Can the EU overcome its dependence on China for solar energy?
The European Union wants to greatly increase solar energy installations by 2030, however at the risk of aggravating its technological dependence on China. The Commission has a plan to boost domestic manufacturing, but there are many doubts
In 2022, the European Union installed over 40 gigawatts of solar photovoltaic panels, a record that was only possible thanks to the doubling of imports of these devices from China. The internally assembled panels were worth 8 GW, but most of the components were still of Chinese origin.
THE OBJECTIVES TO 2030, AND THE RISKS
The European Union wants to reach 2030 with 592 GW of solar photovoltaic capacity: this means more or less tripling the current capacity within the next seven years. It is an ambitious goal, but which without a sufficiently large Community industry risks causing a strong commercial and technological dependence on Beijing. Also because 85 percent of the world's production of solar cells and 74 percent of that of modules takes place in China.
FROM RUSSIA TO CHINA
This is why Kadri Simson, the European Commissioner for Energy, recently declared that "moving from fossil fuels to renewable energies must not mean replacing one dependency with another": that is, from dependence on Russia for natural gas and oil to dependence on China for so-called clean technologies (batteries, wind turbines, photovoltaic panels).
THE NET-ZERO INDUSTRY ACT
To catch up on manufacturing ground, the European Commission has imitated the United States and its Inflation Reduction Act with a bill, the Net-Zero Industry Act , which sets a minimum domestic production target of 40 per cent for all industries by 2030. clean tech .
As MEP Raphaël Glucksmann told the Financial Times , “Europe must go back to producing. We cannot be a continent of consumers. We have learned this from the pandemic and from the war: when there is a market interruption, then we are lost and naked”.
ARE THE HOPES AT ENEL WELL PLACED?
One wonders, however, whether the European target is realistic, given the starting conditions and the very tight deadlines.
Steven Xuereb, director of the German photovoltaic services company PI-Berlin, told the Financial Times in this regard that “we cannot scale fast enough to meet European demand. Everyone is enthusiastic about [Enel's] new plant in Sicily, which will produce 3 GW”: he refers to the expansion plans of the 3Sun plant in Catania, which should become the largest solar panel factory in Europe . “Chinese Giants Announce New 20GW Factories.”
THE (INCREASED) COSTS OF THE TRANSITION
However, there is the possibility that the Net-Zero Industry Act could prove counterproductive, complicating and slowing down the energy transition rather than accelerating it.
The International Energy Agency estimates that a solar panel produced by a completely European supply chain costs one third more than a Chinese panel. In short, wind energy could cost much more, discouraging installations.
THE EU-CHINA CLASH ON SOLAR
The European Union was once the world's largest producer of solar energy devices: in 2007 it was worth 30 percent of all photovoltaic panels in the world. But China was able to take advantage of the 2008 financial crisis, and the consequent economic slowdown in the West, to stimulate its manufacturing – state subsidies were fundamental -, reaching large production volumes and low prices.
In 2012, the European Commission launched an anti-dumping investigation into Chinese imported solar panels, which resulted in tariffs of nearly 50 percent the following year. A heated trade dispute ensued, with threats of retaliation, which frightened the countries of the Union (China is a very important partner, especially for Germany) and ended with the elimination of duties and the establishment of a minimum price on Chinese panels. European solar component manufacturers were not happy. The price floor was then removed in 2018.
From 2011 to today, according to the International Energy Agency, China – by now an almost undisputed power in the solar supply chain – has invested over 50 billion dollars in new manufacturing capacity for panels, ten times more than in Europe.
THE DEPENDENCE ON A FEW MANUFACTURERS
The European Union is not only extremely dependent on China, but more specifically on a handful of companies that produce large volumes of intermediate components such as polysilicon . For example, in 2020, just one GCL-Poly Energy factory in China was worth about 10 percent of the world's supplies of this conductive material.
Furthermore, about two-fifths of the world's production of polysilicon is concentrated in Xinjiang, the region where the violations of the rights of the Uyghur minority (forced detention, forced labor and more) take place, condemned by various countries and in some cases considered a genocide. At least two major Chinese silicon companies, Xinjiang Hoshine and JinkoSolar, own factories in Xinjiang industrial parks where Uyghurs are forcibly detained.
In 2022, the United States imposed a ban on the import of goods containing products made in Xinjiang, and similar restrictions could also apply in the European Union. To escape it, several Chinese companies have already moved manufacturing from Xinjiang to the Inner Mongolia region.
THE WEAPONIZATION OF SOLAR ENERGY
On the other hand – also in response toUS attempts to isolate Beijing from advanced semiconductor technology – the Chinese government is starting to limit the export of some technologies used to produce wafers, the "slices" of semiconductor material used in cells solar. It will be difficult for the European Union and the United States to source elsewhere, given that China is worth almost 97 percent of the world's supply of wafers. On European territory, two Norwegian producers remain, Norsun and Norwegian Crystal.
Restricting trade in a technology or strategic asset for political purposes is known as weaponization : it is a practice that Russia has used several times in the past with natural gas.
WHAT TO DO
It will not be easy for Europe to recover the manufacturing quotas of polysilicon and silicon ingots, in particular, because their production consumes large quantities of energy, which has much lower prices in China. European solar components, therefore, may not be competitive internationally, or could lead to a sharp increase in the price of finished panels that can be installed in the Old Continent.
Assembling solar cells and modules, however, is a less energy-intensive activity.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/energia-solare-europa-dipendenza-cina/ on Sun, 26 Mar 2023 05:44:10 +0000.