Germany cannot afford a trade war over PV
Germany was a first mover in the solar sector. Recent bankruptcies call its early commitment into question, but a closer look shows how well positioned Germany remains – and why it’s a good time for the US to get on board. Today, we see why Germany only stands to lose in a trade war with China over PV.
This article is the first installment of a series contracted by the Heinrich Böll Foundation; a condensed version of the entire series is available as a PDF entitled "German solar bubble? Look again!"
"You ought to study Germany," Newt Gingrich stated in a TV debate on November 14, 2010 about how to compete with China. Gingrich pointed out that, like the US, Germany is a "high-cost country with a huge export manufacturing base." And Germany's economy has proven especially resilient during the current economic crisis, with 3.0% percent growth last year and unemployment at 7.0% in April.
But less than two years after Gingrich’s remark, solar supporters probably wonder whether Germany still sets a good example. “The German government is running the German solar industry into destruction,” Hans-Josef Fell, a chief architect of Germany's Renewable Energy Act back in 2000, told Bloomberg at the end of April. Nonetheless, Fell was speaking more as a politician than as an energy expert, for the German solar industry's woes are not the result of the current governing coalition's policies. A broader look at the sector reveals how much Germany continues to benefit from its role as a first mover.
True, Germany's Q-Cells, the largest solar cell manufacturer in the world in 2008, recently declared bankruptcy, as have a number of other smaller firms from Solon to Sovello. US solar firms, such as Evergreen Solar, have also gone bankrupt, and the biggest two solar firms from the US and Germany, First Solar and SolarWorld, are also in the red – but actually the same could be said for all of China's major solar firms, which all posted losses in 2011. Indeed, Chinese firms are in such dire straits that Suntech, the world's largest PV firm, told Reuters in May that China's PV sector might not survive if the EU follows the US's example and imposes import duties.
The problem globally is that production capacity (estimated at around 60 gigawatts) far outstrips demand, with less than 29 gigawatts installed in 2011 – and a number of forecasts expect the global market to shrink or at least stagnate in 2012. Nonetheless, all Western solar manufacturers face the same additional problem: competition from China. Here, something Fell told me in an interview back in 2009 is more pertinent: "Germany does not want a trade war with any country, including China, because our economy is based on exports."
Germany has a trade surplus with China; the US, a trade deficit. The US exported 94 billion dollars in goods to China in 2011, compared to 367 billion in imports from China – a deficit of 273 billion. The New York Times attributed the 12.7 billion dollar surplus that Germany had with China in the 12 months leading up to August 2011 "largely [to] the sales of capital equipment that helped China produce more products." Solar production lines are one such example.
Tomorrow, we take a look at how ineffective the requirement for local content would be in Germany. (Craig Morris)