Europe faces an uphill struggle in ramping up its domestic solar supply chain, despite ambitious targets set out in recent legislation.

Competing on price alone with major manufacturing hubs in China and Southeast Asia will not be possible, and incentives under the US Inflation Reduction Act are also drawing investment commitments across the pond.

The majority of utility-scale and rooftop solar installations deployed in Europe are imported from China, which holds a dominant market share across all key nodes of the value chain, S&P Global Commodity Insights data show.

But under the European Commission's recently unveiled Net-Zero Industry Act, 40% will be produced in the bloc by 2030.

"To make this target achievable, the EU will have to set high manufacturing incentives ... as well as to set some sort of barriers of entry to lower-cost imports," said Edurne Zoco, executive director of clean energy technology at Commodity Insights, on the latest episode of Energy Evolution, a podcast from S&P Global.

With solar panels evolving from commodity to geopolitical bargaining chip, Europe needs to shed naivety about subsidies and put money into the sector, according to Gunter Erfurt, CEO of Swiss solar module manufacturer Meyer Burger Technology AG.

Meyer Burger is developing manufacturing capacity in both Germany and Arizona, and its 2-GW factory near Phoenix is set to be eligible for receiving $140 million per year under the Inflation Reduction Act once operational, Erfurt said on the podcast.

Without a similar move in Europe, "there's actually no reason for companies to settle in Europe if we have these brilliant conditions in the US," Erfurt said.

According to Zoco, global supply chain woes could become a stronger argument for producing panels closer to where they are used, including in Europe.

Developers in the US have been experiencing delays in panel deliveries due to trade barriers, citing the lengthy paperwork needed to fulfill US Customs and Border Protection documentation in compliance with the Uyghur Forced Labor Prevention Act.

Delays for imports of Chinese solar panels are now spurring demand for US product, chiefly for utility-scale projects with commissioning timelines to achieve under power purchase agreements, Erfurt said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.