Episode 10: The Race to Net Zero

The stakes could not be higher. Germany aspires to lead the way in achieving carbon emissions neutrality. To that, it’s going to need lots and lots of regenerative energy, including solar power. The country already experienced a solar boom more than a decade ago, but it didn’t last. Now, the sun is back at the center of Germany’s transition to clean energy and its new energy economy. Can solar succeed this time around in Europe’s largest market? We get assessments from a CTO of an up-and-coming solar company and a sector expert.

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Dies ist ein eingebettetes Bild | © Christopher Chase, Oxford

Chris Case 

is the CTO of Oxford PV, a solar energy company that has expanded to the eastern German city of Brandenburg, He’s a board member of the European Solar Manufacturing Council, a steering committee member of the European Technology and Innovation Platform for Photovoltaics (ETIP-PV) and, since 2021, the president of the International Thin-Film Solar Industry Association (PVthin). He also advises the SuperSolar Hub of the UK Engineering and Physical Sciences Research Council (ESPRC). He has extensively published in international newspapers and scientific journals and is a regular speaker and lecturer on integrated circuits and photovoltaics.
 

Dies ist ein eingebettetes Bild | © _David Wedepohl für BSW

David Wedepohl

 is a trained radio journalist who studied and has worked on both sides of the Atlantic. He first came in contact with the solar industry while working for an American consulting company, which he left to take up a job as director of communications and markets at the German Solar Association. He also served as the association's spokesperson. He is now that organization’s managing director of international affairs, working on projects in North, West and Southern Africa, Latin America, Southeast Asia and the US.

Transcript of this episode

Presenter:
Thanks, thank - you’re too kind. Welcome to “Into Germany.” The German business podcast brought to you by Germany Trade & Invest, GTAI, the German government’s international business promotion agency.  

On today’s edition of Into Germany, we’re going to play a game called “net zero.” The object: get your society to completely eliminate carbon emissions.  To reach that goal and win the game we need as much energy as we can produce from regenerative sources, as SOON as we can produce it. 
The catch is we also need to maintain our way of life. So energy can NOT become prohibitively expensive. Not so long ago, solar power stalled in Germany because the costs were perceived as simply too high. But could that be changing? Could solar power pay off after all?

David Wedepohl: Well, we're marking the seventh year of double digit growth. So, we need to be building, you know, then 12, 16, 20 to 22 gigs per year. So Germany is an extremely interesting market right now. We have to grow 30% year on year and continue to do so in order to meet the goals. It's a future technology and we have all, you know, the R&D and the engineers to build these things and make and build factories. 

This is what David Wedepohl from the German Solar association says. We will hear his insights later. 
First, though, let's talk to Chris Case of Oxford PV from Oxford in the UK. They’re a pioneer in solar and have opened a site in Brandenburg, near Berlin. It houses the world’s first volume manufacturing line for so called “tandem” solar cells. Production will commence at the end of 2023… 
So, hello Chris. Can you tell us a bit about yourself and Oxford PV please.
My name's Christopher Case, and I'm the chief technology officer at the company named Oxford. So Oxford PV is a renewable energy company and we've been developing a sort of a new type of solar cell that incorporates a material known as Perovskite. Now solar cells or that component that go into the solar modules. And these are the things that appear on the rooftops of homes and buildings and out in the fields, and they convert sunlight into electricity. And for more than or close to 70 years since their first commercial deployment back in 1954, they were majority of them made a material called Silicon. And silicon is actually like the second most abundant material or element in the Earth's crust. But our solar cell is actually unique that we make. And although it does use silicon, it has something known as a tandem configuration which layers this new material on top of the silicon. And the result of that is we can convert more of the sun's energy into electricity. Somewhere between 20 and 50% more can actually be converted into electricity. And, of course, you know, as the chief technology officer, I'm responsible for directing, you know, the future and development of our product. And ultimately, it's commercialization. 

When did the company start? 
You know, the company is more than ten years old, but we began producing our developing this product roughly ten years ago. So it's taken that long, which seems like like a lot of time, but actually is quite short in the development of a new technology. You know, technologies often take decades before they end up in commercial scale. But back in 2015, the company was quite a bit smaller in 2015, I mean, not much more than a dozen or two dozen people.

What are the advantages of tandem technology? Please explain.

Well, I mean, silicone is the material that, of course, is the mainstay of the electronics industry for semiconductors. And the material that we're working with, Perovskite is another semiconductor just not so popular or well known. The easiest way to envision it is if you can imagine those solar cells, which are about 18 centimeters on a side, the kind of square things that you can almost discern when you look at the solar modules. We use that as one of the solar cells and we put another solar cell made of this perovskite material on top of it. So effectively we're stacking two solar cells in series and each of the solar cells has a is tuned to a different part of the solar spectrum so it can absorb more of the sun's energy. And together they're much more effective at converting sunlight into electrons.

So, will this make solar cells more attractive and efficient for countries like Germany? I mean, it's not like the sun shines on Central Europe everyday

Okay. Yeah. You know, I hear this comment all the time, and of course you hear it, especially in countries that have a particular sort of darker climate or, you know, the weather is not so cooperative. But in reality, there is enough sunlight in almost every country that's inhabited to effectively convert sun into electricity. Sure. There's more in places like Spain and along the equator, but there's sufficient sunlight in even places like the UK and Germany to be effective. And today, electricity generate from photovoltaics, which is PV, which is of course what we're talking about from solar cells, actually is cheaper than any other form of electricity almost everywhere in the world. I mean, maybe not the North Pole in the South Pole, but in every inhabited part of the world, there's enough sunlight to effectively convert and produce electricity that's cheaper than coal fired electricity, natural gas, even cheaper than things like wind. So it is the best form of renewable energy to address our challenge, which in principle is decarbonization. But one of the interesting things that's happened in the last year is the story around sort of sustainability has moved from decarbonization and addressing the climate crisis to energy security and having a resilient, you know, economy for the supply of energy. 

What made you choose Germany as the location for your development factory? 

 We started in the U.K., where spun out from a university, the University of Oxford in the United Kingdom. So the company started there. But to effectively demonstrate our technology, we recognized we needed to do it in a much larger scale. So sort of at the factory type scale. So we went on a journey to find a new location. And here's a tip, which maybe a future question of yours. You know, if you're a small company seeking to expand is you don't want to spend your money on what's called bricks and mortar. Right. So you don't want to build something brand new. So we looked for an existing facility or building that could be adapted to our purposes. And we actually went around the world. I think we, in the end, investigate more than 100 sites, predominantly in the US, in the U.K. and within Europe.

Wow, and in the end, Germany won the day?

So there was a little bit of exploration in Asia that those were the predominant locations. There were some concerns in the U.S. about, well, that's a big time zone gap to span potentially to the West Coast eight or 9 hours. So we kind of focused more on the East coast of the United States. But of course, we looked in our home, that's the United Kingdom and we looked in Europe in that would sort of be the easiest thing. And, you know, I don't know if you've ever gone out to buy a flat or a home. You know, the real estate agents and the brokers or the estate agents will often use this phrase location, location, location. And they're right for a pure purchase of a home. But location is only one of the components of the factors that we were considering. And it's an important one you have to have in a location that you can have access to from a transport situation. But equally, in fact, even more importantly, was access to the workforce, a skilled workforce, an engineering workforce. In our case, you know, that would that could to support our our development and our production aspirations. So that was one of the critical factors in when we were seeking and locating things. You know, one of the attractiveness of the factors in the attractions to Germany was an absolute assurance that we had access to a skilled engineering workforce. And in the end it was sort of the tipping point towards one of the decision making.

And why Brandenburg? 

So we did locate a number of sites that were appropriate, but in the particular site that we found in Brandenburg on the hull, so just West, southwest of Berlin, about I think 100 kilometers or so, we found the ideal combination of an existing site that we could acquire with buildings and land that actually had equipment already in place that had been previously used for solar manufacturing, a workforce that was trained, and of course, access in general to the engineering workforce and expertise of Germany, which is world renowned for its engineering and manufacturing competency. And to top that, we were able to locate incentives in the form of subsidies from both the federal government and the local state government to sort of cinch the deal. And I think in the end, the combination has been ideal for us, and we have not been disappointed in any way with our decision to locate our first development's large development demonstration site in factory in Germany. 

What did the German government need to offer for you to sign on the dotted line? 

We're an entirely investor funded company, and currently we actually have no revenue. We have not really sold any product yet. We're beginning our manufacturing right now. So as an investor funded company, everything and every piece of money we raise has to go into the activity that we seek. So in, in, in, in all the sites, of course, you can seek to raise funds from investors. So that's part of what we do. You can borrow money from banks. So we actually reach out to something called the EIB or European Investment Bank. I mean, I can comment about that if you're interested. But then we also reach out both to the federal government in Germany and to the state government to access subsidies for both innovation and for manufacturing. 
And a lot of the subsidies in the states in Germany are tagged to the individual regions. So the regions for which there is more, let's see, need to redevelop like the old coal regions in Germany. The subsidies that are available or even greater. So as much as 30% in the particular region where we're located in Brandenburg, it's 20%. But that is still a substantial contribution to the capital expenditure that we needed to build out our factory.  And so the process was actually rather straightforward, and we received that. We were unable to locate comparable funding, for example, in the UK, which is surprising or not surprising that you can make your own judgments about that. But since the company was a UK based company, no spin out from the UK, it was a bit disappointing, I'd have to say, to find that in the end there was more access to subsidies elsewhere.

Thanks to hefty subsidies, Germany had a booming solar industry until around 2000, but then production in Europe was overtaken by that in China. What can we do better this time round?

Germany did something sort of on its own and unique, which was to this concept of feed in tariffs to subsidize the installation and encourage the installation of solar in Germany by actually paying people really more than the market rate for electricity generated from their own solar systems. And that spurred the German industry and basically to develop both the equipment and manufacturing for solar and solar modules. But in in the 2000 timeframe, and I have to say that was probably the single event that spurred the next renaissance in, you know, the expansion of solar. And unfortunately, it did not last forever because of, you know, challenges that came through from mostly China and basically competing and sort of taking advantage of technology and capability that was developed in Germany to create your own competency in China. And today, you know, China supplies 85% of the world's solar modules to everyone, you know, including Germany. And that entire industry focused around the development of equipment and solar technology sort of became set aside and idle. But I have to say, the engineers were still there. I mean, they moved on to other jobs often in the semiconductor industry or other allied fields. But the expertise in some of the companies remained, and we were well aware of that. And it was one of the reasons that we were particularly attracted to Germany, because we knew we could access that talent. And I have to say that that has been one of the most successful things in the selection of Germany was not only to access engineering talent and manufacturing talent generically, but even talent that came out of what was the German solar industry, you know, in the 2000s.

Germany and Europe as a whole have set themselves the goal of becoming more independent in terms of energy. Are we on track? 

There is a lot of money flow that's coming out of Europe. Right. In discussions and in particular a reaction to something called the I.R.A. or Inflation Reduction Act and move out of the U.S. where, you know, more than $1,000,000,000 is being made available relatively easily to companies that are willing to invest in sustainable technologies in the U.S., we've seen sort of the mirror image of those kinds of programs coming through from both Europe and now in Germany. And we'll be, you know, seeking access to those kinds of funds to build potentially new factories in Germany too. 

Well, thank you, Chris.
 
In a moment we’ll ask David Wedepohl from the German Solar Association for his assessment of the new solar boom. Will it be a winner? Or another disappointment? 
But first: if you want to come out on top, it’s not enough to generate lots of electricity. You also have to have somewhere to put it. That’s where we start this edition’s round-up of some of the best business stories from Germany.

Big Battery

Eco Stor, a German subsidiary of Norwegian utility company A Energie, has announced plans to construct a record-sized electricity storage battery facility in the eastern German town of Föderstedt. It will have a capacity of 600 megawatt hours. The company plans to invest around EUR 250 million in the project which will be completed in 2025.

What the Doctor Ordered

There are plenty of good feelings in German pharmaceuticals right now. That’s the conclusion of a study carried out by the Association of German Chambers of Industry and Commerce. 38 percent of pharma companies plan to invest more in the next twelve months compared with only 25 percent at the start of 2023. The mood is likewise positive in the medtech sector.

AI on a High

The number of new start-ups founded in Germany is back on the rise. The bounce back is being driven by artificial intelligence companies. According to the industry initiative Applied-AI, the number of new startups in this area has risen 67 percent year on year. Berlin is the most common location for fledgling companies followed by Hamburg.

Silicon Saxony
Taiwanese semiconductor manufacturer TSMC plans to construct amassive new production facility in the eastern German city of Dresden. The volume of the new plant for 300-millimeter semiconductors will be at least EUR 10 billion. The German government and the EU will reportedly offer major financial support for the project, pending EU approval. Dresden is located at the heart of the electronics hub often known as “Silicon Saxony.”

And finally Halfway There

In the first half of 2023, renewably generated electricity met some 52 percent of Germany’s domestic needs. That’s the conclusion of preliminary calculations made by the Center for Solar Energy and Hydrogen Research Baden-Wuerttemberg and the energy industry association BDEW. Thanks to sunny weather in May, the percentage of renewables in the electricity mix reached 57 percent that month.
 
Presenter:
So a completely renewable future for Germany IS visible on the horizon but it’s not right around the corner. How can Germany improve its odds of winning the game of “net zero?”
David Wedepohl from the German Solar Association can give us some answers.
Hi David, can you say a few words about yourself? 

Thank you for having me. Of course. I'm David Wedepohl. I'm the international managing director of the German Solar Association. 
I have seen some of the ups and downs of the industry already, although I'm by no means an old timer. I've been in the industry since 2009. 

At the moment, the future looks bright. For the sector in the short term, if not necessarily for the climate in the long term. Would you agree with that assessment? 

Well, we're marking the seventh year of double digit growth and we are a bit doomed to success at the moment because if we want to do our part in meeting the 1.5 degree goal, we really need to build massively and to do that in Germany, given its geography, we can no longer stay on the roofs where most of the systems are. 

Two out of three PV systems are rooftop units. Where else should we be putting them?

We're a densely populated country and normally land is already in some sort of use. So we're going to see a lot of dual use of land. We're going to see agri PV, we're going to see floating PV we're going to see PV cover, carports, parking lots and so on. And of course we're very strong in the building sector. The residential sector we never thought possible, you know, has quadrupled. And so it's really a big thing in Germany. We're going to see more solar on multi-family homes and we are seeing already that what used to be our strongest sector and commercial on roof because with Germany we still make things, you know, factories, logistics centers, office buildings, they are going to come back and be put to use to generate energy.

The German government is putting its full weight behind the solar industry…  

We've just celebrated 3 million systems in Germany. We built 7.4 gigawatts, but we've already done more than that in 2011. So we have quite a bit of experience with be building a lot of solar. Basically this year we have built one gigawatt a month so far, 2023. So we're optimistic we're going to have a more than ten gigawatt market. But all of that is not enough if we are to achieve 215 gigawatts, which is not the dream of the solar association, but it's the actual government target. And it's actually the first time that we lobbied for a government target for 2030, which was 200 gigawatts, and the government said, thank you for the suggestion. We would like 215 please. So, you know, to do the math, we need to be building, you know, then 12, 16, 20 to 22 gigs per year. So Germany is an extremely interesting market right now, doomed to success. We have to grow 30% year on year and continue to do so in order to meet the goals.

Is there a realistic chance of achieving these goals?

That is possible. But it is, of course, very challenging. Well, we are already seeing the market react. So, you know, money is pouring in. People are making investments. The government is thinking about, you know, plugging the value chain and bringing some of the manufacturing back that we have lost. Manufacturing was never gone. Everybody always thinks of modules. We still have module factories, but of course, there still are inverters, mounting systems, cables and so on. They do exist. Software companies and so on exist as well. But you know, machine making and so on and so on. But we're going to see some of that come back.
We are seeing roofers getting trained over 2000 alone last year and this year to come into the sector. But we're going to need more and more people, more and more hens to install all of these systems. And that is going to be a challenge, not this year or next, but is a growing challenge as we move to a market of 2022 gigawatts a year.

Are we heading for a shortage of installers?

Let me put it this way. There is a lot of employment opportunity in solar and storage in Germany right now, not only in Germany, but in neighboring countries as well. So we are targeting, of course, young people. We are targeting people to retrain that have a certain skill set from other industries and and that can learn some of the trades I've said and that we are moving the shifting massively from buildings into open field installations, which are easier to do.

Over the years, Germany lost most of its solar production to China. Can Germany hope to ever get it back?

We still have the engineers, the R&D facilities. There's more than 50 R&D facilities for PV alone in Germany. There still is a solar value chain and environment that you can plug in. And there are the other things that make Germany attractive. You know, it's a legal system and the world class infrastructure and logistics that is there. So, you know, I think Germany is competitive in that way, particularly if you are looking at a more resilient value chain. I think within the entire European Union, there has been some thinking about more resilience and self-reliance when it comes to energy and its components. That said, with a toe to toe gigawatt market in Germany alone, you have seen how the other markets have grown. The Netherlands. The Netherlands has added four gigawatts last year. Poland is the eighth largest solar market in the world. Now there are other attractive markets like Spain and Italy nearby, so  the demand is so high we are going to have our own value chain and some of that, but we also going to be open and trade and we are going to rely and need imports.

Is solar energy now competitive in terms of price?

if you look back, you know, a decade or so and at the prices that we are now and that we are as a technology often now the cheapest option, cheaper than coal. And that is really something that has happened because we are able to work on an industrial scale. But if you want to come to Germany, this is a great time to do that. I think the political climate is also very much in favor. There are a bunch of agencies that that help in the in the federal states if you want to settle or if you just want to invest, you know, solar parks, PPAs, there are many things that are going on.

Well, there are many things going on in other parts of the world as well. America, for instance, with massive subsidies handed out as part of the Inflation Reduction Act… 

But often is a question. If you build a factory and start it now, where do you do that? And absolutely we are as we are competing for skilled labor and we are also competing for industry. And, you know, other parts of the world have recognized this. You have named China. India has a massive production base incentive scheme, and the U.S. is also even subsidizing every step of the value chain. So the Europeans are following suit in that environment, and so is Germany. And we think it is necessary because the small and medium sized enterprises can't raise the capital they need on the market to grow enough and to be competitive. Because you have to have a certain size to play in this international market. There is support that is needed. I think we're going to see a lot of bidding towards what is offered. We're also going to see bidding from foreign competitors because this is what Germany does. We are open for business. We don't restrict our market and whoever is interested in investing here and using this environment is welcome to do so. It's a world market. So where, you know, Germany is an open environment, so is the European Union. Trade on fair terms is is, is possible. And we're trying to build also a European value chain. That said, we still need imports. We can't build massively. We can't build the, you know, cheap utility scale systems that we need to meet our energy demands on this continent, not by ourselves. It's not possible.
    
What are the big trends in solar at the moment? 

Now, if you compare the market today and what the systems can do to what you did, you know, a decade ago, even where, you know, you just fed in, you generated a green electricity already fairly cheap locally and you used it locally, you began to do a lot of self consumption. But now these systems are becoming ever more complex. In the residential sector, we are seeing that 78% of all new systems are installed with a battery or installed where a battery already exists and that in a market, Germany average grid downtime of about 11 minutes per year. But these batteries, they are extremely popular and 43% of all new systems PV systems are being installed where there's charging infrastructure or installed with charging infrastructure. And what is new to us because of the war with Ukraine or against Ukraine, we are seeing that 30%, 38% are installed with heat pumps. So we are really seeing a convergence of sectors. It's not just a generation. It's also how to smartly use that energy to trigger certain devices, including the washing machine and to have a demand side management. This is the example from the residential sector. But imagine if factories are doing that and they are already there heating their cooling the electricity for their fleet and for driving or delivery vehicles. We even have companies now who have cooling, electric cooling and delivery vehicles. So this is really something where we are seeing a massive move. And also because there is a massive demand and I think we are going to see a lot more innovation in that field in the coming years as it becomes more prevalent to also have the local electricity and make the best use of it. And then that convergence I talked about where you suddenly have a system that is very intelligent. 

All this means that we need a lot of electricity. Does Germany run the risk of blackouts or are the systems resilient enough?  

The infrastructure in our cities mostly is from the 1960s. So if you have a multi-family home and people are starting to charge the electric cars, if you have one or two electric cars on your block, that's fine in the distribution grid. But if you have 16 on your block, then it becomes an issue to charge them. So you have to inject electricity locally. And the only way to do that in cities and most Germans live in cities is through PV. Because of what? Because there's not enough gas available. I mean, the energy vendors is an engineering problem. And fortunately, we are Germans. So I'm a little confident in the ability to keep the system running and to build a resilient renewable system. Yes, the majority of our energy is going to come from fluctuating sources, but we already have areas of our grid where at times there's 80 or 100% renewable energy, mostly from wind and solar. There's people in the market already using renewables, both batteries, wind and solar, to provide balancing electricity. So that's also a very interesting trend that we are observing. And we need to change the system from a centrally based system to a one word. Energy is generated everywhere and that is already happening.

Where is the German solar industry located? 

You find us in the industrial heartland in the south and the backbone of the German industry, and that includes the solar and storage industry. You know, mounting system, cable makers included module makers, inverter makers. You're going to find in some mid-sized cities or even in a rural environment somewhere, you know, where these small and medium sized enterprises are located. North Rhine-Westphalia, Bavaria, Baden-Württemberg. But also in in Lower Saxony, in the industrial heartland of North Rhine-Westphalia. And there is a cluster in Thuringia, for instance, in eastern Germany. We have a module factory in Wismar and up at the coast and at the Baltic Sea. So it's really hard to pinpoint where we are located. However, around these factories there's normally, you know, logistics hubs and the whole environment that you can plug into.

Thanks David, so there is a lot going on in Germany and solar hubs are not concentrated in one place but spreading all over the country. And they’re all going to be needed, if Europe’s largest economy is to emerge a winner in game of net zero. 

And with that we’ve ALMOST come to the end of our podcast… 
But before we say goodbye, we’d like to tell you a bit about HOW GERMANY WORKS.

As we’ve heard, Germany’s first attempt to ramp up solar around the turn of the millennium fell short of expectations. And that despite – or perhaps partly because of the subsidy policies. So what’s the state of play now, amidst Germany’s second solar boom?

There is no national law at present mandating the installation of PV units for buildings. The 16 regional states that make up the Federal Republic of Germany DO have some regulations covering some newly built or newly renovated public, commercial and even private buildings.

And although not enshrined in national law, the principle that all suitable roof spaces should be used for solar energy for all new commercial buildings is part of the current government’s coalition agreement. And policy is governed by the Renewable Energy Act, which sets a goal of tripling Germany’s photovoltaic capacity to 216 gigawatts by 2030. So growth in the sector is as good as guaranteed.

And that’s HOW GERMANY WORKS.

Ok that’s it for this episode. Thank you for playing the game “net zero” with us – here's the prize. If you think your company could profit from the current sunny skies over this sector, Germany Trade & Invest can help you set up shop in Europe’s biggest solar market. At no cost because we’re a government agency.
Get in touch at gtai.com.
We’re also keen on your opinions, suggestions and questions. Please leave a comment in your favorite podcast app or drop us a line. You’ll find all the details in our show notes.  
So, till next month, keep on the sunny side of life, “Auf Wiederhören” and remember: Germany means business.