High Power Prices Dent Europe’s Renewable Energy Supply Chain

35 GW Of European PV Manufacturing Capacity May Be Stalled If Power Prices Continue To Rise: Rystad

High Power Prices Dent Europe’s Renewable Energy Supply Chain

Research by Rystad Energy indicates how Europe’s target of achieving a production capacity of 20 GW by 2025 may run into risk if the power prices continue to rise. (Photo Credit: Rystad Energy)

  • As energy prices continue to rise in Europe, also solar and battery manufacturers face the heat
  • Rystadt Energy fears that 35 GW of solar PV manufacturing projects may be stalled, if prices not brought down soon
  • This situation may hamper Europe’s decarbonization plans
  • At the same time, other regions are strongly incentivizing local solar manufacturing

Europe has been witnessing soaring electricity prices, which can derail its efforts towards building reliable low-carbon supply chain to achieve its decarbonization goals, warns market research company Rystadt Energy. The price rise is the result of reduced gas deliveries from Russia, persistent oppressive summer heatwave, and unplanned nuclear and hydropower plant outages. However, the worst-hit with the mounting costs are the solar and battery manufacturers, it emphasized.

As per research conducted by Rystad, if the power prices are not brought down soon, about 35 GW of solar PV manufacturing and over 2,000 GWh of battery cell manufacturing capacity can be stalled. The European Union has a target of achieving a production capacity of 20 GW by 2025, and towards that about 35 GW of projects are being planned. But these projects may not be able to secure fundings in the wake of soaring power prices. And in turn, this will impact Europe’s plans to reduce dependency on imported fuels and boost its installed renewable generation capacity.

Re-emphasizing this, Rystad Energy’s head of energy service research Audun Martinsen said, “High power prices not only pose a significant threat to European decarbonization efforts but could also result in increased reliance on overseas manufacturing, something governments are eager to avoid. Building a reliable domestic low-carbon supply chain is essential if the continent is going to stick to its goals, including the REPowerEU plan, but as things stand, that is in serious jeopardy.”

Moreover, manufacturers in Asia and other parts of the world still enjoy low electricity input  tariffs and that puts European producers in a tight position. Unlike Europe, both India and the US have not only understood but also taken bold measures to support local solar manufacturing. India, through its Production Linked Incentive Scheme flanked by import taxes, is attracting major companies to invest in domestic solar production (see India Clears Tranche II Of Solar PV PLI Scheme). And so does the US through its Inflation Reduction Act (IRA), which offers very high Capex and Opex support to manufacturers, attracting also European companies, like German solar cell and module producer Meyer Burger (see Meyer Burger To Raise CHF 250 Million For Expansion).

To add to this, Europe has also been bearing the brunt of high raw material prices. In May this year, Wood Mackenzie Report had talked about how high raw material prices may hamper targets set out by EU under REPowerEU program (see High Raw Material Prices May Jeopardize REPowerEU?)

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