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Solar industry warns EU rules would hamper clean energy transition

European solar companies say that local content rules in the EU’s proposal to boost the bloc’s renewables manufacturing will make the transition to clean energy more difficult because of limits on Chinese imports.

The European Commission’s proposed Net Zero Industry Act, which was announced on Thursday, obliges governments to mark down public tenders for renewables projects if companies source from a single country that accounts for a more than 65 per cent of the EU market share for the product. The same rules would apply to products that are offered with a consumer subsidy to encourage uptake.

This would disadvantage solar companies, which the act deems as having “insufficiently diversified” supply. China has a more than 80 per cent share of the European market across the industry supply chain.

Last year, the EU achieved a record installation of more than 40GW of solar panels after a push to replace Russian gas. That was made possible by more than doubling annual European imports of solar panels from China, according to the commission.

In 2022, Europe assembled around 8GW of solar panels, one-fifth of its demand, with most of the parts coming from China.

“The current proposal is asking member states to reduce support for technologies that come from dominant geographies in the supply chains, like solar . . . If we don’t want to risk slowing solar deployment, we need a bigger carrot, especially in terms of financing solar plants in Europe,” said Dries Acke, Policy Director at SolarPower Europe, an industry lobby.

Lukas Pauly, managing director of production at Enpal, a German green tech company that sells direct to households, said that if the EU cut national subsidies for non-European products, “the only effect would be a massive hit on installations.

Until we have built up enough capacity in Europe, reducing subsidies would slow down the renewable transition.”

The International Energy Agency estimates the price of panels produced by an onshore European solar supply chain would be more than a third higher than Chinese equivalents, though the differential would probably fall over time with economies of scale.

A clause in the proposed act does allow governments to make exceptions to the local content requirements if there is a “disproportionate” cost difference of more 10 per cent between local and overseas products.

“The sector has worked so hard to reach this point. It would be hard to take if local content rules walk those gains backwards. In the longer term, a diverse and competitive supply chain is a good thing but not at all costs,” said Kareen Boutonnat, chief executive for Europe at Lightsource bp, one of the region’s largest solar developers.

Industry executives also compared the EU’s provisions unfavourably with the US Inflation Reduction Act, which grants $369bn in subsidies to both green tech consumers and producers.

“The EU needs to use the carrot, not the stick. Taking the current approach, without additional financial support . . . will inevitably mean cutting off foreign supplies that we are not yet in a position to say no to,” said Andreas Thorsheim, founder of European residential solar marketplace Otovo.

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