How Will the Industry Benefit?

map“Deutschland – Einstieg in die Deindustrialisierung?” – “Germany, the beginning of deindustrialisation?” asked the German economic newspaper Handelsblatt in the context of the spike in energy prices that has put at risk thousands of companies across Germany in 20221 .

Whereas some sectors such as steel, glass and chemicals have been seriously hit, the manufacturing industries operating in the areas linked to the energy transition (such as renewable energies and hydrogen production) should benefit from decisions taken to reach climate neutrality. The level of ambition of the Federal government has indeed dramatically increased with the new coalition elected in 2021, the share of renewable energy sources (RES) to be reached in the power mix by 2030 being set at 80% (against 47% in 2022). Will the German industry benefit from the ambitious commitments agreed by the new coalition?

The boom and bust of the solar sector in 2011 are a reminder that a strong internal demand does not necessarily translate into strong and resilient supply chains on the national territory. In the context of generous support schemes, several companies emerged in the 2000s benefiting from the strong demand for solar panels before being overwhelmed by Asian competitors. Nowadays, more than 90% of solar panels are imported from China.

  • The level of ambition of the Federal government for the Energiewende has dramatically increased with the new coalition elected in 2021, the share of renewables to be reached in the power mix by 2030 being set at 80% (against 47% in 2022).
  • The German wind industry has however been affected by a slowdown of the expansion of capacities, several rounds of onshore wind and solar auctions being in 2022 undersubscribed. The added value of the Energiewende in terms of job creation has been ambivalent so far.
  • The country’s current industrial geography might be partly reshaped with the efforts made by northern and eastern States to deploy renewables and green hydrogen at large scale. Stakes are high for southern Germany since new spatial patterns are emerging in the automotive sector too.
  • While Chinese competition in the solar and wind manufacturing sectors is tough, the Inflation Reduction Act has reinvigorated discussions around a stronger industrial policy.

“Significant new solar and wind capacities should contribute in a near future to the production of green hydrogen and the related equipment. The country plans to establish up to 5 GW of generation capacity including the offshore and onshore energy generation facilities needed for this. An additional 5 GW are to be added by no later than 204018. Several State governments also have defined hydrogen strategies or roadmaps, especially those where the RES potential is the most significant, which could trigger some new dynamics regarding the industrial geography of the country.”
Gilles Lepesant

Download Gilles Lepesant, “Higher Renewable Energy Targets in Germany. How Will the Industry Benefit?”, Briefings de l’Ifri, Ifri, January 6, 2023.

Gilles Lepesant s Senior researcher at CNRS (National Center for Scientific Research), Géographie-Cités (Paris) and Associate researcher at Centre Marc Bloch (Berlin) and at the Asian Institute for Energy Studies. (Hong-Kong).