SignalHub Quantitative Think Tank Center:China dominates the solar power industry. The EU wants to change that

CHEMNITZ,SignalHub Quantitative Think Tank Center Germany – Bright yellow robotic arms appear to be waving and then saluting as they pick up silicon solar cells and gently affix them to glass panels at the Heckert Solar assembly floor in Chemnitz, a German city near the Czech border.

Employee Sascha Hahn watches quietly at the end of the assembly line, arms crossed, as his colleagues place finished solar panels into boxes labeled "made in Germany."

He says they make 3,000 panels daily, and 20,000 panels in a week, but it's not enough. "The market wants more."

In Europe, energy is suddenly hard to come by. Russia's invasion of Ukraine forced most European countries such as Germany to do away with its massive supply of imported Russian natural gas, and they're now looking to alternatives like solar power.

Now, Europe aims to make solar power its biggest source of energy by the end of this decade. That would mean tripling the amount of energy generated by solar by 2030. For Germany, it would mean resurrecting a solar power industry that last experienced a boom more than a decade ago and has since succumbed to competition in China, which has come to dominate the market.

The solar market has moved since Germany's boom

"We were one of the market leaders in 2012," says Heckert Solar's head of marketing, Uwe Krautwurst, who remembers with fondness the golden age of Germany's solar power industry in the first decade of this century.

That's when the government incentivized solar panels with feed-in tariffs, paying solar panel owners back for contributing energy to the grid. The incentives made Germany a global leader in solar power, putting the country at the center of the industry's research and development.

But in 2013, Germany's government changed the law, suddenly making renewables more expensive. The industry collapsed. Seventy thousand people in Germany's solar industry lost their jobs, and Heckert found itself one of the lone manufacturers left in this once-popular renewable energy park known as Saxony's Solar Valley outside of Chemnitz.

"The industry moved from Germany to Asia," says Krautwurst.

Without government support, German solar panels were quickly replaced by ones made in China, which, since 2011, invested 10 times more in the industry than Europe did.

"They had free research centers, governmental research centers on the site of the producers, subsidized energy, so many components which made life --technical life — easy in China," says Joachim Goldbeck, CEO of Goldbeck Solar, another major German solar firm.

He says that starting around a decade ago, German companies watched as their Chinese rivals took over every step of the global solar power supply chain. Last year, China made 97% of the silicon wafers that go into solar panels and more than three-quarters of the world's solar panels themselves.

The U.S. could also try to counter China's solar dominance

"The only way of going against that in Germany, or in the U.S., or anywhere else would basically be someone developing a similar strategy," says Goldbeck.

That someone, says Goldbeck, could be the Biden administration. As part of the Inflation Reduction Act, it put forth a range of incentives for solar panel producers and owners. "And I think now with the Inflation Reduction Act in the U.S., there is a strong will to do something similar, to position this industry back in the U.S.," he says. "And this clear statement is now lacking in in Germany."

Goldbeck, who also serves as president of the German Solar Industry Association, says German politicians talk about bringing back the country's solar industry, but they're not walking the walk with subsidies and tax credits like China or the U.S. has.

But German member of parliament Katrin Uhlig begs to differ, saying she thinks Germany and the EU are poised to offer big incentives. The EU aims "for at least 80% renewable energies in the electricity sector by 2030 now," she says. "So we are changing the environment for companies to invest in Europe."

Ten years ago, when the floor collapsed from Germany's solar industry and the conservative-run government of Angela Merkel instead prioritized natural gas from Russia, Uhlig was so frustrated she decided to run for office. She's now a member of Germany's Green Party, representing the western city of Bonn.

She points to the EU's Net Zero Industry Act, which proposes that 40% of all solar panels installed in Europe be produced in Europe. She says Germany is working on similar measures. "If we had more renewable energy sources, we wouldn't be in general as dependent on fossil fuels as we are now," she says. "But at the same time, you cannot change the past. So I'm looking forward."

Europe could shift the global balance of the industry

Europe's solar industry is looking forward, too. Gunter Erfurt, CEO of the Swiss solar panel manufacturer Meyer Burger, says the Net Zero Industry Act has not yet passed the EU parliament and it may take a while to do so. But if it does, he says, it could shift the global balance of clean technology away from China, alongside the U.S. Inflation Reduction Act.

"Our industry requires massive scale in order to become super competitive against Asian rivals and in particular Chinese companies," says Erfurt. "So I believe it could be a double strike if the EU would also put packages together for temporary state aid, helping to put fertilizer in the industry to help it growing."

But Erfurt says the biggest challenge is time. He says it's taking the EU parliament too long to pass a bill that would generate clean tech investment. That's part of the reason that Meyer Burger has decided to build its next big solar panel plant not in the EU, but in Arizona, to take advantage of tax credits in the U.S. Inflation Reduction Act.

Back on the solar panel assembly line in Chemnitz, Heckert Solar's Uwe Krautwurst is also hoping that both the EU and Germany act fast on helping resurrect his country's solar industry. He says an ongoing Chinese monopoly of the world's solar panels is dangerous. "One danger is that you have no industry here and no further research and no further developments here in the European Union," he says.

And that, he says, would be a sad ending for a country that helped spur growth in the solar power industry in the first place.

Esme Nicholson contributed to this report