Read more to uncover the answers and discover our #MakeSolarEU campaign
Why does European solar manufacturing matter?
Europe is installing more solar than ever. In 2022, the EU installed over 40 GW of solar – twice as much as was installed in 2020.
From a total solar fleet of around 200 GW today, the EU is aiming to have 750 GW of solar capacity by 2030.
Solar is critical for Europe’s energy security and climate goals. The UN Intergovernmental Panel on Climate Change identifies solar as one of the most feasible and cost-effective methods to decarbonise the economy.
The European Commission calls solar the ‘kingpin’ of REPowerEU – the continent’s effort to get off Russian gas. Solar panels are even featured prominently on a REPowerEU banner at the European Commission headquarters.
Given the critical role of solar in geopolitical resilience, advanced economies around the world are acting on the strategic importance of solar supply chains:
Canada
The Canadian Federal Budget of 2023 offers a 30% refundable Investment Tax Credit for investment in machinery and equipment used to manufacture clean technology - including solar.
China
Their industrial policy in the last decade has made China the world's leading manufacturer of solar components. China has invested more than US$50 billion in new PV capacity since 2011 - ten times more than Europe.
As of 2022, China supplies 80% of the world's solar PV material.
India
Since 2018, India has promoted local manufacturing of PV modules through its production-linked incentive (PLI) scheme - equalling around US$3.2 billion.
In 2023, Indian cell and module manufacturing reached 6.6 GW and 38 GW capacity respectively. Analysts predict annual manufacturing capacity will grow to 110 GW by 2026.
Turkey
Turkey the world's fourth biggest solar manufacturer, with around 8 GW of capacity in 2022. The Turkish government is aiming to join the top three manufacturers and deliver over 9 GW of solar manufacturing in 2023.
US
In August 2022, President Joe Biden announced the Inflation Reduction Act. From the SEIA, the IRA establishes two credits for solar manufacturers;
- A 30% investment tax credit (Section 48C) for eligible investment costs in facilities and equipment and
- A manufacturing production credit for certain components based on the volume of product manufactured.
USD 10 billion dollars are allocated for the Section 48C tax credits, and up to USD 6 billion dollars can support projects on land which is phasing out coal activity.
Why aren't there more solar manufacturers in Europe?
There are two key reasons - energy costs and complex financing rules.
European solar manufacturers face energy costs two times higher than their competitors in China, and three times higher than those in the US.
Europe has retained key elements of the supply chain, like polysilicon and inverters, but energy-intensive cells, ingots, and wafers, prove challenging to reshore. Explore the interactive graph here.
Energy costs in US
20
US$ per kW
Energy costs in China
30
US$ per kW
Energy costs in EU
60
US$ per kW
Tackling the energy costs of solar manufacturing
Read the letter
While other geographies offer tax credits or direct state support, the landscape in Europe has always been trickier.
To protect fair competition between EU member states, ‘State Aid’ rules made it difficult for member states to subsidise their industries.
Industries then rely on EU-level funding - like the Innovation Fund. The Fund is being updated, but has proved lengthy and complex in the past. In the second large-scale call for funding, only 16 out of 139 projects recieved funding, and the timeline from submission deadline to receipt of grant is more than 12 months.
Enel Green Power were the only solar manufacturing beneficiary under the Innovation Fund's 2nd large scale call.
Their TANGO (iTaliAN pv Giga factOry) project, in Catania, Sicily, is set to become Europe’s largest factory producing high-performance bifacial photovoltaic modules. The total investment in the creation of the 3 GW production facility is around € 600 million, with EU funding in the amount of nearly € 118 million.
How do we bring solar manufacturing back to Europe?
We fully support the draft EU Net Zero Industry Act's (NZIA) proposed target of 30 GW of solar manufacturing capacity in the EU by 2030.
We're working together with our partners at the European Solar PV Industry Alliance (ESIA) to deliver that goal.
European Solar PV Industrial Alliance
Manufacturers, developers, policymakers, and the finance community coming together to reshore European solar manufacturing.
Discover ESIA
That 30 GW goal should be achieved at each stage of the value chain, from raw material processing like polysilicon to enabling technology like inverters. It's important that the NZIA takes a full value chain approach.
Inverters Explained
Setting an EU inverter manufacturing target. Ensuring harmonised technical standards. Pairing inverters and non-firm grid connections to support the grid.
Discover the brain of the solar systemThe NZIA also proposes a change to the way national governments procure their renewable energy projects.
Usually a government will put to tender for a certain amount of renewable energy generation. Typically, these type of auctions are designed for the government to select the cheapest bidding project.
The NZIA would require governments to take into account other factors, not related to cost - i.e. ‘non-price criteria.’ One type of non-price criteria is sustainability, another is the geographic origin of the energy equipment.
The current proposal would makes it tougher for technologies - like most solar equipment - that are highly dependent on one supplying country to win these public tenders. We say this acts like a ‘stick’ - it discourages dependency.
However, the NZIA, and associated financing, doesn't encourage the rebuilding of European solar manufacturing. It lacks a carrot.
We propose a number of solutions to balance out the stick in the NZIA:
State Aid
EU State Aid rules were updated in March 2023 to make it easier for EU countries to support the building of solar factories, so called capital expenditure, or capex.
The rules should be further updated to support the running of solar factories - that's operational expenditure, or opex. This is particularly to help the energy intensive parts of the value chain.
Research shows that European solar manufacturing will be competitive once it reaches gigawatt-scale capacity. Updated State Aid rules would help EU solar manufacturers reach that scale.
Recovery & Resilience Facility
The RRF is an existing EU financial instrument of €723 billion which EU countries can use to support domestic manufacturing.
Part of the EU's official Guidance on how Member States can spend RRF Funds - as part of REPowerEU efforts - includes a recommendation that governments:
"need to consider providing support towards developing and expanding their industrial value chains to manufacture and recycle the low-carbon technological components and equipment needed to deliver on their energy and climate objectives. Support to industry in this respect may cover the manufacturing capacity of clean-tech equipment, notably solar, wind, heat pumps, electrolysers, and other low-carbon technologies.”
Some EU countries have already taken up this opportunity, like France, Germany, Italy, the Netherlands, Romania, and Spain.
For more case studies, check out our letter from May 2023 to national governments advising how they can use RRF funds to support their solar PV industry.
Solar Bank
To support a level playing field within the single market, all EU countries should have access to a dedicated EU financing tool for solar manufacturing.
We propose a ‘Solar Bank’ modelled on the Hydrogen Bank. A Solar Bank would allow manufacturing projects to benefit from contracts for difference and double-sided auctioning. It would match the cheapest European solar production projects with the highest willingness to pay from solar developers, backed up with a contract for difference from the state.
The Solar Bank, like the Hydrogen Bank, can be underpinned by the Innovation Fund. The European Commission’s Strategic Technologies Europe Platform proposal adds €5 billion to the Innovation Fund.
Non-price Criteria
The ‘non-price criteria’ in the NZIA must be clear, comprehensive, harmonised, and applied only in technology specific auctions.
Right now, the NZIA proposes that technologies with a 65% dependency on one source are negatively rewarded in public auctions. However, it's not clear how we could calculate the 65%. For example, we could consider the market share relating to the final product, or an average of input materials and components going into a final product.
We're asking EU lawmakers to further detail and clarify these technical specifications within a dedicated Delegated Act.
It's also not clear how much weight that non-price criteria could have.
We recommend that sustainability and resilience criteria should count for no more than 30% of the points that can be awarded in a tender.
Downloads
How to save the renaissance of European solar manufacturing
The SolarPower Europe board makes clear the support tools which the Industry are proposing, and that trade barriers are not the solution.
Read the statement
Record-low solar module prices risk EU's open strategic autonomy
Facing a perfect storm for prices in the solar supply chain (see also 'Saving European Solar Manufacturing' paper) SolarPower Europe writes to the European Commission warning of the risk of bankruptcies, and to offer solutions.
Read the letter
Saving European Solar Manufacturing
An analysis of market conditions in the first half of 2023 causing record-low solar module prices, and its implications for European solar manufacturers.
Read the analysis
The Net Zero Industry Act
SolarPower Europe's formal response to the Net Zero Industry Act's publication in March 2023.
Read the position paper
Keep the NZIA focussed
Industrial policy requires focus. The Green Deal Industrial Plan and the Net Zero Industry Act should support the most climate critical technologies, with vulnerable supply chains.
Read the joint letter
Running costs are critical
European solar manufacturers face energy prices two times higher than China and three times higher than the US. Industrial policy must reflect this.
Read the industry letter
A full value chain approach
We can only benefit from solar energy if we have the enabling technology. Inverters are the brains of the solar system.
Read the letter from inverter leaders
Using existing EU funds wisely
EU member states have access to the €723 billion Recovery and Resilience Facility, which they can use to support domestic solar manufacturing. A number of countries already are. We shared best practice with EU governments for inspiration.
Read our letter to European governments
Before the Green Deal Industrial Plan
Following the US Inflation Reduction Act publication in summer 2022, 13 solar CEOs expressed concern that Europe could fall behind in the global solar race.
Read the joint letter
Links
Discover SolarPower Europe's Manufacturing Workstream
Get to know our flagship work on supply chain sustainability
Deep dive into the brain of the solar system with our 'Inverters Explained' paper
Understand the IEAs Special Report on Solar Supply Chains
Look back at SolarPower Europe's legacy on manufacturing
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