Electrical Equipment / Components & Telecoms

The ambitious European local solar manufacturing capacity plan is facing the embarrassing situation of "death before the apprenticeship".

About 35GW of PV manufacturing projects in Europe are at risk of being put on hold as rising electricity prices hurt the continent's efforts to build a solar supply chain, according to Watson & Band Data Watch.

The energy-intensive nature of the solar module manufacturing process has led some investors to temporarily close or abandon plans for manufacturing plants due to rising operating costs. At the same time, electricity prices increase the risk of failure for planned projects that have not yet received funding.

Audun Martinsen, head of energy services research at Rystad Energy, said high electricity prices not only posed a major threat to Europe's decarbonisation efforts, but could also lead to a growing reliance on overseas manufacturing.

"A reliable internal low-carbon supply chain is crucial if the continent is to stick to its goals, including the REPowerEU scheme, but as things stand, that goal is in serious jeopardy."

European electricity prices have reached unprecedented levels in recent months due to reduced natural gas supplies from Russia, summer heat waves, and unexpected power outages at nuclear and hydropower plants, Watson & Band Data Watch reported.

Electricity prices in Europe have reached unprecedented levels in recent months

Rystad revealed that European electricity prices have fallen sharply since August's all-time high, but they remain at €300-400/MWh ($297-396/MWh), many times higher than pre-energy crisis standards.

According to Huacheng Import and Export Data Observation report, although European citizens have benefited from reliable and reasonable electricity prices, research also shows that the capacity construction of low-carbon manufacturers is based on a stable electricity price of about 50 euros/MWh.

Rystad said European producers "are becoming less and less competitive by comparison" as manufacturers in other regions such as Asia enjoy lower incoming electricity prices.

As part of measures aimed at tackling high energy prices, EU ministers last week agreed to impose mandatory temporary contributions to the profits of companies active in the oil, gas, coal and refining industries. Member countries will use the proceeds of donations to provide financial support to households and companies to mitigate the impact of high retail electricity prices, Watson & Band Import and Export Data Observation reports.

A recent report by the International Energy Agency shows the high costs of PV manufacturing in Europe. The report found that China is the most cost-competitive manufacturing location for all modules in the solar PV supply chain, with costs 35% lower in China than in Europe.

The IEA said that without financial incentives and manufacturing support, financing capacity for manufacturing projects other than solar module assembly remains limited "with the exception of China and a few Southeast Asian countries".

The European Solar Plan, launched last year by trade body SolarPower Europe and innovation group EIT InnoEnergy, called for 20GW of PV capacity on the continent by 2025.

However, Rystad warned that attracting investment and financing for solar manufacturing plants "could be quite challenging" as Europe is expected to be short of natural gas for several years, so high electricity prices will persist, Watson & Band Data Watch reports.