Stockpiles of solar panels in warehouses are growing as buyers anticipate price declines and hold off purchases. Source: ArtistGNDphotography/E+ via Getty Images

Europe is awash with solar panels as a perfect storm of rising imports and lower installation rates causes equipment to pile up in warehouses and prices to decline.

The region has as much as 45 GW of panels stocked in warehouses, according to industry estimates, nearly as much as was installed in Europe in 2022.

Imports of solar modules into the EU picked up rapidly last year after the bloc launched its REPowerEU renewables drive in light of the invasion of Ukraine. However, capacity additions have failed to keep pace with the level of equipment being shipped over.

This new dynamic led analysts at S&P Global Commodity Insights to describe Europe as having turned into a buyer's market for panels, in stark contrast with the US.

The price of polysilicon, a key material used in panels, has declined in recent months, while the oversupply of panels in Europe means solar developers are set to enjoy improved margins for their projects.

'Playing into our hands'

Still, developers of utility-scale solar projects are unlikely to be taking advantage of the high warehouse inventory, with many procuring panels directly from producers in China on a project-by-project basis.

"The stockpiles of solar modules are mostly for residential and commercial and industrial [installations]," said Sixto Garcia Barea, solar capital expenditure leader at Swedish developer OX2 AB. "When we develop utility-scale solar farms we require high-quality products with specific and tough quality control and quality assurance that requires supervision through manufacturing and delivery directly to the solar farm."

Falling module prices are reducing the capital expenditure for solar projects, Garcia Barea noted in an email.

Tino Weiss, head of global purchasing at BayWa r.e. Solar Projects GmbH, agreed that utility-scale projects will typically not receive photovoltaic modules from warehouses. Yet, "the current market is playing into our hands," Weiss said.

China's solar supply chain has ramped up production and exports in anticipation of a surge in deployment in Europe in the aftermath of the energy crisis.

Capacity additions in Europe, however, have not been as rapid as expected, leading to a shortfall in demand for equipment, Weiss said. This is partly due to the higher cost of capital and lower returns for projects.

The market for solar power purchase agreements has also slowed and declined from record highs as wholesale power prices dropped.

Meanwhile, "the Chinese producers continue pushing in their product," Weiss said.

European solar developers seem to coalesce around an expectation of stable prices going forward.

"We do not expect further drops in price but a flat trend in the coming months," Garcia Barea said — a view shared by Weiss.

Europe becoming a solar dumping ground

For German module maker Meyer Burger Technology AG, the current market environment is causing headaches.

CEO Gunter Erfurt said US import restrictions on Chinese-made panels are turning Europe into a dumping ground.

"The imports into the European Union from China have substantially increased ... because products cannot enter the US anymore. And that has led to an oversupply of 45 GW in EU warehouses. This has caused ... a quite substantial price drop," Erfurt said on an Aug. 17 investor call. "And of course, this creates a substantial problem for European manufacturers, not only Meyer Burger."

Meyer Burger has not lowered its prices so far, Erfurt said.

Experts also see risks for some manufacturers in the current price plunge.

"This new aggressive low-price environment can drive further consolidation across the module supply chain," Commodity Insights analysts said.

While high imports are part of the picture, another reason for surging warehouse stocks is deployment delays for panels due to a lack of workers capable of installing them.

"Europe just doesn't have the people power to get the solar installed yet. We're at around 500,000 solar workers today, and that needs to more than double before the end of the decade," a spokesperson for lobby group SolarPower Europe said.

Permits for new projects are also not being granted fast enough.

"For utility-scale, we can see delays of up to four years for permitting alone. Grid congestion and connection delays are increasingly holding up projects too," the spokesperson said in an email.

There are also longer lead times for key components like transformers, the equipment used to connect projects to the grid.

US remains a seller's market

While Europe is grappling with an oversupply of panels, the situation in the US is completely different, and so are developers' procurement strategies. For European projects, Weiss buys panels on an ad-hoc basis depending on construction timelines, six months to a year ahead of installation.

Due to import restrictions on Chinese product in particular, the US is a clear seller's market. BayWa r.e. AG has committed to buying 1.25 GW worth of modules between 2025 and 2029 from a Meyer Burger plant under development in Arizona.

"We are witnessing currently, especially in the European Union, very unfair market conditions, which are forcing us to focus our expansion ... more in the US," Erfurt said. "The US has done a good job already on implementing measures which are helping companies to run a sustained business."

Meyer Burger is operating and developing manufacturing capacity in both Germany and the US, 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 told Commodity Insights in June.

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