Domestic manufacturers of solar cells are demanding additional subsidies to compensate for the disadvantages in domestic production. Otherwise there would be a risk of bankruptcy and job losses. However, China’s high import dependency is no reason for politicians to be forced to provide a resilience bonus.
Once again: Meyer Burger Technology AG, one of the few domestic manufacturers with combined cell and module production for photovoltaic systems, is threatening bankruptcy if politicians do not decide on the so-called resilience bonus soon. This bonus is a production subsidy in which higher feed-in tariffs are to be paid for each kilowatt hour of solar power if the solar power is generated with modules from domestic production. The impending insolvency of Meyer Burger is very surprising given that a record expansion of over 14 gigawatts of photovoltaic capacity was recorded in Germany in 2023. This is almost twice as much as during the solar boom from 2010 to 2012 (Frondel, Schmidt, Vance 2014).
This situation seems like déjà vu: After the end of the solar boom, all major German photovoltaic companies went bankrupt, including Solarworld, which was the largest of these companies for a long time. At that time, companies complained about the reduction in the previously extremely generous subsidies in the form of very high payments for feeding solar power into the public power grid. After the flash in the pan triggered by the high subsidies on the labor market had died down, there was little left of the companies of that time, apart from the immensely high so-called solar debt (Frondel, Ritter, Schmidt 2008), because the feed-in tariffs for solar power are granted for two decades.
Solar debt in the hundreds of billions
More than a decade after the end of the solar boom in 2013, solar debt still needs to be repaid, since mid-2022 with funds from the Climate and Transformation Fund. The solar debt amounts to several billion euros per year – funds that are not available for other purposes, especially not for the research and development of energy generation and storage technologies, which is actually so important for the energy transition. By mid-2022, the solar debts were paid by electricity consumers through a levy on the electricity price with their electricity bills. According to figures from the Federal Ministry for Economic Affairs and Climate Protection, by 2022 electricity consumers will have paid off solar debts totaling around 120 billion euros with their electricity bills (BMWK 2021). A similar amount must now be paid over the next two decades from the Climate and Transformation Fund. The fact that these funds are missing for other purposes is particularly painful in view of the 60 billion euros missing from the fund following the Federal Constitutional Court’s ruling.
No additional subsidies due to high import dependency
Even today, companies threatened by insolvency complain that the level of subsidies is too low and, with the resilience bonus, are demanding support that goes beyond the existing level of subsidies, which also benefit foreign companies, and is intended to reward domestic production in order to become less dependent on imports . This is a transparent argument given the very small amount of domestic production compared to import volumes. In addition, photovoltaic systems are not of such great strategic importance that an immense import dependency on China, from where over 85% of systems and components are currently imported, should cause great concern or even justify higher subsidies for domestic production. Other export countries such as Malaysia, Indonesia or Taiwan would be able to at least partially replace imports from China if there were delivery problems with China – this would probably just be a question of price.
Do not offset higher production costs with higher subsidies
In reality, the resilience bonus is intended to compensate for the fundamental disadvantages of domestic companies in terms of production costs: European companies have disadvantages in cell production that are difficult to overcome compared to foreign companies, especially those from Asia. The high labor costs in Germany in particular are a serious disadvantage that can hardly be offset by a technological advantage – especially since this hardly exists at the moment. Maintaining employment in companies like Meyer Burger or Solarwatt with high subsidies would therefore be the completely wrong strategy, which would entail permanent subsidies in order to be able to compensate for the permanent production cost disadvantages. German politicians should therefore not grant a resilience bonus and thus follow the example of the European Commission, which is reluctant to take trade measures in favor of European manufacturers and does not want to provide additional financial resources.
Module manufacturers also have a future in Germany
Instead of wanting to claim a resilience bonus, companies in Germany should concentrate not on cell production, but on module production, in which they use increasingly cheaper components from abroad for final assembly. This is exactly what companies like 1Komma5° or Enpal do, two successful so-called unicorns with a valuation of over 1 billion. Companies like these, in conjunction with the flooding of the European market with inexpensive foreign cells and components, have made the expansion record of over 14 gigawatts possible.
A resilience bonus would distort competition
A resilience bonus would seriously distort competition. It would also be counterproductive for the energy transition: cells and wafers from European production are currently not available in sufficient quantities, and customers would have to wait months for over-subsidized modules. Because of the possible distortion of competition caused by the resilience bonus, 1Komma5° is calling into question the plans to set up production facilities for module production based on foreign components in the five eastern German federal states. The resilience bonus would then also have counterproductive effects on the labor market.
The future of photovoltaics in Germany lies in the hands of companies like 1Komma5° and Enpal. Instead of permanently subsidizing companies like Meyer Burger, the state should massively increase funding for research and development. The future of photovoltaics in Germany lies in technological advances, not in the preservation of uncompetitive production facilities. The insolvency of all German solar companies after the solar boom of the last decade should be a lesson to politicians that you cannot constantly fight against competitive disadvantages that are sometimes homemade with subsidies.
RWI Essen and Ruhr University Bochum