Solar energy: This is what a smart solar strategy for Europe could look like

Solar energy: This is what a smart solar strategy for Europe could look like

In Brussels, the EU Commission is currently working on an extensive support package for the domestic solar industry. Here, three scientists from the Brussels think tank Bruegel speak out against new tariffs and subsidies.

The halving of solar module prices in the past two years has triggered a solar boom in the EU: the installation of a record capacity of 56 gigawatts in 2023. This is an increase of 40 percent compared to the previous year and theoretically corresponds to more than the entire electricity consumption in the EU Denmark. This increase is a crucial step towards achieving the EU’s expansion targets solar power and has reduced dependence on imported fossil fuels.

Great news, you might think.

However, almost all solar modules installed in the EU in 2023 were deactivated China imported. European solar manufacturers are having a hard time. They find that they cannot keep up with the Chinese competition, which offers high quality modules much more efficiently and cheaply. The panels are so cheap that they are imported faster than they can be installed. The result is a growing supply of European modules, equivalent to more than a year’s worth of production.

European solar panel manufacturers now want a financial lifeline from European taxpayers. Ideas suggested include import tariffs, subsidies for domestic production and buying up excess inventory.

The EU tariffs of 2013 were not a success

But tariffs or other measures blocking trade would be a mistake, as the EU should know. In 2013, the EU imposed tariffs on Chinese solar panels after the industry similarly complained of unfair competition. The tariffs were only in effect for five years and did more harm than good. They have not triggered any significant growth in European production capacity and have slowed the expansion of the solar industry. The protectionist measures only provided temporary relief for manufacturers and came at the expense of climate goals.

Subsidies for the domestic production of solar modules made in Europe would also be a mistake. The background to this idea is the ongoing negotiations in Brussels over a goal of covering 40 percent of European demand for a range of clean technologies through domestic production by 2030. This blanket approach is wrong because it ignores the very different value chains, current competencies and global market dynamics for different technologies.

Global solar market is oversupplied

The global solar market, for example, is extremely oversupplied, and subsidizing additional production does not benefit the climate. The economic benefit for Europe is also small. Full-scale manufacturing processes require energy and capital intensive investments, where Europe has no advantage. Most jobs in the solar industry are in the installation and not the manufacturing of the modules.

Proponents cite resilience as a further argument for subsidies: Europe should not be too dependent on a single foreign supplier for its energy transition. This is a legitimate concern, especially after Europe’s dependence on Russian natural gas was dramatically exposed.

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