Renewable energies offer countries energy independence, however, there is a weakness in this affirmation. Although renewable energy is natural and plentiful, the technologies to obtain it are sometimes not. This is partly the case with photovoltaic solar energy. In Spain we are fortunate to produce more than half of the value chain of photovoltaic installations domestically, with major manufacturers of solar inverters and trackers that are among the most important in the world. However, the most valuable element in a photovoltaic development, the solar panel, is manufactured almost entirely in Asia and, within Asia, principally in China.

[Recibe los análisis de más actualidad en tu correo electrónico o en tu teléfono a través de nuestro canal de Telegram]

China manufactures 75% of the world's solar panels, while another 15% are manufactured in other countries in the Asia-Pacific region. In contrast, less than 3% of the world's solar panels are manufactured in Europe. If we further trace the solar PV value chain, the figures are even worse for us. China manufactures 85% of solar cells, 97% of PV wafers, and almost 80% of PV-grade polysilicon. In the case of wafers, for example, European production is barely 0.5% worldwide.
 
This current era of Chinese dominance was not always the case. In 2004, China produced only 4% of the world's solar cells. By 2008 it was producing 33% but was on a par with Europe at that time. Over the subsequent years, the European industry collapsed and, by 2012, China accounted for more than 70% of manufacturing. China's growth, which virtually wiped-out Western industry, was underpinned by an industrial policy that identified this industry as a key sector and promoted a series of policies for its development, based primarily on low-interest loans and widespread subsidies to manufacturers. This is one of the reasons why the West maintained anti-dumping policies on Chinese panels for years. In any case, this industrial policy had an effect and succeeded in creating economies of scale and vertical integration of the value chain that is the basis of China's current competitive advantage.

This degree of concentration of manufacturing in China is an obvious risk for Europe, especially in this new economic and geopolitical scenario, given that solar PV energy is one of the basic pillars of the continent's decarbonisation process. Aware of this, the European Commission has launched the European Solar Strategy and, within it, the European Solar Industry Alliance, established at the end of 2022 with the aim of increasing European manufacturing capacity of photovoltaic panels to 30 GW in 2025, multiplying the current capacity by six. 

To achieve this goal, will alone is not enough, a strong industrial policy is needed. In February this year the European Commission presented the Green Deal Industrial Plan, specifically aimed at promoting clean energy industries in the EU, and in March the proposed Net Zero Industrial Act was brought forth, which is somewhat more concrete. These regulations have several pillars, including the creation of a simplified regulatory framework for this type of industry and greater flexibility in state aid to promote these sectors. However, the general opinion in the industry is that the plan falls short of what is needed to compete with the powerful Chinese industry and also with the US policy set out in the Inflation Reduction Act, which proposes aid for clean technologies manufactured in the US to the tune of $370 billion.

The need to bring back to Europe a substantial part of the solar panels we need will require a bolder vision than we have today. It is not only the US that is establishing industrial policies but also Japan and India. The world has changed at an unprecedented speed and the reviled industrial policy (remember "the best industrial policy is the one that does not exist") has given way to industrialisation programmes everywhere. This ambition will be essential, moreover, because of the need to compete with economies of scale of enormous size and with powerful investments in research, development, and innovation. Without powerful aid programmes and without certain guarantees that the high investments needed will not end up succumbing to the dumping policies of other competitors, it will be difficult to mobilise the amount of investment needed to achieve competitive and sufficient production in Europe. Because let us not lose sight of the fact that it is essential for European manufacturing to be competitive if we want to make electricity cheap, which is essential both to reindustrialise Europe and to electrify the economy. 

The challenge is such that the production of solar panels and their value chain will probably involve a variety of countries in Europe, but it seems clear that Spain must be at the heart of this strategy. Firstly, because it is and will continue to be one of the main demanders of these panels, as it has the best solar resource in Europe. Second, because Spain also has manufacturers in the world's top 10 inverter and tracker manufacturers, and it makes sense to take advantage of the synergies and know-how that this can produce. Third, because solar panels have been manufactured in Spain before, with manufacturers that became important before the economic crisis of 2008 and Chinese competition wiped them out. And finally, because of a central issue for industrial productivity: Because the Iberian Peninsula today has the capacity to generate the cheapest renewable electricity on the continent, and this is especially relevant at the beginning of the value chain of the photovoltaic industry, in the polysilicon purification stage.



There is considerable concern in some countries that the European strategy leaves too much autonomy to individual states to make their subsidy policy, which would favour larger countries with more financial capacity over smaller countries or those with less economic room for manoeuvre. Essentially, it could favour Germany and France over other countries. Germany has a long tradition in research and industrial photovoltaic production and is a country that will obviously be in the European equation. France, without such a history, also has characteristics that make it interesting. But Europe cannot enter into an internal competition that ends up imposing the interests of the strongest and not that of the the general interest by choosing the most optimal locations, such as the Iberian Peninsula. 

Throughout Europe, projects are beginning to appear to start manufacturing solar panels again, in many cases beginning with the final stage of the value chain, which is the manufacture and assembly of the panel. Spain also has several projects, of which two stand out: the Asturian company Exiom's project, which will be located in Langreo, and the first of the projects announced in Spain, that of the Valencian company Silicon Valen, with its manufacturing centre in the town of Massanassa. There are more projects in the pipeline and the Ministry for Ecological Transition itself recently announced that it was going to allocate €1 billion to the renewable energy value chain, although not specifically for photovoltaic, so depending on how it ultimately is resolved, it could turn out to be scarce.

But something more is needed. The European producer must know that, if he is competitive, he will be able to sell his panels without being squeezed out of the market by unfair competition and dumping from other countries, just as Chinese and now also American producers know. How to do this without falling into a crude protectionist policy that creates disincentives to innovation and improvement is key. Issues such as valuing local production or the lower emissions associated with the manufacture and transport of the panel (which will be lower in Europe than in Asia) in tenders, competitions, or auctions could potentially be important variables to consider. Also, speeding up the regulation that prohibits the import of products made with forced labour, which affects the production of polysilicon from the Chinese region of Xinjiang is vital. The devil is always in the detail, but there is scope to get it right and thus generate the necessary certainty and assurance to bring back to Europe the photovoltaic panels we need for our decarbonisation process.