Solar energy is booming, but European manufacturers cannot produce competitively in this country. The oversupply from China is huge – which has a pleasant effect for homeowners.
Despite the ongoing solar boom, the prospects for the survival of solar module production in Europe are bleak. A concrete plan and industrial policy support with better framework conditions are necessary for the revival of domestic production desired by the EU, argue industry representatives and experts.
“At the moment, it is not possible to operate a module production economically due to the current price situation and the excess capacity from China,” says the Dresden-based company Solarwatt, which is closing its German production this summer. “If something does not happen quickly, there will be no more European module production very soon.”
The German Solar Industry Association (BSW) expects strong growth in installed photovoltaic capacity in Germany this year “in the lower double-digit percentage range.” This is what CEO Carsten Körnig says. This year’s Intersolar trade fair, the most important industry meeting place in Europe, begins in Munich this Wednesday.
Demand has risen rapidly
According to Körnig, lower costs have contributed to the fact that demand for photovoltaics among private property owners has increased tenfold in the past five years, and in recent months companies have increasingly been installing solar systems on their roofs. “Consumers are benefiting from inexpensive solar modules, but so are large parts of the domestic solar industry.”
According to the Federal Network Agency, new solar systems with a capacity of 14.1 gigawatts were installed in Germany in 2023 – almost twice as much as in 2022. But European module manufacturers have been sending messages of crisis in recent weeks: In addition to Solarwatt, the Swiss producer Meyer Burger is also closing its German plant.
Hardly any modules from Europe
The reason is cut-throat competition in China, where several large module manufacturers are based. Chinese competition has already swept several Europeans out of the market in the past decade. “Around 94 percent of PV modules come from Asia-Pacific. Another three percent are produced by US companies, and then comes Europe,” says Eva Poglitsch, energy expert at the management consultancy Strategy&, a subsidiary of the large auditing firm PwC. “Europe as a whole has around 10 to 12 gigawatts of production capacity per year.”
According to data from the Chinese Solar Industry Association CPIA, manufacturers there increased their production by 69 percent last year and produced modules with a total output of 499 gigawatts. In the People’s Republic, almost 217 gigawatts were installed in 2023, according to the latest annual report of Tongwei, one of the major Chinese manufacturers.
Prices halved in twelve months
The vast majority of the remainder must therefore be sold on the global market, but the USA has restricted the import of Chinese solar modules. This is increasing the sales pressure on Chinese companies, resulting in a drop in prices. According to figures from the German wholesaler Pvxchange, prices for standard modules have roughly halved since May 2023.
The cut-throat competition is also causing difficulties for Chinese producers, some of whom are making losses. One major project developer for solar systems is Munich-based Baywa re. It does not expect a turnaround any time soon. “After the volatile market situation in recent months, the price has currently settled at a lower level than at the beginning of 2023 and will not rise sharply in the foreseeable future,” says company boss Matthias Taft.
Oversupply persists
“Solar module manufacturers are therefore still struggling with low profit margins and we expect that the oversupply of modules will not resolve in 2024 despite stronger global demand.” According to the manager, cheaper financing costs could have a positive effect: “However, demand for modules could pick up speed, particularly due to falling interest rates,” says Taft.
The most important raw material for solar cells is polysilicon, and Tongwei is the world market leader. The company plans to almost double its polysilicon production capacity from 450,000 tons to 850,000 tons per year in the near future, as can also be read in the annual report of the company based in Sichuan Province.
German company produces in Asia
The Dresden manufacturer Solarwatt will also have production in Asia starting this summer. “The modules will continue to be 100 percent Solarwatt modules,” the company spokesperson stressed. Research and development will remain in Dresden. The home site will not be closed down for the time being. “If market conditions improve, Solarwatt could ramp up German production again.”
Whether this succeeds depends on European politics. The EU’s “Net Zero Industry Act” is intended to ensure that industries important for climate protection do not disappear from Europe. Strategy& energy expert Poglitsch points out that Europe’s dependence on Asian solar modules is even greater than it used to be on Russian gas. When it comes to gas, there was the option of using LNG gas. “There is no such alternative in the market for solar modules.”
EU law offers opportunities
According to Poglitsch, the Net Zero Industry Act is an opportunity for European manufacturers. “Despite the difficult market, European manufacturers are at the forefront of innovations in the field of photovoltaics.” However, politicians must create incentive mechanisms and regulations.
Manufacturer Solarwatt also welcomes the decision on the Net-Zero Industry Act, but this alone will not change anything. “The solar industry in Europe finally needs a concrete plan on how to ensure that 40 percent of the new photovoltaics will come from European production,” the company says. “Only when the framework conditions are clear will manufacturers be willing to invest in Germany or Europe again.”
It would be more than bitter for European manufacturers if domestic production were not profitable despite the solar boom. According to the German Solar Industry Association, recent representative surveys of companies and private property owners show “a very high willingness to invest in photovoltaics and battery storage,” as CEO Körnig says.
Source: Stern
