Germany has asked interested companies to submit so-called ‘expressions of interest’ related to subsidies for building or expanding solar manufacturing capacities and has also held out the prospect of fast-tracking similar support to wind turbine makers and producers of electrolysers.
Companies involved in the manufacturing of solar modules, key components, the processing or recycling of required raw materials in Germany, or those with plans to do so, can signal their interest in receiving investment cost support for their projects, the economics and climate ministry said, with details published in the country’s Federal Gazette.
“For key transformation technologies, we need our own manufacturing capacities in Germany and Europe. This is … also a question of economic security,” economics and climate minister Robert Habeck said.
“The EU's new state aid framework provides opportunities in this regard, and we want to utilise them. We are starting with photovoltaics and aim to support our industry in establishing a sustainable photovoltaic production in Germany by providing financial assistance to flagship projects.”
Habeck’s call for expressions of interest came after the CEO of Swiss solar cell and panel maker Meyer Burger earlier this month had threatened to halt a planned expansion of a German solar cell factory and instead boost US manufacturing further to take advantage of generous subsidies under the Inflation Reduction Act (IRA).
Next to the rivalry with the US in the wake of the IRA, subsidies are also seen key for reshoring at least some of the solar panel making the EU has lost to Chinese competitors in the past decade.
The European Commission in March – also on pressure by Germany – had significantly expanded its ‘Temporary Crisis and Transition Framework’ (TCTF) to promote energy transition technologies and create new possibilities for state subsidies, including for solar or wind manufacturing.
Habeck before had already said Germany could offer subsidies to ‘cushion risks’ for the country’s struggling wind, solar and grid sector. How dramatic the situation is once more became clear last week when Siemens Energy axed its profit guidance on the heels of €1bn ($1.09bn) in expected costs for its Siemens Gamesa wind turbine unit to fix quality-related issues at turbines.
Planned solar manufacturing support will concentrate on a few flagship projects. It will be contingent on demonstrating a concrete funding commitment from a third country outside the European Economic Area (EEA) for an equivalent investment (to match it), as well as co-financing from the German federal state in which the respective project is planned.
Germany's solar industry federation BSW welcomed the start of the procedure of expressing interest for manufacturers and added some detail on the potential volume of state aid.
"On the basis of the Temporary Crisis and Transition Framework published by the EU at the beginning of March, Federal Minister of Economics Habeck would like to fund up to 5 solar giga-fab lighthouse projects," the BSW said in a note.
"According to the so-called matching clause, the amount of the grants should be granted under certain conditions up to the amount that an equivalent investment project in a third country such as the USA would demonstrably receive."
The support is intended to compensate for distortions of competition to the detriment of Germany as a business location, such as those created last autumn with the IRA in the US, the group stressed.
When evaluating project outlines, particular consideration will be given to planned production capacity as well as technological, climate, and environmental standards, the ministry said.
Any potential funding must be individually notified and approved by the European Commission.
The expression of interest process will run until August 15, 2023.
Subsidies for wind turbines and electrolysers
The economics and climate ministry also aims to subsidise the set-up of production capacities in other areas such as wind turbines, electrolysers (that produce green hydrogen from renewable power), and large heat pumps. The government is currently working on a regulatory framework to support the establishment of manufacturing in all transformation technologies, which will also allow states to add their own support.
Some of the smaller and southern European EU member states have balked at potentially massive German energy transition subsidies as they fear they may be unable to match the country’s financial muscle and ability to hand out massive support, to the detriment of their own in-country industries.
The EU therefore also wants to set up a new ‘European sovereignty fund’ to give incentives to produce in Europe or keep already established industries there. How the fund will be filled sufficiently is still unclear as Germany and other northern European members abhor the possibility of more common EU debt for it.
UPDATED with comment by Germany's solar industry federation BSW.