Chinese manufacturing glorified the long-last history of PV industry. From technology transformation to wafer size innovations, China fueled up the development of PV industry worldwide with rapid duplications and cost reduction. Once expensive, solar power has become the cheapest clean electricity. Solar energy pioneers the development of renewable energy, as global PV market sees TW-scale installed capacity.
Europe and the U.S. are the two biggest solar markets relying on imports of Chinese products. As the industry begins to see steady developments, the two started to realize that importing from China is no permanent solution, for it quashes local businesses. Doubled with lofty supply chain prices in recent two years and energy issues emerging amid the Russia-Ukraine conflicts, full-fledged markets seek active localization guidelines urgently. Among which, Europe receives the most heated discussions.
Europe lacks manufacturing capability, despite having 22-GW annual polysilicon production capacity. In the face of the U.S.-Xinjiang issue, manufacturers panic buying polysilicon outside of China, with most capacities booked by Tier-1 Chinese manufacturers and little left for the local supply chain. Wafer and cell production capacities, on the other hand, are very scant, sitting at 0.5 GW and 2 GW, respectively. While Europe has an annual module production capacity of 6.5 GW, actual production output is limited, for high production costs (electricity and labor costs) keep prices high, deferring customers who end up purchasing modules from China.
All these lead up to cross-sector disproportionate production capacities and low utilization rates in the European supply chain.
With 49 GW of module demand this year, Europe is the second-largest market after China. Presently, 90% of its demand are fed by Chinese products. Reducing that figure and increase local production is crucial. In light of that, SolarPower Europe and InnoEnergy launched the European Solar Initiative, aiming to establish a cross-supply chain production hub with 20 GW of annual production capacity.
Despite a poor supply chain, Europe attracts various manufacturers for production expansions due to following factors:
To wean itself off Russian natural gas, European countries grow to accept energy reform. Data compiled by InfoLink show PV demand in Europe increase every year with Germany taking the lead, potentially attaining 65-70 GW of annual module demand by 2025.
The European Solar Initiative aside, the joint announcement the EU and the U.S. made at the Trade and Technology Council on May 16 also pledged to reduce PV industry concentration and fortify the European supply chain. With controversies regarding Xinjiang-origin materials, the U.S. strikes the first blow, banning imports of relevant products. Meanwhile, the EU pays close attention and plans for possible sanctions. Supportive policies are expected in the future to protect and bolster local manufacturing activities.
Wide price acceptance
Delivering prices saw upside momentum, owing to robust demand and fluctuating exchange rates. Glass-backsheet modules rated beyond 500 W are delivered at USD 0.27-0.28/W. Spot prices reach beyond USD 0.28-0.30/W when supply lags strong demand, as pandemic in China weighs on the supply chain in recent months. Residential distributed projects see prices coming in at USD 0.285-0.315/W. Prices for modules with black backsheets have mounted USD 0.295-0.35/W. Price differences between mainstream products and Chinese modules sit at around 3-8%.
For now, production expansions are limited in Europe, with only few manufacturers making substantive moves. Still, with clear discernment and successful differentiation from Chinese products, the bloc could become a manufacturing magnate of the PV industry.
First of all, expansions should be focused on targeting the right customer base. European manufacturers, subject to higher production costs, are advised to focus on high-end rooftop markets for better profits, for ground-mounted projects have lower price acceptance.
Secondly, as the M10 format is projected to remain mainstream in the years to come, while G12 will see market share gradually growing, manufacturers should deploy equipment that can accommodate with sizes up to G12 for long-term usage and cost amortization. Such equipment allows manufacturers to provide mainstream products continually and transition from one format to another.
Manufacturers have two technology options for expansions in Europe, n-type TOPCon and n-type HJT.
As data of InfoLink suggest, p-type PERC will remain mainstream in recent years, thanks to cost advantage and its similar process flow that enables manufacturers to upgrade existing lines to TOPCon,
HJT has simpler manufacturing process (with only six procedures), higher theoretical conversion efficiency, uses thinner wafers. Additionally, HJT is a fundamental technology for developing low-carbon footprint modules, for it is a low-temperature process and can score higher in carbon emission evaluations.
There’s no distinct advantages or disadvantages between the two techniques in terms of technology selection. The point is to opt for n-type technologies. Presently, p-type and n-type modules see USD 0.01-0.05/W of price differences. With wider price acceptance, Europe can be a pioneering market for n-type modules. The development and application of n-type products will be accelerated if the European market adopts n-type products widely.
Finally, it is desirable for manufacturers to have GW-scale production expansions rather than 200-500-MW ones, for resultant cost advantage grants them bigger bargaining chips against either up or downstream sectors.