New Delhi

Europe's ambitious journey towards green energy is facing a significant challenge, caught in a dilemma between soaring installations driven by cheap Chinese solar panel imports and the devastating impact on local solar manufacturers.

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While European Union countries celebrated a record year for green energy with a 40 per cent surge in solar capacity compared to 2022, many solar panels and parts were sourced from China, reaching up to 95 per cent in some instances, as per International Energy Agency data.

The boom, however, has proven detrimental to local manufacturers, prompting warnings of imminent closures unless governments intervene.

Despite the green energy triumph, Europe's few remaining solar panel manufacturers are teetering on the brink, grappling with oversupply and the influx of inexpensive imports.

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Production closures loom large, with industry leaders cautioning that up to half of the sector's capacity could shut down in a matter of weeks without government intervention.

Policymakers find themselves in a dilemma, torn between addressing the crisis and the potential consequences of trade restrictions on Chinese solar imports.

German Economy Minister Robert Habeck expressed concerns in a letter to the European Commission, warning against imposing trade restrictions on Chinese solar imports.

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Habeck emphasised the risk of hindering Europe's green energy expansion and raising costs in the photovoltaic (PV) market.

The letter suggested that such restrictions could lead to bankruptcies among EU companies involved in assembling and installing solar panels using imported components.

While Germany contemplates support for the sector, a government budget crisis has cast uncertainty on planned initiatives.

Spain is considering tariffs, the Netherlands eyes carbon border taxes, and Italy recently announced ainvestment in a PV panel factory in Sicily.

EU Financial Services Commissioner Mairead McGuinness addressed the solar sector's challenges, offering no new support but highlighting existing measures, including a forthcoming law aiming to expedite permits for local manufacturing and provide EU-made products a competitive advantage in clean tech tenders.

On the topic of trade restrictions, McGuinness maintained a cautious stance, emphasising the need to balance potential measures against energy transition objectives.

The industry itself is divided, with solar manufacturers urging government intervention to absorb excess inventories, while the broader green energy sector opposes import curbs.

Amid the struggle for a solution, European solar manufacturers, even those hoping for a competitive local industry, acknowledge the daunting reality of a "price war" with China.

Gunter Erfurt, CEO of Swiss panel maker Meyer Burger, highlighted the challenge, stating that Europe is competing against strategically subsidised Chinese solar firms, some selling below production costs.

(With inputs from Reuters)