Germany as a solar location

The days are getting longer, the spring sun is shining. That pleases the mind twice over - both mentally and financially, if solar systems are involved. Whether on balconies, on the roof of your own home, on industrial roofs, on agricultural land or even floating on lakes: photovoltaics are booming in Germany. In 2023, solar power will have become an integral part of the renewable energy mix with a share of 23 per cent. Photovoltaics thus accounted for twelve per cent of gross electricity generation in Germany. Last year, electricity generation from PV systems in Germany totalled around 61 terawatt hours. To put this into perspective, this corresponds to almost 44 per cent of the electricity demand of all German private households in 2021. 

In 2023, energy consumption in Germany was at a record low, almost eight per cent less than in the previous year. While consumption is falling continuously, the generation of clean energy is increasing: according to the Federal Network Agency, PV installations in February 2024 will be well above the threshold of one gigawatt per month.

Sunny times for the solar industry in Germany? Yes and no.

Solar policy as a stumbling block: from Solar Package I to the Net Zero Industry Act 

The German government had been negotiating the "Solar Package 1" since August 2023, promising "German speed". However, the legislative package was only passed by the Bundestag in April 2024.  It aims to reduce bureaucracy in the construction and operation of PV systems, for example by significantly streamlining approval procedures for balcony power plants, and further accelerate the expansion of PV systems.

Solar Package 1 is an important building block for the success of the energy transition, as Germany aims to operate the electricity sector largely without greenhouse gas emissions by 2035. An interim target is to cover at least 80 per cent of gross electricity consumption from renewable energies by 2030. To this end, 215 gigawatts of solar power are planned by 2030. By comparison, an average nuclear power plant in Germany supplies around 1.2 gigawatts.

About half of the increase in solar capacity stipulated in the Renewable Energy Sources Act is to come from ground-mounted systems and the other half from rooftop systems. Sounds good, and it is. But the German and European solar industry is dependent on imports. The modules and components produced here cannot cover the demand for these expansion targets. Thanks once again to smooth global supply chains, the warehouses are overflowing with low-priced competitor products from China. Domestic products can hardly keep up, and there are no significant differences in quality compared to goods from the Far East. Producing solar companies such as Meyer Burger and Solarwatt are therefore closing their sites in Germany and calling for a change in the political framework. There is a threat of Germany's solar industry going under again, as it did a decade ago.

Drama, baby: the resilience bonus

The final stretch of Solar Pact 1 led to calls for a "resilience bonus", which was both strongly debated and polarised by industry representatives. This subsidy bonus was intended to benefit local producers by rewarding customers who opt for solar modules manufactured in Europe. In the form of a surcharge on the feed-in tariff, it was intended to compensate for the price advantage of Chinese products. The aim was to strengthen the competitiveness of the German solar industry. However, even here the industry reacted in a divided manner and some players were vocal in their opposition to this measure. Some fear that the introduction of the resilience bonus will increase pressure on the small system segment and warn of an unwelcome monopoly. Opponents of the resilience bonus believe that a tendering model that could link the awarding of contracts to the use of German and European components would make more sense.

Net-Zero Industry Act as a solar saviour?

Federal Minister of Economics Robert Habeck has already made initial preparations for such resilience tenders. The European Commission presented the "Net-Zero Industry Act" back in March 2023. It aims to strengthen the European clean energy technology industry by reducing bureaucracy and improving authorisation procedures and access to funding. One goal: by 2030, companies in the EU should produce 40 per cent of the key green technologies required for the climate targets themselves. According to the plan, this will reduce dependencies on other countries. The EU Commission is also planning to promote domestic production through "Net Zero Resilience Projects", which will establish an EU supply chain and strengthen competitiveness.

However, the planned and important expansion of solar power is encountering serious bottlenecks in the electricity grids. The large quantities of solar power cannot yet be successfully integrated into the energy system. This is because PV is fundamentally grid-connected. Even if large parts of PV generation can be consumed directly on site, it is clear that it still requires functioning distribution grids. At the moment, the increasing number of requests for grid connections are being met with ever tighter grid operator capacities and their often still inefficient, less digitalised and inconsistent processes. Operators of new plants are experiencing curtailments, as are operators of old plants as part of redispatch. For end consumers, this means that electricity prices are rising twice: due to the increased grid fees resulting from interventions to stabilise the electricity grids and due to the lack of cheap PV electricity.

One thing can therefore be said with certainty about the status of Germany as a solar location: it is complicated.

Germany as a centre of innovation 

Despite all the adversity: Energy economist Andreas Löschel emphasises solar energy as one of the key technologies of the coming decades. Germany is a leader in PV technology expertise, also in terms of mechanical and plant engineering. He poses the question: "Is it possible to secure this lead without us also manufacturing PV modules locally on a large scale?"

It would be absolutely desirable if the power of innovation in this country were to pick up even more speed so that Germany can re-establish itself as a centre of innovation. There are many opportunities and approaches - from material development and new design options to process optimisation and digitalisation.

From an economic perspective, there is no need for greater coverage of demand from regional production in order to achieve the expansion targets in terms of costs. However, it is important to find a middle way so as not to forego European production altogether. In the long term, however, securing expertise and innovative strength is the path to competitiveness.

Cover picture: Unsplash

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