“The price of solar panels is double what it was three years ago. And we have seen how the cost of transport from Asia, mainly from China, multiplied by ten: a 40-foot container [12 metros] It went from just under $2,000 a unit to $18,000. It is one of the most stressful supplies that our company has and that produces a high level of insecurity for us.”
José Luis Morlanes, CEO of the Alter Enersun group, recounts the difficulties he has suffered in the last two years to acquire photovoltaic modules. First, because of the pandemic; then, due to the tension in the supply chain, and now, due to the war in Ukraine. This is the only component that is not manufactured in Spain, it is mainly imported from China, with two thirds of the market, but also from Vietnam, South Korea, Malaysia, Thailand and Indonesia, and represents 35% of the cost of a project solar, according to the Spanish Photovoltaic Union (Unef).
Most of the raw materials come from China.
“The supply of panels to Europe is in the hands of less than ten companies. Buyers have lost bargaining power. We depend on the supply of Asian companies that impose their conditions, the prices differ very little between the different firms, with the risk of a different contractual culture and a very long supply chain”, adds Morlanes, who asks for a European policy that brings manufacturing back to Europe.
This is what the Spanish photovoltaic sector wants: to reduce its dependence on Asia thanks to the promotion of a reindustrialization policy. “That the entire value chain, from silicon production to final assembly, be carried out in Spain; that is the challenge”, proclaims José Donoso, director general of Unef. Although the intention is not to cover all the demand, Donoso clarifies, but 3 or 4 gigawatts (GW) per year. “It allows us not to get hung up on a crisis; we want a competitive market, not autarky”, he stresses.
Wind turbines are almost all manufactured in Europe, but Beijing is already eating land
Up to 65% of the cost of a photovoltaic plant could be supplied by Spanish firms, he recalls. Many of them are even world leaders (two appear in the top 10 of the largest global manufacturers of inverters, and three in the list of followers). But it is insufficient, especially in an energy transition process. The European Council of Solar Energy Manufacturers believes that at least the 75% of the solar demand in Europe should be covered by national production. This implies building 60 GW of manufacturing capacity in the EU by 2026.
A similar situation suffers the wind. “Rising steel prices, transportation and supply chain bottlenecks have made turbines 17-21% more expensive, but these are still not making a profit despite the increases. Manufacturers are absorbing these additional costs, when their contracts with promoters are not indexed due to the time that elapses between the order of a wind turbine and its actual delivery”, illustrates Tomás Romagosa, technical director of the Wind Energy Business Association (AEE).
In addition, China begins to eat land. “Almost all wind turbines installed in Europe are manufactured in the EU, but Chinese manufacturers are starting to receive orders because their prices are more competitive,” he warns. Romagosa also cites the tariff and anti-dumping measures of third countries or the protectionist policies of countries such as the US, which has imposed a 73% tariff on imports of wind towers from Spain, expelling manufacturers from the American market.
In response to the demand of the sector and due to the competitive weakness that this dependency entails in the midst of the energy crisis, the Government announced at the beginning of this month, at the Unef Solar Forum, that Spain is going to lead a project of community interest (IPCEI, for its acronym in English) to encourage the manufacture of solar panels in Europe. “We have to achieve more strategic autonomy and energy security,” defended Sara Aagesen, the Secretary of State for Energy, at the meeting. While Joan Groizard, director of the Institute for the Diversification and Saving of Energy (IDAE), advanced in said forum that they are already in talks with other Member States to present a solid proposal to the European Commission shortly. The intention is to attract European funds.
“We have an opportunity and a limitation because those resources expire in three years and we must address investments first,” admits Donoso, who believes that a good part of the projects have to come from their own financing. Morlanes calculates that the development of this industry may take between five and ten years. “It has to be a European objective, as has been done with batteries,” he insists. There are no investment or employment forecasts yet.
But photovoltaics add other requests. That the manufacturing volume is around 5 GW minimum, that the factory is as close to a market demanding photovoltaic investments, that the materials (aluminum, glass, plastic) are close to the installation, that the solar itself serve to supply energy to the plant and thus lower energy costs; tax incentives, benefits in the adjudication of auctions and more advantageous financing for favoring local production, details Christopher Atassi Morales, CEO of Gonvarri Solar Steel.
Companies aim for the entire value chain to be carried out in Spain
For example, the US works with the ITC (investment tax credit), a tax deduction on benefits to the owner of the investment for a value of around 30%-40% of the total plant if 40% is local production. In Saudi Arabia, if the structure or tracker is manufactured there, the company that bids for the realization and investment of a project will have more points. Something similar happens in Turkey. While Brazil favors access to better financing as long as certain national manufacturing requirements are met, illustrates Atassi Morales.
To which wind power is added. “There is an urgent need for a strategic rethinking on a national and European scale to defend the main industrial sectors such as wind power, and ensure that the factories, production and R&D centers remain in Spain,” says Romagosa.
Despite bottlenecks in the supply chain, solar deployment has not slowed down. “The years 2020, 2021 and 2022 have been the ones with the highest installation in Spain. Installed power went from 8.7 GW to 17.8, not counting self-consumption,” says Alejandro Labanda, director of ecological transition at beBartlet, who also sees it as positive to have this industry for greater autonomy from Spain and the European Union.
Other critical materials
The photovoltaic panel is not the only component that is scarce in Spain and Europe. There are several minerals (lithium, silicon, copper, cobalt, nickel, aluminium, graphite, zinc…) that are essential in the manufacture of clean technologies and whose extraction and processing is concentrated in very few countries, with China once again in the lead.
A recent report by the International Energy Agency (IEA), The role of critical minerals in clean energy transitions, indicates that a solar, wind and electric car structure needs more minerals than one using fossil fuels. Thus, for example, a wind installation requires nine times more minerals than a gas plant. The agency calculates that, in 2040, if the objectives of the Paris Agreement are met, the global demand for copper and rare earths will increase by 40%, that of nickel and cobalt, by 60%-70%, and that of lithium, by 90%. . In 2050, that consumption will be multiplied by six.
In the case of the EU, Brussels estimates that the demand for rare earths, used in permanent magnets for electric vehicles, digital technologies or wind generators, and which come 98% from China, could multiply by ten between now and 2050. From this perspective, it is feared that a crisis like the one happening today with Russian gas, but of materials, will occur in the future.
Experts say that suppliers will be diversified and R&D and recycling will be boosted
However, Julián Cubero, leading economist of the climate change economy cluster at BBVA Research, assures that strategies that favor energy security will be promoted beforehand: “Diversifying value chains with alternative suppliers, favoring efficiency in the use of materials through R&D, promoting recycling for reuse and strengthening the governance of open and non-discriminatory international trade”.
“We cannot go from a fossil dependency of some countries to another of materials. As long as we do not have a stronger presence in the raw materials and production processes of the transition, we will be in a weak position that must be corrected”, says Labanda.
To “avoid falling into the same trap as with oil and gas”, according to the president of the European Commission, Ursula von der Leyen, the Community Executive announced the creation of a European law on critical materials, in consultation until 25 November and which is expected to come into force in the first quarter of 2023, and a fund (for an amount not yet set) to reduce that dependency.
The Spanish Government, in line with Europe, also approved a roadmap in August that, among other objectives, seeks to promote the mineral raw materials industry of a strategic nature for the energy and digital transition.
Solar initiatives underway
Germany. There are already several projects underway to reindustrialize Europe. The Meyer Burger company has opened a solar cell and module factory in Germany, with an initial capacity of 400 megawatts. His intention is to expand it to 3 gigawatts in 2024 and 5 in the long term. England’s Oxford PV has a 100 MW plant in Brandenburg that produces tandem cells, crystalline silicon and perovskite.
France and Spain. In France, the startup Carbon is promoting a 5 GW gigafactory, which is scheduled to open in 2025. And in Spain, Aurinka plans to install another with a capacity of 300 MW if it wins a tender called by Miteco for the reconversion of the Andorra thermal power plant. Also noteworthy is the European Solar Initiative, with the support of the European Commission and EIT InnoEnergy, for the production of the entire value chain, from polysilicon to modules, with a planned capacity of 20 GW by 2025.
Italy. Enel Green Power has obtained European funding to scale its bifacial cell and panel factory in Catania (Sicily) from 200 MW to 3 GW.
Norway. In the Nordic country, several ingot and wafer manufacturing initiatives are being developed for heterojunction modules (combine a layer of crystalline silicon between two thin-film amorphous silicon) and PERC (reflective layer to maximize radiation). “They have a strategic advantage: due to the large amount of hydroelectric production, their energy costs are very low and they can produce without emitting carbon dioxide,” highlights Unef, the sector association, in its annual report.
Portugal. The MCPV company stands out in the production of heterojunction cells. There are four facilities that this firm projects between 2023 and 2028 in different European countries, with a total production capacity of 15 GWp (gigawatt hour peak).
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