Europe’s solar developers are facing up to climate risks

“Europe is a hotspot for climate change,” began Roberta Boscolo, climate and energy leader at the World Meteorological Organisation, a division of the UN. “We have recently experienced the hottest summer in our observations … and we [broke] temperature records in September by a big margin, almost one degree Celsius.”

“October was also the hottest October on our records in 2023, and we’re having a very mild November as well,” added Boscolo, drawing attention to the fact that Europe, and European industry, is not only responsible for a considerable part of climate change, but one of the parts of the world that could be most strikingly affected by disruptions to the Earth’s climate.

This reframing of the impacts of climate change, and the opportunities of the solar sector to overcome these issues, as one affecting Europe directly, could be an important step in the future of the continent’s solar sector.

With considerable potential in European solar, alongside concerns as to its financial viability and robustness of the solar manufacturing supply chain, working with the continent’s changing climate, rather than reacting to disruptions to weather and sea levels, could be of benefit for the sector as a whole.

Climactic disruptions and solar power planning

In her introductory remarks, Boscolo drew attention to the changes that have been taking place in the European climate, and the disruptions that could follow, if global warming is not mitigated.

“In the last 30 years, we have recorded an annual mass loss of the global glaciers, and especially [in] Europe, we’ve registered the negative mass from our glaciers, especially in Switzerland” said Boscolo, using figures from Copernicus, the UN’ climate observation and monitoring programme. “In 2022, the total mass [of glaciers] was 6.2% [lower than in 2021].”

This is notable considering that, between 2020 and 2021, the country’s glaciers lost just 0.8% of their mass, suggesting that the dramatic increases in temperature experienced in recent years could have a disruptive effect on European countries.

Similarly, between the mid-1980s and 2022, carbon dioxide concentration in the atmosphere increased 149%, alongside a 262% increase in methane concentration and a 124% increase in nitrous oxide concentration, with changes to the atmospheric composition threatening as many disruptions as changes in temperature.

Crucially, for the solar sector, this disruption of climate has already started to impact the ways in which solar projects are permitted, planned and built. Factors such as temperature coefficient, a measure of how much power output is lost for each degree above or below a panel’s optimal temperature, are important aspects of a solar module’s design and implementation, even for some of the most recent panels in the sector.

First Solar, which could stand to be one of the few remaining profitable module developers in the coming years, has noted that its latest module series, the Series 6 and Series 7, both have a temperature coefficient of 0.32% per degree Celsius, demonstrating how even the most advanced commercially-available panels are subject to the impacts of environmental changes.

“There’s clearly a challenge in making sure we’re fit for the climate we’re going to expect over the life of our assets, and so we’re careful to make sure that the quality of installation and the quality of the design of those installations meets [in particular] considerably greater winds in some years,” said Mark Wakeford, the chairman of EvoEnergy and a member of the UK Solar Taskforce, a body established to grow the solar industry in the UK, discussing how climactic variation can affect the planning of new solar projects.

“We’re also interested in rainfall and other precipitation, and making sure our panels are fit for things like hailstorms – we’ve seen some massive hailstorms, certainly in southern Europe – and making sure that what we’re installing is fit for the life of those installations,” added Wakeford, with hail in particular a challenge for solar developers in Europe. “I think there’s quite a lot of work to do on both design and installation to make sure we’re, as an industry, [able] to respond to those changing scenarios.”

Investment risks

Beyond concerns regarding panel performance and durability, the changing European climate has posed a number of new questions for developers at the start of the solar construction process, notably for those seeking project financing.

As is the case with all power investments, financiers are more likely to support a project if they can be sure of its profitability, and the fact that it can generate power reliably over a long period of time, and these are all aspects that are made uncertain by disruptions to climate.

“The challenge is making sure we build the right things in the right places, and this becomes a little bit more tricky as well, as it’s impossible to forecast climate impact,” said Anthony Doherty, chief investment officer at renewable financier NTR. “Doing the modelling and assessing around how climate change can impact both on location and type of renewable generation infrastructure is an important one [raising questions as to] how best to assess that.”

“This is a binary thing,” added Doherty, suggesting that if these questions about a project’s long-term prospects are not adequately answered, investors could withdraw funding from an initiative entirely. “We assess the risks, from one to five, and if [a project] has a scoring above a certain level, or on certain questions the answers are negative, [the project] doesn’t progress. It’s very core, and essential, to what we do, in terms of looking to deploy our investors’ money.”

This is particularly relevant considering the unprecedented sums of money involved in the global solar sector in general, and the European solar sector in particular. In 2022, the average price of a power purchase agreement signed for European solar projects reached €76.84 (US$82.4)/MWh, the highest on record, and Avnet figures reveal that, in the first five months of this year, European solar start-ups received €5.6 billion (US$6 billion) in funding, a new record for the region.

Critically, this figure is a fivefold increase over the €1.1 billion (US$1.2 billion) raised by European solar start-ups in the first five months of 2022, and close to the €6 billion (US$6.5 billion) raised by US start-ups in the first five months of 2023, suggesting that there is more interest, and more money, in European solar projects than ever before, making the effective prediction and management of climactic changes more important than they have ever been.

This also presents questions for the supply chain as a whole, with solar developers, installers and investors now more aware than ever of the impacts of climate on the effectiveness and bankability of new solar projects, but this is not to say that these questions remain unanswered.

“The solar task force has a supply chain sub-group looking at exactly these [supply chain] issues, and it won’t surprise you to learn that while we’ve got [a target of] 70GW in the UK, it pales into insignificance compared to some of the challenges that Germany, France and Spain are [experiencing] for their opportunities in solar,” said Wakeford, suggesting that the UK Solar Taskforce is taking a holistic, continent-wide approach to answering these supply chain questions.

“There’s quite a lot of opportunity to onshore and on-board this technology and get some manufacturing capability back into Europe,” added Wakeford. “This will also address some of the slaver issues that are becoming increasingly important to many of our investors, that we need to make sure that the products that we are procuring and installing are free from child labour around the world.”

Opportunities for new ways of working

Wakeford’s point, that these questions pose opportunities to reassess how the solar sector makes decisions, particular with regard to project financing and deployment, was echoed by other speakers at the panel.

“We get a third party to do a climate risk assessment,” said Doherty, explaining how NTR has started to adapt its assessment of a project’s financial viability, considering uncertainties regarding its environmental conditions. “They take the location – it’s very location-specific – and look at up to eight physical risks, so the likes of surface water, coastal inundation, forest fires, freeze thaw and all these extreme weather-type things and assess them up to 2100.”

These new ways of working also provide opportunities for companies to work in a manner that is itself more sustainable, raising the prospect of developers building solar projects through processes that themselves do not contribute to global warming.

“In terms of how we assess, and how we factor [climate risk] into our decision-making, one of the strategies we apply is diversification, from a technology perspective but also geographically, looking at where we position different projects,” said Monika Paplaczyk, an investment director at Thrive Renewables, a clean energy investment platform based in the UK.

“We then also look at more nature-based solutions – it’s very important for us at Thrive, we’re a B Corp company – and we look at what else we can do with those sites to not only generate electricity but create more ways to [introduce] pollinators.”

Paplaczyk also suggested that this approach could lead to new ways of thinking about the solar sector, and innovations in solar power generation itself. She named agrivoltaics as an example of a newer form of solar generation, which is more integrated into the characteristics of a project’s surrounding environment, and has seen increased interest in Europe in particular this year, with research suggesting that the continent has the potential to install a mammoth 51TW of agrivoltaic capacity.

Even if this lofty target is not met, the European Commission has argued that, if solar agrivoltaic projects are built on just 1% of Europe’s farmland, Europe will meet the entirety of its solar capacity deployment goals by the end of the decade. This is an eminently more attainable goal than building out 51TW of new solar capacity, and is an effective example of new opportunities for the European solar sector that can arise from a manner of thinking more in tune with environmental and climactic considerations.

Speakers across the panel were optimistic about the potential for new ways of working amid the climactic uncertainty, with Wakeford suggesting that these changes could drive motivation for new training and reskilling programmes, to best equip the solar sector for long-term growth.

Ultimately, it was clear that environmental changes in Europe provide an opportunity for those involved in the solar sector, from designers to financiers to developers, to more accurately monitor, and more proactively work, with changes in the European climate, creating a more dynamic solar industry, and one that is better-suited to the environmental conditions of the continent, rather than one left behind by rapidly-melting ice caps and suddenly-shifting atmospheric conditions, which would lead to uncertainty and a lack of investment in the sector.

“There’s opportunity in the huge need to decarbonise our energy system and transition the way we do things,” concluded Boscolo. “Electrification is definitely a massive mover, which has created this whole sector’s trend for renewables.”

This webinar was held to promote Solar Media’s upcoming conference, Solar Finance & Investment Europe, to be held in London between 31 January and 1 February next year. Those interested in attending can sign up with the code PVTech15 to receive 15% off their tickets.