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Italy’s Enel Green Power has secured a €560mn European Union and export credit agency-backed financing package to expand a photovoltaic facility, as the bloc works to weaken China’s grip on global solar supply chains.

Funding is being provided by the EU’s lending arm, the European Investment Bank (EIB), alongside a pool of Italian lenders, and supports the expansion and day-to-day operations of Enel’s 3Sun solar gigafactory in Catania, Sicily.

Under its green guarantee programme, Italy’s export credit agency, Sace, is providing a 80% guarantee to UniCredit for a €147.5mn facility and is offering similar cover to two loans worth €140mn each from Banco BPM and BPER Bank.

UniCredit is also extending a separate €85mn VAT loan, while the EIB is providing €47.5mn in direct funding to the project, and has committed €118mn in intermediated financing to UniCredit to lower project borrowing costs.

Production capacity at the plant, which first commenced operations over a decade ago, is set to grow 15-fold from 200MW to 3GW.

The expansion, slated to be completed in 2024, will make 3Sun the largest solar panel factory in Europe, Enel says.

“The gigafactory will act as a catalyst for reshoring the PV [photovoltaic] value chain in Europe,” the EIB says, while noting the Sun3 project will reduce the EU’s reliance on gas imports and diversify sourcing away from China.

The funding comes amid growing alarm in Europe over China’s dominance in all aspects of global PV supply chains, which includes the manufacture of polysilicon, ingots, wafers, cells and modules, otherwise known as panels.  

China has pumped over US$50bn into growing its photovoltaic supply capacity – 10 times more than Europe – since 2011, the International Energy Agency (IEA) said in a special Solar PV Global Supply Chain report in mid-2022.

While such spending has had positive effects, including lowering the costs of PV products, European producers say they cannot compete with Chinese exporters.

Earlier this month, the European Solar Manufacturing Council (ESMC) called on the EU to implement “swift, emergency” measures and warned key producers are struggling to “sustain their operations” due to difficult market conditions.

“Our members are competing against heavily subsidised foreign PV module manufacturing – that currently offers modules on the European market at prices below profitability even for these subsidised actors – creating an uneven playing field that ultimately leads to closures and bankruptcies of European companies,” it said.

In theory, the EU has PV module production capacity of 11GW, but the ESMC says only half of that capacity is currently operational. European companies are struggling to offload their stock in the face of Chinese competition, the industry body adds.

“1GW is currently held in the inventories. Regrettably, these stocks remain unsold due to prevailing market conditions of ultra-low pricing, expected to persist throughout at least 2024. The closure of PV module manufacturers is also closing possibilities to develop other parts of the PV value chain and European material and component manufacturers are thus also at very high risk.”

In recent weeks, Swiss solar cell and module maker Meyer Burger said it is readying to close its production sites in Freiberg, Germany, citing the “severe impact of the market distortion in Europe”. The closure, which could take place as early as April, would potentially affect 500 jobs. The group said it expects to conclude the 2023 financial year with an earnings before interest, taxes, depreciation and amortisation loss of CHF126mn (US$148mn).