Europe’s solar industry is facing its deepest crisis in more than a decade as steep competition from China erodes manufacturing in the sector, rendering the continent’s hope of greater energy independence even more wishful.

More solar panels were installed than ever before across the European Union last year in a boon for the bloc’s climate goals. However, that was partially made possible by an influx of Chinese equipment, causing profits for local manufacturers to plunge. Despite insistence to push for more homegrown energy infrastructure, governments have been slow to prop up the ailing industry.

The latest fallout became apparent on Wednesday, when Swiss panel maker Meyer Burger Technology AG said it may shut a production site in Freiberg, Germany — one of Europe’s largest — and redirect investments to the U.S. Pending a final decision next month, the shutdown of the site may happen as early as April and would affect around 500 workers.

Solar has been at the forefront of Europe’s renewables expansion in recent years due to plummeting costs, but the trend has come at the expense of European panel producers who haven’t managed to scale up supply chains sufficiently to compete globally. At the same time, governments are under pressure to push ahead with the energy transition, and lack the budgets that would be needed to help European producers keep up.

A key factor that complicated matters was the U.S.’s 2022 ban on panels with components from China’s Xinjiang region. The move aimed at ruling out forced labor, but caused equipment to flood into Europe. Research firm Rystad Energy estimated last July that around €7 billion worth of Chinese-made panels had piled up in European warehouses, capable of producing about the same amount of energy as all the panels that were installed in the region during 2022.

Meyer Burger CEO Gunter Erfurt called the development "dumping.” Globally, solar module prices halved to $0.12 per watt in 2023 — about a third of Meyer Burger’s module production cost, according to BloombergNEF. Even leading Chinese solar manufacturers have struggled to maintain profitability.

In September, Norway’s Norsun AS — which makes ingots and wafers used in solar cell production — announced a temporary output halt and layoffs. German module producer Solarwatt GmbH said it will cut 10% of its workforce in November, which it had previously intended to expand.

Finnish solar company Valoe Oyj filed a debt restructuring application in December to avoid insolvency. Austrian PV producer Energetica Industries GmbH opened bankruptcy proceedings that month.

"The European and German solar industry is currently being massively undercut across the board,” said Solarwatt’s CEO Detlef Neuhaus.

The EU has said it aims to manufacture at least 40% of its clean tech needs domestically by 2030, an ambition shaped in no small part by the lessons from the energy crisis following Russia’s invasion of Ukraine.

At the moment, however, domestic suppliers meet less than 2% of European demand for solar, according to business association SolarPower Europe, and about 90% of components come from China. Some manufacturers like Meyer Burger are eyeing investments in the U.S. after President Joe Biden’s Inflation Reduction Act boosted tax cuts and incentives for end consumers.

The situation is a grim reminder of events that hurt Europe’s photovoltaic industry about a decade ago. Back then, the EU imposed import tariffs on Chinese solar panels after the Asian country ramped up industrial policy, contributing to a steep decline in European solar deployment. Many companies closed their solar operations in Europe, such as Robert Bosch GmbH.

"Today it is as dramatic as back then,” Solarwatt’s Neuhaus said.

Trade lobbies have pushed governments to ramp up support while avoiding tariffs or import bans. The European Commission’s Net Zero Industry Act, which is yet to be finalized, aims to set criteria for renewable auctions to take into account cyber-security, sustainability, and ability to deliver — something that should favor domestic wind and solar manufacturers.

In Germany, the government is debating offering producers a "resilience bonus” which can cover the operational cost differences versus their foreign competitors, but officials are still divided over the measure as they have been busy plugging a €17 billion ($18.5 billion) budget hole.

"Renewable energies are part of critical infrastructure and we should not become too dependent on other countries — especially in the current tense global situation,” said Claudia Kemfert, an energy expert at the DIW research institute in Berlin.