20 March 2023

The photovoltaic supply chain in Europe

To solve its current energy challenges and meet its 2050 climate neutrality commitments, Europe plans to significantly increase electricity generation from solar photovoltaic (PV) panels.

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This is part of the "EU Solar Energy Strategy", which has set a target of installing 600 GW of solar PV by 2030, a significant increase from 208 GW in 2022. The increase in solar power generation should help Europe to manage electrification, decarbonise the electricity grid, reduce dependence on other countries and achieve its renewable energy targets while reducing its carbon footprint. Solar photovoltaic (PV) systems are one of the most promising sources of renewable energy and their use is growing rapidly in Europe. However, the production of solar PV systems requires a complex supply chain involving a number of raw materials and components, which are often produced in different countries than the PV modules.


At present, Europe is largely dependent on a single country - China - for the supply of solar photovoltaic panels. It has become the dominant player in global PV panel production capacity over the last decade, overtaking Europe, Japan and the United States. Thanks to investments of more than USD 50 billion in new PV panel supply capacity, China has created ten times more jobs in the solar PV production chain than Europe (300 000 jobs) since 2011. Currently, China's share in all stages of solar panel production, including polysilicon, ingots, wafers, cells and modules, exceeds 80%. While China's significant role in reducing the global cost of PV has many benefits for the clean energy transition, its high level of geographic concentration in global supply chains raises potential issues for governments to address.

In an effort to increase energy independence and reduce carbon emissions, the European Union is actively promoting the local production of photovoltaic systems. At the end of last year, the European Commission officially launched the "Solar Photovoltaic Industry Alliance", which aims to create a European solar PV ecosystem aimed at securing and diversifying the supply of solar PV products. The EU has set a target of producing 30 GW of PV products per year across the entire supply chain by 2025 (it currently has a production capacity of approximately 6 GW of modules and approximately 1 GW of cells and 2 GW of wafers). However, there are several challenges to achieving this goal:

  • European PV manufacturers face strong competition from countries with low labour costs, including China, India and Southeast Asia. Currently, the cost competitiveness of existing PV cell production is a major barrier to diversifying supply chains. For example, production costs in China are 10% lower than in India, 20% lower than in the United States and 35% lower than in Europe.
  • The cost-effectiveness of key components in the PV supply chain is dependent on cheap energy. This may be particularly challenging for Europe given the current increased energy costs. The production cost of polycrystalline silicon accounts for more than 40% of the cost of electricity, compared to almost 20% for ingots and wafers.
  • The production of photovoltaic cells requires a number of important materials, including silicon and rare earth elements, the availability and prices of which can fluctuate. European manufacturers may have difficulties in establishing a reliable supply chain due to the lack of local sources of these materials.

At the same time, the EU and European manufacturers can use several strategies to support and develop their supply chain and PV production:

  • The EU can support the competitiveness of local manufacturers by increasing investment in technological research and development to increase the efficiency of PV cells, reduce production costs and encourage innovation in production processes. This could include funding academic and industrial research initiatives, fostering university-industry cooperation and creating public-private partnerships to share costs and risks. For example, developing manufacturing processes that are less dependent on critical minerals such as silver and copper and achieving higher cell efficiency and higher power per module could reduce the cost per watt.
  • Manufacturers can promote circular economy principles to promote sustainability and minimize waste in PV manufacturing. This can be achieved by creating closed supply chains, promoting the use of recycled materials and working to develop technologies that improve the recyclability, reusability and durability of solar PV panel designs.
  • Economies of scale are essential for the PV industry in Europe to reduce overall production costs. The world's leading players have production systems with up to 100 GW of company-level capacity and operate more than ten plants within their production systems. Another critical factor for the expansion of the industry is the creation of a viable supplier ecosystem. If the industry is not large enough, it will struggle to attract the necessary investment and foster competition among subcontractors and technology partners. In addition, solar panel manufacturers can use their products to generate renewable electricity on-site, thereby reducing their electricity bills and emissions.

"The production of photovoltaic panels and the location of the supply chain in Europe is becoming a strategic issue in terms of safety and technological maturity. This opens up space for investors to secure their own projects under relatively favourable conditions of growing demand for PV panels. The question remains, however, how to build their own production and supply chain to be competitive already under existing conditions and possibly redirect some critical raw materials and intermediate products to Europe."

-Miroslav Lopour, Senior manager


Brussels industry representatives stress that the EU PV Alliance is a timely and positive initiative in the light of the current energy and climate crisis and the intensifying global competition for solar cells and modules. An example of the intensifying competition is the US Inflation Reduction Act, which will boost PV module production in the US. To avoid being left behind in this race, the European industry needs financial support to increase production capacity faster. The proposed production capacity of 30 gigawatts would meet around 75% of the annual demand for solar modules in Europe and would also create more than 100,000 manufacturing jobs. Strategies to support and develop the European supply chain and PV panel production could include increasing investment in R&D, promoting circular economy principles, achieving economies of scale and using solar panels to generate renewable electricity on-site.