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After Decade Of Decline, Solar Panel Prices Are Rising In World's Biggest Solar Market

This article is more than 8 years old.

The average price of a solar panel in Europe is doing something it hasn’t done in years. It is rising.

Prices for solar panels in the European spot market have risen by about 6% so far this year, according to pvXchange, a solar market consultancy based in Bremen, Germany.

Despite its modest size, the uptick in prices represents an abrupt reversal of recent historical trends. In 2011, the average price of a solar panel in Europe fell by nearly one third compared to the previous year. In 2012, solar panel prices in Europe plunged by nearly another third. Indeed, just last year, the price of a solar panel in Europe fell by more than 14% compared to the previous year.

The reason for the rise in prices is almost certainly tied to the escalating trade war between Europe and China over alleged dumping of solar imports.

The European Commission’s anti-dumping duties are starting to curtail the flow of cheap solar imports manufactured in China into the European solar market. Combined with overcapacity and weakening demand in key markets, the trade war is wreaking havoc on Chinese manufacturers. Over the past two years, at least four major Chinese solar manufacturers have declared bankruptcy, including LDK Solar, a huge solar-cell manufacturer, and Suntech Power, which had once been the world’s largest solar-panel maker.

While the import restrictions may hurt Chinese manufacturers, it is unlikely to revitalize Europe’s moribund solar industry, especially in Germany. Germany’s solar industry was among the hardest hit by the aggressive pricing pursued by Chinese solar manufacturers.

Beginning in 2000, Germany's Renewable Energy Sources Act (EEG) galvanized the solar industry’s equivalent of a gold rush. The EEG guaranteed solar projects a fixed price – which was significantly above the market prices – for electricity sold to the grid. The boom did not necessarily go bust. Instead, it went to China where solar equipment manufacturers leveraged generous (arguably over-generous) government subsidies to allegedly under-price solar equipment sold in markets like Germany.

Germany still leads the world in the total installed solar capacity, but its solar industry has become a faint shadow of what it was a decade ago. In 2014, European manufacturers supplied about 8% of the world’s solar panels, according to the Renewable Energy Policy Network for 21st Century. By contrast, China manufactured about 64% of the world’s annual supply of solar panels last year.

As pvXchange explained in a recent market analysis:

[T]he systematic effort to force Chinese companies out of the European market has now taken on almost absurd dimensions. Even those operating production facilities within the EU are forced to comply with minimum prices. The reasoning from the officials behind this is that it is now supposedly impossible to distinguish whether panels that end up on the European market are of Chinese or European manufacture, as long as they have similar specifications and the same branding. The up-shot of this is the closure of production facilities due to lack of product attractiveness and a complete withdrawal from the EU area.

Germany and China will almost certainly survive this trade dispute, but the solar industry may not.