Last week, European Commission (EC) President Ursula von der Leyen unveiled the EU's response to the Inflation Reduction Act (IRA) and China's dominance in the solar manufacturing chain, the Green Deal Industry Programme (GDIP).
This plan is based on four pillars: a predictable and simplified regulatory environment, faster access to finance, skills upgrading and open trade for a resilient supply chain.
If the IRA has been welcomed by the US solar industry and almost seen as a saviour to boost domestic manufacturing, in Europe the response seems to be more lukewarm.
Manufacturers across the value chain have welcomed the initiative, but if the EU wants to compete on a level playing field with the likes of China (which currently holds more than 80% of the global value chain), the US and India, then more demands need to be made.
Udo M?hrstedt, CEO of component manufacturer IBC SOLAR, said, "The GDIP is a very good first step, but it must be followed up quickly with capital, commercial and manufacturer strategic alliances, in addition to plans on how to kick-start the sector."
Trade body SolarPower Europe has called on the EU to support technologies such as solar PV to contribute to Europe's green transition and energy security.
In a statement last week, SolarPower Europe policy director Dries Acke said, "It is good that industrial policy is focusing on the critical renewable energy supply chain. However, we are concerned about the lack of focus in the Green Deal industry plan. We need particular support for the bulk technologies on which net zero emissions and energy security are based."
The more detailed scope of this scheme remains to be seen, with some uncertainties such as how companies will qualify for funding or the extent to which the scope of such funding is uncertain yet to be unveiled. Instead, the IRA contains a detailed list of manufacturing credits along the entire value chain, designed to boost the US PV manufacturing sector.
A spokesperson for polysilicon manufacturer WACKER said, "We certainly welcome EU initiatives, such as the Green Deal Industry Program. However, how these initiatives are concretely implemented is crucial. The specific actions the European Commission intends to take remain to be seen."
NexWafe currently operates a prototype production line in Germany
Davor Sutija, CEO of wafer manufacturer NexWafe, said that one of the main differences between the European program and the IRA so far has been how manufacturers get their funding and how long the process will last. In Europe, it can take up to two years to apply for and receive funding, while in the US it will depend on whether the company produces a certain product.
Sutija adds, "Even if you go through this two-year process, there is no guarantee that you will be successful in getting funding. In North America, if you can build the product, you can make money."
For European manufacturers, this longer process won't bring much progress for expansions and new facilities, and the EU's Interim Framework Measures for Crisis and Transition, which aim to facilitate and accelerate the green transition in this region, will be in place until December 31, 2025.
"Solar energy is a realistic option for the energy transition. The geopolitical map of energy is being redrawn, especially around solar technologies. Not all net-zero technologies are in the same boat, both in terms of strategic importance and in terms of the impact of the inflation reduction bill on these technologies."
"We are also concerned about the timeframe involved. The revised programme of state aid under the communication proposal applies until 2025. The US is operating on a 10-year timeframe. We are advocating flexibility until 2030."
M?hrstedt said the GDIP is an important step and has vast prospects. However, if the EU is committed to building substantial capacity in Europe, it needs to move faster, "We need to compete not only with China and the US, but also with other parts of the world such as India."
To increase and accelerate funding for solar manufacturing, member states will be able to grant state aid for projects in their respective countries, which could spark a race to attract players to build plants in markets with greater financing capacity.
A spokesperson for Italian power company Enel said, "The European Commission and member states should fine-tune existing instruments in a selective way, while also taking into account the existing industrial base and sector-specific expertise of individual countries in order to ensure that the results are as effective as possible."
"We must also bear in mind that a massive surge in state aid risks leading to a fragmentation of the internal market, which favours Member States with greater financial capacity and can penalise those with limited financial capacity, distorting the competitive environment."
Meanwhile, one of the problems currently facing European manufacturers is unstable electricity prices, a factor that has increased costs over the past year.
A spokesman for WACKER said, "High energy costs in Europe are indeed a considerable challenge. That's why we have been advocating industry electricity prices for several years to ensure Europe's international competitiveness."
NexWafe's Sutija added that in order to have a long-term manufacturing industry in Europe, there needs to be a guarantee of predictable power contracts for industries building renewable energy on the continent, which would accelerate the installation of solar and wind power and also lower electricity prices.
This will create a favourable feedback loop in Europe, as increased manufacturing capacity will accelerate the use of renewables and reduce electricity prices.
IBC SOLAR's M?hrstedt said, "Strategies and measures to build up the entire European solar supply chain also consolidate the downstream and thus ensure that solar energy contributes to climate targets, which is crucial."
A WACKER spokesman said that three prerequisites were needed in order to make additional investments in solar silicon capacity commercially viable: capital expenditure incentives through EU and/or national programs, attractive electricity costs, and customers willing to sign long-term supply contracts for the increased production.
To ensure a diversified supply chain, one of the four pillars of the GDIP will be geared towards securing partnerships with other countries and reaching trade agreements. With this in mind, the European Commission will explore the formation of a Key Raw Materials Club to give European manufacturers access to the raw material supplies needed to create solar PV.
M?hrstedt said that in a fast-growing market like the solar industry, availability has its own meaning and diversification has its own value, which justifies supporting the construction and operation of the European solar manufacturing industry.
"On the other hand, even if we succeed, we do need components from outside the EU, which means that Europe should support its own manufacturing and open its borders,"
While the solar industry welcomes the European Commission's plans to start and accelerate domestic solar manufacturing, more needs to be done and fast, something the EU has not done brilliantly due to its bureaucratic procedures.
Some of the issues raised need to be addressed in a timely manner, especially given that the continent has only two years to meet the 30GW annual capacity target for the entire solar value chain.
While the energy crisis has stimulated the development of renewable energy across the continent and accelerated the green transition, it has had a negative impact on those responsible for establishing the solar supply chain in Europe.
"In Europe, we have high electricity prices. If you want to get to the kind of manufacturing scale that [solar] PV needs, you need to get stable, lower electricity prices."
Sutija says, "Just like the Inflation Reduction Act, you need to get predictable long-term financial support up to 2031. And you need to move quickly, with a decision cycle shorter than one to two years."