Record-low solar PV prices risk EU's open strategic autonomy

Since the start of the year, prices of PV modules have dropped by over 25% down to less than 0.15 EUR/W for low-cost products, now even submerging pre-Covid levels, making it extremely difficult for European manufacturing companies to sell their products. This is creating concrete risks for companies to go into insolvency as their significant stock will need to be devalued.

Record-low solar PV prices risk EU's open strategic autonomy

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A ‘perfect storm’ of market forces, not unusual in commodities, has driven prices down by more than 25%. Module prices have hit the record-low of less than 0.15 EUR/W for low-cost products, now even submerging pre-Covid levels, making it extremely difficult for European manufacturing companies to sell their products. The news comes soon after Norwegian Crystals, one of the continent’s enduring ingot manufacturers, filed for bankruptcy.

The combination of strong global demand signals and fierce competition between Chinese suppliers, has led to significant rates of new investment in solar PV supply chains. The resulting oversupply has led to quickly dropping prices for raw materials like silicon, down the supply chain to modules, inverters, and batteries. Further analysis is available in a supporting report.

The current situation is exacerbated by a slight, temporary, slowing down of the European solar market in Q3, linked to inflation and tightening bottlenecks around grid connections and project permitting.

Read more detailed analysis on market conditions here.

SolarPower Europe is urgently calling on the European Commision to take decisive action, such as:

Swift emergency acquisition of European PV manufacturer’s module inventories.

This could be procured through an EU level special-purpose-vehicle, and/or by elaborating the Ukraine Facility for the green reconstruction of Ukraine. Such emergency measures are essential in the immediate term as the only effective way to tackle the issue of looming depreciation of inventories and ensure the survival of many European manufacturing companies.

Set up a Solar Manufacturing Bank at EU level

A dedicated instrument, similar to the Hydrogen Bank under the Innovation Fund. Based on a system of two-sided competitive auctioning, the Bank will bring together the cheapest European solar production projects with the highest willingness to pay from solar project developers backed up with a contract for difference from the state. Such Solar Manufacturing Bank can be set up in a matter of weeks and would give the much-needed short-term financial impetus in rebuilding solar supply chains in Europe.

Address the inadequacies of the TCTF

Address the inadequacies of the Temporary Transition and Crisis Framework (TCTF) for State Aid, in particular point 86 which is presented as a clause to allow for matching aid vis-à-vis Europe’s global competitors, but does not adequately allow for aid for operational expenditure in compensation for structural energy cost disadvantages.

Accelerate the adoption of the Net Zero Industry Act

Accelerate the adoption of the Net Zero Industry Act, including strong sustainability and resilience non-price criteria in specific auctions. Member States should be allowed to set up ‘resilience auctions’, rewarding solar PV systems with the highest shares of production in the EU. This will secure a stable market for European manufacturers in the years to come, which is essential in that phase of industrial scaling-up.

Advance the effects of the EU Forced Labour Regulation

Advance the effects of the EU Forced Labour Regulation by backing the Solar Stewardship Initiative (SSI). The SSI, as a value chain assurance program, with third-party audits, ensures that companies can independently demonstrate commitment to upholding sustainability best practices in their production. With the support and recognition from the European Commission and national governments, we will see expedited market adoption of the SSI, enabling project developers to focus on the import of SSI-compliant PV modules, potentially creating an upward effect on PV module import prices.

Enable collaboration between Member States programs

Enable collaboration between Member States programs to support the build up of PV manufacturing value chains in Europe and ensure that significant pan-national clusters of PV manufacturing emerge. Only by leveraging the full market and technological ecosystem power of the EU will European Manufacturers become competitive players in the global PV market.

Boost demand for solar PV in Europe

This can be done in the short-term, for example, by landing a rooftop solar mandate as part of the ongoing European Building Performance Directive, or by pushing Member States to implement the December 2022 EU emergency regulation to accelerate renewable energy. EU leaders should also deal with inflationary effects that are currently delaying solar projects, for example by collaborating with the European Central Bank (ECB). Ultimately, the only structural way to deal with supply overcapacity is to boost demand. That is a win for all players in the solar industry, as well as for Europe’s economic, security and climate goals.