European Solar Charter: last call for European industry

This article was first published on RivistaEnergia.it  – see Carta solare europea: ultima chiamata per l'industria europea (rivistaenergia.it)

The European Solar Charter represents a strategic partnership aimed at supporting the communal photovoltaic industry and countering Chinese dominance. Is it too late? Several factors could favor a European revival.

The European Commission recognises the pivotal role of photovoltaic energy production, for both ecological transition and the EU's energy security. According to the Commission, photovoltaic solar energy is the fastest-growing renewable energy source worldwide.

In 2023, approximately 56 GW of nominal power will be installed in the European Union. Photovoltaic technology has reduced the impact of high electricity prices and mitigated risks associated with gas supply disruptions, saving about 15 billion cubic meters of Russian gas imports in 2022 and 2023.

The sector has also generated around 630,000 jobs, with projections to reach one million by 2030.

The EU’s target: 600 GW of photovoltaics by 2030, equating to 48 GW per year

To achieve the EU target of 42.5 per cent renewable energy by 2030, aiming to reach 43 per cent, further increase the deployment of renewable energies is necessary, with photovoltaics continuing as a mainstay. Under the REPowerEU strategy, the European Union aims to install 320 GW of new photovoltaic capacity by 2025 and 600 GW by 2030, roughly 48 GW of new installed capacity annually. 

Despite clear goals and the essential nature of this technology, little has been done to support the development of a European industrial supply chain in the sector. According to the latest report produced by the European Solar Manufacturing Council, China dominates the photovoltaic supply chain, holding almost 93% of global wafer production. The top 10 manufacturing companies at all stages of the photovoltaic value chain are Chinese (except for polysilicon production, where Germany's Wacker Chemie AG holds a prominent position).

The collapse of Chinese panel prices puts further pressure on a still insufficient European industry

Europe's annual production capacity for photovoltaic components is significantly insufficient, approximately 23 GW of polysilicon, 1.7 GW of ling wafers, 1.4 GW of cells, 9.4 GW of modules, and 70 GW of inverters.

Consequently, the demand for photovoltaic modules in the EU has primarily been met by imports from China, a clear vulnerability in the supply chain due to lack of diversification and the inherent geopolitical risks associated with reliance on a single supplier country.

Moreover, the prices of Chinese products have plummeted in recent years. According to Commission estimates, in 2023 alone, the average price of photovoltaic panels fell from around €0.20/W to less than €0.12/W, squeezing the profitability of existing European production and putting future investments in the sector at risk.

It is well known that several European companies have already scaled down their activities, announcing that they want to invest in other international markets, particularly in the United States (e.g., the Enel Group), or even to cease production (e.g., France’s Systovi).

After the European Solar Alliance, comes the European Solar Charter

This initiative follows the goals set in December 2022 through the European Solar PV Industry Alliance, launched to strengthen industry cooperation with a target of 30 GW of production capacity across the entire photovoltaic value chain by 2030. 

To reinvigorate the sector and address the issues described, the European Solar Charter was signed on 15 April 2024, a document endorsed by the Commission, 23 Member States, and representatives of the solar photovoltaic value chain: associations ESMC (European Solar Manufacturing Council), SPE (SolarPower Europe), the big power companies Engie and Enel, and EIT companies InnoEnergy, Amarenco, Belga Solar, Carbon Solar, MCPV, SMA Solar, and Solarwatt.

The Charter represents a strategic partnership among the signatories, delineating actions to support the European photovoltaic industry, with a twofold objective: bolster EU module production and simultaneously reduce module imports from China.

The role of the Commission: facilitating access to EU funding

The Charter anticipates that the European Commission will further facilitate access to EU funding (in particular, through Recovery and Resilience Mobility, Structural Funds, Innovation Fund, Modernisation Fund and Horizon Europe) for photovoltaic solar energy projects. 

In cooperation with the European Investment Bank (EIB) and in conjunction with the Member States, a new Important Project of Common European Interest (IPCEI) focused on supporting European photovoltaic production is to be prepared. 

The Commission is also tasked with supporting the Member States in adopting criteria that are not purely economic in the auctions for the allocation of incentives (a point that could prove particularly relevant with the new incentive schemes being adopted in several European countries). Moreover, the Commission will continue to support the European Solar PV lndustry Alliance in achieving the abovementioned goals. 

The Charter strongly emphasises the need to foster the growth of professional and technical skills required by the sector, assigning the Commission the task of implementing the necessary measures. To achieve this, several initiatives will be implemented, including the creation of the Solar Academy and the Renewable Energy Skills Partnership. 

Additionally, the Commission is tasked with proposing regulations to govern the eco-design and energy labelling of photovoltaic products. These regulations will be based on a robust methodology and appropriate environmental and energy performance standards to ensure quality.

On the international front, the Charter entrusts the Commission with the responsibility of carefully examining any allegations of unfair commercial practices reported by EU operators. It also mandated the Commission to form partnerships with third countries to diversify the supply chain and reduce dependence on a single supplier.

The Role of Member States and Operators 

The Member States are tasked with promoting the production and supply of sustainable and higher-quality products in Europe, enhancing the sector’s competitiveness and stimulating job creation. It includes, in line with the Net-Zero Industry Act, adopting criteria other than purely economic ones in auctions for the allocation of incentives for the production of energy from renewable sources and in public procurement, such as resilience, sustainability, corporate social responsibility, innovation, and cybersecurity. 

Member States should also promote innovative forms of solar energy deployment, such as agrivoltaics, floating photovoltaics, photovoltaics integrated into buildings, infrastructures, and vehicles, including through the removal of regulatory and authorisation barriers and the adaptation of public support schemes. 

Signatories have also committed to including innovative photovoltaic products in their portfolios, commensurate with European production capacity, providing clear indications of their origin and gradually increasing their volume. They are required to maintain and, where possible, expand current production capacities in line with expected demand growth. 

Too late?

The initiatives proposed by the European Solar Charter might seem somewhat belated, given the current Chinese dominance in the industry. However, several factors could still allow for potential revival of the European photovoltaic industry.

Consider, for instance, the enormous capacity still to be installed (around 48 GW per year until 2030), the increasing share of components that will need replacement, and the widespread presence of incentive schemes in the European Union, which could bolster EU production.