European photovoltaic production: does it make sense?

Dr Lars Oberbeck, Program Manager at IPVF and solar technology Expert at TotalEnergies, shared with us his views on why and how Europe could re-establish a strong ecosystem for photovoltaic production.

Fifteen years ago, the photovoltaic industry was going strong in Europe; today, it is very largely dominated by China–to the point where the pertinence of re-establishing photovoltaic production in Europe is even in question. To help us understand what is at stake, IPVF asked Dr Lars Oberbeck to provide his insights.

Dr Oberbeck is an expert in solar technologies with a two-decade experience in both academia and the industry. The former head of solar R&D at Total, he is now the expert for solar technologies there. At IPVF, Lars Oberbeck is Program Manager for the techno-economic and environmental assessment of PV technologies. In September 2021, he gave a talk at IPVF on European photovoltaic production, and his position was both clear and nuanced: yes, European production can make sense, but a lot of parameters will be needed for it to be successfully re-established.

PV production today: the European David and the Chinese Goliath

Dr Oberbeck started  with an assessment of today’s PV market. Right now, it is dominated by China, both in terms of module production and new PV systems installations. China produces almost all the silicon wafers and about 75% of the cells and modules for crystalline silicon technology–whose market share worldwide is around 93%. Europe, on the other hand, only manufactures about 0.2% of the cells and 2% of the modules for this technology. In terms of new installations, China is also the largest market in the world: in 2020, 135 gigawatts of PV systems were newly installed, almost 50 of which were in China–and 20 each in the U.S. and in Europe.

China is not the home of PV technologies. As Dr Oberbeck points out, “none of the features that we see in current PV modules have been invented in China, but they have been produced in China.” As such, the country’s role in developing PV worldwide is crucial: 15 years ago, European modules were relatively expensive; then, China started to mass produce and leverage economies of scale. This drove a drastic reduction of costs: today, module prices are around 20 cents per watt peak. Their decrease has been enabled by two main factors: per piece learning and efficiency learning, as expressed in the learning rate. Since the start of mass production in China, the learning rate has been around 40%: this means that with every doubling of the cumulative installation of PV modules, the module prices drop by 40%. For Dr Oberbeck, “without the Chinese mass manufacturing, we would not be at the same level of cumulative installation and production, and not at the same level of benefit that PV already has on the environment.”

But in spite of China’s clear-cut dominance, there is a lot of potential in Europe too. With the 20 gigawatts added in 2020, the total PV installation in Europe is currently around 137 gigawatts. And over the next few years, a solid growth in annual installations is expected, with rates ranging between 13 and 23%. This is true of Germany, the largest European market with around 55 gigawatts already installed, where the annual installations are  projected to reach a mid- to high-single digit GW range. This is also true of France; in the first half of 2021, 1.36 gigawatt have already been installed, when in the past there would be less than 1 GW per year. This positive trend, of course, is backed by high ambitions: France aims to reach 44 gigawatts of total installations by 2028.

For Dr Oberbeck, as the Covid crisis has shown, there are strategic advantages to re-establishing energy security in Europe, with less reliance on imports. The home market is large and will continue to grow, creating jobs in solar cell and module production, but also all along the supply chain. European manufacturing is also very likely to be more sustainable than the Chinese, not only because of its greener energy mix (China still relies on coal power plants to about 70%), but also because of the advances of cradle-to-cradle concepts. Last but not least, says Dr Oberbeck, there is leading know-how in research and development on the continent–driven among others by IPVF. For all these reasons, “European PV manufacturing does make sense.”

Technology options for European manufacturing

However, considering the future of PV production in Europe begs quite a few questions.

The first one is : which technology should the continent focus on producing?

Today, there are at least five different ones for crystalline silicon:

– PERC, the “workhorse of the PV industry”, made of monocrystalline silicon, has a current module efficiency of around 20.5% and is projected to reach around 22% by 2030.

– Passivated contacts, also called “TOPCon” (Tunnel Oxide Passivated Contact), can be viewed as advanced developments of PERC technology and are compatible with existing PERC lines–a non-negligible point for the future upgrade of these lines.

– Next are two technologies that enable higher efficiencies: interdigitated back contact (IBC) and silicon heterojunction. Both are currently in production, but only represent niche amounts; their market shares are nevertheless expected to grow over the next ten years.

– Finally, perovskite and silicon tandem modules are expected to reach the market in 2022, driven by Oxford PV. They may then have an efficiency of around 23-24% (“close to what the best crystalline silicon technologies enable at the moment”), but they are projected to exceed 30% in the future. For Dr Oberbeck, “tandem solar cells will not only enter the market, but also grow in market share”.

This breakdown reflects an overall trend towards higher efficiencies: compared to PERC, these advanced technologies increase efficiency and energy yield… but they also typically come with higher manufacturing costs.

The question of cost-competitiveness

Which brings us to another crucial question: the cost-competitiveness of European PV modules, compared with those produced in China. Here, Dr Oberbeck refers to a study published by the Fraunhofer Institute for Solar Energy Systems and VDMA (the Association of German machine and equipment builders), comparing the manufacturing costs for PERC modules from a 1 GW-integrated factory with the costs of Chinese production. Unsurprisingly, they found that European manufacturing costs depend on the location in Europe and the availability of cost competitive materials.

The most interesting option for European production is a so-called “recover scenario”, in which the whole material supply chain has been reestablished in Europe, with an ability to produce at Chinese costs. In other terms, combining European integrated manufacturing with a fully European supply chain is the most credible path to cost-competitiveness with China. This would also enhance Europe’s competitive advantage in other ways: if glass were to be produced locally, for instance, its environmental footprint would likely be lower than if it had been imported from China–a perk that “could be recognised financially by the customers”, says Dr Oberbeck. Environmental boundary conditions could also incentivise European production, by favoring modules with a lower CO2 footprint, for instance. In a nutshell, “we really need the return of the materials supply chain to Europe at competitive costs, in order to make European PV manufacturing not only profitable, but also environmentally meaningful.“

The double need for a business case and political will

There are limitations to this scenario, of course. The first one is that Europe would need to reach higher production volumes: today, PV production in Europe is dominated by smaller-scale module manufacturing, done in fabs with an annual capacity of 500 megawatts or less. For this scenario to work, fabs of five gigawatts or more–the upcoming standard–would need to be set up. The economic appeal (or lack thereof) of financing the re-europeanisation of production could also be a hurdle: PV manufacturing is historically a low margin business, and investors might be deterred by the past shutdowns of manufacturing facilities in Europe. What this means is that the re-establishment of a European supply chain and manufacturing capacity will depend very largely on political will on the European Union’s part. For Dr Oberbeck, “the industry itself will only do it if there is a business case, and the business case depends on the boundary conditions established in Europe. If there is a strong need in the industry, and a strong will of the European Union, then it will happen.” The VDMA study also makes assumptions that Dr Oberbeck finds questionable, e.g. that modules produced in Europe would have 0.5% absolute higher efficiency than Chinese ones, for the very same technology.

Finally, other interesting scenarios could be imagined: for instance, one where PV cell manufacturing is done in Asia and module manufacturing is done in Europe. This would dramatically reduce transport costs for Asian manufacturers, since cells are much cheaper to move than modules. The question then is whether leading PV manufacturers in Asia would be interested in investing in European fabs, as is now the case with battery manufacturing.

In any case, the potential in Europe is still to be fully tapped. Dr Oberbeck is positive that PV is “only at the beginning of a long success story”: one where we will see two-junction and three-junction technologies emerge, driving efficiency even more. This efficiency is what might help Europe differentiate itself from China, allowing the continent to focus on premium, higher efficiency and quality products for residential applications or niche markets. Efficiency is also an important driver for sustainability. Today’s solar cells are thinner, cheaper and, because they use less material to achieve the same power, boast a lower environmental footprint. This will become even better with higher efficiency modules: the more efficient they are, the more diluted the environmental impact of their production. This could be combined with other structural innovations, such as the continued decarbonisation of European countries’ electricity mix, and the adoption of new manufacturing practices (circular economy – notably recycling and reuse of chemicals and water). All in all, Europe has what it takes to become an important producer of PV systems. Now, as they say, where there is a will, there is a way.