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    HomeBusinessWorld's largest manufacturer warns: "Everyone is bleeding at the moment"

    World's largest manufacturer warns: “Everyone is bleeding at the moment”

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    The Chinese solar industry dominates the market unchallenged. This is set to change by producing a significant proportion of the technology in Germany and Europe again. But the ailing industry in Germany will not be able to get back on its feet without the Chinese.

    The German solar industry is fighting for survival. Low prices from Chinese suppliers are no longer just putting the Swiss solar company Meyer Burger and Solarwatt under pressure. A third large module producer is now also questioning Germany as a location: the Chemnitz-based photovoltaic manufacturer Heckert Solar. All companies have one complaint: they cannot operate profitably under the current market conditions. Let alone keep up with the Chinese dumping prices. If the federal government does not help the industry, they want to move their production facilities abroad.

    As a result of decades of government support, a rapid increase in domestic demand and intense local competition, China now dominates the solar industry, accounting for more than 80 percent of global production. With the oversupply of Chinese imports, there is not only a demand for greater diversity of supply, but also increasing safety concerns about the use of components made in China.

    Federal Minister of Economics Robert Habeck never tires of emphasizing that he wants to support those remaining in the industry in Germany. The goal is to produce a significant portion of the technologies in Germany and Europe. This raises the question: is the reconstruction of a domestic solar industry even realistic and what consequences would this step have?

    “Chinese manufacturers now have a significant lead, particularly in terms of scaling up production, which has also led to a significant cost advantage,” says DIW expert Peter-Wolf Schill to ntv.de. In principle, he believes it is possible that the European solar industry could catch up with this lead. “But that would require significant subsidies, the corresponding political will and a fairly long-term political approach,” Schill adds. Given the current financial situation, the DIW expert believes it is unlikely that the German solar industry will become competitive again.

    “Everyone is bleeding at the moment”

    In the Financial Times, the world's largest solar panel manufacturer, Longi Green Energy Technology from China, warns that Europe and the US risk a slower decarbonization of their economies if they ban Chinese companies from their renewable energy supply chains. Vice President Dennis She notes that restricted Chinese solar supplies would “at least slow down” Western countries' move away from fossil fuels. He also warns that without Chinese involvement, the cost of solar panels would double in countries like the US.

    With regard to the consequences for decarbonization, DIW expert Schill She agrees under one condition: “If a certain degree of 'local content' is required in principle, this could actually slow down the energy transition.” At the moment, he does not see this danger in the resilience tenders being discussed. In order to help the industry in the short term, so-called resilience tenders and bonuses are to be anchored in the Renewable Energy Sources Act. Then, for example, a higher feed-in tariff would be paid for solar systems that are primarily produced in Europe.

    According to energy consultancy Wood Mackenzie, production costs for solar modules in China have fallen by more than 40 percent in the past year to around 15 cents per watt – compared to 30 cents in Europe and 40 cents in the US. This decline is partly due to lower material costs and oversupply. “Everyone is bleeding at the moment,” the FT quoted She as saying. He added that only players with sufficient size will survive. Small or new suppliers will disappear from the market.

    According to Wood Mackenzie, China will continue to be a leader in solar technology after investing more than $130 billion last year alone. Over the next three years at least, the country will control more than three-quarters of the world's production capacity for polysilicon, wafers, cells and modules.

    Reconstruction is not possible without China

    In the fight for competitiveness, the German solar industry is facing a serious problem. According to Jochen Rentsch, solar expert at the Fraunhofer Institute for Solar Energy Systems, the reconstruction of the domestic industry is not feasible without materials and intermediate products from China. “If you are looking for equipment for solar wafer production, for example, you will not currently find a competitive non-Chinese manufacturer. If we want to implement the construction quickly, we would have to rely on China,” the Frankfurter Rundschau quoted Rentsch as saying.

    According to the expert, the EU has already created favorable conditions by allowing member states to specifically support companies in energy transition technologies. After all, EU competition law actually prohibits this. “The member states can, for example, use funds from the 'Green Deal' pot for this. They can also try to create industrial clusters with the help of targeted location support,” says Rentsch.

    So that European companies can prevail against cheap competition from China, subsidies from the federal government for the solar industry are also being discussed. According to the president of the Leibniz Institute for Economic Research in Halle, instead of subsidizing in Germany alone, the question of how supply chains could be broadened should be considered at the European level. A subsidy race within Europe must be avoided at all costs.

    It is questionable whether subsidies would change China's dominance at all. DIW expert Schill says: “Among economists, it is controversial whether promoting the European solar industry would make any sense at all.” On the one hand, it is certainly helpful to be independent of a supplier country. On the other hand, the question is whether the German solar industry is not so far behind that it is hardly possible to catch up. Given the high capital and energy costs, for example, specializing in other economic sectors might make more sense in the long term, according to the DIW expert.

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