Today, when we talk about photovoltaic panels, batteries, inverters, wind turbines, each of us identifies these objects as products “made in China”, and it could not be otherwise given that this nation in the space of a few years has become the undisputed world leader in the sector.
The Chinese, investing 80 billion dollars a year in these technologies, have thus managed to expand economies of scale thanks to a massive increase in production that has led to an unthinkable reduction in costs that is making technology that was once reserved for only a few increasingly accessible to most people.
The entire supply chain, the so-called “supply chain”, relating to semiconductor materials such as silicon, boron and phosphorus, for panels and raw materials such as cobalt, lithium, nickel, copper, graphite and manganese, for batteries, are now firmly in the hands of the Chinese thanks to sealed agreements with the main supplier countries.
At the same time, on the other side of the world, namely Europe, the constant push from the “Green Deal” followed by the acceleration of “REPowerEU” has led and is leading, day after day, to an increasingly massive shift from fossil fuels to renewables.
Not a month goes by without the 27 European governments being required to adopt some community directive on the subject, which thus brings new rules, new reforms and new incentives, not to mention everything that has already been included in their respective national recovery and resilience plans.
On the one hand, we are working hard to reduce our dependence on fossil fuels (natural gas and oil) in electricity production, transportation and buildings, but on the other, we are forced to go and buy the tools necessary for this transition in China.
It is clear that from a strategic and geopolitical point of view this new dependence puts us from the frying pan into the fire.
But there is still another problem, despite the push from Europe, at a global level the phase of “falling in love” with green policies and therefore with renewables, is fading everywhere.
Federico Rampini, for example, in his recent Global newsletter tells us that the ESG investment sector – “environmental, social, corporate governance” – is no longer in fashion among investors as it was until recently”
Investors are starting to unwind, moving a small, if not huge, portion of their money elsewhere.
And what does China do in the face of this decline, slow down?
Absolutely not, on the contrary, it is moving forward like a train, having a desperate need to maintain its economies of scale made up of extremely high production numbers.
We are increasingly seeing prices being squeezed down along the supply curve, with the result that markets all over the world are being flooded with products that are clearly being sold below cost price!
Those who have customs barriers at the entrance are safe, while those who, like us Europeans, do not have any, are invaded by them.
Today it is not difficult to find Chinese panels online (we will see with which certifications) at a price 4/5 times lower than that of 6 months ago because what happens in Beijing or Shanghai has direct repercussions on our markets.
We are thus entering a great “loop”, low prices on the one hand democratize products, as has happened for many technological items in recent years, but on the other hand they cause dependence on these economies, destroying the already remote possibilities of developing our own industry.
I am thinking for a moment about the Europe of the future outlined by Mario Draghi a few months ago at a conference, speaking about the future of our competitiveness, establishing principles that aim to transform the entire European economy.
I am thinking about this speech because the former prime minister was shining a light on the problem of the supply chain of green and advanced technologies, which at the moment, he recalled, was almost entirely the prerogative of China.
Draghi spoke of technological dependence, of a lack of raw materials necessary for these particular productions, and imagined proposals to try to change the state of things, but the point, in my opinion, is another.
It is utopian to think that new industrial activities can be born and develop with oriental competitors already so structured and who for economic reasons as seen above, are even starting to sell below cost!
What is the point of an incentive on the purchase of photovoltaic panels, such as the one provided for by “transition 5.0” (which in the best case scenario reaches a 65% tax credit) that at the same time forces you to choose only those produced in Europe?
They ask me to buy a European product that could cost 200/300 compared to a Chinese one that costs 100 but in exchange they offer me a tax credit (65% in the best case) on the more expensive one. Put like that, it doesn’t seem like a great deal to me.
Obviously, the above reflection is of a low level, but mine is a provocative speech that serves as a premise to get to the point of the matter.
And again, what is the purpose, for example, of financing such as that provided for by the Development Contracts of Mission 1, Component 2, Investment 7 of the PNRR, financed by the European Union, aimed at incentivizing investments for companies that decide to start an industrial production of photovoltaic panels?
We have already seen that in the current world market they would not be able to sell even one panel… They would be stillborn companies.
And here is the point in my opinion, even if the choices are various and difficult:
“Should we protect our nascent and hypothetical industry, thus reducing dependence on Chinese products by raising customs barriers, or should we leave it to the market?
Should we focus on low prices for photovoltaic panels to accelerate the energy transition by increasingly democratizing these technologies or produce them ourselves, making them more expensive?
Will we be able to reduce our dependence on Russian and/or other countries’ fossil fuels if we return to more expensive technologies than the ones we have today thanks to constant Chinese dumping?
That said, I would not want to be in the shoes of those in Brussels who will have to take on the responsibility of making these difficult decisions on which, alas, the future of energy and not only of our beloved Europe will depend…”
Of Cyrus Troncone
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