The resurgence of photovoltaics (PV) production in Europe was one of the main topics addressed at the 38th PV-Symposium, held in Bad Staffelstein, Germany, from February 27 to March 2 to bring together PV industry experts from Germany, Austria and Switzerland. To achieve energy sovereignty sustainably in Europe, it seems more urgent than ever before to create the right incentives, work strategically and push forward with projects quickly.
How can we succeed in this? What competitive advantages do we have and what obstacles are we facing? And what is Europe’s position in the global race surrounding production capacities?
For our two-part interview with the experts, we met with Dr. Marcus Rennhofer, Senior Scientist at the AIT Austrian Institute of Technology, and Prof. Dr. Andreas Bett, Director of the Fraunhofer Institute for Solar Energy Systems ISE and Professor at the University of Freiburg, at the PV-Symposium to speak about these issues.
The first part of our interview focused on barriers to investment, how Europe is competing with major manufacturers like the USA and India, scaling up, and the integrated development of a European PV supply chain.
In Europe, the demand for PV is currently outstripping supply many times over. For some time now, there has also been a consensus that Europe needs to ramp up its PV production again. Despite this, why are our continent’s production capacities being expanded so sluggishly?
Rennhofer: In Austria, there have been repeated approaches to expand production capacities. A huge sticking point in recent years was the lack of backers willing to invest the sums needed to build modern, fully automated production facilities on the scale required for Europe to produce PV in a way that is financially competitive.
The other issue was that despite the general awareness of the necessity to expand PV, political decisions to support this growth have sometimes been insufficient. This has led to inadequate recognition of the vital role played by new PV production facilities on the road to achieving this expansion. For a long time, the prevailing opinion was[SHdM1] that the most economical way to access the technology – which, as they saw it, was produced excellently elsewhere – was to import it. And they also believed that, in doing so, we could still transform our energy system at the same time. This was the mindset before the crisis and before people were fully aware of all the supply chain problems and technological dependencies on other parts of the world.
Bett: If you look at Europe as a whole and, in fact, at most parts of the world, the predominant belief throughout the history of photovoltaics has always been that PV is too expensive. In Germany, previous governments all stuck to the same tune: “We don’t care where the PV modules come from. What matters most is that the PV power is cheap and using PV modules made in China makes it even cheaper.” There was some truth to this when the industrial development of PV was still in its infancy because many production steps were performed manually.
However, technological progress, the automation of processes and economies of scale brought about by mass production have since made PV modules less expensive, paving the way for PV power to become one of the cheapest sources of electricity. These days, industrial production is almost fully automated, meaning that labor costs are much less of a factor in the cost structure of PV modules today. As a result, China has lost one of its cost advantages. That said, over its years of strategically building its PV production capacity, China has created another cost advantage for itself simply by manufacturing PV at such high volumes. China also now has an ecosystem of suppliers to support its PV production activities.
This situation currently places Europe at a cost disadvantage. Starting out with small production volumes will make us more expensive at first, meaning we need government support along the complete supply chain. This entire debate used to focus solely on solar cell production. However, as the PV-Symposium has reminded us, the rest of the world is almost entirely dependent on China for wafers.
In the past, the spotlight was also largely directed towards financing. Yet I believe sustainability should also be taken into account when looking at the broader picture. How much CO2 is actually emitted during production? Where does the material come from? How is it procured? These are all issues that are not initially reflected in the price.
How quickly can or must PV production be ramped up in Europe to prevent us from being overtaken by countries like the USA or India where PV and renewable energy incentive programs have taken effect at a rapid rate? How can we make up ground?
Rennhofer: They’ve already overtaken us in terms of production capacity. Despite this, I think we need to do more than the US is currently doing by focusing primarily on using government support, market subsidies and feed-in tariffs to increase installation capacity. We should be introducing measures across a range of different sectors. We need to increase our production capacities, train more staff, and create networks within Europe so that we don’t overlook anything or do the same thing twice without first working together. In other words, we should be cooperating in a much more coordinated way and be securing much higher volumes of investment than the money currently made available through market incentives.
Bett: Change hasn’t always happened as rapidly in the USA either. For example, the Inflation Reduction Act (IRA) was drafted two years before it was finally passed in August 2022. Nobody in Europe had picked up on this delay so, when the Act was agreed, the EU was alarmed and commented that it needed to respond quickly.
In India, the Production Linked Incentive (PLI) scheme and customs duties in place have been in effect for three to four years. The developments in India demonstrate how it takes time for measures like this to have an impact. This will also be the case in the USA, giving us a chance to catch up. Nevertheless, it’s true that we need to respond quickly. I think that the Inflation Reduction Act in the USA has the potential to accelerate the introduction of political measures in the EU.
In Europe, how can we expand our production capacities sufficiently to enable us to compete with international production facilities? Meyer Burger, which produces its solar modules in Germany, was one of the companies to speak about this at the 2023 PV-Symposium.
Bett: Ultimately, if we are to reach a certain capacity, we must make headway without delay, including in terms of start-up funding. Meyer Burger is a shining example of a company that has started to create a local supply chain. But the current production volumes are not enough. To compete on the global market, individual companies need to be financially supported to reach a production capacity of 10 to 20 gigawatts (GW) and must work more closely together.
Due to the customs duties levied on individual components, there are numerous examples of small cell and module manufacturers in Germany that are at a disadvantage compared with companies that import complete PV modules. Regulations like this must be amended so that manufacturing industries stand more of a chance.
Rennhofer: Production capacities can be guaranteed by creating the conditions needed to achieve them across the entire supply chain. In addition to processing and procuring raw materials in Europe, this entails producing peripheral subcomponents, for example aluminum, glass and back sheets in Europe and training specialists.
The European market is actually slightly bigger than the US market. If we can make Europe competitive as a whole, we will therefore also be able to make European production capacities competitive at the module level.
How can we manage to successfully re-establish the entire supply chain? You’ve just mentioned aluminum and glass, but the industry is rather skeptical as to whether these materials can even be manufactured in Europe again.
Rennhofer: I feel that a lot of progress comes down to raising awareness, even among decision makers. We must increase awareness of how the entire supply chain is integral to reducing commercial, economic, and environmental dependencies. The Green Deal and climate targets will not be achieved if we install imported goods with a large carbon footprint as opposed to adopting the more environmentally friendly practice of producing products sustainably and regionally in Europe. This latter approach would also allow us to add value by creating local jobs.
The volumes by which photovoltaics need to be expanded are an important part of the argument that the solar industry has the potential to create jobs for the long-term benefit of the economy. It can be argued that photovoltaics will create enough jobs to visibly benefit the economy and make it resilient.
Bett: In response to your question, we need to kickstart production now in order to succeed. Meyer Burger is an excellent example of how one single company can have a very positive impact.
Although we have some major tasks ahead of us across the entire supply chain, we have the fundamental expertise and means in Europe to overcome these challenges. The one thing that was missing was political support, which we are now starting to receive and must turn into concrete action. We need financial support with investments and assistance with operating costs, especially electricity costs. I’m also convinced that we have a lot to offer in terms of research and that we can transfer our findings to the industry, helping to boost our competitiveness in the process.
Rennhofer: To get the supply chain up and running, we will need to implement innovations. This will require us to reintegrate a full cycle of innovation along the entire European supply chain. This will only be possible with government support, as the industry alone will be unable to maintain this cycle of innovation. Without government backing, the innovations would disappear and Europe would not be competitive. A cycle of innovation is the only way of transferring research on various levels – including basic research, applied research and industrial development research – into industrial production.
M. Rennhofer and A. Bett S spoke to Sarah Hommel de Mendonça.