“The next decades will see the greatest industrial transformation of our times – maybe of any times,” said President Ursula von der Leyen of the European Commission at the World Economic Forum annual meeting earlier this year, where she addressed the firm promise of renewable energy development. Recently, traditional energy prices soared amid the Russia-Ukraine war, underlining the necessity of energy transition and security, making Europe a decisive role in this global transformation.
The REPowerEU set forth goals of 45% of (approximately 1,236 GW) renewables in the bloc’s energy mix and installed PV capacity addition of 600 GW. To attain the targets as soon as possible, the European Commission proposed two drafts this March, the Net-Zero Industry Act and the Critical Raw Materials Act. The two drafts will be carried out under the Green Deal Industrial Plan EU introduced a month prior.
According to the Net-Zero Industry Act, the EU must, by 2030, satisfy at least 40% of the annual deployment of the eight strategic net-zero technologies with local manufacturing capacity through streamlining administrative procedures, cultivating talent cultivation, etc., by 2030. The Critical Raw Materials Act, on the other hand, regulates that no more than 65% of the supply of indispensable raw materials, especially those related to renewables, such as lithium and rare-earth elements, come from a single third country.
Backed by multiple bills, the Green Deal Industrial Plan is regarded as a strong response to the Inflation Reduction Act of 2022 (IRA) of the U.S. Introduced last year, the IRA pumps $369 billion into the renewable energy industry, providing subsidies and tax credits for PV, wind, and energy storage projects. Meanwhile, the EU plans to expand investments and subsidies for the industry.
Besides the EU’s policies, many countries within the bloc recently updated their renewable energy targets for 2030. Italy raised the target by 53% from 52 GW to 79.9 GW, while Spain significantly lifted from 39 GW to 76 GW, a whopping 94% increase. Germany, a key PV market in Europe, already revised its target from 200 GW to 215 GW during the Russia-Ukraine conflicts.
Overall, policy developments in European countries will boost end-user demand. According to data compiled by InfoLink, Europe will have 92-114 GW of module demand in 2023. Despite short-term setbacks, such as excess inventory and belated grid connection progress due to labor shortage, the long-term outlook is bright, thanks to supporting policy frameworks and the optimization of manufacturing technology and cost management. By 2027, Europe may have 141-160 GW of module demand, namely a compound annual growth rate (CAGR) of 7-8.9%, indicating a promising future for the European PV market.
Additionally, the levelized cost of electricity (LCOE) of solar energy in Europe gradually declines as module prices fall amid polysilicon price drops this year. Assessment based on a module price of $0.194/W shows the LCOE of solar energy in Europe to be $34.9/MWh in 2023, and decline below $29.5/MWh after 2027 if the trend continues. With lower LCOE and comprehensive supply chains, solar energy will remain the top choice for Europe, even the world, to achieve energy transition.
Energy transition has become an international movement, where Europe plays a pivotal role, wielding profound impacts on the world’s pursuit of a net zero future.