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European manufacturing cost premiums raise solar LCOE 15% above that of Chinese-made panels
1/10/2025
News
Producing a solar module in Europe with EU-made solar cells costs around 18% more than producing the same module in China, according to a new report from SolarPower Europe and Fraunhofer Institute for Solar Energy Systems (ISE).
The gap stems from higher costs in equipment (+40%), building and facilities (+110%), labour (+280%) and material costs (+50%), notes the analysis. As a result, such utility solar installations cost about €608/kWp compared to €500/kWp for a Chinese system, translating into a levelised cost of electricity (LCOE) that is 14.5% higher for European-made modules.
The report also notes a significant cost difference between EU-made and non-EU-made modules, even if both are compliant with the EU’s Net Zero Industry Act (NZIA). The difference between them amounts to between €22–58/kWp.
‘The NZIA’s resilience criteria can therefore diversify module supply chains and boost imports from elsewhere in the world, but without more policy measures, reshoring EU production may not be achieved,’ warns report co-author SolarPower Europe.
However, the report reveals that the cost gap between European made and Chinese imported solar could be reduced to below 10% with the ‘right mix of policies’ and provided that European solar factories reach 3–5 GW capacity. Policies recommended are similar to the successful models seen in the US under the Inflation Reduction Act and Production Linked Incentive schemes in India, suggests the study.
The report recommends establishing an EU-level output-based support scheme for solar manufacturing, combining grants, loans and de-risking instruments to cover both capex and opex. It also suggests implementing NZIA policy schemes across member states, including ‘Made-in-EU’ bonus points in rooftop support and public procurement programmes.
The study notes that industry support needs range from €1.4–5.2bn/y to reach the 30 GW target for European solar manufacturing for 2030, with up to 39% of costs being recovered through macroeconomic benefits (up to 2,700 jobs and €66.4mn in annual tax and social revenues per GWp/y).
Walburga Hemetsberger, CEO at SolarPower Europe says: ‘Without interventions, Europe risks losing remaining industrial and technological capabilities in solar.’
Sonnedix sets its sights on Italian solar
One market that European solar manufacturers could supply is Italy, where global renewable energy company Sonnedix has just expanded its portfolio with the acquisition of five new projects in Sicily and Lazio, west-central Italy. The projects will add a combined capacity of 226 MW as the company looks to reach 1 GW of operating capacity in Italy by the end of the year. Sonnedix currently has over 800 MW of operating capacity in the country, including the 10.5 MW capacity Malalbergo, Tuscany solar farm (pictured), with a further 500 MW under construction.
Looking ahead, the company plans to expand its capacity in Italy to 2 GW within the next three years.
Although Sonnedix has historically focused on solar, it is seeking to broaden its portfolio across the renewable energy spectrum by investing in hybridisation and advanced energy storage solutions. The company has commenced construction of its first battery energy storage system (BESS) project in Italy, an 18 MW plant located in Sicily. The project will be co-located with a 70 MW solar PV plant that is currently under construction.
