The solar industry warns that EU regulations will hinder the transition to clean energy

European solar companies say local content rules in the EU proposal to boost renewable energy production will complicate the clean energy transition due to restrictions on Chinese imports.

The European Commission’s proposed Net Zero Industry Act, announced on Thursday, will oblige governments to cut public tenders for renewable energy projects if companies source from a single country that accounts for more than 65 percent of the EU market share for the product are omitted. The same rules would apply to products offered with a consumer subsidy to encourage uptake.

This would penalize solar companies, which the law attributes to an “inadequately diversified” supply. China has a share of more than 80 percent of the European market in the entire industrial supply chain.

Last year, the EU achieved a record installation of more than 40 GW of solar panels after trying to replace Russian gas. This was made possible by more than doubling annual European imports of solar panels from China, the commission said.

In 2022, Europe assembled around 8 GW of solar panels, a fifth of its needs, with most of the parts coming from China.

“The current proposal calls on member states to reduce support for technologies originating from dominant regions in supply chains, such as B. Solar energy. . . If we don’t want to risk slowing down solar deployment, we need a bigger carrot, especially when it comes to financing solar installations in Europe,” said Dries Acke, policy director at SolarPower Europe, an industry lobbyist.

Lukas Pauly, managing director of production at Enpal, a German green tech company that sells direct to households, said that if the EU cut national subsidies for non-European products, “the only impact would be a massive hit to installations.

Until we build enough capacity in Europe, reducing subsidies would slow down the renewable energy transition.”

The International Energy Agency estimates that modules manufactured by a European onshore solar supply chain would be priced more than a third higher than Chinese equivalents, although the difference would likely narrow over time due to economies of scale.

A clause in the proposed law allows governments to make exceptions to local content requirements if there is a “disproportionate” cost difference of more than 10 percent between local and foreign products.

“The industry has worked so hard to get to this point. It would be hard to stomach if local content rules reversed those gains. In the long term, a diverse and competitive supply chain is a good thing, but not at any price,” said Kareen Boutonnat, chief executive for Europe at Lightsource bp, one of the region’s largest solar developers.

Industry executives also negatively compared the EU rules to the US Inflation Reduction Act, which provides $369 billion in subsidies to both consumers and producers of green tech.

“The EU must use the carrot, not the stick. According to the current approach without additional financial support. . . will inevitably mean cutting off foreign supplies to which we are not yet in a position to say no,” said Andreas Thorsheim, founder of European solar marketplace Otovo.