European solar companies say local content rules in an EU proposal to boost the bloc’s renewables manufacturing will make the transition to clean energy more difficult because of limits on Chinese imports.
The European Commission’s proposed Net Zero Industry Act, announced on Thursday, obliges governments to mark public tenders for renewable projects if companies source more than 65 percent of the EU market share for the product from a single country. Similar rules will apply to products offered with consumer subsidy to encourage consumers.
This would disadvantage solar companies, which the Act deems to have an “insufficiently diversified” supply. China accounts for more than 80 percent of the European market across the entire industrial 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 about 8GW of solar panels, a fifth of its demand, with most parts coming from China.
“The current proposal is asking member states to reduce support for technologies coming from dominant geographies in the supply chain, such as solar. . . If we don’t want to risk slowing down solar deployment, we need a bigger carrot, especially in terms of financing solar plants in Europe,” said SolarPower Europe’s policy director, the industry lobby.
Lucas Pauli, managing director of production at Enpal, a German green tech company that sells directly to homes, said that if the EU were to cut national subsidies for non-European products, “the only impact would be massive on installations.
Reducing subsidies will slow down the renewables transition until we build enough capacity in Europe.”
The International Energy Agency estimates that panels produced by the onshore European solar supply chain will cost more than a third more than the Chinese equivalent, although the difference will likely narrow over time with economies of scale.
A clause in the proposed act allows governments to make exceptions to domestic content requirements if there is a “disproportionate” price difference of more than 10 percent between domestic and foreign products.
“The sector has worked very hard to get to this point. It will be hard to take those benefits if local content regulations roll back those benefits. In the long term, a diversified and competitive supply chain is a good thing but not at any cost,” said Karin Boutonat, Europe chief executive of Lightsource BP, one of the region’s largest solar developers.
Industry executives also compared the EU’s provisions unfavorably with the US inflationary reduction law, which provides $369bn in subsidies to both green tech consumers and producers.
“The EU needs to use the carrot, not the stick. Take the current approach, without additional financial support. . . Inevitably that would mean cutting off foreign supplies which we are not in a position to say no to,” said Andries Thorsheim, founder of European residential solar marketplace Autovo.