Europe’s attempts to cut its reliance on Russian oil and gas is likely to drive more buyers towards solar panels from Chinese manufacturers, helping sustain prices near a three-year high, analysts said. As the U.S. and the EU imposed sanctions on Russia's key exports, the European Union is to take steps to build alternative energy sources and make it independent from Russian fossil fuel. The EU, which currently relies on Russia for 40% of its natural gas needs, is looking to trim that by two-thirds by the end of 2022, officials have said. That would call for a near-quadrupling of installed capacity, up by 480 gigawatt (GW) of wind farms and 420 GW of solar farms by 2030 from current levels. The initiative could also raise the EU’s installed solar energy capacity to 585 GW in 2030 to compensate for the loss of 20 billion cubic meters of annual Russian gas imports.
“We believe overseas demand for China’s solar panels will remain strong” even at higher prices, said Dennis Ip, Analyst at Daiwa Capital Markets. The Ukraine conflict will also encourage energy users to go green faster, he added. Solar panels currently cost around CNY1.88 per watt, according to Ip. Prices hit CNY2.1 in December last year, a level not seen since July 2019, under pressure from a surge in the prices of raw materials such as polysilicon because of tightening supply.
Prices are likely to stay elevated before easing off after the fourth quarter this year when additional new raw material capacity comes on stream, said Frank Haugwitz, Founder of Asia Europe Clean Energy (Solar) Advisory. China’s annual polysilicon capacity may surge to 3 million tons by 2025, enough to produce 1,000 GW of panels, assuming all the projects announced in the past 18 months are built as planned, he forecasts. China is the world’s biggest solar-panel producer and the biggest market as well. The EU installed a record 25.9 GW of solar farms last year, compared to 54.9 GW in China, despite severe material supply shortages, logistic challenges and product price hikes. The EU could install 30 GW this year, according to SolarPower Europe, a Brussels-based industry association.
Europe, including non-EU nations, is the biggest export market for Chinese solar panels. It accounted for 45 GW last year, a 54% increase from 2020, as the region stepped up efforts to fight climate change. China’s solar panels output jumped 46% last year to 182 GW. Some 100.5 GW worth USD25 billion were exported, a 27% increase from a year earlier. Benefits from the EU’s latest pro-renewables policy will start to be reflected in shipments of Chinese panels next year, when more components become available, said Edurne Zoco, Executive Director responsible for clean energy technology research at S&P Global.
The industry association SolarPower Europe earlier this month called on the European Commission to boost solar installations to 1,000 GW by 2030. It has previously projected that 672 GW of solar capacity can be put in place under existing policies by 2030. The Association proposed measures including mandatory solar installations on new buildings, banning fossil-fuel boilers, freezing grid connection fees and setting aside €1 billion to help boost its own solar panel production capacity.
Eight leading European solar projects developers have lobbied the European Commission in January for policy support to boost the EU’s annual solar panel capacity to 20 GW by 2030 from 2 GW currently, to enhance energy security, the South China Morning Post reports.