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On 6 February, the European Council and the European Parliament signed an important agreement in the fight against climate change. The Net Zero Industry Act (NZIA) sets a standard for the European Union to produce 40% of its expected demand with clean technologies by 2030. This figure includes onshore and offshore wind, hydro and geothermal, as well as solar power. In parallel, the EU’s solar energy strategy aims to increase solar power capacity from the current 263 gigawatts (GW) to almost 600 GW by 2030. This is an increase of more than 140 percent, making solar the EU’s largest source of electricity production. .
However, at present, the European solar power industry is not on track to contribute to this goal. According to the EU Solar Power Map, Europe’s annual production capacity is only 14.1 GW, which corresponds to 25% of the total capacity of solar panels to be installed in 2023.
Achieving solar PV installation targets in Europe is important not only to reduce carbon emissions but also to reduce energy costs. From May to August 2022, 12% of the EU’s electricity would come from solar PV, avoiding a potential €29 billion in gas imports. This is an important factor to consider as Europe’s energy market remains plagued by rising prices and disruption from Russian aggression. Ukraine.
One of the reasons why Europe’s solar power manufacturing industry is in crisis is the falling price of solar panels made in China. These are urgently needed to decarbonize Europe’s energy system. Consistent support from the Chinese government, economies of scale, and innovation have enabled Chinese companies to emerge by a considerable margin as the world’s largest and cheapest manufacturers of solar panels, after years of declining prices across the board. did it. Between 2010 and 2019, the cost of generating electricity from photovoltaic (PV) panels fell by 82%. By 2020, solar power was being dubbed the “cheapest electricity in history,” with the cost of producing solar panels in China dropping by a further 42% from 2022 to 2023.
In 2022, 56% of China’s solar panel exports will go to Europe, accounting for 96% of European panels. In a time marked by geopolitical uncertainty and changing energy dynamics, over-reliance on a single external source for solar PV technology poses risks. A domestic solar PV manufacturing sector could not only strengthen the EU’s long-term energy security, but also reduce vulnerabilities associated with disruptions to global supply chains. There are several options for providing a long-term future for Europe’s highly competitive solar power industry. Forward-looking industrial solar power policies must move beyond potentially counterproductive protectionist measures and focus on promoting innovation, new product development, and local economic opportunities.
The tale of The opinions of two solar power companies, one based in Switzerland and one based in China, are informative about the different situations in each market. It came as no surprise in February this year when Germany’s leading solar panel producer Mayer Berger announced its decision to close its Freiberg factory. After years of losses ($330 million in 2023 alone), the company decided to prioritize production facilities in Colorado and Arizona. The move comes amid growing market pressure against imports of subsidized Chinese-made solar panels into Europe.
In contrast, Trina Solar, one of China’s largest manufacturers, reported operating revenue of 113.5 billion yuan ($15.8 billion) in 2023, up 33.46 percent from 2022. In 2023, China accounted for 81 percent of the world’s solar panel manufacturing. Most of his remaining 19% are also located in Asia, including Vietnam, Malaysia, and India. Importantly, China holds more than 90 percent of the market share even in the early stages of the manufacturing value chain, such as polysilicon, ingots, wafers, and solar cells. China’s solar power manufacturing capacity has more than doubled global demand in 2023.
Europe’s solar power manufacturing industry is appealing to the European Union for urgent support as China expands its already dominant market share. Up to half of the EU’s active solar PV manufacturing capacity will be shut down within weeks, the European Solar Manufacturing Council (ESMC) wrote in January to European Commission President Ursula von der Leyen. warned that there was a possibility that ESMC called on the EU to take immediate steps to save the sector, including reducing price pressures by buying excess stock and further easing state aid rules. If these cannot be done, the letter said, the EU should consider tariffs and quotas on solar power imports from China.
However, the solution is far from simple. EU Energy Commissioner Kadri Simson has ruled out trade measures, and there is political opposition to tariffs in member states. German Deputy Chancellor Robert Habeck, a member of the Green Party, expressed very strong concerns about the imposition of tariffs on solar panels from China due to the impact on prices and the potential for job losses in the solar installation industry. At the same time, Habeck’s efforts to introduce subsidies for domestic solar manufacturers come at a time when Germany’s coalition government is struggling to approve its 2024 budget, with liberals criticizing it at the expense of taxpayers. It is opposed by its coalition partner, the FDP. .
European importers and installers also strongly oppose China’s trade measures, including tariffs on solar panels. Their business, and many jobs in Europe’s solar industry, depend on imports from China.
European solar manufacturers face pressure from an influx of solar panels and components from China, as well as gravitational pulls from the United States leading to capital flight. Meyer Burger’s decision to relocate is consistent with broader plans already announced for 2021. These plans will become more specific in 2023 and aim to take advantage of incentives provided by the US Inflation Control Act, such as the federal government’s Advanced Manufacturing Program. Tax credits provided to solar power manufacturers. A 25% tariff on solar power imports from China will make the United States even more attractive to European solar power producers. US industry also enjoys cheaper electricity than European industry.
However, if the EU wants to significantly reduce its dependence on China, it will need targeted industrial policies that support the development of all stages of the solar PV manufacturing value chain. However, allocating large sums of money to bail out European solar companies and try to build significant production capacity early in the value chain is a poor use of public funds, especially It may not make a big difference in the short term. Currently, there are only a few manufacturers in Europe responsible for these early stage production processes, which are capital and energy intensive.
While the EU’s policy priorities should clearly be to promote the cost-effective deployment of solar PV and meet climate targets, EU institutions and Member States have a strong desire to conditions for long-term competitiveness and sustainability.
first step In strengthening Europe’s solar power industry, under the new NZIA, at least 30 per cent of renewable energy deployed through auctions will be subject to qualitative Essential criteria other than price must be met, such as environmental and social parameters. These non-price standards have already been adopted in wind power development and should be extended to solar power as well.
Second, member states can invest in new solar PV manufacturing plants, subject to approval from Brussels. In early February, Italy announced an investment of nearly 90 million euros to boost production at the Enel 3Sun Gigafactory in the city of Catania. The factory’s innovative concept combines research with cell and panel production. Italian Prime Minister Giorgia Meloni has vowed to boost renewable energy in the country’s south to address decades of underdevelopment and wants Italy to be competitive in solar power manufacturing. He said it was necessary to do so again. The Italian government’s investment builds on a €560 million monetary package agreed in January 2024 between the European Investment Bank (EIB) and the Italian banking group. The EIB has financed several solar power plants, but financing solar PV manufacturing is a new approach.
Third, European support should target research, development and innovation. Through targeted long-term support to more than 20 existing solar cell research and development centers, the focus could be on next-generation solar cell technologies such as high-efficiency perovskite solar cells (thin-film devices built with layers of perovskite materials). There is sex. All over Europe. Europe is unlikely to be able to compete in mass production of low-carbon technologies like solar power, but it can and should lead in innovation and next-generation technologies. This is your competitive advantage.
Fourth, renewables already produce 44% of electricity in the EU, and the total contribution of renewables to energy (including transport, industry and heating) will almost double by 2030. It is expected. Europe needs to work hard to develop and manage an energy system that: Renewable energy dominates and we have already taken important steps in this direction. If this happens, we will be in a good position to export the technology and capabilities that have made this possible.
Fifth, it is increasingly necessary to adapt the solar PV manufacturing industry to circular economy standards. Expected EU ecodesign and energy labeling policy measures for photovoltaic products will set minimum standards for circularity, energy performance and environmental sustainability of photovoltaic products placed on the European market . Measures and product standards that encourage the adoption of sustainable practices in product design, manufacturing, and recycling of photovoltaic components will promote long-term industry sustainability and competitiveness.
Finally, the European Commission is working to ban products produced with forced labor. On 5 March 2024, negotiators from the European Parliament and the European Council reached a provisional agreement. Since silicon from Xinjiang Uyghur Autonomous Region falls under this policy, it may become a non-tariff trade measure that restricts imports of solar panels from China. EU countries and businesses will have three years to start applying the new rules. Companies that import solar power from China will need to improve their supply chain due diligence programs. Although the ban has no immediate impact, it will help improve traceability in the solar power supply chain and improve human rights and sustainability standards.
Whether as a result of protectionist policies, trade disputes, forced labor bans, or local content requirements, there are several risks associated with increasing the cost of solar panels in Europe and thus slowing their adoption. It is not yet clear how the European Commission will decide on Chinese solar panels coming to Europe, but support for European companies is likely. Indeed, there are indications that the EU expects member states to take action through joint declarations and national aid measures.
The International Energy Agency estimates that panels produced entirely in Europe from start to finish will be 140% more expensive than their Chinese equivalents in 2028. As a result, the European Union’s ambitious decarbonization targets may become more costly and difficult to achieve, and for a longer period of time. Japan is dependent on imports for fossil fuels for power generation. However, the concentration of solar power generation in China is likely to continue for some time, leaving Europe dependent on imports of Chinese solar power to meet its climate goals, but EU governments are looking to improve their competitiveness and competitiveness. We can provide the right conditions and support policies to ensure their recovery. Innovative solar power manufacturing industry.
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