• One of the key success factors towards achieving Europe’s renewable energy goals is creating a viable local PV ecosystem

The 30 GWp of solar PV capacity added in Europe in 2021 marks a record for PV additions to European energy generation1. This number sets a European base line while the continent is facing increasingly uncertain and costly fossil energy supplies, lately spurred by the war against Ukraine.

This situation constitutes the background for an energy independent Europe, mainly – but not only – from Russian fossil energy supplies. More than ever, cost-competitive, and stable renewable energy generation appears imperative to securing energy while avoiding compromises on the Paris Agreement.

Consequently, a target of 1 TWp of cumulated PV capacity in Europe by 2030 receives ever stronger backing by ambitious political targets, e.g., 215 GWp in Germany alone. This would imply an approximately 24% PV share of total electricity consumption in 20302. Apricum forecasts a solar deployment of around 50 GWp over the next 2-3 years in the continent, propelling quickly to reach 80 GWp levels towards 2030.

“The urgency and scale of building a European PV value chain requires the close attention of the EU Commission and large industry participants.”

The largest barrier to achieving this goal is the high dependence on imports from the global solar PV manufacturing hub China – currently accounting for around 90% of all European installations. There is a strong rationale for localization of European supplies: First, as any other region, Europe needs geographic supplier diversity and multi-sourcing options; second, geopolitical shifts strengthen the need for an independent manufacturing base; third, Europe could benefit from a massive industrial economic value creation along the entire PV value chain and lastly, Europe could build a viable PV ecosystem securing long term competitiveness.

A realistic goal for localization could be 50% of the PV demand by 2030, i.e., 40 GWp per year. Currently, Europe has around 8 GWp of nameplate module capacities which, however, are very poorly loaded and require upgrading. This massive gap by itself best describes the sheer size of the tasks to be accomplished within a small number of years.

For a PV module manufacturer to be economically viable in the longer run, 3-5 GWp annual capacity appears essential to allow for economies of scale. Hence, with European target production capacities of 40 GWp, a total of five to eight sizable producers are to be envisioned. Ideally, these players should be well distributed geographically, on product and end market focus. Presently, a few giga scale solar projects are on the table with plans for additional future capacity expansions, namely concrete projects of Meyer Burger and Enel (3SUN), in the planning stage REC’s expansion to Europe, and even earlier stage projects in Spain (Greenland) and France (Carbon) to name but a few.

To create around 40 GWp of PV cell and module capacities, total investment is projected to be around EUR 10B (including ramp-up and working capital) while creating about 35,000 new direct jobs in the European PV manufacturing industry.

Past experience – especially since 2020 – shows that PV module assembly plants alone would not resolve the issue of independence and delivery security since the vast majority of solar materials and components are procured from Asia, e.g., wafers, glass and frames. In parallel to cell and module manufacturing, key components should also be localized to effectively build an ecosystem allowing the European PV industry to rely upon a powerful and diversified supply chain, to secure supply chain resilience and overall renewable energy market stability.

An analysis performed by Apricum reveals significant gaps in the European solar materials value chain.

On the upstream polysilicon side (basis for wafers) the combined European nameplate capacity amounts to just above 20 GWp, most of which are currently exported outside of Europe. Moving to the next step in the value chain, ingots and wafers, a most serious 40 GWp gap between a 50% target and the current <1GWp supply suggests that these critical components have been largely overlooked. Norwegian suppliers NorSun and Norwegian Crystals are expected to expand beyond single digit GWp capacities by 2030, but ingots and wafers still remain a major area of attention. Initiatives and incentives to fund new PV ingot and wafering plants should hence be high on the European priority list.

PV glass for front (and rear) of the module is another critical material and cost item in PV module manufacturing. Currently, rolled glass is supplied by Interfloat out of Europe plus Chinese and Indian imports. To fill the 38 GWp of glass supply gap, around 4,000 tons per day new melting capacity would be required, stipulating an investment of around EUR 1.8 billion.

European capacities exist for the aluminum and steel used in PV frames and mounting which can be readily implemented. However, for both glass and aluminum, high energy (natural gas) and comparatively high labor and raw-material costs suggest, that a localization target of 50% appears on the high side, as long as those materials can also be procured from diverse international sources.

PV films, encapsulants and backsheets, are also mainly procured from Asia, although there are several European-based players, e.g., Coveme, Endurans and Borealis. Given the cost structure of film making and new chemical compositions plus extrusion and coating technologies, there seems to be available space for European localization up to 50% of local demand for these materials.

For each PV material a differentiated strategy is to be designed depending on the degree of innovation, cost structure (including shipping costs) and economies of scale. In general, the further upstream (e.g., polysilicon), the larger the potential for economies of scale – and the smaller the number of potential viable suppliers in Europe.

The urgency and scale of building European PV value chain requires the close attention of the EU Commission. Europe needs more focused and aligned initiatives to scale current technologies. A successful industrial project could resemble the recent Li-ion battery alliance example and could be designed to create the optimal number of PV value chain participants inside a lively ecosystem.

This undertaking requires double digit billion euro investments. EU and national governments could choose from two instruments to support a streamlined PV value chain creation. First, targeted investments into key players’ equity stakes in order to bootstrap the industry and accelerate scale-up. A second and probably more effective option could resemble the recently implemented production tax credits in the U.S. where manufacturers will receive support per produced entity of PV materials, components, and modules, thus stirring actual production output.

Managing projects at this scale require industrial as well as technological experience, funding and access to relevant partners to facilitate this growth in due time. Over the past years, Apricum has taken an active role in devising market entry strategies for players in Europe, creating robust business plans and raising equity, loan and subsidies. Given the 15-year experience in working all along the PV value chain, Apricum can assist policy makers, investors and companies to reach the goal of an energy independent Europe.

Footnotes:

1) Apricum PV market model Q2 2022

2) Total electricity consumption projected by Energy Brainpool, EU energy outlook 2050, April 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Author:

Florian Haacke

Partner

Florian Haacke is the head of Apricum's materials practice group comprising solar, energy storage and green hydrogen materials, chemicals and processes. He has profound expertise in strategy development with a focus on the materials enabling those renewable technologies. He speaks at major materials conferences worldwide and contributes to studies and publications regarding his focus areas.

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Author:

Nikolai Dobrott

Managing Partner

Nikolai Dobrott has profound technology and market knowledge in the solar, wind and integrated renewable energy industries, combined with deep functional expertise in strategy development, strategic business plan execution and corporate finance.

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