Even as Europe works towards building local solar module production capacity, developers cannot wait till 2025 or later to secure the supply, hence they are increasingly filling up their warehouses with much cheaper Chinese panels. Rystad Energy counts some 40 GW DC of Chinese PV panels worth €7 billion currently hoarded in European warehouses, a number that's likely to grow to around 100 GW DC by 2023-end.
The analysts forecast that annual European imports of Chinese panels are set to hit 120 GW DC in 2023 with a 38% annual increase and double of 63 GW DC the continent is expected to install this year—meaning a gap of 57.4 GW DC between imports and installations. They cite an annual jump of 17% in module imports in January, 22% in February, 51% in March, 16% in April and 6% in May.
According to InfoLink Consulting, China exported 88 GW PV modules to the world during 5M/2023 with Europe taking the largest share – 51.9 GW (see Inventory Draws May Dampen Chinese PV Exports).
The jump is not sudden and instead has been growing over the last few years. Picture this, Europe spent €5.5 billion on solar imports in 2018, increasing it to exceed €20 billion in 2022, according to Rystad. Of the latter 91% or €18.5 billion of all PV import expenditure was on Chinese products.
From 2021 and 2022, European nations increased their imports of Chinese modules by 112% to about 87 GW DC. In 2022, the Netherlands alone received 45 GW DC of these panels, more than 10 times its installation that year. Greece too was able to install only 15% of the capacity it received from China in 2022. Spain, Germany, Poland, France, Italy, the UK are among other countries actively buying Chinese products. However, imports products imported to Greece or The Netherlands are mostly there because these are important ports where Chinese ships offload their shipments.
Even in times of volatile prices during 2021 and 2022 in the face of growing PV demand, Chinese modules were still cheaper. China's solar module production at economies of scale means it can produce at a significantly lower cost than its European counterparts. Today, Chinese panels cost 'as little as two-thirds of European-manufactured capacity'.
On the other hand, Europe targets 30 GW DC manufacturing along the entire value chain by 2025.
"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," said Rystad Energy's Senior Supply Chain Analyst, Marius Mordal Bakke. "Although efforts are underway to build a reliable solar supply chain in Europe, the need for panels now means leaders cannot wait until 2025 or later to buy European."
There is no stopping the overstocking in Europe as the continent, apart from limited local module supply, is also fighting challenges of labor shortage and critical material delays. Rystad expects these bottlenecks to sustain until 2025. The good thing with the modules in oversupply for this market, a 'meaningful' price increase can be ruled out.
Analysts do caution, "With the current technology transition in the solar industry – from P-type to N-type cells – and incentives for purchasing European-manufactured panels, stockpiled products could face declining interest from European buyers if left in storage too long. However, that is not likely in the short term until the continent can advance its manufacturing capabilities."
However, you can also read the story another way: Chinese module makers have little alternatives to Europe for large shipments. Both the US and India have made life hard for Chinese module suppliers to enter their markets as they set up various protection measures, and although demand in China is growing dramatically this year – possible to around 150 GW, it's by far not enough to absorb the solar panels made in China. It's very likely that Europe will continue to be flooded by Chinese modules and other PV products, keeping warehouse piles growing and prices dropping (see TaiyangNews PV Price Index).