Strategies for supply chain risks in energy transition

As nations hasten to transition to clean energy, an unexpected challenge has emerged: reliance on specific countries for the technologies driving this change. In the wake of the Ukraine war and tensions in the Middle East, reliance on fossil fuels has proven vulnerable. Yet, the pursuit of clean alternatives has inadvertently created new risks.

South Korea, for instance, finds itself increasingly dependent on China for energy transition technologies. The country's solar power sector has shifted dramatically, with Chinese-made modules surging from 29 percent of the market in 2023 to 58 percent in 2024, and further climbing to 69 percent by the end of 2024. This rapid dominance of a single foreign supplier marks a stark contrast to domestic production levels.

The implications are profound. Within just two years, Korean solar power plants have seen their production capabilities dwindle. While domestic solar cells once accounted for 35 percent of solar power plants in 2021, that share has plummeted to just 4 percent by the end of 2024. This shift is attributed to the nature of many Korean solar power facilities, which are predominantly small-scale operations under 100 kW. Such plants are price-sensitive and thus vulnerable to the influence of larger foreign manufacturers.

Moreover, the cells used in these solar power systems face their own challenges. More than 80 percent of domestically produced solar power plants are small-scale, making them highly sensitive to price fluctuations. Consequently, the cells manufactured for these facilities are also at the mercy of external market forces and the decisions of foreign producers.

This complex web of dependencies underscores a critical issue: as the world pivots towards cleaner energy sources, the very technologies intended to safeguard against fossil fuel vulnerabilities may inadvertently create new sources of dependence.