The EU Solar Manufacturing Facility

In this paper, we outline how the EU-level financial tool, referred to as the EU Solar Manufacturing Facility, could operate, taking inspiration from examples in the EU (like the Hydrogen Bank), as well from outside the EU (like the Indian Production Linked Incentive (PLI) approach). 

Initial calculations indicate that – in order to meaningfully jumpstart Europe’s solar PV supply chains to reach initial scale – this financial instrument would need to have access to at least €0.78 bn EUR annually to support investment of 10 GW across the solar PV supply chain over a 10-year period (totalling €7.78 bn EUR). This would cover capital expenditure and operational expenditure for partially re-shored manufacturing capacity. 

Funding could be sourced either from existing EU funding, like the Innovation Fund, or new EU funding, for example in the form of a European Sovereignty Fund, and should be supported by the European Investment Bank. Additionally, the auction is recommended to incorporate an “Auctions-as-a-Service” (AaaS) design feature to allow for Member State participation. This could unlock additional funding, and aid Member States in attracting domestic solar manufacturing capacity to their country, by removing administrative and financial barriers.

Large welfare creation and tax influx can be expected through attracting domestic solar manufacturing capacity, which would largely offset the annual funds required. If assumed to be proportional, €67 million in tax collection can be expected per GW of re-shored capacity under the Solar Manufacturing Facility - this would translate to at least 50% of the required public funding.

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