EU threats could strangle solar growth

The Engineer

“Subsidies” is a bit of a dirty word for many readers of The Engineer, particularly when it relates to the grants and tariffs designed to prop up and stimulate the renewables sector.

The solar sector has come in for particularly harsh criticism over the past few years, with the government’s now radically scaled-back feed-in-tariffs (FITs) viewed by some as a striking example  of unsustainable state assistance.

But as we report in our latest feature on the topic, the rapid growth of the UK’s solar sector has at least as much  – if not more – to do with the plummeting cost of solar modules manufactured in the Far East as it has to do with subsidies. Indeed, as the cost of the technology has come down the subsidies have dropped and the industry is now approaching the point where it can stand on its own feet.

For advocates of a power source that’s created plenty of jobs and opportunities for UK firms – and which promises a plentiful supply of renewable energy – this is largely seen as a good thing.

But it seems that the EU doesn’t quite view things the same way. And in an effort to reverse what it views as a Chinese assault on the European solar market it’s preparing to slap so called anti-dumping tariffs of up to 67 per cent on solar panels imported from China. 

Exporting around €21bn of solar panels to the EU every year, and accounting for 80 per cent of sales, Chinese manufacturers currently dominate the European solar panel market.

European manufacturers – many of whom have been driven out of business – say that Chinese firms have only been able to achieve this thanks to unfair assistance from their government in the form of things like tax rebates, free land for factories and other policy support. 

The proposed new tariffs will, claims the EU, help create a level playing field in which European manufacturers can once again compete. 

On the surface it sounds plausible. But with very few European solar manufacturers left, imposing punitive tariffs now is rather like shutting the stable door after the horse has bolted.

What’s more, it risks destroying an industry that still has much to offer UK businesses and consumers.

Indeed, over 1,000 companies have reportedly written to the EC warning that imposing import duties at a time when subsidies are coming down will drive up the price of the technology and make it unattractive to investors and consumers. 

Many in the industry think it’s too late for Europe to compete on a grand scale.

Ray Noble, one of the driving forces behind the UK’s recently launched national solar centre, told us that industry only has itself to blame, that European solar firms failed to invest in growth and left the door open for Chinese manufacturers to take over the European market.

Describing the EU’s present stance as “sabre rattling” Noble predicts that rather than start a trade war, the EU will do a deal that sets a minimum price for solar modules that could in theory make manufacture feasible for European manufacturers.

Longer term though, he expects the industry to follow a pattern seen in other sectors, and for Chinese manufacturers to begin establishing their own operations closer to their markets in Europe.

Critically though, Noble also spies plenty of good opportunities for European and UK firms downstream of module manufacture, on the installation side and in the development of energy storage technologies that will help even out supply and demand.

It’s a point that was echoed by Noble’s fellow solar industry veteran Tim Bruton, who told The Engineer that Europe is in a good position to build on its powerful solar research base and drive the development of the next stage of PV technology.

Galling as it may be to see European manufacturers lose out to low-cost rivals in the Far East, it’s hardly an unusual trend. And it’s surely better to have a thriving solar industry  – with all of the domestic opportunities that creates –  than have no industry at all.

Rather than squash a sector that hasn’t quite worked out as planned, the EU must swallow its pride, step back from a trade war, and learn from its mistakes by investing now in the areas of solar technology where it could still secure a lead.