35GW Of European PV Manufacturing Projects Threatened With Shelving

Ambitious plans for indigenous solar manufacturing capacity in Europe are facing an awkward situation as they "die before they are ready".

According to a study by consultancy Rystad Energy, some 35GW of European PV manufacturing projects are at risk of being put on hold as rising electricity prices undermine the continent's efforts to build up its solar supply chain.

Rystad Energy noted that 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 have increased the risk of failure for planned projects that have not yet been funded.

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 an increased reliance on overseas manufacturing.

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

According to Rystad, European electricity prices have reached unprecedented levels in recent months due to reduced gas supplies from Russia, summer heatwaves and unexpected outages at nuclear and hydro power plants.

European electricity prices have reached unprecedented levels in recent months

Rystad reveals that European electricity prices have fallen back significantly since their historic high in August, but they remain at €300-400/MWh ($297-396/MWh), many times higher than the pre-energy crisis norm.

While European citizens have benefited from reliable, reasonable electricity prices, studies also show that low-carbon manufacturers are building capacity on the basis of stable electricity prices of around €50/MWh.

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

As part of measures aimed at tackling high energy prices, EU ministers last week agreed to set a mandatory temporary contribution to the profits of companies active in the oil, gas, coal and refining sectors. Member states will use the proceeds of the contributions to provide financial support to households and companies to mitigate the impact of high retail electricity prices.

A recent report by the International Energy Agency demonstrates the high cost of photovoltaic 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 in China being 35% lower than in Europe.

The IEA said that without financial incentives and manufacturing support, the ability to finance manufacturing projects beyond 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, calls for 20GW of PV capacity on the continent by 2025.

However, Rystad warned that attracting investment finance for solar manufacturing plants "could be challenging" as high electricity prices will continue due to the expected lack of gas in Europe for several years.