EU seeks share of China-centric solar, wind supply chains

Most solar and wind power component manufacturing takes place beyond Europe's borders, but businesses and political leaders are looking to grow the continent's share to protect its energy transition.

The European Commission (EC) laid out a policy proposal geared in part towards creating stronger local supply chains for wind and solar panel makers in a 5 May update to the EU's existing industrial strategy.

The chief executive of regional trade association Wind Europe, Giles Dickson, told a panel at the virtual SolarPower Summit on 10 May that Europe has around 250 factories making wind power components or assembling wind turbines.

He said the Europe needs cheap components to build wind farms. "We need to be able to import certain materials and components cheaply from outside of Europe, notably glass fiber, blades, and steel. So, it's very important that you get trade policy right, because the supply chain is global."

China's outsized role in the global wind generation supply chain is likely to grow relative to Europe's, he said. "China has built up a very strong wind turbine manufacturing industry. It's not surprising that five out of the 10 largest wind turbine manufacturers in the world are Chinese, at least, and they are big competition. We need a very proactive European renewables industrial policy, supporting both the wind and the solar industries to make sure we stay competitive," Dickson said.

Switzerland-based solar module maker Meyer Burger is launching German production plants in Bitterfeld-Wolfen and Freiberg this year. Meyer Burger CEO Gunter Erfurt explained to summit attendees that solar panel makers needed stronger EU support to compete with imported solar panels as there were no import tariffs on them, but there were tariffs on imported components such as solar glass and extruded aluminum his company needs for manufacturing.

EU seeks homegrown renewables

China dominates the market for certain rare earths-based magnets required to build traction motors for electric cars and generators in wind turbines, and the EU is vulnerable to shortages of these as it targets both green and digital transitions, according to the EC's staff working document on the industrial strategy.

The industrial strategy describes an emergency policy that responds to critical product shortages by speeding up product availability and cooperation on public procurement. It will also require more data to be collected on products.

The scarcity of rare earths materials in Europe posed a "very high" supply risk to the wind power industry, as well as the fuel cell sector, the document showed. A "high" supply risk was seen for batteries and solar panels that use the elements such as magnesium, niobium, germanium, scandium, or the compound borate. Concerns like these were behind a December policy proposal to require EU-wide EV battery recycling.

Supply chain security plays into other EU goals. The EU plans to boost renewable generation as a result of the bloc's agreement to legislate for a 55% cut to emissions through the European Green Deal. It announced plans to double the required levels of renewables by 2030 under a revision of the Renewable Energy Directive (RED II) in September.

In two separate announcements this month, the EU formed a renewables partnership with China's long-time rivals India and Japan. India pledged to cooperate more closely with the bloc on floating solar, offshore wind, hydrogen, and energy storage, under an 8 May connectivity partnership agreement. Japan made a similar commitment on 27 May.

Europe differentiates with standards

There may be kinds of products that European manufacturers can offer customers that Chinese players will find it difficult to match, avoiding a competition on price alone, observers say.

Eduardo De San Nicolás Juárez, chief strategy officer for single-axis solar tracker manufacturer Soltec, told audiences at the SolarPower Summit that investors were asking about Environmental, Social and Governance standards for its manufacturing.

"I think that if we as Europe lead that, we are going to be different from the rest of the world and that we will be able to capitalize there," he said. "If you can see where the utility-scale solar investing companies are, they are mostly utilities, they are banks, they are international funds that are looking into greening their pipelines. So, if you give them a way to do it, I think they will pay for it."

Manufacturers in Europe believe this is the future. "In addition to producing the best panels for our customers, we also want to transform ourselves into a lighthouse by conducting a real green business," said Erfurt.

The EC is working on eco-design standards for solar panels, a move that may require carbon footprints for their manufacture, according to its working document on the industrial strategy.

This is in addition to the EU Taxonomy, a green labeling system for financial products such as energy investments, which for products under the Climate Delegated Act will apply from 2022 and bring new finance sector focus and funding opportunities to the greening of Europe's supply chains.

The EU is also mulling a Carbon Border Adjustment Mechanism, which would link the carbon performance of manufacturers to the tariffs their customers pay for importing into the bloc.

Erfurt hinted that such tariffs were a good idea. "I think we discussed already where Europe's industry stands, we have never lost competitiveness. If that has been the perception then it is wrong potentially. But we lost manufacturing in Europe for several reasons. And I believe all the industry now needs is, of course, a level playing field that is fair and that enables the industry to rebuild in a sustainable way," he said.

Posted 28 May 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability