According to European solar companies, the EU’s plan to enhance the bloc’s renewables manufacturing through local content rules will impede the switch to clean energy due to constraints on importing from China.
On Thursday, the European Commission unveiled the Net Zero Industry Act, which requires governments to reduce public tenders for renewable projects if firms procure from a sole country that represents over 65% of the EU market share for the item. The same regulations would extend to items provided with a consumer subsidy to encourage adoption.
This would disadvantage solar companies, which the act deems as having “insufficiently diversified” supply. China has a more than 80 per cent share of the European market across the industry supply chain. Last year, the EU achieved a record installation of more than 40GW of solar panels after a push to replace Russian gas. That was made possible by more than doubling annual European imports of solar panels from China, according to the commission.
In 2022, Europe assembled around 8GW of solar panels, one-fifth of its demand, with most of the parts coming from China. “The current proposal is asking member states to reduce support for technologies that come from dominant geographies in the supply chains, like solar . . . If we don’t want to risk slowing solar deployment, we need a bigger carrot, especially in terms of financing solar plants in Europe,” said Dries Acke, Policy Director at SolarPower Europe, an industry lobby.
Lukas Pauly, managing director of production at Enpal, a German green tech company that sells direct to households, said that if the EU cut national subsidies for non-European products, “the only effect would be a massive hit on installations.
Until we have built up enough capacity in Europe, reducing subsidies would slow down the renewable transition.”
The International Energy Agency estimates the price of panels produced by an onshore European solar supply chain would be more than a third higher than Chinese equivalents, though the differential would probably fall over time with economies of scale.
A clause in the proposed act does allow governments to make exceptions to the local content requirements if there is a “disproportionate” cost difference of more 10 per cent between local and overseas products.
“The sector has worked so hard to reach this point. It would be hard to take if local content rules walk those gains backwards. In the longer term, a diverse and competitive supply chain is a good thing but not at all costs,” said Kareen Boutonnat, chief executive for Europe at Lightsource bp, one of the region’s largest solar developers.
Industry executives also compared the EU’s provisions unfavourably with the US Inflation Reduction Act, which grants $369bn in subsidies to both green tech consumers and producers.
“The EU needs to use the carrot, not the stick. Taking the current approach, without additional financial support . . . will inevitably mean cutting off foreign supplies that we are not yet in a position to say no to,” said Andreas Thorsheim, founder of European residential solar marketplace Otovo.
