European solar panel builders are suffering from the fall in the price of Chinese panels

A rapid drop in solar panel prices – that sounds like festive news for the energy transition. But it isn’t, or at least not alone. European companies that build panels – or parts thereof – see the current price drop as a disaster.

Chinese panels became 42 percent cheaper last year, according to a report from consultancy group Wood Mackenzie. In the solar power world, prices are expressed per watt peak; the Chinese have dropped below 14 euro cents per watt peak on average. According to market experts, the prices of European standard panels are around 30 cents per watt peak.

The price for panels often fluctuates, but it is so low that it is impossible to compete with it, European manufacturers notice. Several companies have already collapsed or temporarily stopped production. They refer to the cutthroat competition from Asia.

In september a European trade association sounded the alarm in a letter to the European Commission. Solar Power Europe called the situation “extremely precarious” for European manufacturers active in solar power. This makes it “extremely difficult” to sell products, and there are “concrete risks” of financial problems. SolarPower Europe cites Norwegian Crystals as an example. This manufacturer of panel parts went bankrupt in August. Last month, Austrian panel manufacturer Energetica Industries went bankrupt. Referenced in Austrian media the company to devastating competition from China.

Wholesalers’ warehouses in Europe are full of Chinese panels that are marketed at dumping prices, according to Energetica. In addition, the Norwegian company NorSun AS also temporarily halted production this winter and sent employees home. Another industry association, European Solar Manufacturing Council ESMC, writes in a report that the production of some important parts of solar panels virtually no longer takes place in Europe.

professor emeritusWim Sinke When China started ramping up its capacity (around 2010), it used production machinery from Europe

According to entrepreneurs in the solar power industry, prices are now falling so fast because of one perfect storm. China has invested heavily (with large subsidies) in additional production capacity and has started producing much more. At the same time, European demand for panels has cooled down somewhat after the strong demand during the energy crisis, creating a surplus.

Another important cause of the price drop is the import restrictions from India and the US for Chinese panels, which means fewer panels can go to those countries. The Americans have also introduced the Forced Labor Act, a law against products made with forced labor. An important raw material for Chinese solar panels comes from the Xinjiang region, among other places, and there is growing evidence that the oppressed Uyghur minority is being coerced into mining.

Chinese solar panels that can no longer enter the American market are therefore transported to Europe. This creates enormous surpluses of Chinese panels for the European market.

All in all, the panels are now even sold below the Chinese production price, so writes the ESMC. Solar panels are being dumped here, entrepreneurs say in annoyance.

Europe was ‘naive’

China is the absolute market ruler in every step of the solar panel production process, from mining raw materials to fusing the final panels. Because the EU is not at all happy with a high dependence on China for sustainable energy, there are European ambitions to reshoren, as it is called. The EU wants “whatever it takes” do to build Europe’s solar panel production capacity, Estonian European Commissioner for Energy Kadri Simson said in 2022.

It is all extra bitter knowing that Europe had a huge leading position in the field of solar panels. The continent gave that role away to China far too easily, perhaps naively, as Wim Sinke saw. Sinke is a prominent researcher into solar energy and emeritus professor at the University of Amsterdam. He has been active in the industry for forty years. “When China started building up its production capacity (around 2010), it used production machines to build panels from Europe for the factories in Asia. This has been a major export product for the Netherlands and the EU for a number of years. There was also government policy to encourage that.”

What China also did, says Sinke, is to stimulate its own industry “gigantically. The growth over the past fifteen years is breathtaking.” This caused the European solar panel manufacturing industry to rapidly collapse and caused many bankruptcies.

Still reasonable position in raw materials

Making a solar panel consists of all kinds of intermediate steps. Europe still has activity, but not in every part of the process. Europe still has a reasonable position in the production of raw materials such as silicon, although this is also strongly threatened, says Sinke. And Europe also has quite a few companies that produce panels with purchased solar cells (the basis of solar panels). But some steps in between, such as making solar cells, are done almost exclusively by China. The dependence on this country is enormous.

At solar panel factory Solarge in Weert, the effect of the cheap panels is not too bad, says Gerard de Leede, technical director of the company. “That is because our panels do not directly compete with the Chinese ones, because our panels are circular, lightweight and without PFAS, intended for industrial roofs,” says De Leede. “Moreover, we are still scaling up, so we still have quite a few orders. But in the future this could also affect us.”

De Leede hears from other companies in the industry that they are struggling with the price drop of Chinese panels. “It is very annoying that this is happening now,” he says. “Before you know it, Europe’s ambition to participate in solar energy again will suffer a major blow. During the war in Ukraine we were dependent on gas from Russia. We have seen that we do not want to be dependent for our energy.”

Help requested from Brussels

Fortunately, the potential to become a solar energy powerhouse is not lost, says Sinke. “That’s not nonsense, there is still a lot of technological knowledge available in Europe. It has been good that countries such as the Netherlands, Germany, France and Switzerland have continued to stimulate research into solar energy, even as the industry shrank. This gives us the basis to build something again. But ultimately, someone has to put billions on the table and invest in companies. Because developing such a sector costs a huge amount of money.”

What now? Industry association Solar Power Europe is asking the European Commission for a rapid capital injection of 100 million euros for European solar power companies. Protective measures must also be taken quickly, the sector advocates, such as the accelerated implementation of the European version of the Forced Labor Act (on which no formal agreement has yet been reached).

“In the long term, Chinese prices will of course not remain as ultra-low as they are now,” says Dick Heslinga, involved with SolarNL from the MCPV. This is an alliance of entrepreneurs who have been promised several hundred million euros through the National Growth Fund (a government incentive program) to help build up large-scale production of solar cells and solar panels in the Netherlands.

“The Chinese are now selling their stocks lower than their own production costs. They won’t last long,” says Heslinga. “In the longer term, the main thing is: how do we become competitive vis-à-vis China?”

It makes no sense, says Heslinga, to build a new industry in the Netherlands to produce the same standard solar panels. “Then you will be crushed by China.” The Netherlands currently has few producers of regular panels, and SolarNL is not going to change that either. This focuses on new types of solar power, such as a program to process advanced solar cells in flexible foil. This way you can integrate solar cells in roofs, in cars, trucks or, for example, on highways.

But Chinese producers will also innovate. Ultimately, a European solar panel industry really depends on a level playing field, say entrepreneurs in the sector. This includes Marc Judge, who, supported by SolarNL, is preparing for a factory in the Netherlands for a new generation of solar cells. “We need the same kind of support and protection that exists in the US and India, for example.” There are currently major support programs for sustainable energy in both India and the US, for example the billions provided by the US Inflation Reduction Act. “In Europe we are slower with such things, and more focused on subsidizing research than subsidizing economies of scale.”

There is a hurry, says Sinke. “Things are moving very quickly in the US, China was already very active (in solar panels). There must be a European answer quickly, otherwise you will simply lose the industry. And that is unacceptable not only for geopolitical reasons. We are also missing enormous job potential.”

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