BEIJING: China's solar industry appears to be one of the few bright spots on a gloomy horizon for exports from the world's No. 2 economy, amid rising concerns of a global slowdown.
According to a South China Morning Post calculation based on China customs data, exports of Chinese solar batteries to the European Union (EU) - which is further broken down into photovoltaic cells and modules - increased by 138 percent in the first eight months of the year. Hui. compared to the same period in 2021.
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In the same period, the total export of solar batteries increased by 91.2%. As more businesses and families install rooftop solar panels in response to skyrocketing energy costs after the Ukraine war, demand for Chinese solar exports to Europe has increased.
As a result of Russia's reduction in natural gas supplies to the continent in response to sanctions that stimulated world energy markets, Europe is attempting to reduce its reliance on Russian fossil fuels.
Kin Yan, an energy analyst at financial services firm Refinitiv in Norway, claimed that as energy costs rose, he, including his friends, saw a significant increase in the desire for new rooftop solar installations.
As an energy professional, Qin said, "I do a cost-benefit analysis of installing rooftop solar on my home and see electricity prices on the screen every day." "Even with the Norwegian government's electricity tariff subsidies, the payback time has been cut in half to seven years.
According to the Post's calculations, China's exports of solar batteries to Norway in the first eight months of this year increased by 79.3% compared to the same period last year.
According to Xu Fei, managing director of Inno Investment Bank, which has a large solar portfolio, Chinese solar suppliers are struggling to meet demand.
“Last year, forecasts suggested that the price of polysilicon would drop from this July to August as demand gradually subsided, but material prices were still high. This suggests that downstream in the supply chain, demand is unbreakable.
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He claimed that there were constraints in the production of solar batteries and that as the products were produced, they were quickly procured mainly by foreign buyers.
Despite government subsidies to help households with energy bills, Qin claimed that electricity costs for European households are two to three times higher than in 2019-20 in the backdrop of the Ukraine war.
Consumers are now more concerned about energy security due to power shortages, and household renewable energy is considered a reliable source.
Demand in Europe will increase as a result of "expectations for more favorable government policies to promote renewable growth", he said.
Small and medium-sized businesses are particularly driven to move away from fossil fuels because they are often left out of government relief programs.
According to experts, solar panels are becoming more and more attractive in the majority of Western European countries due to the significantly shorter payback period for medium-scale roof installation, which has been reduced from 15 years to six or seven.
The European Union put out the REPowerEU plan in May in response to market disruption caused by Russia's invasion of Ukraine, with a focus on promoting renewable energy, to diversify energy supplies and accelerate decarbonization of the bloc's economy. . Analysts predict that Chinese makers of solar and wind equipment will benefit from the accelerated transition from clean energy.
According to Xu of Inno Investment Bank, it will be more challenging for governments to impose tariffs or other trade barriers on Chinese imports as residential solar demand in Europe rises.
He declared, “Our supply chains are quite competitive.” Even if more tariffs are implemented, strong consumer demand will not subside, and consumers will have to bear the burden of higher prices brought on by tariffs. According to the International Energy Agency, China accounts for more than 80% of the total production of solar energy.
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Although the country's largest solar companies have a significant presence in developed economies such as Germany or Spain, Xu said the growing demand from smaller, more scattered markets provides new opportunities for second-tier firms that have historically worked in Africa, the Southeast and the Middle East. Emerging markets such as Asia have been served. or South America.
It can be very challenging for small businesses to compete in the business-to-business sector due to the high capital requirements and complex supply chain management requirements, but they may be able to do so by targeting consumers directly.
The European Commission wants to increase solar manufacturing in Europe as part of REPowerEU, which will reduce dependence on Chinese imports. I wouldn't be surprised if the EU announced new trade sanctions, Qin said.
However, China's dominance and competitiveness across the entire value chain are quite apparent and unrivalled.