In the early 2000s, Germany's solar industry was booming, with a cluster of factories in the country's east all dedicated to the production of photovoltaic modules.

With competition from Asian markets undercutting manufacturing costs in the 2010s, the sector faded from Germany's industrial landscape. But an effort to bring the supply chain back to the so-called "Solar Valley" is now underway.

In 2020, Meyer Burger Technology AG, a Swiss manufacturer of solar modules and cells, bought the solar factories abandoned by insolvent SolarWorld AG during the exodus and is now gunning for a revival in the region. Meyer Burger paid €12 million for the plants and started production in 2021.

Meyer Burger CEO Gunter Erfurt Source: Meyer Burger Technology AG

"We consciously went to the Solar Valley, simply because the infrastructure was there with buildings in top condition and also the expectation of finding workers with the key skills," Meyer Burger CEO Gunter Erfurt told S&P Global Commodity Insights in an interview March 9, on the sidelines of the SolarPower Summit in Brussels.

Many of the former solar workers have been rehired, with about 80% of the workforce coming from the first German solar era. That includes Erfurt, who worked at SolarWorld until 2015.

"We now produce higher volumes of solar cells than used to be produced in the entire Solar Valley combined," Erfurt said, pointing to improved efficiencies.

At its German sites in Thalheim and Freiberg, Meyer Burger is aiming to ramp up the annual production capacity of cells and modules to 1.4 GW by 2023, growing to 3 GW globally by the end of 2024.

The European Union is targeting 30 GW of domestic solar manufacturing by 2025, and in its upcoming Net-Zero Industry Act may also introduce targets for made-in-Europe solar panels. A leaked draft of the legislation showed the bloc is aiming to meet 40% of its annual solar deployment with domestic manufacturing by 2030.

"That this is now being discussed so directly in the [European] Commission shows a new quality in industrial debate," Erfurt said, adding that if such a target is set, it would mean 500 MW of new manufacturing capacity being installed across the EU each month through the end of the decade.

"From today's view it looks like a major wall that cannot be climbed, but physically, technologically, that is possible," Erfurt said. "But the framework conditions need to be there."

Europe is planning to relax state aid rules to enable member states to provide more direct support to clean-tech companies, a move the executive welcomed.

'Fertilizer' needed for revival

Structural challenges for Europe's solar revival remain. Producing solar modules in Europe costs about 50% more than in mainland China, analysts at S&P Global Commodity Insights said in a Feb. 27 report. This is driven in particular by higher electricity prices and labor costs.

"To get an industry that is effectively dead back to the levels envisaged by EU policymakers will require some fertilizer initially," Erfurt said. "That's not just [capital expenditure] but also [operational expenditure] support."

For power-hungry polysilicon producers, that would involve help with energy costs. Meanwhile, for companies higher up the value chain, the executive wants import costs slashed for key components required for manufacturing, which often come from China.

"We still have the absurd situation that we as Europe need to pay import tariffs on components that cannot be bought domestically," Erfurt said.

'Solar industry 2.0'

Solar manufacturing made with the cleaner European grid would cut emissions related to the product itself by 20% compared to Chinese solar equipment, Commodity Insights analysts said. Photovoltaic manufacturing is concentrated particularly in coal-dominated regions of China such as Xinjiang, the analysts added.

Concerns over human rights violations in Xinjiang, which China denies, have resulted in trade barriers from the U.S. Europe is handling the issue with a lighter touch, developing a traceability standard for all supply chains, including solar, and in the longer term is planning a ban on products made with forced labor.

Erfurt so far sees limited cut-through on the ground.

"On the investor side this topic has really landed. We get asked about it a lot," the CEO said. "The downstream market in Europe has, in my opinion, not focused on this. As long as it's from China and nice and cheap, nothing else matters, so to speak."

Erfurt argued that criteria for sustainable manufacturing is much needed, not just on forced labor but also on carbon footprint, recyclability and the use of heavy metals such as lead in panels.

While such requirements would need phasing in to avoid slowing down the energy transition, Erfurt said industrial policy should make clear commitments now.

"As a continent we need to say, 'We want to do this,' and set targets as we are starting to now," the executive said. "Then Europe really has the chance to become a technology leader in a solar industry 2.0."

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