The European Commission has launched two in-depth investigations into Chinese solar component manufacturers who may have benefited from state subsidies to win a bid to design, construct, and operate a 110 MW solar photovoltaic park in Romania.

The investigations relate to the potentially market distortive role of foreign subsidies given to Chinese companies — LONGi Solar Technologie GmbH and two subsidiaries of Chinese state-owned firm Shanghai Electric — in a public procurement procedure. The Commission will assess whether the companies benefited from an unfair advantage in winning public contracts in the EU.

LONGi and its subsidiary in Germany develop, manufacture, and service solar wafers, cells, and modules.

Shanghai Electric provides services for wind, solar, and hydrogen storage and an integrated process of generation, grid, load, and storage.

The EU Modernization Fund partially finances the project in Romania.

According to the Foreign Subsidies Regulation, companies are obliged to notify their public procurement tenders in the EU when the estimated value of the contract exceeds €250 million (~$271.4 million) and when the company was granted at least €4 million (~$4.3 million) in foreign financial contributions from at least one-third country in the three years before notification.

The European Commission will further assess the alleged foreign subsidies and obtain all the information required to establish whether they may have allowed the companies to submit an unduly advantageous offer in reply to a tender. Such an offer could cause other companies participating in the public procurement procedure to lose sales opportunities.

In line with the provisions of the Foreign Subsidies Regulation, at the end of its in-depth investigation, the Commission may (i) accept commitments proposed by the company if they fully and effectively remedy the distortion, (ii) prohibit the award of the contract, or (iii) issue a no-objection decision.

The regulation enables the Commission to address distortions caused by foreign subsidies, allowing the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.

The EU and China have accused each other of being overly protectionist about their renewable energy interests.

Last year, the EU opened an investigation against cheaper Chinese electric vehicle imports, which the bloc alleges have benefited from state subsidies.

In March 2023, China introduced a proposal at the World Trade Organization to deepen multilateral discussions on the trade aspects and implications of environmental measures like the EU’s Carbon Border Adjustment Mechanism, which seeks to put a price on the emissions generated in the manufacture of imported products like steel and cement.

The EU believes foreign subsidies have distorted the bloc’s internal market, including providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts to the detriment of fair competition.