The photovoltaic industry has become an indispensable partner in the global energy transition. According to the Global Market Outlook 2022-2026 published by SolarPower Europe, global solar capacity doubled in 3 years from 2018. However, with a 14% annual growth rate and an all-time high of 54.9 GW of new solar, China kept its market leadership in 2021, adding twice as much solar power capacity than the second-largest market, the United States. 1m2a2h

Growth was also maintained in Europe region continued its positive solar trajectory, achieving 31.8 GW of additional solar capacity – representing 33% growth and notably only a 0.1 GW difference to the 2021 Global Market Outlook projections.

But again, China’s solar-PV industry’s also scale-up has been rapid—from zero to 300 GW capacity in some 15 years. While European companies initially led the industry, Chinese solar-PV companies, in many regards, today dominate both manufacturing at scale and deploying new technologies, ing major solar-PV ecosystems built around industry hubs.

The EU has launched its solar PV strategy to re-establish a viable manufacturing industry, but there are still many challenges to overcome.

To gain a deeper insight into the situation, Review Energy wanted to talk to Zygimantas Vaiciunas, Policy Director at European Solar Manufacturing Council (ESMC), to understand what the key challenges are in addressing the current situation.

Review Energy (R.E.): Are the latest measures, proposed by the European Commission (Critical Raw Materials Act, Net Zero Industry Act, EU Electricity Market Design proposal), sufficient to achieve independence in PV module manufacturing?

Zygimantas Vaiciunas (Z.V.): The recent proposals and decisions of the European Commission are steps in the right direction. However, further actions and policies must be developed to ensure at least a 30 GW manufacturing capacity along the entire PV value chain to be achieved by 2025, and to cover at least 40% of European PV deployment with products made in Europe by 2030. ESMC welcomes the unprecedently quick actions of the European Commission by enforcing State aid exemptions in Temporary Crisis and Transition Framework (TCTF) which opens the possibilities to de-risk parts of the financing for European PV manufacturers.

ESMC acknowledges that such aid possibilities will put European PV manufacturing industry in better competitive conditions, however, the aid ceilings and the time limitations fall short to expect meaningful scale-up of PV manufacturing capacities in Europe.

The European Solar PV Industry Alliance has started the work to frame concrete proposals to how a competitive financial and regulatory environment, necessary to establish GW scale manufacturing capacities across the EU, can be achieved. Consequently, the recent actions of the European Commission are a good start to establishing the targeted PV manufacturing capacities in Europe, however, these measures should be supplemented with concrete financial measures and long-term competitiveness on the demand side.

R.E: What short-term measures could boost module manufacturing in Europe?

Z.V.: In Europe, not only module manufacturing capacities are of critical importance. The entire value chain (polysilicon, ingots, wafers, cells, modules and associated raw materials) should be developed in Europe to ensure supply independence and to boost the European economies. In the short term, incentives targeting equal competitiveness conditions should be prioritised, with special attention given to the United States and China. PV modules, and associated components, are a global commodity. Accordingly, European PV manufacturing conditions should not differ extensively from the conditions in other PV manufacturing markets. Addressing the capital and operational expenditures, together with European added-value on sustainability of PV products, would mark a clear direction for the actions of the industry, European Commission and the Member States.

Currently, the most important short-term action to be delivered in the EU Member States is to secure REPowerEU financing for PV manufacturing through the revision of the national Recovery and Resilience Plans. The €20 billion REPowerEU potential should be used for PV manufacturing, as one of the key strategic net-zero industries. The TCTF, adopted by the European Commission on 9th March, ensures the legal possibilities for the Member States to the PV manufacturing industry. If the REPowerEU financing won’t be adequately secured in the next weeks, Europe is at risk of losing the financial background, necessary for developing substantial PV manufacturing capacities by 2025. This is the most urgent issue, which should be extensively reflected in each of the EU States as soon as possible.

R.E.: What measures would have to be taken in the long term to ensure independence in PV module manufacturing?

Z.V.: In the long term, aid for capital expenditure and operational costs should be combined with an additional bonus for European-produced PV modules and its component along the entire value chain. The Net-Zero Industry Act goes in the right direction respectively. However, the Member States should get the possibility to buy locally manufactured PV production with a higher price . This would constitute a strategic investment in the independence of European PV manufacturing. Circularity, recyclability, and other quality factors should be seriously taken into , to ensure that the paid for domestically manufactured PV products is grounded in objectivity.

R.E.: What are the main barriers slowing down European independence in module manufacturing?

Z.V.: The main barrier for the scale-up of PV manufacturing capacities in Europe is the demand side policies, premiering the cheapest possible PV products. This gives PV products from Europe a disadvantage, since recyclability, workforce, electricity pricing factors into a comparatively higher price range than the PV modules produces without taking labour standards and sustainability criteria into . Such conditions reduces the bankability of new potential PV manufacturing project in Europe.

R.E.: Which countries in Europe are making the fastest progress in the diversification of pv module manufacturing?

Z.V.: Until now, the possibilities to produce PV products in Europe have been limited, due to the unlevel playing field, compared to other PV manufacturers, mainly in China. TCTF has positively changed the PV manufacturing landscape in Europe, but to a limited extent. In Europe, and especially in Italy, , , Spain, Netherlands, Norway, Poland, Romania, the PV manufacturing potential is huge. As TCTF has temporary lifted State aid rules in all EU Member States, the progress depends on mobilising EU Member States financing to PV manufacturing in Europe.

The ongoing revision of the Member States’ national Recovery and Resilience Plans of the Member States will answer the question whether the PV manufacturing potential will be explored in the most efficient way. The €20 billion potential of REPowerEU financing could be used through the national Recovery and Resilience Plans for net-zero strategic industries, including PV manufacturing. Accordingly, the next couple of weeks will be decisive to acknowledge which of the EU Member States will use the existing financial opportunities to European PV manufacturing.

R.E.: China controls at least 75% of every key stage of PV solar manufacturing and processing. Is it 100% negative to depend on China?

Z.V.: High dependency on China is obviously not in line with the strategic European PV deployment target of 600 GW by 2030. This hyper-concentrated dependency of the value chain creates a trade deficit, technical risks and could compromise the achievement of the 2030 EU PV deployment targets. Last year, the European trade deficit of PV products amounted to more than €12 billion – dedicated for European PV manufacturing industry in that magnitude of order would meaningfully reduce the trade deficit in 2-3 years.

The target of at least 30 GW PV manufacturing capacity along the entire value chain by 2025 is already fixed, including a capacity of at least 40% of the deployed capacities in Europe by 2030. Currently, the financial and other measures should be mobilized to ensure the achievement of these targets and, consequently, pooling the benefits of the domestically produced PV products. These are the most important measures to reduce the current hyper-concentrated dependency on China without delay and with adequate measures.