Europe’s solar industry is currently in its worst crisis in more than ten years due to strong competition from China, which is causing manufacturing in the sector to decline. This is making Europe’s hope of achieving greater energy independence more difficult. Despite an increase in solar panel installations across the EU last year, driven by the continent’s climate goals, a large portion of this was due to an influx of Chinese equipment, leading to a significant drop in profits for local manufacturers. Governments have been slow to support the ailing industry despite an insistence to boost home-grown energy infrastructure.
A Swiss panel maker, Meyer Burger Technology, may close its production site in Freiberg, Germany – one of the largest in Europe – and redirect investments to the US. The potential shutdown could take place as early as April and affect approximately 500 workers.
The solar industry has been a significant part of Europe’s renewable expansion in recent years, but European panel producers have not been able to scale up their supply chains enough to compete globally. This, coupled with government budget limitations, has worsened the situation. The US ban on panels with components from China’s Xinjiang region has also complicated matters and led to a flood of equipment into Europe, with about €7 billion worth of Chinese-made panels estimated to have piled up in European warehouses. This led to a significant price drop, referred to as “dumping,” by Meyer Burger’s chief executive.
Globally, solar module prices have halved, causing leading Chinese solar manufacturers to struggle to maintain profitability. This has resulted in layoffs, bankruptcy, and debt restructuring for various companies across Europe. Despite the EU’s goal to manufacture at least 40% of its clean tech needs domestically by 2030, current domestic suppliers meet less than 2% of European demand for solar, and about 90% of components come from China. Some manufacturers are looking to invest in the US due to boosted tax cuts and incentives for end consumers offered by President Joe Biden’s Inflation Reduction Act.
The situation reflects events that hurt Europe’s photovoltaic industry about a decade ago when the EU imposed import tariffs on Chinese solar panels. The solar industry is pushing for government support while avoiding tariffs or import bans. The European Commision’s Net Zero Industry Act aims to set criteria for renewable auctions that favor domestic wind and solar manufacturers, and Germany is considering offering producers a “resilience bonus” to cover operational cost differences versus foreign competitors.