Germany's Solar Valley could shine again as Europe strives to close energy gap

Germany has enlisted help from Brussels to revive its solar panel industry and improve the bloc's energy security as Berlin, reeling from the consequences of over-reliance on Russian fuel, strives to cut its dependency on Chinese technology.

It is also reacting to a new US law that has raised concern the remains of Germany's formerly-dominant solar industry could relocate to the United States, Reuters reports.

Once the world's leader in installed solar power capacity, Germany's solar manufacturing collapsed after a government decision a decade ago to cut subsidies to the industry faster than expected drove many solar firms to leave Germany or into insolvency.

Near the eastern city of Chemnitz in what is known as Saxony's Solar Valley, Heckert Solar is one of half a dozen survivors surrounded by abandoned factories that the company's regional sales manager Andreas Rauner described as "investment ruins".

He said, the company, now Germany's largest solar module, or panel maker, managed to weather the impact of state-subsidised Chinese competition and the loss of German government backing through private investment and a diversified customer base.

In 2012, Germany's then-conservative government cut solar subsidies in response to demands from the traditional industry whose preference for fossil fuel, especially cheap imports of Russian gas, has been exposed by supply disruption following the Ukraine war.

"We are seeing how fatal it is when the energy supply is completely dependent on other actors. It's a question of national security," Wolfram Guenther, Saxony's state minister for energy, told Reuters.

As Germany and the rest of Europe seek alternative sources of energy, partly to compensate for missing Russian supplies and partly to meet climate goals, interest has surged in rebuilding an industry that in 2007 produced every fourth solar cell worldwide.

In 2021, Europe contributed only 3 per cent to global PV module production while Asia accounted for 93 per cent, of which China made 70 per cent, a report by Germany's Fraunhofer institute found in September.

China's production is also around 10-20 per cent cheaper than that of Europe, separate data from European Solar Manufacturing Council ESMC shows.