On February 13, the Böll Foundation, which funds this website, held an all-day conference on Germany’s energy transition. Craig Morris says one industry representative may have been overly pessimistic about Germany’s early commitment to solar.
In 2012, I wrote a paper (PDF) on the fate of Germany’s solar sector. Maybe it’s time for a brief update.
I write this post almost with a feeling of guilt, lest I appear to be picking on the main guy representing German industry at Böll’s conference. Holger Lösch spoke on behalf of German industry association BDI, and at lunch I had a chance to chat with him. “We have justified interests to represent,” he told me, and I concur. But while I am certain that Lösch is brilliant in describing the situation that German industry faces, his statements also revealed an inadequate grasp of the situation with renewables – and solar in particular.
Lösch seems to believe that Germany’s commitment to solar has not led to a healthy solar sector within the country. Specifically, he mentioned the drop in silicon prices as one reason for the reduction in solar array costs (which fell by two thirds from 2006-2012) and said that high industry power prices were preventing silicon manufacturers from doing business in Germany. He mentioned Norway and Malaysia as two countries where silicon manufacturers were doing well.
I’m not so sure. First, compare the prices for power at Nordpool (which includes Norway) to those for the Phelix zone (Germany & Austria) at EPEX. You can sort through weeks to compare, but let’s take one example. The Norwegian prices (NO1-5) come in very close to 3 cents in the week from February 11-17, whereas Phelix prices ranged more broadly from 1.5-3.9 cents – but we are not talking about much cheaper prices in Norway. In fact, Statkraft only recently complained about competition with cheap power from Germany in a press release published only in German; it seems intended solely for the German audience, as it has not been published in English as of this writing (February 17).
Silicon manufacturers cannot move to Norway to escape high prices in Germany if the price levels are roughly the same. Malaysia has a strong silicon base in general; the country has a long history in the IT sector. Nonetheless, Germany’s only solar silicon manufacturer, Wacker (#2 in the world) is not doing bad making Si in Germany and shipping it to Asia. In contrast, Wacker’s Norwegian competitor REC once again posted a loss in 2013. Market analysts at Bernreuter say the future looks good for the German firm particularly since China, the world’s largest PV market in 2013, announced the German polysilicon manufacturer is completely exempt from import duties – further indication that power prices are not the only consideration.
The focus on silicon completely overstates the case anyway. I remember reading in 2007, back when silicon was expensive, that the material only made up seven percent of an array’s total cost. According to IRENA’s Technology Brief from January 2013 (PDF), “The typical cost of a c-Si module includes about 45-50% for silicon”, and “The cost of a PV module typically ranges between 30-50% of the total cost of the system” – in other words, silicon makes up 15-25 percent of the total system cost (a figure I still find a bit high). The main cost reductions for arrays have come from reduced soft costs thanks to feed-in tariffs and economies of scale brought about – you guessed it – by demand created by feed-in tariffs.
Perhaps Lösch is aware of the bad news from 2013, but not the current good news. Granted, solar manufacturers in Germany cut their workforce in half last year, but the global solar sector is about to take off, growing from around 35 GW in 2013 to 45-50 GW this year. Germany’s Centrotherm currently has a backlog twice as big as its entire business volume last year, and Roth & Rau is hiring as many people as it once had to lay off.
This overview is not exhaustive, and it’s only a snapshot anyway. Nonetheless, it suggests what a closer look would probably reveal: Germany’s first-mover commitment to solar might yet pay off.