Photovoltaics shows how industrial policy doesn’t work: despite high demand, the industry in Europe is fighting against extinction in the face of cheap Chinese imports. Should the EU have protected producers better?
The end is sealed. The crisis-ridden Swiss solar company Meyer Burger Technology is closing its factory in Freiberg, Saxony, affecting 500 employees. Subsidies in solar module production in China have led to a serious market distortion, explained managing director Gunter Erfurt. Without its own funding, the company, which once produced drilling machines for the watch industry, has no chance with its production in Germany. However, this so-called resilience bonus was denied by the German Finance Minister Christian Lindner (FDP). Thanks to generous state aid from Washington, the Swiss will now concentrate on building new factories in the United States. With the plant’s closure, Europe, once a leader in solar panel manufacturing, is sinking further toward global insignificance.
How could this happen? The solar industry has boomed since the turn of the millennium and was considered a job machine. In 2008, the German Solarworld, then a celebrated stock market star, even made a takeover offer for the car manufacturer Opel. From 2011 onwards, however, things quickly went south. Falling sales and losses at the former model company Solarworld resulted in bankruptcy in 2017. The cause of the decline was the increasing and highly subsidized low-cost competition from China. At that time, demand in Europe was primarily supported through feed-in tariffs into the electricity grid, but without shielding local providers from foreign competition. Around 80 percent of the solar modules installed in Europe are now manufactured in the Middle Kingdom. Was it an industrial policy mistake not to protect a promising industry like photovoltaics with trade barriers?
Upheavals in world trade
Not from the perspective of the time, says Monika Rosen, Vice President of the Austrian-American Society. The stock market expert recalls that there was unbroken belief in globalization back then. “It was a different world,” she says, “where something was produced, it wasn’t an issue.” The main thing was that it was cost-effective and delivered just in time. But from 2016 onwards, with Brexit and the customs policy of former US President Donald Trump, a move away from globalization became apparent, which was finally completed with the start of the Ukraine war. Economic dependencies such as those on Russian gas are considered a risk. “Today it no longer matters where something is produced,” says Rosen. Wifo economist Harald Oberhofer points out that China joined the World Trade Organization (WTO) in 2001. “If you break down barriers, competitive pressure increases.”
How was China able to ramp up its own large-scale production so quickly? The economist points to the subsidies and lack of protection of intellectual property in China, especially since the technology has been known since the 1960s and is now “no longer rocket science”. Looking back, from Oberhofer’s point of view, the approach was “a bit naive”: “Europe has not reacted to China’s heavy subsidy policy for too long,” he says.
How markets are developed
Did the train leave with that? Or can Europe strengthen or develop its own industries in sustainable technologies and promising sectors such as photovoltaics? Markus Müller, who heads the Chief Investment Office at Deutsche Bank, also notes a change in goods trade and says: “The Chinese and Americans are managing to develop markets.” This is also shown by the number of global trade interventions that will increase by 2022 compared to The time before the corona pandemic increased sixfold.
The following questions arose for Europe: “How do we get technological solutions into the home market? And what protective measures do we need around industries?” He thinks little of the EU’s so-called China strategy, with which the Union wants to reshape the relationship. “The best strategy for Europe is a focused European strategy instead of worrying about others,” says Müller – but admits with regard to the conversion to renewable energies: “We have a time problem.”
So would punitive tariffs on cheap Chinese imports, like those brought by France, be the right approach? Stock market expert Rosen is skeptical: “You can’t ramp up your own production so quickly,” she points out with a view to the energy transition. In addition, there is already enormously high production capacity: “The Chinese are drowning in their own solar panels,” says Rosen. Wifo economist Oberhofer points out that European manufacturers have to produce at higher costs: “As far as the pure question of price is concerned, the match is lost.”
So panels from China will continue to dominate Europe’s roofs – and Meyer Burger’s factory in Freiberg will not be the last European solar factory where the lights go out forever.
The standard
2024-04-03 11:39:00
#Chinas #dominance #Europes #rooftops #Energynewsmagazines
