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Europe Plots Solar Revival to Replace Russian Gas

The EU wants solar power to become ‘the kingpin’ of its effort to become independent of Russian energy imports by 2027.


philippe lopez/Agence France-Presse/Getty Images

Twice bitten, thrice shy—except when it comes to the now politically strategic solar industry, apparently.

Despite the historical failures of Western solar panel makers to compete with Chinese suppliers, Brussels, like Washington, hopes to rebuild its local manufacturing to supply and profit from the expected build out of solar power. It might work this time, or could instead be an expensive folly that leaves the West highly dependent on Asian suppliers.

European Union officials said on Wednesday that solar power was “the kingpin” of their effort to become independent of Russian energy imports by 2027. The solar initiative is one among a number of measures, but is estimated to displace about 9 billion cubic meters of gas imports annually by 2027, nearly a 10th of the EU’s planned reduction.

The new solar strategy aims to more than double 2020 capacity—adding 320 gigawatt of capacity by 2025 and 600 gigawatt by 2030—through streamlining permitting, training workers, increasing rooftop solar and phased-in requirements for panels on all large public and commercial buildings, as well as new residences. It also aims to build a local supply chain for the solar industry, which is currently rooted in Asia, with an annual capacity of 20 gigawatt by 2025.

Rooftop solar is more expensive than utility-scale, but it is quick to build and could supply almost a quarter of EU electricity consumption, more than gas currently does, according to the EU. Installing on roofs doesn’t require additional land, faces fewer objections because locals often benefit from the power produced, and it also minimizes the transmission requirements, thereby avoiding permitting challenges and power losses along the line.

High European power prices have improved the payback. EU consumer interest increases exponentially when payback is less than about 7 to 8 years, says Daniel Tipping at consulting firm Wood Mackenzie. Pairing solar with storage is becoming increasingly popular, particularly with high power prices and incentives in Germany, Italy, Austria and the U.K.

Shifting from gas to solar power risks creating a new reliance on Asian panel manufacturers and China in particular. European companies currently only contribute about 9% of the gross value added in the solar supply chain, according to Guidehouse Insights. However, unlike Russian gas, which requires ongoing purchases, panels last 20 to 30 years, which gives Brussels time to foster a local supply chain.

They will need it. Unlike the U.S., Europe has a very fragmented rooftop installer market. It has competitive companies building racks to turn panels to track the sun and power inverters, which convert power to alternating current and optimize output. However, it hasn’t been able to compete with large Chinese producers of cheap panels.

Europe hopes to rebuild its local supply chain with a strategic alliance similar to the one established in 2017 for electric-vehicle batteries. So far, that has been a successful initiative, increasing EU production capacity from 0% in 2017 to a forecast 25% of global supply by 2030, according to Anna Darmani from Wood Mackenzie. It sparked cooperation and accelerated development of new European production sites, though the nascent industry still needs to prove it can compete on quality and price with leading Asian suppliers.

Unlike batteries, Europe has some solar legacy to build on. One listed company that has weathered the ups and downs is

Meyer Burger,

which until recently focused on solar research and selling manufacturing equipment. It pivoted in 2020 and is opening facilities in Germany and Arizona to produce 4.6 gigawatt of high-efficiency solar cells and modules annually by 2025, although the pandemic has caused some delays.


the Italian utility aspiring to be a global green-energy giant, is also investing in a Sicilian plant to build three gigawatt of high-tech modules, with the help of EU funds. European-made panels will have local appeal but could still face stiff competition as Chinese and Indian manufacturers are investing in similar technology.

European solar production offers very few companies that stock investors can buy into, but it is early days. The push into high-tech solar panels will generate the jobs and improved energy security politicians want, but the market needs to develop further before it becomes clear whether it can also generate hot returns for investors.

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com

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