysilicon is produced, will test the ability of the West to ensure a steady supply of solar PV panels. The dilemma in the West is how to balance moral and ethical concerns with energy security needs and decarbonisation goals.
Despite the numerous challenges for Australia in achieving its decarbonisation and energy security goals, one thing is clear: more investment is required into those critical minerals that are essential for technologies that enable the green energy transition. This includes silicon and polysilicon production, which are essential for the solar value chain. For Australia to realise a successful solar industry, a pragmatic approach from government is required to ensure that a domestic solar value chain has access to relevant expertise, equipment and incentives.
