A fight for the industry of the future is not only taking place between the USA, China and Europe. The German federal states also want to be home to new factories. One location factor could become increasingly important: the availability of renewable energy.
Elon Musk’s new Tesla factory is in Brandenburg, Schleswig-Holstein will be the new location for the battery startup Northvolt, and Saxony-Anhalt will get the factory of the US chip manufacturer Intel. Is it just a coincidence that these federal states are also pioneers in the expansion of renewable energies? The first results of a new study by the Institute of German Economics in Cologne (IW) show: The location advantage through renewable energies is growing.
“We are already seeing a north-south divide in Germany,” explains Dennis Bakalis, economist for digitization and climate policy at the IW and one of the authors of the new study, in an interview with ntv.de. “Especially in northern Germany there is an increasing locational advantage due to the expansion of wind energy.”
80 percent of the almost 1,000 companies surveyed rated the prospects for a climate-neutral energy supply in northern Germany as “rather good” or “very good”. In contrast, only 30 percent of the companies said this about the southern federal states. The “Handelsblatt” reports in advance about the results of the IW study.
The share of renewable energies already varies greatly depending on the federal state. In 2020, 81 percent of the electricity generated in Mecklenburg-Western Pomerania came from renewable energies. It was followed by Schleswig-Holstein with 63 percent and Thuringia with 62 percent. In Baden-Württemberg, on the other hand, 40 percent of energy production was renewable. In North Rhine-Westphalia it was only 16 percent.
Musk’s decision to build his gigafactory in Brandenburg also shows how important it is to be in close proximity to wind farms and the like. The billionaire from the USA expressly mentioned this as one of the central aspects for his choice of location. The Gigafactory is to be operated with 100 percent renewable electricity. In the first application documents for the environmental impact assessment, there was talk of 109 megawatts of electrical power – as much as a city with 40,000 inhabitants consumes. In the current version, it is only 72 megawatts.
Uniform electricity price
Brandenburg is actually a pioneer in Germany when it comes to expanding renewable energies. In 2020, only 37 percent of energy production was renewable. But the large areas of the country offer a lot of potential. In 2022 Brandenburg was one of the leading federal states in the expansion of wind energy. However, it is still unclear where exactly the amounts of energy for Tesla will come from. Musk has indicated that he doesn’t want to build his own power plant. It could even be that in the end a power purchase agreement will be concluded with an offshore wind farm in the North Sea or a solar field in Spain.
In terms of price, it actually makes no difference whether green electricity from the North Sea is used in Schleswig-Holstein or Brandenburg: in Germany there is a uniform electricity price. “It doesn’t have to make any difference where the electricity is produced, because an efficient electricity transmission network in Germany is a basic requirement for the energy transition,” says Norbert Ammann, energy expert at the Chamber of Industry and Commerce for Munich and Upper Bavaria, in an interview with ntv.de.
So don’t all the wind turbines in Brandenburg have such a decisive influence on the attractiveness of the location? It is not that easy. The networks as they are currently being built are not prepared for a climate-neutral world. The north-south routes must be massively expanded. The distribution networks to the end consumers are also not prepared for the large amounts of renewable energy. If more and more end consumers are buying green electricity, the grids can’t stand it at the moment. Even if the North could produce enough electricity for the South, it still cannot be transported there. “The expansion of the power grid is crucial to transporting green energy from the windy north to the south,” explains Bakalis. However, this is only part of the solution, because wind power must be expanded in all parts of the country.
Transmission networks are being expanded
The Munich Chamber of Industry and Commerce also sees the solution in the expansion of the power grids: “The transmission grids will be further expanded. In the end, 150 or 800 kilometers of transmission distance doesn’t make a big physical difference,” says Ammann, referring to the well-established balancing mechanisms in the European grids, which, depending on the weather, bring French nuclear power to Germany or southern German solar or biomass power to the Austrian pumped storage plants. “In the long term, renewable energies will not bring any locational advantages in terms of industrial settlements, since power generation and consumption must always be balanced over as large an area as possible to ensure grid stability.”
Ammann also points out that due to the focus on wind power, the share of renewable energies in electricity generation in Bavaria is often underestimated. In Bavaria, at 48.5 percent, slightly more electricity was generated from renewable sources in 2021 than the national average (39.8 percent). In Bavaria hydropower, photovoltaics and biomass play a greater role than in other parts of Germany – wind power less so.
CO2 price makes renewables attractive
Tesla certainly did not decide in favor of the Grünheide location solely because of the advanced expansion of renewable energies in Brandenburg. The large area, the proximity to the metropolis of Berlin and the access to skilled workers may also have played a role. “The availability of renewable energies is becoming an increasingly important location factor,” says Bakalis. Ultimately, however, one indicator alone is never decisive, the local infrastructure or available skilled workers are also important.
Due to rising CO2 prices, the pursuit of climate neutrality is becoming an increasingly important location factor. According to EU plans, the CO2 pricing of oil, gas and fuels is to be switched to Europe-wide emissions trading in 2026. The price for each tonne of emissions will then be regulated by the market – there will no longer be a uniform price. The more is consumed and the faster the certificates are used up, the more expensive the ton of CO2 emissions become. “The companies are already calculating everything,” says Norma Groß, spokeswoman for the East Brandenburg Chamber of Commerce and Industry ntv.de.
However, she does not believe that companies are now moving away because there is more solar and wind energy in Brandenburg or Schleswig-Holstein. Nowadays not so much industry is developed – and relocation costs a lot. Relocating operations just for solar or wind energy is currently not realistic. That is why she does not yet see any direct locational advantages in renewable energies. Certainly in the future, for example when the price of CO2 emissions rises. “But that will take a while.”