European solar companies head for US’s healthier investment climate

Frieberg, Germany — European governments due to move to support their solar power manufacturers this week will be too late to stop solar panel maker Meyer Burger packing up a German factory to send production to the US.

The plant in Freiberg in eastern Germany closed in mid-March with the loss of 500 jobs as the Swiss-listed firm joined a growing list of European renewable energy manufacturing factories shutting down or moving. In the past year, at least 10 have said they are in financial difficulties.

On a recent visit to the site, giant white robotic arms hung dormant over empty wooden pallets as workers prepared the last production line for shutdown. Talks with the German federal government to try to secure a future for the factory ended without success in late March, a company spokesperson told Reuters.

Germany’s economy ministry said it was aware of the “very serious situation” of German companies and has been examining funding options with the industry for over a year. It agreed to give Meyer Burger an export credit guarantee for equipment produced in Germany to be used at the US factories, which will help a site nearby but won't save the Freiberg one.

The closure, which in one sweep reduced European solar panel production by 10%, comes despite a boom in wind and solar energy in Europe. Additions to renewable energy capacity, including solar panels, are running at record pace, according to data from the International Energy Agency.

But Europe-based manufacturers that supply those panels are being crushed by competition from China and the US, where governments give more support to their producers.

The situation poses a dilemma for European governments keen to fight climate change: offer more support to ensure local production can stay competitive, or allow the unfettered flow of imports to keep up the pace of installations. A meeting in Brussels between European energy ministers on Monday will make a gesture of support for the struggling industry.

China is expanding solar output and now accounts for 80% of the world's solar manufacturing capacity. The cost of producing panels there is about 12c per watt of energy generated, compared with 22c in Europe, according to research firm Wood Mackenzie.

US subsidies announced as part of the 2022 Inflation Reduction Act allow some renewable energy manufacturers and project developers to say tax credits, which are attracting businesses from within the EU and beyond.

Meyer Burger says its plans include a solar panel factory in Arizona and a solar cell factory in Colorado.

“We made a bold move in the absence of any industry policy support in Europe and shifted a solar cell expansion project from Germany to the US,” said its CEO, Gunter Erfurt.

Similarly, battery company Freyr which operates mostly in Norway, has stopped work at a half-finished plant near the Arctic Circle and is focusing on plans for a plant in the US state of Georgia after Washington announced the policy.

Freyr said in February it had changed its registration to the US from Luxembourg.

“We did spend quite a bit of time trying to really make sure that we weren't committing a mistake,” said Birger Steen, CEO of Freyr. The company first sought support from Norwegian or other European governments.

“We got to the point where we concluded that that form of policy level response was not forthcoming.”

Asked to say, Norway's ministry of trade and industry said that it had launched an industrial policy framework targeting energy transition technologies including solar and batteries, but did not directly address questions about additional funding for the companies in this story.

Charter

At Monday's meeting, the European Commission will launch a voluntary charter for governments and companies to sign in support of solar manufacturing plants. Industry association Solar Power Europe will co-ordinate company signatories. But the charter, which says that buyers of solar panels should include some domestic production in what they buy, is not enforceable, Solar Power Europe said.

Michael Bloss, EU parliament member for Greens, launched a petition earlier this month calling for action at a European level to rescue panel manufacturers.

Bloss says he is pushing for the European Commission to set up a €200m fund to buy up unused European-made solar panels, but Europe has been unwilling to pursue that. The European Commission declined to say.

“We are in headlines and Sunday speeches very much in favour of creating our own solar industry, but then in action, nothing happens,” said Bloss.

“The charter will be more like a political declaration signed by member states, solar companies and the commission. It’s more long term, it has no immediate effect.”

In February, European policymakers adopted the Net-Zero Industry Act, a set of measures including a target to produce 40% of the region’s clean tech needs by 2030.

The previous month, the EU also approved almost $1bn of German state aid for a Swedish battery producer, Northvolt, to help it set up a production plant in Germany after Northvolt threatened to take its business to the US. It was the first time the bloc made use of an exceptional measure allowing member countries to step in with aid when there's a risk of investment leaving Europe.

But aid for ongoing operations has not been forthcoming, amid political disagreement over how much public funds should go to struggling businesses.

Decisions about supporting industries or firms like Meyer Burger are down to member states, a spokesperson for the European Commission told Reuters. Germany's economy and climate ministry believes aid to maintain an existing company like Meyer Burger would not be legal “if there is a lack of market prospects from the company's perspective”, a spokesperson told Reuters.

Potential customers — renewable energy installers that depend heavily on cheap Chinese imports — have also pushed back against any new subsidies for local panels, arguing such moves could hurt them by causing consumers to postpone orders as they wait for the subsidies to kick in.

Intertwined

More than a year's worth of low-price imported panels sit in European warehouses awaiting installation, according to consultancy Rystad Energy and solar panel makers. Reuters could not independently verify that estimate.

That backlog could grow as Chinese capacity continues to expand, Rystad says: If all the plans Chinese firms have announced go ahead, China's industry will be able to make twice as many panels as are expected to be installed worldwide in 2024, said Marius Mordal Bakke, senior analyst at Rystad.

Dresden-based Solarwatt is carrying six to nine months of stocks, up from about six weeks, its CEO Detlef Neuhaus told Reuters in March.

The company laid off about 10% of its employees last year and says its local panel production is running at roughly one-third of capacity.

“This industry is so important for the future, we cannot allow that we are losing all our competence,” said Neuhaus.

Analysts say it’s not clear what support could actually help, because firms like Meyer Burger produce a fraction of the volumes made by those in China, or planned in the US

“They are tiny, so they will always struggle with volume, not just to compete with Chinese producers but also with US producers,” said Eugen Perger, senior analyst at Research Partners.

And local clean technology industries are so globally intertwined it's hard for European manufacturers to imagine a fully independent supply chain.

Norway-based NorSun, which produces solar wafers — thin silicon film used in panels — said Chinese equipment is crucial to both its plant in Norway and a proposed facility in the US. The company has halted production at the Norway plant while it decides whether to upgrade it.

Most of the equipment for either project would have to come from China. “There's essentially no other option,” said Carsten Rohr, chief commercial officer at NorSun.

New industries

Freiberg has been here before. Since the 1990s, companies setting up operations in the region have benefited from federal funding programmes to rebuild East Germany and help it close the gap with western Germany’s prosperity.

New industries sprang up, including in solar and semiconductors. But Freiberg took a big hit in the 2010s after China’s solar industry boosted production and undercut competitors.

In 2020, the German government removed a cap on subsidies for solar power installations which helped lift demand. In 2021, the EU’s Green Deal signalled political support for future demand, and Russia’s full invasion of Ukraine also helped solar deployment.

Meyer Burger, which is headquartered in Gwatt, Switzerland, only set up production in Freiberg in 2021 as the industry started coming back to life. It refurbished a bankrupt solar company’s plant that had stood unused for almost three years.

For a while it became one of the town’s largest employers, mayor Sven Krueger confirmed.

“This is the second time the German solar industry is at risk. They failed once already,” said apprentice Max Lange, 19, greeting colleagues with a silent nod as they cleaned idled machinery on the factory floor.

“If it fails again, I doubt that I will be able to pursue a career in the European solar industry, because I don't say it will come back,” he said, wondering aloud if he might instead find work in the US solar industry.

Reuters