Europe's Solar Crisis: Solarwatt Relocates Production to China

Germany's Solarwatt, founded in the early 1990s in Dresden, has long been regarded as a model example of Europe's ambitious plans in the renewable energy sector. However, the company now faces a radical shift: following the opening of a new solar module factory in Dresden at the end of 2021, Solarwatt plans to relocate production to China. "It is a major loss for our employees, but from an economic perspective, there was no other option," explains Peter Bachmann, Chief Product Officer of Solarwatt. This decision reflects the global challenges of the solar industry, which is under price pressure due to a global oversupply of solar modules. This oversupply has forced manufacturers in Europe, the USA, and China alike to cut staff and delay projects. Last year, over 800,000 people were employed in the solar sector in Europe, while in the USA nearly 265,000 worked in the industry. Despite the upheavals in the sector, the availability of cheap solar modules is leading to a significant increase in installations by consumers and companies. According to the International Energy Agency, electricity generated from solar energy will surpass that from wind and nuclear power by 2028. This situation presents a delicate task for governments: they must expand renewable energy while supporting domestic production capacities to keep energy costs low and ensure security of supply. Michael Parr, Director of the trade group Ultra Low Carbon Solar Alliance, describes this as a "delicate and difficult balancing act." Europe's solar module manufacturing capacity has shrunk to about 3 gigawatts, roughly half the capacity from November. This has serious implications for the EU, which aims to derive 45 percent of its energy from renewable sources by 2030. The Biden Administration in the USA aims to establish a completely carbon-free electricity grid by 2035. Despite Brussels’ previous refusal to impose new tariffs on Chinese products, the pressure on European companies remains. The Net Zero Industry Act, introduced by the European Commission in May, is intended to strengthen the EU's clean energy industries, but skepticism remains. Gunter Erfurt, CEO of Meyer Burger, emphasizes the need for a "level playing field" and sees tariffs as potential support. The Inflation Reduction Act in the USA has already triggered billions of dollars in investments in the solar industry, yet uncertainty remains high there as well. A potential electoral victory by Donald Trump could overturn existing support and create new economic policy uncertainties. Meanwhile, as Solarwatt partially retains its machinery in Dresden, the final decision on the future of production lies with political decision-makers. "They must decide whether we want to be completely dependent on Asia or at least resilient to a certain percentage," says Bachmann.