By Kate Abnett, Susanna Twidale and Nina Chestney
BRUSSELS/LONDON, June 11 (Reuters) – The European Union’s ban on public funding for Chinese-made solar inverters could affect more than a fifth of new solar capacity, exposing a growing tension between energy security fears and the bloc’s race to meet climate targets.
Brussels imposed the restriction last month, citing fears that internet-connected inverters supplied by “high-risk” countries such as China could be used to disrupt Europe’s power grid. Because the devices can receive remote software updates, officials warn they could provide a back door for foreign actors to interfere with or even shut down electricity systems.
Based on current deployment levels, the EU-wide ban would affect at least 14 gigawatts of new solar capacity, more than 20% of the EU’s annual installations, according to Reuters calculations, forcing developers to seek costlier alternatives.
Inverters, which convert solar power into grid-ready electricity, are a critical but often overlooked part of the system. Chinese manufacturers, led by Huawei and Sungrow, supplied about 70% of Europe’s inverters in recent years, leaving the bloc reliant on foreign equipment for a fast-growing share of its electricity supply.
FEARS OVER RISKS TO THE GRID
EU officials say the curbs are a precaution against systemic risk, but some industry groups and developers warn the policy could raise costs and delay installations – particularly in markets dependent on public subsidies – complicating efforts to meet renewable energy targets.
“This could mean a remote shutdown of member states’ networks, leading to countrywide blackouts,” a Commission spokesperson said at the time of the ban.
The Chinese commerce ministry has said it “refuses to accept” the EU restriction.
Sungrow said in a statement that it strictly complies with EU regulations and embeds cybersecurity compliance across its systems and practices, adding it did not have further comments regarding the EU’s decision.
Huawei did not immediately respond to a request for comment.
Some EU officials acknowledge the curbs risk slowing solar deployment and raising costs, but argue that the alternative is a growing vulnerability at the heart of Europe’s power system.
“Every inverter manufacturer has access to their inverters via the internet, to, for instance, perform firmware updates. And so also the Chinese do,” said Christoph Podewils, head of industry group the European Solar Manufacturing Council.
“You could seriously harm the European energy system, and that’s the risk here.”
COSTS AND CONSEQUENCES
Some developers say that replacing Chinese inverters will not be quick or cheap.
In markets such as Central and Eastern Europe, where subsidy schemes underpin many installations, higher costs and weaker local support networks could lead to delays.
Chinese companies have built extensive distribution and service capacity across the region, often offering technical support in local languages, an advantage some European rivals lack.
“It’s not like ordering shoes on the internet. You have to communicate with the inverter manufacturer,” said Jan Krcmar, executive director of the Czech Solar Association, whose members include Huawei, and which does not support the ban.
“We see a drop down of at least two-thirds of installations in the next one, two, three years.”
A total of 9 GW of large utility-scale projects across all markets hold EU financing commitments, Wood Mackenzie data show.
In Latvia and Estonia, 70% of household solar installations receive some form of EU support, while the EBRD loaned Hungary €70 million ($80.94 million) this year for a 700-megawatt solar and battery storage project.
These markets are price-sensitive, “so the expected increase in total system costs could slow down adoption initially”, Wood Mackenzie analyst Juan Monge said.
Industry data suggests EU-made inverters cost 20-40% more than Chinese parts, adding around 2% to the overall system costs – enough to squeeze already thin margins.
WILL EUROPEAN PRODUCERS FILL THE GAP?
European producers say they can ramp up output to meet the extra demand.
German inverter manufacturer SMA Solar said it is “well-positioned” for a potential rise in order intake with one of the largest production facilities in the sector in Niestetal/Kassel in Germany and a new multi-gigawatt factory at the same site set to open in September.
Austrian manufacturer Fronius said Western manufacturers could fulfil European demand within a year. Fronius said however it would need to hire more staff to increase its production, a step it argues will require stronger EU restrictions to justify the investment.
“It is not sufficient to simply stop subsidising these products. Such components should not be allowed to be connected to the public electricity grid,” CEO Elisabeth Engelbrechtsmüller-Strauss told Reuters.
Others are doubtful that the gap can be filled quickly. Without Chinese technology, renewable targets could slip in the short to medium term, said Aurora Energy Research’s Evangelos Gazis.
For now, the EU curbs only apply to new and in-progress projects, leaving more than 200 GW of Chinese-made inverter capacity already embedded in Europe’s grid, an exposure that critics say risks giving Chinese firms remote control over entire installations.
Some governments are weighing stronger measures.
“It’s a problem … we’re speaking about some grid equipment that can have an impact on the proper functioning of the grid,” Poland’s state secretary for energy, Wojciech Wrochna, told Reuters.
Poland is assessing national options to address the risk. “If we see that there is a threat, the answer to that question should be a total ban,” Wrochna said. “You need to find the right balance between the objectives and the potential cost.”
Lithuania has already moved to block remote access from Chinese suppliers to control systems.
Inverters in new European solar projects “should be EU produced, or US produced,” Lithuania’s energy minister Zygimantas Vaiciunas told reporters last month, adding that Europe needs “additional measures” to address Chinese parts already installed in its grid.
EU officials say tougher restrictions may be considered. A proposed legal framework under negotiation could pave the way for a bloc-wide ban on inverters from “high-risk” suppliers, depending on the outcome of an ongoing security assessment.
“This is determined first and foremost by Chinese behaviour,” a senior EU official said. “Our action is to a large extent going to be driven by their ability to live up to our expectations of what the rules are.”
($1 = 0.8648 euros)
(Reporting by Kate Abnett, Nina Chestney and Susanna Twidale; additional reporting by Christoph Steitz in Frankfurt and Colleen Kristen Howe in Beijing; Editing by Louise Heavens)
