Solar power in Germany – output, business & perspectives
Quick facts
(Figures for 2023; Sources: BSW Solar, UBA, AGEB)
Number of solar arrays installed: 3.7 million
Total capacity installed: 81 GWp
Output: 61 TWh
Projected expansion: 215 GWp in 2030
Share in gross power production: 11.9 %
Employment: 58,500 (2021 est.)
Output
Despite being among the countries with the least sunshine hours, Germany is one of the largest solar power producers in the world. After leading the field for several years, the country ranked 5th globally in installed capacity in the International Renewable Energy Agency’s (IRENA) global ranking in 2021. At the end of 2023, the country boasted a capacity of about 61 gigawatts (GW), according to figures by solar PV industry group BSW Solar.
In contrast to conventional energy systems focused on big and centralised producers, tens of thousands of small solar panel operators have become an important part of the German energy system. In 2023, all solar PV operators together produced about 12 percent of the country’s net power consumption, contributing to a total renewable power share of 52 percent. Solar power’s global share in power generation stood at about 4.5 percent in 2022, according to the International Energy Agency (IEA).
Solar arrays can contribute a much greater share to the German power mix during particularly sunny times. On 7 July 2023, solar power reached its highest output ever in Germany so far, providing 68 percent of the entire electricity mix at about noon, when both sun intensity and usually also power consumption are at peak levels. Throughout June 2023, solar PV had an output of 9 terawatt hours (TWh), according to research institute Fraunhofer ISE. The total output in that year was 61 TWh.
The high output, both in the short-term around midday and in the long-term during summer, is offset by a reciprocally lower or non-existent output during the winter and at night, respectively, highlighting the need for reliable storage technology to complement renewables expansion. However, sunny weather and hot temperatures are not automatically leading to higher solar power output, as solar modules lose electric tension when they become hot, which brings down their capacity despite the stronger radiation.
Fraunhofer ISE says solar panels achieve up to 980 full load hours per year in Germany, meaing about ten percent of the year - or less than half of the amount that wind power can deliver. The researchers estimate that 1,030 full load hours are possible in the country. However, this is still far below the nearly 6,600 full load hours that lignite plants ran in 2016.
Adding more capacity also acts as a check against oscillating solar power production levels due to weather effects. Despite experiencing a comparatively cloudy summer but thanks to capacity expansion, solar PV installations between January and August 2021 generated roughly the same amount as in the much sunnier previous year.
Expansion
The large-scale roll-out of solar power installations began around the year 2000 and peaked for a first time in 2012, with annual additions reaching more than 7 gigawatts (GW). Expansion then fell of a cliff, reaching less than 2 GW between 2015 and 2017, but since has steadily increased again. In 2023, the buildout exceeded government plans significantly, with added capacity reaching more than 14 GW instead of the scheduled 9 GW, almost twice as much as in the year before, according to Fraunhofer ISE data.
As a key component of the country's push for greater energy independence following Russia's invasion of Ukraine, interest in the technology grew rapidly. In April 2022, the government released its "Easter Package" of renewable energy policy reforms. It aims for a share of renewables in electricity production of 80 percent in 2030 and 100 percent in 2035, which means average annual expansion volumes must exceed 20 GW to reach the target of 215 GW installed capacity by the end of the decade.
Industry groups generally have lauded the efforts that the government of chancellor Olaf Scholz has taken to accelerate solar PV expansion since taking office in late 2021. A sustained high investor interest in the technology backs this assessment: In the last ground-mounted solar PV auction of 2023, the volume of bids (5.5 GW) by far exceeded auctioned capacity (1.6 GW), the Federal Network Agency (BNetzA) said
In 2022, two German states implemented a solar-PV obligation for certain construction projects and more states followed suit with similar legislation. The federal government proposed in its coalition agreement to make rooftop solar mandatory for new commercial buildings and establish them “as a rule” on new private buildings. It also agreed on opening up more agricultural spaces as well as moorland to solar PV installations. However, the agricultural industry lobby group German Farmer’s Association (DBV) has warned that the demand for new space for solar power installations could create acceptance problems among landowners.
At the same time, many citizens are eager to take part in solar power expansion, and more and more homeowners install panels on their roofs, often in combination with solar-powered batteries. In 2023, the total number of installed solar power batteries doubled to more than one million units. More than 70 percent of the added capacity in 2023 came from rooftop installations, with homeowners responsible for 6.5 GW of the new installations, according to consultancy Rystad. Also balcony-mounted solar panels have enjoyed a surge in popularity and regulatory reforms in 2023 aimed to facilitate their installation. A poll by Yougov found that 68 percent of homeowners with suitable roof space said they wanted to purchase a solar energy system, with 16 percent planning to do so in 2024.
Business
Despite the country’s modest potential for harvesting solar energy the Renewable Energy Act (EEG), introduced in the year 2000 allowed for a rapid growth of Germany’s solar power capacity. The number of solar panel producers and service companies skyrocketed quickly, as investors rushed to reap the benefits of the large-scale technology support under the EEG, which gave feed-in precedence to renewable energy sources and allowed investors guaranteed remuneration for a 20-year-period. Between 2008 and 2013, Germany saw its solar power capacity increase rapidly from about 6 GW to 36 GW, about 150,000 jobs in the country by 2011.
However, after its quick ascent to world leadership within less than a decade, Germany’s solar industry’s faced an even more rapid decline after 2012. Competitors from abroad, especially from China, offered solar panels at a much cheaper rate than German manufacturers, while support rates remained stable regardless of the panels’ country of origin. Consequently, many investors swapped domestic for foreign suppliers to maximise returns and left the freshly expanded German industry bereft of customers. Due to a parallel drop in guaranteed remuneration, solar PV expansion fell by 80 percent between 2013 and 2015, while doubling globally during the same period.
The effects on the German solar power industry were harsh: Many major players, such as Q-Cells, Solon and Conergy - which often had just invested large sums of money to ramp up production - were forced to close down. As a result, the number of jobs plummeted to just over 45,000 in 2016. SolarWorld, once one of the three biggest solar power companies in the world and the last major solar panel producer from Germany, finally succumbed to Chinese competition and filed for insolvency a year later. The industry initially secured protection from Asian competitors through the implementation of trade barriers by the European Commission in 2013, which imposed minimum prices on Chinese imports. But as it did not succeed in keeping European manufacturers afloat, the EU Commission abandoned trade limitations in 2018.
However, business confidence in the sector has steadily increased in the past years and was further bolstered by the government's 2022 announcement to aim for 100 percent renewables in the power system by 2035. As of 2021, the solar power industry employed about 58,500 people in the country, according to data by Germany’s Federal Environment Agency (UBA). In 2023, lobby group BSW Solar said it expects a “lasting solar boom” in the country. However, a shortage of skilled labour for installing panels and several other factors could still hamper a quick growth of solar power.
Yet, only about two percent of the solar PV modules installed in the EU in recent years were produced domestically, while the vast majority of installations has been imported. European solar power companies have called for a full-fledged renaissance of the sector, arguing environmental and labour standards in China often are far less strict and some producers appeared to even take advantage of forced labour. Efforts to strengthen manufacturers in Europe were shaken by an announcement by Swiss producer Meyer Burger, which runs Germany's largest solar module plant. In February 2024, it announced an end of production in Germany and a new focus on the U.S. market, arguing not enough efforts are made against distorted competition in Europe.
Policymakers from German states in early 2024 backed industry demands for more political support and called for the implementation of so-called "resilience bonuses or auctions." This would mean, for example, that higher feed-in tariffs would be paid for solar systems that are primarily produced in Europe. Germany’s council of German state governments (Bundesrat) said such instruments are necessary for European photovoltaic (PV) companies to have a chance on the global market, as China heavily subsidises its own solar sector. Economy minister Robert Habeck in late 2023 said he plans to protect domestic solar panel makers against low-cost competition, arguing that Germany should have at least “a basic share of its own production.”
Also, tighter rules for supply chain management introduced in Germany and the EU could tilt the balance in favour of European producers who can offer advanced life-cycle emissions reduction for their products and also provide more sustainable solutions regarding raw material sourcing and disposal. However, there are also concerns that luring hardware production to Europe risked slowing the technology’s expansion due to higher costs or other undesired effects.
Costs
The cost curve for solar PV has been sloping downward constantly in the past years and in 2020, the International Energy Agency (IEA) declared that the technology allows to produce the “cheapest electricity in history.” Between 2013 and 2023 alone, costs for solar PV have fallen by 87 percent, and the cost of battery storage by 85 percent, an analysis Mercator Research Institute on Global Commons and Climate Change (MCC) showed.
According to research institute Fraunhofer ISE, solar power has become the cheapest mode of power generation also in Germany. Depending on the type of installation and sunshine intensity at a given location, generating one kilowatt hour (kWh) with solar panels may cost no more than 3.7 eurocents, Fraunhofer ISE found. An analysis by British climate NGO Sandbag found that costs fell so much that new solar (and wind power) installations in German auctions are not only cheaper than new hard coal and gas plants, but also undercut the operation costs of existing fossil power plants.
However, support payments for existing and new solar power installations still carry substantial costs for German power customers: Until mid-2022, the renewables levy (EEG Umlage) paid by power customers as part of their electricity bill was used to finance the difference between guaranteed remuneration levels and sales revenues for renewable power installations. According to Germany’s economy and energy ministry (BMWK), these amounted to over 10.3 billion euros in 2018 alone. In 2021, renewable power operators received a direct state subsidy for the first time, amounting to 10.8 billion euros before the renewables levy was abolished entirely in 2022 and all costs were covered directly from the state budget.
In the last auctions of 2023, average support was 5.17 cents per kilowatt hour (kWh) for ground-mounted installations and 9.58 ct/kWh for roof-mounted ones. But many solar power users install their panels also without participating in auctions: According to the Federal Network Agency (BNetzA), just under 3.8 GW out of a total solar PV expansion of more than 5.2 GW in 2021 were installed outside of the tendering process.
Many commentators in the past have lamented that the support policy effectively meant that German power customers subsidise Chinese producers. Domestic suppliers therefore were said to be unable to compete due to higher labour costs and stricter environmental regulation on panel production. Others lauded the combination of steady German investment support and cheap Chinese labour as a catalyst for cost reduction that helped boost capacity growth and paved the way for the technology’s competitiveness.
While German solar power companies struggle to compete with Asian manufacturers, they retain an edge when it comes to research on the modules’ system integration and the implementation of innovative applications. Foreign market leaders are often focussed on large-scale projects that yield high returns but will likely only account for a part of future growth, where small-scale prosumers are expected to play an important role as well.
Companies have begun to offer integrated solutions that allow to store surplus solar energy at home and to share or trade electricity it with neighbours and other prosumers around the clock. As prices for home storage technology have fallen sharply over the past years, they are set to benefit from a trend towards self-supply and decentralised production, making them less reliant on support rates.
However, falling panel prices that have been a large driver in the latest surge in solar power expansion may hit a plateau. This would allow other factors, such as greater productivity, sustainability and flexibility, gain in importance for researchers and investors. Regardless of future breakthroughs in panel development, German citizens already embrace solar power as their favourite form of renewable energy generation.
Of the new installations added, large parts were mounted on the roofs of private investors. Solar arrays with a capacity rating below 10 kWp accounted for over 60%of Germany’s total installations in 2021, many of which were installed by households and small businesses seeking to become more independent of market power prices.
