Q&A: EU solar gains nothing from trade war

The EU's net zero industry act (NZIA) could boost Europe's solar manufacturing and make it more resilient to competition from abroad. But Europe should avoid protectionism and escalating trade wars, industry association Solar Power Europe deputy chief executive Dries Acke tells Argus' Sian Morris.

How has the European solar industry fared in the past three years?

It has been quite an intense three years, because there was the energy crisis year, with the situation between Russia and Ukraine. So it was really important that Europe reacted and did something to substantially reduce gas imports from Russia and accelerate the energy transition to fill that gap. And that's really been the beginning of this acceleration story of solar. We're proud that solar delivered for Europe.

The other thing that also happened in the past few years was we saw Covid supply chain restrictions released and a strong decline in volume prices from China. That was a very difficult situation for European manufacturers. But we're quite happy, because through that we have the solar charter, which is political confirmation that European leaders and the industry are committed to maintaining and growing solar manufacturing in Europe.

What are the solar industry's goals for the future?

We have a very clear goal for ourselves in the solar sector. We want to reach at least 1,000 gigawatts (GW) by 2030 in Europe. That's a goal we launched three or four years ago and was received with a lot of scepticism. But you can see that projections are increasingly creeping closer to that goal. For example, if you look at the latest national energy climate plans, the new ones that will be finalised very soon aggregate to well above 650GW. And that's just the current plans of member states on paper, which we always know are developed a little bit prudently.

One of the goals of the NZIA is to make sure the renewables being rolled out are manufactured in the EU. How much of that 1,000GW do you think will be manufactured in Europe?

The NZIA has an overall goal of having 40pc of clean technology deployment made in Europe by 2030. But for solar, there is a specific target of at least 30GW of solar manufactured in Europe by 2030.

We project that in 2030, we will have a European market of well above 100GW, maybe around 120-125GW. But first, that 30GW goal for us represents meaningful scale. For the moment, we don't have scale and, depending on which supply chain step we talk about, we don't have more than 5GW of solar manufacturing in Europe right now. And that's what we need to overcome, we need to have industrial scale.

What are the mechanisms in place to increase solar manufacturing capacity?

There are a couple of things about the NZIA, but I think the most important are the provisions around non-price criteria, because they create demand for sustainable European products. And that's what the NZIA does, it creates a legal framework for non-price criteria around resilience and sustainability.

Sustainability is easy to understand. That's about carbon footprint or certain chemicals or recyclability, which need to be considered in public procurement. But resilience means that you are rewarded in public procurements and auctions if you have a product that is less composed by the dominant source of supply. So if you have a solar system that is not reliant on components that come from China, you get rewarded for that because you are valuable from a diversification point of view.

Looking further upstream, the raw materials used in solar manufacturing are very exposed to China, how much of a risk is that for Europe's solar manufacturers?

It's certainly a concern. The main raw material for solar is high-purity polysilicon, where we have this European player, Wacker Polysilicon, which already can cover a large part of the demand in Europe. The problem is that it's not followed through with capacity on the ingots and wafers, which then means that we have almost nothing on cells and only a little bit on the assembly of components.

But with [metals] such as germanium and gallium, the dependency on China is already exposed to a lot of geopolitics. For the moment, there is no problem with raw materials supply. But if the geopolitics around the energy transition and solar get more tense, and we move into more of an isolationist or protectionist trade war, then we may see that that becomes a problem.

It is very important for Solar Power Europe to make sure that we keep doing resilience and industrial strategy within an open trading mindset. Europe has nothing to gain from an escalating trade conflict. And in that sense, it also sets itself apart a little bit from the US, where the situation is very different. So, we want the EU to keep forging its own path and looking at its own interests.

Low polysilicon prices and high energy costs are really squeezing margins for polysilicon producers right now. Do you think in the long term that Europe will be resilient to competition from bigger players in China or the US?

There's a very important conversation happening on a European level now more and more about Europe's competitiveness in general. Europe's industrial ecosystem and competitiveness relies on cheap Russian gas, which we don't have anymore. We all know that ultimately the only way for Europe to be competitive is to accelerate the energy transition. Europe has no choice but to base its competitiveness on cheap solar and wind in a flexible electric grid system.