Observation and Long term Outlook on the Demand for European Photovoltaic Market in 2024

July 31, 2024

In recent years, Europe has been vigorously developing renewable energy to achieve energy security and net zero carbon emissions goals, with photovoltaics becoming a key driver of development. According to Infolink’s estimation, the global demand for photovoltaic modules in 2024 will fall between 470-529 GW, with the European market demand of approximately 82-93 GW, accounting for 18% of the global market demand and ranking as the second largest photovoltaic market in the world.

However, this year, with the gradual decline of traditional energy in Europe, it has affected people’s willingness to install distributed projects. In addition, factors such as the fluctuation of photovoltaic supply chain prices, consideration of financing costs, and subsidy restrictions have led to delays in some national projects. As a result, the inventory level of European components has quietly risen since the second quarter, and the market has a strong wait-and-see sentiment. Based on the accumulation of overall factors, Infolink estimates that the growth rate of component demand in Europe this year will relatively slow down. Compared to the 84.4 GW component demand in 2023, the conservative expected growth rate this year may slightly decline by 3%. In an optimistic scenario, there is a chance to grow by 10%, and it is difficult to repeat the leapfrog growth of component demand last year. Long term demand still depends on government policy planning. Currently, Europe is still discussing relevant favorable policies, subsidy incentives and other measures to continue stimulating market heat.

As an important player in promoting the development of the European photovoltaic market, the European Union has also had a significant impact on the European market, almost becoming the most important driving force for the development of the European photovoltaic market. At first, the European Commission launched the European Green Deal in 2019, pledging to achieve net zero carbon emissions by 2050 and achieve the goal of ‘climate neutrality’. After the outbreak of the Russo Ukrainian War in 2022, the European Commission launched the “RepowerEU” plan in May of that year, which aimed to reduce dependence on natural gas energy from Russia through four major projects: energy conservation, diversification of energy supply, accelerated promotion of renewable energy, and expansion of investment. Through the “EU Recovery and Resilience Facility,” member states were provided with subsidies or low interest loans to help them develop renewable energy.

Recently, the EU’s policies have received the most attention, with the Net Zero Industry Act (NZIA), the Critical Raw Material Act, and the Prohibition products made with forced labor on the Union market. Although the detailed regulations are different, they mainly aim to enhance the EU’s net zero technology autonomy or primary manufacturing, while reducing dependence on key technologies and related products from third countries. As the largest importer of photovoltaic products in Europe, China is bound to be affected. However, although the European Union and its member states have signed the European Solar Charter, promising to support local photovoltaic manufacturers and help strengthen the competitiveness of EU local photovoltaic products, the measures to subsidize local manufacturing at this stage are not clear, and local production capacity cannot match its huge demand. As a result, many photovoltaic associations and companies have called on the EU and European countries not to impose trade restrictions and tariffs on Chinese photovoltaic products from the end of last year to the beginning of this year. Therefore, it is estimated that the impact on China’s module output volume will be limited in the short term.

In terms of other stimulus policies, the European Union also issued the Energy Performance of Buildings Directive (EPBD) in May this year, which stipulates that all new buildings should achieve net zero carbon emissions before 2030; By 2050, all existing buildings should achieve net zero carbon emissions, except for agricultural, religious, or historical buildings. In addition, some European countries such as Italy and France also encourage the installation of photovoltaics on road soundproofing walls, parking lot sunshades, exterior walls of commercial and industrial buildings, and public buildings, especially in the installation of parking lot sunshades, which is expected to bring good demand and benefits to distributed projects.

However, it should be noted that some European countries are gradually limiting agricultural photovoltaic projects due to factors such as food security and farmer protests. In addition, some countries are experiencing grid congestion problems, which may to some extent affect the development of centralized projects in the short term. In addition, European countries must continue to address issues such as bureaucracy and cumbersome administrative processes in the approval process, and actively supplement the current technical workforce in the photovoltaic market to accelerate the development of photovoltaics in Europe.

Overall, under the EU’s transition strategy towards renewable energy, the European photovoltaic market will continue to thrive. In addition to the EU proposing many stimulus policies, most European countries have also put forward corresponding positive measures. Observing the market share of a single European country in 2024, Infolink estimates that Germany ranks first with a 19% share in component demand, followed by Poland, Italy, the Netherlands, and Spain with 7-8% share, ranking 2nd to 5th. The five countries account for approximately 50% of the overall European market demand. The following will provide a comprehensive overview of the market and policies for the top five demand countries in the European region.

In the German market, as we enter the peak season for solar power generation in summer, there has been a sharp drop in solar electricity prices recently, with negative prices even occurring during peak periods. In addition, the gradual decline in traditional energy electricity prices has led to a nearly 10% year-on-year decrease in solar installed capacity in Germany in the second quarter. However, looking at the first half of this year, Germany has added 7.55 GW of installed capacity, an increase of 8% compared to last year’s 6.97 GW. It has achieved 58% of the target of adding 13 GW of installed capacity this year and has a chance to successfully meet the standard before the end of the year. Infolink predicts that Germany’s component demand will fall between 16-17.5 GW this year.

In May of this year, Germany’s Solarpaket 1 program was officially launched, which is considered one of the most important policies to stimulate the future development of photovoltaics in Germany. In addition to providing a grid connected electricity price subsidy of 0.015 euros per kWh for industrial and commercial projects, the program has also been implemented; Simplify the application and installation process for rooftop and balcony photovoltaic systems; Raise the limit of centralized projects from 20 MW to 50 MW; And encourage the development of agricultural power projects in compliance with the Federal Law on Nature Conservation (Bundesnaturschutzgesetz), while promoting the installation of photovoltaic systems in parking lot awnings, which is expected to drive long-term centralized and distributed photovoltaic installations in Germany. Compared to other European countries, Germany has a clearer goal for developing renewable energy, with over 90% of the population strongly supporting the development of renewable energy. In addition, more and more German companies are announcing the expansion of investment in their own photovoltaic systems to reduce electricity costs. Therefore, it is expected that the demand for photovoltaics in Germany will increase year by year in the future.

Observe the second and third largest single demand markets in Europe, Poland and Italy. Although Poland still relies on coal-fired power generation as its main source of electricity, it has also made significant progress in the development of photovoltaics in recent years. By 2023, a total of about 4.9 GW of new installed capacity will be added, making it a significant emerging market for photovoltaics in Europe. It is expected that Poland’s photovoltaic demand will fall between 6.8-7.9 GW this year. Poland has also recently faced the problem of excessive photovoltaic power generation during off peak periods, leading to heavy pressure on the power grid. In light of this, Polskie Sieci Elektroenergyczne (PSE) announced that it will invest approximately 117.5 billion euros by 2040 to optimize measures such as the Polish transmission and distribution network. Another positive news is that the Polish government is expected to launch the “My Electricity Plan (M ó j Pr ą d 6.0)” in September this year. Due to the growth brought by M ó j Pr ą d 5.0 to the installed capacity of Polish households, M ó j Pr ą d 6.0 is expected to drive about 16000 households’ installed capacity demand, stimulating distributed demand in the next two years. With Donald Tusk, who encourages the development of renewable energy, taking office as the Prime Minister of Poland at the end of last year, more favorable photovoltaic policies may be introduced in the future to stimulate long-term demand.

On the other hand, in Italy, the 90% subsidy rate of Superbonus last year helped increase the demand for distributed projects. However, with the rate reduced to 70% this year, it may affect the public’s willingness to install household photovoltaics. In addition, the Italian government passed a law in May this year prohibiting the installation of ground-based centralized photovoltaics in areas designated as agricultural land in the future, which may to some extent affect the development of centralized projects. It is expected that Italy’s installed capacity this year will mainly be reflected in industrial and commercial or public building facilities projects, with a demand of about 6.2-6.6 GW. However, Italy has been more significant in investing in local manufacturing. In March of this year, the Italian government released the second round of the National Recovery and Resilience Plan 2 (PNRR 2), which provides subsidies to developers who choose local photovoltaic products. At the same time, the European Commission has also provided subsidies to local photovoltaic manufacturers through Italy’s “Green Deal Industrial Plan”. Due to Italy’s current insufficient domestic production capacity, it cannot match its demand, so it still relies on Chinese exported photovoltaic modules in the short and medium term.

Finally, briefly describe the market situation of the fourth and fifth largest single demand markets in Europe, namely the Netherlands and Spain. Last year, the Netherlands added approximately 4.8 GW of photovoltaic installed capacity, making it one of the fastest growing markets for photovoltaic development in Europe. However, due to land scarcity, the Dutch government has been vigorously developing photovoltaic systems on bike lanes, parking lot sunshades, highway soundproofing walls, public buildings, and even water. It has also performed well in household and commercial projects. However, the coalition government led by the Dutch Liberal Party (PVV) reached a coalition agreement in May this year, announcing the expansion of offshore natural gas extraction and nuclear power generation. At the same time, it was decided to cancel the “Salderingregeling” plan from 2027, and in the future, the public will not be able to input the electricity generated by household photovoltaics into the grid to receive feedback. No other favorable policies have been observed recently, and it is expected that the demand in the Netherlands will fall between 5.8-6.5 GW this year.

On the Spanish side, since the beginning of 2022, wholesale prices of renewable energy electricity in Spain have continued to decline, affecting the returns of power plant investors. With the arrival of this summer, the output of photovoltaic power generation will increase significantly, which may lead to the emergence of negative electricity prices, affecting investor returns and further reducing the incentive for photovoltaic field development. According to Infolink’s survey, many development projects in Spain have experienced delays, and it is expected that the demand for centralized projects will be difficult to meet this year. In addition, there have been no significant stimulus policies for household projects in Spain recently, which will affect the demand for distributed projects this year. Overall, the Spanish photovoltaic market is expected to be sluggish this year, with demand expected to fall between 5.5-6 GW. Whether there will be improvement in the future depends on whether issues such as grid congestion, slow administrative processes, and shortage of technical personnel can be addressed.

In summary, even though the European market has been affected by factors such as the decline in traditional energy, supply chain prices, financing costs, and subsidy restrictions this year, which have limited the growth rate of module demand this year, long-term demand in the European market is expected to grow. It is expected that the demand for photovoltaic modules in the European market will fall between 95.1-111.3 GW by 2025, an increase of 9-18% compared to this year, as the EU continues to introduce favorable policies for the development of renewable energy and member states reach a collective consensus on the net zero carbon emission target by 2030. The actual market situation still needs to be monitored from the second half of this year to the first half of next year, whether the EU and European countries have introduced other favorable policies, as well as the development of supply chain prices, financing costs, and global and regional political and economic situations. As the deadline for achieving net zero carbon emissions by 2030 approaches, European countries may increase module procurement to achieve this goal. It is estimated that there is a chance for the demand to exceed 150 GW in a single year in 2028, so we are optimistic about the long-term development of the European photovoltaic market.