Europe’s solar producers are teetering on the edge of extinction. A bombshell report reveals it costs 280 per cent more to make a solar panel in the EU than in China. Brussels has just six years to come up with a €5.2bn annual lifeline or kiss its green energy dreams goodbye.
A report by SolarPower Europe and Fraunhofer ISE, published on Wednesday, 24 September, has mapped a precarious path for reshoring solar manufacturing to the EU. Producing modules with European cells costs 10.3 euro cents per watt-peak (€ct/Wp) more than in China, driven by higher costs of equipment (+40 per cent), facilities (+110 per cent), labour (+280 per cent), and materials (+50 per cent).
Utility-scale systems using EU modules cost 60.8€ct/Wp versus 50.0€ct/Wp for Chinese equivalents, raising the cost of electricity (LCOE) by 14.5 per cent. That sits comfortably within the 15 per cent premium allowed under EU’s for non-price criteria, the report notes.
Policy levers
The NZIA’s resilience rules aim to diversify supply chains, but the report warns that without subsidies, reshoring remains unlikely. A cost gap of 2.2–5.8€ct/Wp persists between EU-made and non-EU NZIA-compliant modules. Bridging this requires annual support of €1.4–5.2bn to reach 30 GW of EU solar capacity by 2030. Up to 39 per cent of this could be offset by macroeconomic gains: 2,700 jobs and €66.4m in annual tax contributions per gigawatt (GW) of output.
The study advocates combining capital and operational expenditure support with output-based incentives, mirroring US and Indian models. The US Inflation Reduction Act (IRA) offers up to 11 US cents per watt, while India’s Production-Linked Incentive (PLI) scheme ties subsidies to production scales.
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For Europe, factories reaching 3–5 GW capacity could reduce the cost gap below 10 per cent. “With the right policies, Europe can competitively deliver 30 GW of solar manufacturing by 2030,” said Walburga Hemetsberger, CEO of SolarPower Europe.
Without intervention, we risk losing industrial capabilities. — Walburga Hemetsberger, CEO of SolarPower Europe
Three supply-chain scenarios were modelled: fully EU-made systems (12.8€ct/Wp costlier than non-EU options), hybrid EU-Chinese systems, and modules using Southeast Asian cells with Chinese polysilicon. Fully reshoring requires €5.2bn annually but yields €66.4m in tax revenue per GW, or five times higher than the least EU-dependent option.
China’s recalibration
The EU’s solar demand, projected at 60–104 GW annually by 2030, remains uncertain. China currently supplies 81–93 per cent of EU solar components, while European capacity languishes below 10 GW. “Without intervention, we risk losing industrial capabilities,” Ms Hemetsberger told pveurope.eu, an industry server.
Meanwhile, changes are afoot in China’s solar sector. The country’s market, long defined by overcapacity and price wars, is shifting. President Xi Jinping recently demanded an end to “disorderly competition”, prompting regulators to pressure local firms (e.g., LONGi, Jinko Solar). Module capacity hit 1,800 GW in 2024 against global demand of 700 GW, forcing loss-making production. “The price war prioritised survival over sustainability,” Gerard Scheper, CEO of European Solar, claims in a LinkedIn post. Raw material prices rose 10 per cent this summer as Beijing tightened export tax rebates and upstream controls.
The upfront cost (of solar power) is partly recovered through macroeconomic benefits. — report by SolarPower Europe, Fraunhofer ISE
Mr Scheper expects further price hikes as policies take effect. “The industry needs to recover margins,” he said. While this may dampen China’s export edge, Europe faces a narrow window to act. Scaling factories takes 2–3 years, leaving little time to meet 2030 targets. The report also urges immediate adoption of output-based subsidies and “Made-in-EU” preferences in rooftop schemes and public procurement. Rooftop solar, forecast to reach 34–45 GW annually by 2029, offers a critical testing ground.
The high stakes of hesitation
The EU’s 30 GW goal hinges on two steps: an EU-wide subsidy scheme covering grants, loans, and de-risking tools, and national NZIA policies with ‘Made-in-EU‘ bonuses. Member states must integrate these into auctions and procurement, particularly under the revised EU Public Procurement Directive. Delays could render Europe’s solar industry obsolete.
China’s recalibration adds urgency. Its potential export tax cuts and consolidation could reshape global pricing. Yet reliance on NZIA-compliant imports—while diversifying supply chains—would not revive Europe’s industrial base. “The upfront cost is partly recovered through macroeconomic benefits,” the report notes, citing €12.6–66.4m in annual tax revenues per GW depending on supply-chain depth. Fully EU-made systems deliver five times the fiscal benefits of minimally compliant imports.
Europe’s solar ambitions now face a race against time. Factories require 2–3 years to scale, leaving barely six years to meet 2030 targets. The report urges EU leaders to establish an output-based support scheme by 2025, blending grants and loans to offset capital and operational costs. Member states must also embed “Made-in-EU” preferences in rooftop subsidies and public tenders, leveraging the NZIA’s 15 per cent auction flexibility.
Closing the window
China’s turbulent market complicates timelines. With raw material costs rising and Beijing enforcing consolidation, Chinese module prices may stabilise—or even increase. “This could narrow Europe’s cost gap organically,” said Mr Scheper. Yet betting on external shocks is risky. The EU’s 30 GW target demands annual investments of €1.4–5.2bn, a fraction of the €175bn spent on energy imports in 2022.
To meet its 30 GW target, the EU must prioritise two policies: an output-based subsidy scheme and “Made-in-EU” procurement rules. The first would channel grants and loans to manufacturers, covering 28–39 per cent of costs through macroeconomic returns. The second would mandate preferential treatment for EU modules in public projects and rooftop schemes, leveraging the NZIA’s 15 per cent auction flexibility.
The industry needs space to recover. — Gerard Scheper, CEO of European Solar
China’s solar sector, the juggernaut of cheap exports, now grapples with overcapacity and state-enforced consolidation. Europe cannot bank on this turmoil alone to rebalance trade.
Time is of the essence
Instead, the Union it must create a self-reinforcing cycle: subsidies boost production, scaling drives down costs, and procurement rules secure demand. “The industry needs space to recover,” said Mr Scheper. For Europe, that space must be carved out now, or not at all.
Time is essential. With two to three years needed to build factories, decisions made this year will determine whether the EU’s 2030 goals remain achievable. But the report’s message is a clear warning that ambition without action is futile.
