Why is European solar manufacturing declining

Europe used to be the center of global solar manufacturing hosting the world’s biggest cell and panel makers such as Q-Cells, Aleo Solar, Solarworld etc. However, the rise of low cost Chinese manufacturing has decimated the noncompetitive solar players in Europe who made margins greater than 30% at one point of time. Most of the abnormal profit margins were derived from the fat feed in tariffs given by the European governments. Though China has often been blamed for heavily subsidizing its domestic companies through a mix of monetary and fiscal incentives, the fact is that these companies will still beat the western companies black and blue even without these incentives. Operating at very thin margins on a very cost efficient structure, many of the large Chinese Tier 1 companies have repeatedly awed the whole energy industry by their continuous declines in production cost of around 10-15% every year. This is the main reason why solar energy is now cheaper than coal in 30 countries and going forward will become universally cheaper than all other energy sources in another 10 years.

The European Union in order to avoid a trade war with China had imposed volume and price controls on imports of solar panels from China in 2012. However, these prices are so high that they make no sense and most Chinese companies export to Europe paying the stiff duties imposed on them. These costs are passed on to the European customers increasing the overall cost of solar energy in Europe. The solar manufacturers who were supposed to benefit from these trade restrictions have failed to benefit. In fact the production of solar panels in Europe now is less than 3 GW as a whole. In comparison the biggest Chinese company is going to ship double this amount in 2016. Solarworld who was the instigator of this whole trade war with China has become bankrupt once and looks like going that path again despite the Qatari money. The recent sharp price cut in solar panels has made Solarworld sharply cut its workforce in Germany and it seems on the path to go bust once again.

The once powerful German solar manufacturing industry is gone away almost completely and most of its strength lies in its technology companies such as SMA Solar in inverters, Centrotherm in solar equipment manufacturing. Making commodity panels has never been the strength of Germany and it does not make sense for it to change now. Some bits and pieces of solar cell and panel making take place in Italy, Germany and Netherlands and it would remain that way. Europe is not going to be the powerhouse of solar panel making every. The quicker the European Union mandarins realize that the better. Instead of pursuing foolhardy price controls on Chinese panels, they should allow a free market which reduces the prices of solar energy for customers. They will create far more jobs in the solar installation and financing sector than the solar manufacturing industry.