The European Union wants to strengthen its domestic photovoltaic manufacturing and make the supply of clean electricity more resilient. The Net Zero Industry Act (NZIA), which reflects the high strategic importance of solar technology, allows member states to tie funding programmes for PV projects to non-price criteria such as carbon footprint or energy efficiency. A recent study by DIW Berlin, the German Institute for Economic Research, finds that differing implementation of these criteria across member states is having negative consequences for costs and competition.
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"With the new legislation, the EU is pursuing an important goal: to cover 40 percent of its PV demand with domestic products by 2030 and thereby become less dependent on global supply chains," says Thibault Deletombe, study author and researcher in the Climate Policy department at DIW Berlin. "But our analysis shows that the highly heterogeneous implementation by member states so far may mean that this goal is only partially achieved."
Fragmented criteria raise manufacturing costs
Drawing on a model of the European PV module production sector, the study examines the effects of differing national funding criteria. The result: current fragmentation means that the potential of the single market is not being fully exploited. Divergent requirements for PV modules increase complexity for manufacturers and investors alike, and push up costs.
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"If every country defines its own non-price criteria, the result is a patchwork of requirements that hampers investment and prevents economies of scale," explains Karsten Neuhoff, head of the Climate Policy department at DIW Berlin. "This makes manufacturing more expensive and weakens the competitiveness of European suppliers."
Harmonisation could lower costs and strengthen competition
At the same time, the study shows that EU-wide harmonisation of non-price criteria would bring considerable benefits. Uniform standards would strengthen the single market, lower production costs and provide clearer framework conditions. Companies could serve larger markets and produce more efficiently as a result. A harmonised European framework would also help improve the competitiveness of European manufacturers. At present, Chinese PV modules in particular enjoy a clear cost advantage. To offset this, European companies need reliable and consistent policy frameworks.
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Alongside the Net Zero Industry Act, the proposed Industrial Accelerator Act (IAA) also has an important role to play. It envisages that funding for PV projects can give greater weight to whether components have been manufactured in Europe ("Made in EU" criteria). What matters, however, is that both instruments are implemented in a coordinated and consistent manner.
"The EU's goals of a more resilient manufacturing of PV systems, lower costs and a contribution to a competitive global market can only be achieved through a coordinated European industrial strategy. This requires industrial, competition and environmental policy to be more closely aligned," concludes study author Deletombe. (hcn)
