Industry leaders sound alarm over need to broaden supply chain of renewables

As Europe scrambles to replace Russian natural gas following the war in Ukraine, officials caution of similar risks in concentration of renewable energy inputs in a few countries

A solar power plant in Zhejiang Province. China controls more than 80 per cent of global solar panel manufacturing. Reuters

The global energy crisis sparked by war in Ukraine has underscored how parts of the renewables supply chain might face similar struggles if not quickly diversified, energy executives told the Reuters NEXT conference this week.

Europe has scrambled to replace natural gas from Russia, its primary supplier, following the February invasion of Ukraine, casting a spotlight on the region's over-reliance on a single gas source.

“Out of this crisis, you learn that there are many other things that might follow this same pattern,” said Francesco Starace, chief executive of Italy's Enel, speaking at the conference on Thursday in New York.

Mr Starace noted how solar panels are produced overwhelmingly in China, saying that, and the manufacture of other energy components critical to transitioning from fossil fuels, are potential problem areas.

Enel is investing in manufacturing solar panels in Europe and in the US to hedge against the risk of a single-source supply chain, Mr Starace said, adding that he was aware of other companies following suit. He said the company is currently deciding between four different US states to site its planned factory.

“It is now the case that both in Europe and in the US, you have regulation and laws that kind of make it easier and more economically appealing to do this reshoring,” Mr Starace said.

China controls more than 80 per cent of solar panel manufacturing, according to the International Energy Agency, as well as an outsized share of lithium and other metals needed for battery production.

The head of China's Zijin Mining Group Co, which has already spent $16 billion buying three lithium mines over the past year, said at Reuters NEXT that his company expects to continue to move ahead with investments despite record-high lithium prices expected to halve by the end of 2025.

Expansion of renewables, including solar and wind, as well as battery storage, is seen as critical to energy transition efforts to reduce CO2 emissions and slow the effects of climate change.

South Africa, the most industrialised country in Africa, will need to add more than 50,000 megawatts of new power generation capacity to help meet demand and stabilise its grid, Brian Dames, chief executive of African Rainbow Energy & Power, said at a Reuters NEXT panel on Wednesday.

“Most of that is going to be renewables,” Mr Dames said.

That nation is aiming to slash the use of coal in its power generation to about 38 per cent by 2031, while ramping up wind, solar and gas generation to around 47 per cent during the period, according to a plan presented to parliament by state utility Eskom.

Egypt, which recently hosted the Cop27 UN climate talks, expects to award deals next year to build 21 water desalination plants in the first $3 billion phase of a programme that will draw on cheap renewable energy, said Ayman Soliman, the chief executive of the country's sovereign fund, during a separate Reuters NEXT discussion.

The bottlenecks caused by the war in Ukraine along with the Covid-19 health crisis threatens to delay large-scale pushes to boost clean power generation and storage as well as the operations of smaller climate-focused energy start-ups.

“Getting electronic components, especially power electronic components that are going into battery installations, and inverters, and electric vehicles — those are still in very high demand,” said Sophia Wennstedt, chief executive of Chicago-based Blip Energy, which focuses on battery-based home energy storage systems. She said the bottlenecks are a top concern for the coming year.