Europe stockpiles €7B of Chinese solar panels for energy security.

Europe stockpiles €7B of Chinese solar panels for energy security.

Europe’s Solar Panel Stockpile: A Surprising Twist in the Energy Transition

Image source: TNW

When Russia cut off Europe’s gas supply following the invasion of Ukraine, it exposed the vulnerable underbelly of a continent largely reliant on imported energy. The bloc responded by quickly sourcing gas from other countries and stockpiling it for a rainy day. But, it turns out, Europe was also hoarding mountains of another commodity: solar panels.

Currently, approximately €7 billion worth of solar panels – equivalent to 40 gigawatts direct current (GWdc) of capacity – sit gathering dust in European warehouses. This stockpile alone has the potential to power 20 million homes for a year. What’s even more surprising is that this stockpile is expected to more than double in size by the end of 2023, according to research conducted by Rystad Energy.

However, it wasn’t the war in Ukraine that drove this Black Friday-esque buying spree, but rather Europe’s fervent pursuit of green agenda. “European countries are desperate to get their hands on affordable solar infrastructure to advance their renewable energy targets, decarbonize, and avoid paying elevated prices for new capacity,” says Marius Mordal Bakke, senior supply chain analyst at Rystad Energy.

Driven by policies like the Green Industrial Plan and RePowerEU, Europe’s spending on solar imports has almost quadrupled over the last five years, surging from €5.5 billion in 2018 to over €20 billion last year. An overwhelming 91% of this money was spent on panels from China, which produces four out of five of the world’s photovoltaics. This is partly due to China’s tight grip over the building blocks of solar technology.

China’s dominance over the PV supply chain enables them to offer high-quality panels at dirt-cheap prices. In fact, today, Chinese solar panels are up to two-thirds less expensive than those made in Europe. As a result, a catch-22 situation arises for the EU; it wants to source 45% of its energy from solar and wind by 2030 but also aims to produce 40% of the panels locally within the same timeframe. Currently, however, domestically-made modules cannot compete with cheaper imports.

This leaves policymakers with a dilemma: wait for domestic PV production to ramp up and risk stalling the energy transition, or import panels and become dependent on China for supply. For now, Europe seems to be opting for the latter. Chinese solar panels are heading to several key countries including the Netherlands, Spain, Germany, Poland, France, Greece, Italy, and the UK.

The Netherlands, despite being the smallest country on the list, stood out as the leader in Chinese PV imports in 2022, bringing in almost 45 GWdc. Interestingly, most of these countries imported far more panels than they installed. This trend is expected to continue as PV installations lag behind the rate of imports due to bottlenecks such as labor and material shortages.

While having a stockpile of affordable PV modules immediately available may seem advantageous, Rystad Energy warns that if the panels remain unused for too long, they could become outdated and lose their value. However, the bigger concern is Europe’s increasing dependence on China for imports of solar panels and other critical materials and technologies.

In a special report last year, the International Energy Agency highlighted that “the world will almost completely rely on China for the supply of key building blocks for solar panel production through 2025.” This level of concentration in any global supply chain represents a considerable vulnerability, as we learned from Russia’s invasion of Ukraine. When it comes to energy security, it is unwise to put all our eggs in one basket.

Mark Widmar, CEO of American solar manufacturer First Solar, aptly sums up the situation by saying, “Solar is ‘freedom energy’ – unless we depend on autocracies for the technology.”

Europe finds itself in a fascinating and somewhat precarious position. While stockpiled solar panels offer immediate affordability, they also highlight a reliance on China. Balancing the need for immediate progress in the energy transition with the desire for domestic production presents a formidable challenge. As Europe continues on its green agenda, only time will tell how it navigates this complex landscape and shapes its energy future.