Saving European Solar Manufacturing

The global solar PV sector has been marked by steep reductions in solar module prices in Europe in the first half of 2023 into September 2023.

While declining costs is typically welcome news for accelerating a cost-effective energy transition, it is also creating a deeply precarious situation for European solar PV manufacturers who were building up their manufacturing capacities encouraged by the broad political support for reshoring a European PV value chain.

SolarPower Europe has written to the European Commission to warn of the conditions, and recommend clear solutions. To support this letter, we have provided the below analysis paper ‘Saving European Solar Manufacturing’.

Since the start of the 2023, 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. We have already witnessed the ingot producer Norwegian Crystals filing for bankruptcy on 21 August 2023. 

If no immediate action is taken, this situation will render the European ambition to create Open Strategic Autonomy, in key sectors like solar PV, extremely hard to reach. 

The EU goal of reshoring 30 GW of the solar PV supply chain, as stated in the Net Zero Industry Act and adopted by the European Solar Industry Alliance, is at serious risk.

The recent decreases in solar PV module prices can be explained by a ‘perfect storm’ in the global solar PV sector. The combination of strong global demand signals during the pandemic (a demand-induced bullwhip effect) has led to new, large investment in solar PV supply chains with fierce competition between Chinese suppliers to gain market shares. 

This has resulted in large overcapacities across the value chain – thus leading to quickly dropping prices for silicon to modules, inverters and batteries. This is exacerbated by a slight, temporary, slowing down of the European solar market in Q3, compared to the energy crisis induced strong demand in 2022. The combined impacts of faster than expected power price decline, interest rate increases, and tightening bottlenecks around grid connections and project permitting all contributed to the slowing down of demand and were underestimated by wholesalers and developers ordering high quantities of PV equipment. Attached to this letter, please find a more detailed analysis of the market dynamics.

While these market dynamics are not unknown to global commodity markets, the situation does require urgent action if EU leaders want to materialise the European Open Strategic Autonomy agenda and the rebirth of European solar manufacturing.