The German government is spending heavily to attract promising industries onto its soil, pledging to match subsidies to entice solar panel supply chain companies to build their factories in economically weaker regions of the country.
Germany was once home to a vibrant solar industry. In the sector’s boom years, which came to an end by the early 2010s, a peak of 130,000 workers found gainful employment in the industry. Today, that figure is about 30,000 despite a much larger global market.
With most of the world’s production located in China, the government hopes to entice production to return to its soil as part of its renewables push, or Energiewende – by matching other nations’ generous subsidy schemes like the US’ Inflation Reduction Act.
“We need our own manufacturing capacities in Germany and Europe for central transformation technologies,” Robert Habeck, Germany’s minister of economy and climate action, said.
Fears of being overly reliant on China boosted these ambitions.
“This is a question of economic security and strengthens not only our technological, but also our energy policy sovereignty,” Habeck added.
The dust has settled, and the government has laid out the concrete terms for companies applying to be subsidised until 15 August, based on a loosening of EU state aid rules passed in March.
Companies can receive the same subsidies they were credibly promised elsewhere.
“The aim is to build up a total production capacity of around 10 gigawatts (GW) per annum along the value chain,” read the terms published in the government’s official journal. That should result in a manufacturing capacity of 2 GW of modules per year.
That figure faces down the installed solar capacity in 2022, which amounted to 7.3 GW. The pace of new solar panel installations is set to almost quintuple as Germany charges towards the 200 GW goal for 2030, up from about 60 GW today.
These amounts of domestic manufacturing capacity are unlikely to make a meaningful dent in imports either. To facilitate its 7.3 GW expansion in 2022, Germany imported solar panels worth €3.6 billion, with China providing the largest share of €3.1 billion. €1.4 billion worth of solar panels were re-exported into EU countries.
The goal of the endeavour is “the establishment of a value chain that is as closed as possible”, according to the government.
Berlin wants to boost economically weaker regions through the scheme by tying the subsidies to investments in regions of the country where incomes are below the EU average, and the unemployment is above – or investments into three different European Economic Area countries.
Most of the regions for which subsidies can be applied in Germany are located in the formerly Soviet states.
Pressure from industry
Germany’s announcement follows pressure by Europe’s last remaining solar panel manufacturer, Meyer Burger, who’d sent a warning letter to German Finance Minister Christian Lindner that plentiful subsidies may see them opening new factories in the US instead.
“We have already found suitable building sites,” the letter obtained by ZDF read.
The company welcomed Berlin’s decision. “We are currently examining the expression of interest procedure and its conditions and expect that the instrument is suitable,” said Meyer Burger CEO Gunter Erfurt.
The sourcing of the funds for these subsidies has raised concerns among green politicians and climate activists that the funds for the green transition may be depleted in the name of industrial subsidies.
A previous €10 billion subsidy awarded to chip-maker Intel was taken out of the government’s climate- and transformation funds (KTF) – the fund that is designed to subsidise the country’s climate action policies with an annual budget of about €15 billion.
How much the German state will actually have to pay solar panel manufacturers to relocate to Germany is yet to be known.
[Edited by Nathalie Weatherald]
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