Analysts with Wood Mackenzie believe the European Union's (EU) solar ambitions under its flagship REPowerEU program may suffer with the rise in prices for raw materials and suggest that it would need to create and aggressively expand its local solar supply chain to meet the targets.
They further add that the aggressive expansion needs to be at 3 times more polysilicon than current capacity, 20 times more wafers, 42 times more cells and 6 times more modules.
At present, the annual polysilicon production capacity of Europe is enough for around 16 GW of capacity, with practically all of it produced by Germany's Wacker Chemie that sells almost all production to Chinese companies due to less demand locally. Europe's ingot and wafer capacity stands at a mere 1.5 GW to 2.0 GW, it reports.
In the absence of any robust local supply chain, the industry has been paying 3 times the price of polysilicon over the last 18 months, along with elevated prices of silver, aluminum, copper, steel as well as anti-reflective ultra-clear glass as natural gas and tin prices rise.
With China's power crisis impacting manufacturing activities and COVID-19 restrictions playing spoilsport, polysilicon prices are expected to remain high during rest of the year.
"Europe is called to transform its energy system in the wake of the Russia/Ukraine war, with the REPowerEU initiative envisioning at least 420 GW of new solar capacity by 2030," explained Wood Mackenzie Senior Analyst Theo Theodorou. "But as more sanctions are on the way against Russia, and with electricity and fuel prices showing no sign of slowing down, Europe needs to navigate this high price environment and act fast to develop a local solar supply chain to achieve its targets."
Wood Mackenzie expects global solar installed capacity till 2031 to add up to 3.5 TW, to which Europe is likely to contribute close to 331 GW with a lot riding on REPowerEU to drive installations.
However, the assessment seems to be based on old solar target of the EU as solar numbers have been revised by the bloc under REPowerEU from 420 GW AC under Fit for 55 (FF55) to 600 GW AC by 2030 (see EU Announces 600 GW AC Solar Target By 2030). Moreover, it needs a translation of the REPowerEU's AC numbers into DC to compare apples to apples – and that would mean a 2030 target of 750 GW DC (equal to 600 GW AC). With 167 GW of PV installed in the EU by end of 2021, the EU-27 member states need to install 583 GW by 2030 to reach the REPowerEU targets. In other words, WoodMac believes the EU would only install a little more than half of what the EC is asking for. Europe's solar sector association SolarPower Europe's pre-war released business as usual scenario forecasts an installed capacity of 672 GW by 2030, but it was trying to lobby the EC to implement a target of 1 TW by 2030 in REPowerEU.
REPowerEU has also identified the need for at least 20 GW solar manufacturing in Europe along the value chain to support its local solar installation targets (see EU Announces 600 GW AC Solar Target By 2030). Meanwhile, several European PV companies are expanding and investors are looking into expansion in Europe while expansion of China's solar supply chain continues to supply global solar demand in the short and long term.
Wood Mackenzie makes this analysis in its report titled Solar raw materials: A real challenge for Europe on the way towards net zero which is available on its website to purchase for $1,050.
Recently, the G7 nations (Canada, France, Germany, Italy, Japan, UK, US and EU) committed to a 'predominantly' decarbonized electricity supply by 2035 along with ending their coal fired power generation, but did not specify a timeline do exit coal. Nonetheless, they agreed to increasing their climate ambitions with the help of renewable energy and end direct international public financing of fossil fuels by the end of 2022.