Europe’s solar dilemma: China is pushing prices down – a wave of bankruptcies is looming

The long arm of Beijing reaches all the way to Germany, even on sunny days. Solar modules are intended to produce cheap, climate-friendly electricity and thus make a contribution to the energy transition. But sunny prospects are rare in the European solar industry since China has become heavily involved in the past few years.

Last week, EU heads of state and government assured that they wanted to strengthen the domestic solar industry. The tenor is that a dependence on China in such an important future industry is simply dangerous. Now the European solar companies are warning in an open letter to Brussels: “If nothing happens now, there is a great risk that European solar producers will have massive problems in the next few months, and some will even go bankrupt.”

Solar industry “victim of an unprecedented price war”

Chinese products are already flooding the market in Europe with predatory prices. The companies would offer the solar modules in this country for up to 50 percent less than their production costs in China, reports “Handelsblatt“. Within a year, prices fell by more than 35 percent to up to 15 cents per watt. “The entire European solar industry has been falling victim to an unprecedented price war for several months,” says Gunter Erfurt, head of the Swiss solar manufacturer Meyer-Burger, to the Handelsblatt.

The reason for the low prices are well-filled warehouses: European manufacturers currently have more than 500 megawatts of solar modules in stock, the newspaper reports. That’s 30 percent more than usual. The Chinese warehouses are also full with an estimated capacity of 40 gigawatts. Manufacturers from Asia can therefore charge prices of 15 cents per watt with a purchase guarantee of two megawatts per year. They would actually have to charge 20 cents per watt to break even.

The “ketchup bottle effect”

Henning Rath from the solar service provider Enpal spoke to the newspaper about the “ketchup bottle effect”. Because of the energy crisis, demand for solar modules initially increased. Manufacturers continued to replenish their inventories due to strained supply chains. “Demand is now returning to normal and warehouses are full,” says Rath. Suddenly there is a pop and prices fall. Global production capacities for solar modules have more than quadrupled in recent years. Leader here too: China.

For the market, this means oversupply and falling prices. Bad for European companies. The wafer manufacturer Norwegian Crystals has filed for bankruptcy, as has the Norwegian manufacturer Norsun – both important suppliers to the European solar industry. According to Handelsblatt, German companies now also want to introduce short-time work in order to save costs.

There is a threat of a wave of emigration

Instead of a strong solar industry in Europe, there is now a threat of emigration or bankruptcy. The companies put it this drastically in their letter to Brussels. Anyone who doesn’t stop production and go bankrupt can only move to other countries like the USA, where the solar industry is supported with high subsidies. A solar plan for Europe is still pending.

Jean Harris

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