Published on Sunday 3 September 2023 | Article n°455
The Russo-Ukrainian war marked a turning point in the global photovoltaic industry: Europe turned its attention to panel installations, while India and the United States implemented a policy of industrialisation and panel production. The European Union has missed the opportunity for industrial independence. It is now dependent on Chinese industry. The latter is currently launching an offensive to asphyxiate the few small manufacturers that remain and, above all, to kill off any hint of the emergence of serious competitors by slashing prices. China wants to retain a captive market.
The Russian-Ukrainian war has changed the geopolitical situation: Europe's dependence on Russian gas has prompted the EU to make massive use of renewable energies from February 2022, with the emphasis on electricity-generating facilities.
Other countries have launched photovoltaic industrialisation: is this a coincidence or a consequence of the war? Last year, India and then the United States launched a policy to restore their photovoltaic industry.
Various attempts at industrialisation in Europe: the European Union's measures to promote reindustrialisation have been timid and ill-calibrated. Some countries then sought to regain the initiative.
The window of opportunity closed: the Chinese did not want to lose the European market, which absorbs 58% of their exports. They filled European warehouses with old-generation panels (type P) and also supplied new-generation products. To sell their P-type panels, they are slashing prices, even though these panels are produced by the European industry. The European industry is in difficulty.
The European Union is the victim of its own strategy: by giving priority to electricity production over panel production, the European Union finds itself at the mercy of Chinese manufacturers, who will do anything to keep control of the European market!
The Russian-Ukrainian war has changed the geopolitical situation
The European authorities reacted swiftly to the war in Ukraine and the gradual suspension of gas pipelines from Russia. Very quickly, this 40% dependence on a single country supplying cheap gas seemed like a millstone around the neck of the Brussels authorities, who quickly drew up a plan to replace gas with electricity from renewable sources. They set targets for the installation of panels that were constantly being raised in order to keep up with the times, namely the reduction of greenhouse gases in favour of a greener planet.
They then drew up a plan to reindustrialise the photovoltaic industry, called REpowerEU. Faced with a lack of interest, they proposed the NZIA (Net Zero Industry Act) to stimulate PV production in the EU.
Poorly calibrated, with insufficient incentives, reindustrialisation was quickly forgotten, forcing Germany to launch its own reindustrialisation plan (which is currently being drawn up).
But the window of opportunity at the end of 2022 has closed. The Union will not (in the foreseeable future) be equipped with a photovoltaic production industry. Russia as the main supplier (40%) is being replaced by China, which supplies 80% of the panels installed in Europe. The only difference is that gas is used on a daily basis, whereas the supply of panels can be delayed by several months or quarters. There's not the same urgency!
As a result, the EU has a programme to install panels, but still no European manufacturer!
Other countries have launched photovoltaic industrialisation
In April 2022, India launched a photovoltaic industrialisation plan, introducing customs duties and subsidies for the construction of production plants. After a difficult period following the introduction of these customs duties to hinder Chinese imports, the capacity of Indian production units is increasing rapidly, making the country self-sufficient and enabling it to supply panels to the rest of the world.
In August 2022, the United States launched a programme to stimulate its PV industry through tax credits. One year on, the success is already evident, even if the factories have yet to be built. All (or almost all) of the major photovoltaic suppliers from virtually every country (even China) have announced that the financial aid is sufficient to allow them to invest across the Atlantic. Meyer Burger, for example, which wanted to set up a cell factory in Europe, has transferred its equipment to the United States. Siemens has already decided to build an inverter production unit there. Even SMA, after two attempts, wants to seize the opportunity to re-establish itself in America.
These European companies are attracted by the tax advantages. The amounts invested in the United States will not be invested in Europe.
Various attempts at industrialisation in Europe
Under the aegis of the European Union and the Member States, a number of announcements have been made, including Carbon near Marseille and Holosolis in Sarreguemines, which together plan to build 10 GW of cells and panels.
Germany has launched a call for applications to set up production units on its territory. A number of companies have submitted applications. It is still too early to know what will come out of this and whether these projects will be completed.
The window of opportunity has closed
Only the Chinese have reacted to avoid the emergence of European competitors. Firstly, because Europe absorbed 58% of Chinese exports in thefirst half of 2023 and 56% in the first nine months of 2022. Secondly, it was not in the interests of Chinese manufacturers to wait for competitors to emerge, which would have cost them market share. They had to react. Finally, they acted in their usual way, flooding the target market with low-priced products to dissuade new candidates and at the same time kill off a few small suppliers. They have overstocked European warehouses with a quantity of panels equivalent to the installations of 2022 (40 GW), made up of old-generation (P-type) products. They look set to increase their oversupply to 100 GW by the end of 2023 (according to Rystad).
While the rise in the price of silicon had pushed up the price of panels, they convinced silicon producers to lower their prices in the 2nd quarter of 2023, leading to a fall in the price of panels. In Europe, these deliveries of TOPCon products (new generation) are competing with P-type products (old generation), the same technology manufactured by European producers. To sell their P-type products, the Chinese are slashing prices, making them (depending on the source) between 15% and 25% cheaper, while S&P estimates that they are 50% cheaper than European products. How can European manufacturers hold out when they have much higher labour and energy costs than Chinese companies?
Meyer Burger has just denounced this Chinese dumping and is calling for the rapid implementation of industrial policy measures. But the European elections in six months' time are preventing any rapid and binding measures from being taken. So, having launched their offensive a few months ago, the Chinese can only reap the rewards of their strategy, retaining the European market, stifling any new competition and eliminating a few small competitors in the process.
The European Union is the victim of its own strategy:
In wanting to push PV installations (too far?), it neglected to rely on the other support for its policy, the supply by its own industry of the panels needed for its renewable energy policy. It has put itself in the hands of the Chinese, on whom it is increasingly dependent. It has forgotten to look at how the Chinese are colonising South-East Asia: dumping to eliminate the competition. From now on, it will be very difficult to free itself from such a cumbersome partner.