Transatlantic Clean Investment Monitor: A Perspective on Solar PV
This note is the second in a series of quarterly briefings comparing clean technology deployment and manufacturing trends in Europe and the United States as part of a collaboration between Bruegel and Rhodium Group.
This note is the second in a series of quarterly briefings comparing clean technology deployment and manufacturing trends in Europe and the United States as part of a collaboration between Bruegel and Rhodium Group.
The US and Europe are pivotal players in the global solar photovoltaic (PV) landscape, each navigating distinct strategies for deployment, manufacturing, and trade. Europe has led in solar capacity deployment since the 2000s, while recent US policies, such as the Inflation Reduction Act, have driven a surge in domestic solar manufacturing, a trend not mirrored in Europe. The Clean Investment Monitor, a joint project of Rhodium Group and MIT’s Center for Energy and Environmental Policy Research (CEEPR), tracks public and private investment in the manufacturing and deployment of clean technologies in the US, while Bruegel’s European Clean Tech Tracker provides an overview of the main clean technology manufacturing and deployment trends in Europe. In this second note of our Transatlantic series, Bruegel and Rhodium Group explore the differing approaches of these regions as they strive to balance decarbonization goals with domestic manufacturing priorities and supply chain concerns.
Globally, solar PV technology has enabled the clean energy transition, with module prices plummeting by more than 90% over the past two decades, enabling mass worldwide deployment. The booming global manufacturing industry reached a $90 billion value in 2023, dominated by China, and is characterized by large overcapacity, with manufacturing capacity soaring to 1,140 gigawatts (GW) compared to 345 GW deployed. In terms of trade, Europe imports almost all its solar equipment from China, while the US has diversified its supply chain, importing mainly from Southeast Asia due to trade policies limiting Chinese-origin imports. As solar continues its increasingly central role in decarbonization, we examine the effects of competing policy priorities in the US and the EU.
Deployment
At COP28, governments of the world committed to tripling renewable generation capacity by 2030, positioning solar PV to accelerate its deployment globally. Leading international energy modeling efforts—from the International Energy Agency, International Renewable Energy Agency, and the Rhodium Climate Outlook—project that solar PV will dominate new clean electricity generation capacity between 2024 and 2030, with China, the US, and Europe playing major roles.
In Europe, generous subsidies in the 2000s ignited the solar industry. Virtually non-existent in 2005, solar deployment in the EU rapidly increased to more than 20 GW annually by 2011, thanks to policies like feed-in tariffs. However, as policy costs soared and economic constraints emerged, several European governments rapidly phased down their subsidies, leading to a slowdown. The US, despite significant early investments in solar R&D, missed this wave of deployment. The first federal tax credit for solar generation, introduced in the Energy Policy Act of 2005, along with state-level incentives—primarily in California—began driving steady growth in subsequent years.
By the second half of the 2010s, EU and US deployment converged at around 10 GW annually as solar panel prices fell. In 2019, the pace of European deployment rebounded, outpacing the US. Consequently, the gap in installed solar capacity widened. By 2023, the EU had deployed 257 GW of solar capacity, generating 9% of total electricity, compared to 139 GW of solar capacity in the US, accounting for 6%.
Despite the EU installing far more solar panels, both regions generate a similar amount of solar electricity (Figure 2). This is predominantly because the US benefits from more hours of sunlight on average, particularly in sunnier regions. However, sunlight availability varies widely across both the US and EU, highlighting the advantage of deploying solar in sunnier geographies. Germany leads Europe in solar deployment with more than double the capacity of any other country as of 2023.
Manufacturing
The global supply of solar PV modules and components required to meet these deployment figures is dominated by China, raising questions about domestic manufacturing in the US and Europe. While Europe leads in solar deployment, the US is experiencing far faster growth in solar manufacturing capacity. Until mid-2022, investments in the PV manufacturing supply chain were roughly equal between the two (Figure 3). Starting in Q3 2022, US investments surged, driven by the enactment of the Inflation Reduction Act (IRA), which incentivized advanced manufacturing and clean electricity production. These subsidies, combined with tariffs that limit Chinese market access, have further accelerated US solar manufacturing growth.
Following the passage of the IRA, solar manufacturing investment trends diverged sharply between the US and Europe. Companies invested more than $2 billion in US solar manufacturing in Q2 2024, a 10-fold increase compared to the $198 million invested in Q2 2022. In Europe, investments in 2024 are at their lowest level since 2021, totaling just $281 million for the first half of 2024. Although there is a substantial volume of announced investments in Europe, only a small fraction have received final investment decisions and are currently under construction (Figure 4).
Pre-IRA, Europe consistently led the US in announced solar manufacturing investments, with large new projects regularly reported across the years. Since the IRA became law, the US has experienced a boom in announcements across the supply chain—modules, cells, wafers—resulting in higher announced capacity since Q3 2022. The IRA unlocked two key tax credits for solar manufacturers in the US. Manufacturers can claim a newly introduced Advanced Manufacturing Production Tax Credit (45X), which subsidizes the production and sale of solar manufacturing components until 2032. Alternatively, they can claim the expanded Advanced Energy Project Investment Tax Credit (48C), an upfront tax credit that can help finance up to 30% of the investment to establish, re-equip, or expand renewable component manufacturing facilities, including solar.
The sharp rise in solar manufacturing investment in the US is materializing into a growing capacity across the value chain. Installed capacity for module assembly doubled from 19 GW at the end of 2023 to 38 GW as of Q3 2024 (Figure 5). Additionally, the influx of investment is expanding the pipeline for earlier-stage solar manufacturing, with 8.3 GW of wafer production capacity under construction and another 13 GW announced. Production is also ramping up for the nascent solar cell manufacturing industry, with current capacity at 300 MW and expected to grow significantly—11.8 GW of capacity is under construction, and another 18 GW has been announced.
In comparison, Europe’s manufacturing capacity, while predominantly focused on modules, is slightly more diverse. Europe has 22 GW of solar module manufacturing capacity, along with 2 GW of wafer and 5 GW of cell manufacturing. Despite lower investment levels, Europe does have capacity in the construction pipeline, with 12 GW of module manufacturing capacity, and 5 GW of both wafer and cell manufacturing.
Where to invest in solar manufacturing? The case of Meyer Burger
In February 2024, the Swiss PV manufacturing company Meyer Burger made headlines by announcing the shutdown of its PV module production facility in Freiberg, Germany. The announcement came amid calls from European solar manufacturers for emergency assistance from the European Union, as they faced an oversupply of Chinese-manufactured solar panels and associated drop in prices. Meyer Burger indicated it would refocus its investments in the US to take advantage of the new tax credits offered through the IRA.
In June 2024, the company confirmed its plans to expand solar module production in Arizona and establish a solar cell manufacturing facility in Colorado, counting on the 45X tax credit for financing. Meyer Burger intended to shift the supply of solar cells for its Arizona module facility from a facility in Thalheim, Germany, to its new plant in Colorado. However, Meyer Burger subsequently declared in August 2024 that the Colorado and Arizona projects were no longer financially viable, following a White House decision to increase the amount of tariff-free solar cell imports to the US. On September 18, the company ultimately announced a restructuring plan that would involve cutting 20% of its global workforce by 2025 in a bid to regain profitability in an increasingly competitive market dominated by Chinese manufacturers.
Trade
Both the EU and the US rely on imports to meet solar PV demand. In response to threats to EU industrial capacity, the European Commission in 2012 investigated Chinese companies selling solar panels in Europe below market prices and subsequently imposed antidumping duties on Chinese solar panels in 2013. These tariffs reduced and stabilized imports at a lower level until 2018, when they were lifted due to fears they would hinder renewable energy deployment goals. Since then, the EU’s trade deficit in solar panels has increased markedly, more than doubling from 2021 to 2022 as prices collapsed (Figure 6).
The US also imposed anti-dumping duties on Chinese solar panels in the early 2010s under the Obama administration, despite not experiencing the same large import deficits as the EU. In 2018, the Trump administration imposed additional tariffs under Section 201 of the 1974 Trade Act to protect the small domestic solar manufacturing sector from low-priced imports. On net, these policies significantly shifted US imports away from China to four countries: Viet Nam, Malaysia, Thailand, and Cambodia. By 2023, these four countries accounted for more than 75% of total US PV module imports and 64% of cell imports (Figure 7).
The Biden administration granted an exemption from tariffs to those four countries in 2022 to mitigate supply risks while attempting to bolster domestic clean technology manufacturing. However, from 2022 to 2023, the solar trade deficit increased by 82%. An investigation by the Biden administration resulted in a decision to allow this exemption to expire in May 2024. In September, the Biden administration heightened tariffs on solar cells made in China.
Today, both regions have an annual trade deficit of around $20 billion, but signs of supply chain diversification have emerged. In the past three years, the share of Indian supply in US module imports has significantly increased from 2.5% in 2022 to 10.7% in early 2024 (Figure 7a). Conversely, the shares of imports for solar cells from Viet Nam and Malaysia have decreased, falling from 22% in 2022 to 10% today and 62% to 34%, respectively. South Korea has filled this gap, supplying 34% of total imports to date in 2024.
The US has seen a significant rise in cell imports between 2022 and 2024 (Figure 8). This increase is necessary as expansions in solar module manufacturing have not yet been matched by operational domestic solar wafer or cell manufacturing. Cell imports in the first five months of 2024 were equivalent to more than 85% of annual US cell imports in the two prior years. Imports from South Korea and India increased significantly to meet this demand, with imports from these two countries in the first half of this year 11 times and 590 times, respectively, larger than those of 2022.
In Europe, solar module imports are almost entirely supplied by China, accounting for upwards of 96% in the past few years. However, the landscape for solar cells appears to be diversifying away from China. While Chinese suppliers represented 90% of total imports in 2022 and 2023, data for the first half of 2024 indicates that their share slipped to 78%. During this period, 10% of solar cell imports came from the US with an additional 11% sourced from the rest of the world. This shift in supply is primarily due to a slowdown in overall solar cell imports to the EU (Figure 8), which primarily affected Chinese suppliers. EU cell imports in the first five months of this year accounted for less than a quarter of imports over the same months in 2022 and 2023.
Looking ahead
With a rapidly shifting landscape of manufacturing investment and trade policy in the US and Europe largely maintaining the status quo, it is likely that the two regions will continue to experience diverging trends. The US approach is expected to focus on expanding domestic solar supply and reducing reliance on China-linked imports, while Europe will likely prioritize fast-paced deployment of solar technology for electricity generation. Bruegel’s Clean Tech Tracker and the Rhodium-MIT CEEPR Clean Investment Monitor will continue to track the evolution of the solar PV sector in Europe and the US over the coming quarters. Our next Transatlantic Clean Investment Monitor briefing notes will explore how these deployment and manufacturing trends are evolving for other clean technologies.