For weeks, the head of the solar manufacturer Meyer Burger has been threatening to close the factory in Germany. Although it is not at all clear what measures Solar Package 1 includes, the company announces: It is giving up its production facility in Freiberg. A smart move or just PR?
Even before the federal government has passed its Solar Package 1, the Swiss solar manufacturer Meyer Burger is taking its weeks-long threats seriously: the company is initiating the closure of its factory at the Freiberg site in Saxony. Production is scheduled to stop in the first half of March and the closure will come into force at the end of the month. The company expects this to result in significant cost savings. The move is justified by the fact that “there is still no decision on political support measures to remedy the current market distortions caused by oversupply and dumping prices for solar modules,” it says.
Energy economist Andreas Löschel from the Ruhr University Bochum is not surprised by Meyer Burger’s decision. Nevertheless, he notes: “There is a lot going on right now. That’s why it would certainly have been good if the company had waited for the political discussion before making such a far-reaching decision,” he says in an interview ntv.de. The EU’s Net Zero Industry Act in particular finally set the course in the right direction. The agreement is intended to strengthen the solar and wind power industries. Specifically, it is about tenders for renewable energies. Criteria such as resilience and sustainability should be rewarded in 30 percent of all tenders.
Instead of waiting for further concessions from Germany, the solar module manufacturer would rather ramp up production in the USA. A solar cell factory in Colorado Springs, Colorado, and a solar module factory in Goodyear, Alabama, are currently under construction. The company reiterates that it wants to “halt ongoing losses in Europe and benefit from the highly attractive US market.” In the USA, Meyer Burger expects “an estimated $1.4 billion in future tax credits” under the Inflation Reduction Act. Until financing is secured, the solar cells for the modules will come from other sources – including from the Meyer Burger factory in Bitterfeld-Wolfen in Saxony-Anhalt.
In response to Meyer Burger’s announcement, the Ministry of Economic Affairs stated that the federal government had promised an export credit guarantee for the production of machines in connection with the development of solar module production in the USA. This will enable the Meyer Burger location in Hohenstein-Ernstthal in Saxony to continue operating. Machines are manufactured there that are also intended for export.
Industry association: FDP should give up resistance
Solar manufacturers in Germany find themselves with their backs to the wall because of overwhelming competition from China and government support in the USA. Chinese manufacturers are flooding the market with their modules at dumping prices. “It would be a shame if the lights had to go out at Germany’s last solar module producers,” said managing director Carsten Körnig from the Federal Association of the Solar Industry, commenting on Meyer Burger’s decision at the request of ntv.de. The hope in the industry until recently was that politicians had learned from the geopolitical frictions of the last few years. “Long supply bottlenecks caused by the corona pandemic and the energy crisis in connection with the war in Ukraine have painfully shown that excessive dependence on individual supplier countries can be very expensive.”
According to König, the German solar industry is absolutely dependent on support. Without subsidies there is no chance of establishing an internationally competitive production of solar modules and their preliminary products in Germany as a production location. And time is running out. Only if the traffic light coalition manages to agree on temporary resilience bonuses for part of the EEG funding before Easter will solar module factories in Germany have a future, according to König. “We appeal to the FDP to give up its resistance to the introduction of a resilience component in Solar Package 1.”
Meanwhile, energy economist Löschel points out: “We don’t need explicitly German solar production per se. But we do need European solar production to a certain extent.” However, this still means that German companies have to assert themselves in the European context. “In the long term, Chinese manufacturers will probably be able to offer their solar modules cheaper.”
Do subsidies really help the left-behind industry?
However, what is often forgotten in the discussion about prices is: What actually happens if China fails as a supplier? “We’ve learned: We can’t just buy where it’s cheapest,” says Löschel. Germany needs a diverse supply structure and must keep its own options open in case of an emergency.” However, a healthy balance is important here: “Extensive solar production in Germany puts too much pressure on costs. “If the solar systems are quite expensive, then either there is less demand or they have to be more heavily subsidized. There is then no money for other requirements. Excessively high costs therefore slow down the energy transition.”
Whether subsidies would change anything in China’s supremacy is controversial among experts. According to DIW expert Wolf-Peter Schill, the German solar industry could already be so far behind that it is hardly possible to catch up. “The current providers are proven to have no chance in every respect. Selling them as a jewel worth protecting is at least questionable,” says Philipp Schröder, founder of EinsKommaFünfGrad, ntv.de. For him, Meyer Burger’s high-profile announcement is a means of political pressure. “If Meyer Burger actually closes the factory in Saxony after repeated threats, then 1KOMMA5° is ready to at least save module production and secure jobs.”
“As a European company, we are against bureaucratic market intervention in the form of a national solo effort, especially if it obviously promotes Meyer Burger arbitrarily and one-sidedly.” This funding would make domestic competition impossible and slow down innovation and investment. “There is also no strategy to ensure that the producers who benefit ever become competitive without there being an endless loop of subsidies.