How much is solar manufacturing worth?

The European Union has set a goal of at least 30 GW of European solar manufacturing, at each stage of the value chain, by 2030. However, market forces are driving down the price of solar components, making it difficult for Europe’s solar industry to sell their products and scale up. Some parts of the European solar value chain are particularly impacted, like solar modules and wafers. We continue our urgent calls to support these critical links in the solar-led energy transition.

Recent weeks have brought three key reports from the International Energy Agency (IEA) . First came Renewables 2024, then, the defining World Energy Outlook 2024, and finally last week, the Energy Technology Perspectives 2024. The story of solar is written in bold across each publication. This week's edition of Solar Manufacturing Matters captures some of the key takeaways from these reports relevant to the solar sector and its manufacturing.

Renewables 2024 & The World Energy Outlook

Traditionally, the IEA’s modelling has erred on the conservative side, when it comes to projecting solar growth. Each year, projections are revised upwards. For example, back in 2021, SolarPower Europe projected that – in the best-case scenario – the world would be installing around 350 GW per year by 2025. In the same year, the IEA forecast an annual global market under 250 GW by 2025 (in its accelerated scenario).

Of course, solar has outstripped even the more bullish projections. SolarPower Europe now projects more than 500 GW of solar will be installed worldwide this year. In this year’s forecasts, the IEA also reveals much about electricity generation in the years ahead. Solar will be generating most of the world’s electricity by 2033.

On global solar manufacturing, Renewables 2024 sets out how capacity has declined across the value chain in the last year. However, global solar manufacturing capacity is expected to still sit over 1 TW at the end of 2024, significantly more than the projected demand for 2025.

The oversupply continues to keep module prices low, creating difficult market conditions – the IEA reports the cancellation of manufacturing capacity worth about USD $25 billion, including 300 GW of polysilicon and 200 GW of wafer manufacturing. The good news, however, is that the solar supply chains are diversifying. While the planet’s overall manufacturing declines, it continues to increase in some regions – almost tripling in the US and India. Europe is, unfortunately, lacking from that picture, and that has to change.

Energy Technology Perspectives

Digging in to Energy Technology Perspectives (ETP), for the first time the annual report introduces a combined analysis on the interplay between energy, industrial and trade policies. The publication answers our title question – clean energy technology investment surged by 50% in 2023, with solar PV and batteries receiving 80% of the USD $235 billion total.

Pointing to the ETP findings, SolarPower Europe has emphasised the massive economic potential of solar PV manufacturing; it stands as clear evidence that Europe must pursue a strong solar industrial strategy.

Most global clean tech investments have been made in one country. By the end of 2023, China held over 80% of module manufacturing and more than 95% of all polysilicon and wafers production machinery.

However, in parts of the world, governments are acting on the risk of overly concentrated supply chains, and the loss of industry. Supply chain diversification is driven by regional policies such as the US Inflation Reduction Act (IRA) and India’s Production Linked Incentive (PLI) Scheme.

Relatedly, Renewables 2024 reveals that in the first half of this year, almost 60% of all capacity awarded in energy auctions worldwide included non-price criteria, such as sustainability, energy system integration, or supply chain security – double the level seen five years ago.[1] This reflects part of the EU approach: using the Net-Zero Industry Act to drive domestic demand for local products without slowing the market. SolarPower Europe welcomes this approach and has published recommendations on how Europe can best implement supply chain resilience auctions here.

Though the report holds back on strong recommendations, it does note that “broad-based protectionism” is “unlikely to make for a winning industrial strategy.” SolarPower Europe continues to push for the swift implementation of the EU Net-Zero Industry Act, which should be complemented by support from the European Investment Bank, as well as a dedicated EU financing instrument for solar manufacturing.

“The report underlines the energy security benefits of solar – dependency on imports of Russian gas flows is of very different and much higher-risk nature than importing solar PV stocks, certainly as supply chains diversify.” – Dries Acke, Deputy CEO at SolarPower Europe

The ETP report also offers wider analyses on the energy transition’s impact on trade flows. Nearly half of all global shipping mass is fossil fuels. A single large container ship can transport approximately 2 GW of solar PV modules. These modules produce sufficient power for around half a million European households for 25 years. In contrast, it would take 50 LNG carriers and 100 large coal ships to produce the same energy output. The efficiency gains of the clean energy transition continue to be mind-blowing.

Solarcoaster

Trade: Trump’s victory is causing a strong reaction on the stock market, with US PV company shares dropping. While local support through the IRA could be under jeopardy, the effect on clean energy tech might extend beyond the US. While PV prices might be close to bottoming out, both internationally and in the EU, the introduction of additional trade barriers could further increase downwards price pressure. The EU in particular, as one of the few regions without barriers on PV imports, could experience further module price decreases.  

Product launch: German companies claim launch of world’s largest plug-in PV system of 6 kW

Product launch: A Danish provider of print finishing equipment now offers turnkey pilot lines for perovskite and organic solar cell production.

Solar Manufacturing Matters is a fortnightly newsletter on the European solar manufacturing landscape. Every other Friday, check out our latest EU policy analysis and a roundup of solar manufacturing market news.

From SolarPower Europe, the award-winning European trade association with over 300 members active at every point in the solar PV value chain.