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Can Germany regain its solar power crown?

August 8, 2022

The war in Ukraine has exposed Germany's overreliance on Russian gas, prompting a search for alternatives. Solar power is one and is already seeing a surge. Is the former solar powerhouse on the cusp of a new solar boom?

A worker standing in front of solar panels at a hydro-solar farm in Thailand
Germany is betting heavily on solar power to make the country climate neutralImage: JACK TAYLOR/AFP

Europe is in crisis mode. Climate change, increasing demand for energy, the war in Ukraine and Russia's subsequent throttling of oil and gas deliveries have pushed the continent into a new era.

Germany has been trapped in a corner. The country relies heavily on cheap imported natural gas to run its industries, and some power plants also use gas to produce electricity. Finding sufficient substitutes quickly is nearly impossible.

Ideas to prevent a looming power crisis in Germany have ranged from reducing demand to keeping nuclear power plants online past their official closing date at the end of the year. Large wind turbines are doing their part, but many people don't want them in their backyard.

An infographic showing Germany's electricity mix in 2020

A giant opportunity for the German solar industry

Green activists have long believed renewable energies are the answer to keeping the lights on. But building up these capabilities takes time. Now many experts once again see solar power as a shining light at the end of the tunnel, with some saying a solar boom is in the making.

Before the war in Ukraine put energy security at the forefront, the new German government had already pledged that renewable sources — wind and solar — would make up 80% of electricity production by 2030, instead of 42% today. By 2035, the government has said electricity generation should be carbon neutral.

It's an ambitious plan, but the country seems to be on its way. July was the third month in a row when solar power output soared to a record level, trade publication pv magazine reported. For the month, photovoltaic (PV) systems generated 8.23 ​​terawatt hours of power, around a fifth of net electricity production. They were only behind lignite-fired power plants, which brought in nearly 22% of net production. 

Solar cells hanging on a modular solar house during the Solar Decathlon Europe in Wuppertal, Germany
Solar panels can come in many different shapes and sizes, and can be used in many different waysImage: ing Tang/NurPhoto/picture alliance

In 2021, Germany added more than 5 gigawatts of solar power capacity, 10% more than in 2020. That took the total solar power capacity to 59 gigawatts, overtaking installed onshore wind power capacity in Germany, pv magazine said in January. Last year's solar production was about 9% of gross electricity consumption, according to Harry Wirth, who is head of photovoltaic modules and power plant research at the Fraunhofer Institute for Solar Energy Systems in Freiburg.

"For 2032, the government target is around 250 gigawatts of solar energy. According to their estimates, electricity consumption will increase to 715 terawatt hours by 2030," Wirth told DW. A different study by consultancy McKinsey said this is the lower limit. "So if we assume 730 terawatt hours for 2032, we would be at around 30% photovoltaic electricity in gross electricity consumption," Wirth added. 

The energy expert also envisions great potential to install more solar panels without taking up valuable land. Besides adding them on top of parking garages or buildings, photovoltaic parts can be integrated into the exterior of buildings or even on the outside of e-vehicles. This would "not only produce electricity on surfaces already in use, but it would also create synergies in its own application," said Wirth.

Foreign investment in German solar

It's not just researchers who are taking note — big businesses are also stepping in. In July, Portuguese clean energy firm EDP Renovaveis (EDPR) announced it had agreed to take a 70% interest in Germany's Kronos Solar Projects, a solar developer, for €250 million ($254 million).

The Munich-based company has a portfolio of 9.4 gigawatts of solar projects in different stages of development in Germany, France, the Netherlands and the United Kingdom, according to the press release announcing the purchase. Germany represents close to 50% of the acquired solar portfolio.

EDPR, which claims to be the fourth-largest renewable energy producer worldwide, said it generated 17.8 terawatt hours of clean energy in the first half of 2022.

Miguel Stilwell d'Andrade, chief executive of EDPR and its parent EDP, said they have great expectations from Germany in particular as "it is a key market in Europe with reinforced renewable growth targets." 

German policy putting on the brakes?

But for many, Germany's solar power growth outlook may seem too rosy.

Germany was once a leader in solar power, enjoying a large share of the world's total solar capacities for many years. A lot of that early success had to do with innovative government support. That support, however, proved too successful for some as a fall in electricity prices hurt the profits of power companies, leading to calls for a change in the rules.

Updated regulations, and changes to the Renewable Energy Sources Act that reduced feed-in tariffs, slowed things down. Feed-in tariffs usually grant long-term grid access and above-market price guarantees in an effort to support fledgling industries.

With less direct financial incentives, the industry was neglected leaving it open for competitors. The pace of solar infrastructure growth has also been hampered by issues of red tape, supply chain backlogs, a lack of skilled technicians and a shortage of storage for electricity produced when it is not needed.

Now the war in Ukraine and Europe's dependency on Russia is refocusing efforts and "will strengthen the determination for an ambitious PV expansion," said Wirth. But the biggest challenge to the region's solar industry remains China.

Solar panels on the city hall in Freiburg, Germany
Public buildings can play a big role, not just because of their size but because they're controlled by the governmentImage: imago images/Winfried Rothermel

An overreliance on China

China took an early interest in photovoltaic technology and soon galloped past countries like the US, Japan and Germany thanks to huge state subsidies for manufacturers. Today, it has become the place to go for all things solar.

A new report from the International Energy Agency puts it into numbers. "China has invested over $50 billion in new PV supply capacity — 10 times more than Europe — and created more than 300,000 manufacturing jobs across the solar PV value chain since 2011."

Today, China has over 80% of all solar panel manufacturing capacity and is home to the top-10 suppliers of photovoltaic manufacturing equipment. Such a high concentration has led to some incredible realities, like the fact that "one out of every seven panels produced worldwide is manufactured by a single facility," according to the report.

These economies of scale have brought down costs, and the country can make solar components 35% cheaper than in Europe. This gives China outsized power and makes the industry susceptible to supply chain bottlenecks. To diversify the industry and get back some of this market, Europe needs to invest in innovation and make solar growth a top priority.

Germany has several high-tech photovoltaic manufacturers and research institutes. But it only has one manufacturer of solar cells specializing in high-performance heterojunction technology, said Wirth. Yet even though the European photovoltaic industry is fragmented and not what it once was, he is still counting on big demand for solar technology in the foreseeable future. 

Edited by: Ashutosh Pandey

Germany prepares for worst-case energy scenario

Timothy A. Rooks
Timothy Rooks One of DW's business reporters, Timothy Rooks is based in Berlin.