Germany's Photovoltaic Power System: GUI Collaboration

Introduction

A photovoltaic (PV) power system is a type of renewable energy technology that converts solar energy into electricity. One of the primary advantages of PV technology is that it is pollution-free and requires little maintenance (EPIA, 2008). Because sunlight is available at no direct cost, research and development (R&D) efforts have increased significantly in order to make photovoltaic energy accessible to households and industry alike. With these advantages in view, a variety of research initiatives have been launched at national and international laboratories focusing on the mass production of solar power at the lowest possible costs (Dahl, 2005).

Germany has been particularly active in developing PV technology, with growing collaboration among government bodies, universities, and industry consortia. The objective of this paper is to analyze the government-university-industry consortia (GUI) collaboration for the development of photovoltaic power systems in Germany, evaluate strategic options for firms considering entry into the German PV market, and offer recommendations based on a SWOT analysis.

Research Collaboration in Germany's Photovoltaic Sector

Germany is the world's largest supplier of solar photovoltaics, with a market totaling 3.6 GWp and representing 49% of the global market share. Germany also produces 55% of the world's solar electricity, with a capacity of 11 GWp of new PV capacity. In 2007, the PV sector generated revenues totaling EUR 5.7 billion for Germany, representing 33% of the world market. The growth of PV systems has led to the establishment of over 10,000 businesses, employed more than 42,000 people, and driven employment growth of over 30%. This expansion has been largely fueled by sustained R&D investment: there are currently over 60 research institutes engaged in PV technology development, and in 2007, Germany's investment in PV R&D reached approximately EUR 176 million. Between 2004 and 2007, 250 patents were registered in Germany. Supportive industries — which rank among the leading enterprises in Europe and in the top three globally — have been major contributors to the rapid development of PV systems (GTAI, 2009).

The presence of excellent research institutes, combined with private-sector collaboration and government support, has made Germany one of the richest landscapes for PV R&D. In 2007, German industry invested approximately EUR 175.8 million in R&D, while the German government invested EUR 6.5 billion in solar energy research. The Ministry of Education also invested EUR 360 million to support PV R&D (El-Beyrouty, Meimanaliev, Petrosyan et al., 2009).

Germany's PV sector has developed more rapidly than those of other countries for several key reasons. First, the German government has provided significant investment in PV R&D. Second, supportive industries have collaborated with government and universities to sponsor research. The Federal Ministry of Education and Research disbursed EUR 22 million for PV R&D, and in 2006, the German Federal Environment Ministry (BMU) spent approximately EUR 38 million across 21 PV research and development projects. A primary objective of this funding was to reduce the cost of solar power. Additional BMU-supported R&D in 2008 totaled EUR 39.9 million. As a result of this consistent funding, the costs of PV systems declined dramatically from 1995 onward, as illustrated in Figure 1 (Wissing, 2006).

Fig. 1: Costs of PV Systems between 1995 and 2009 (Source: Wissing, 2006)

Beyond federal government funding, German universities have also demonstrated significant initiative in PV development. The Technical University of Ilmenau has intensified its research efforts in PV systems since 1997, conducting interdisciplinary research with 40 partners in more than 20 solar energy projects (Thuringia, 2010). Many German universities have introduced undergraduate, graduate, and doctoral programs in PV technology. The University of Stuttgart's Department of Electrical Engineering offers modules such as Applied Photovoltaic and Thin Film Technology and Solar and Heat Engineering, and provides scholarships to Master's and doctoral students who focus their research on PV development. The University of Technology in Ilmenau allows students to pursue a master's degree in photovoltaics, supported by an endowed professorship.

Research institutes also play a central role. The Fraunhofer Institute for Solar Energy Systems (ISE) is the largest solar energy institute in Europe. ISE conducts fundamental scientific research across areas including solar energy conversion, energy storage, and the rational use of energy, and works on practical applications of solar systems for residential and industrial use at low costs.

Government Efforts to Promote GUI Collaboration

Close cooperation among research institutes, universities, and industry associations has been a defining factor in Germany's PV development. One of the primary government mechanisms for promoting GUI collaboration is the provision of subsidies to both German and foreign firms wishing to establish solar energy businesses. In 2008, the German government provided subsidies totaling $1.2 billion for the East German solar cluster. Firms entering PV activities are eligible to receive up to 50% of their capital expenditures as support. The KfW low-interest loan program is also available to private and commercial investors. The German government further offers a range of incentives, including operational support, training assistance, and subsidies for both domestic and international investors.

Infrastructure investment has also played a key role. The German Utility Projects, launched in 1991, were intended to close the infrastructure gap between East and West Germany. The total investment was EUR 38.5 billion and included seven motorways, nine railway ventures, and one waterway. Since 1990, the German government has disbursed over EUR 67 billion to rebuild infrastructure in East Germany. By 2007, this improved infrastructure attracted numerous solar energy firms, research institutes, and foreign companies to establish PV operations in East Germany. As a result, "the availability of highly skilled and specialized workers, a good transportation system, and solid physical and technical infrastructure at relatively low costs made East Germany an ideal setting for the growth of the PV cluster" (El-Beyrouty et al., 2009, p. 23).

There are several notable examples of GUI collaboration in Germany. The Federal Solar Energy Association (BSW) unites over 650 members — including R&D institutes, producers, consultants, and wholesalers — and serves as a forum connecting the German government with solar energy businesses. The European Photovoltaic Industry Association (EPIA) has approximately 200 members and promotes 80% of the global PV industry at national and international levels (EPIA, 2011). The German Energy Agency (DENA) also functions as a GUI collaboration vehicle, providing funding schemes for PV system development.

Firms that set up GUI collaborations can enjoy several advantages. They gain access to government loans at low interest rates, benefit from subsidies, and can draw on Germany's extensive network of more than 60 education and research institutes that train specialists in photovoltaic technology. The close collaboration of universities, research institutes, and PV manufacturers has made PV technologies more cost-effective and has been a vital element of Germany's PV success. Nevertheless, the PV solar system remains in its early stages, market availability for this energy type is still limited relative to conventional sources, and the upfront cost of solar energy investment remains high — meaning firms may face market risks.

SWOT Analysis for GUI Partnerships in PV Investment

The SWOT model — representing Strengths, Weaknesses, Opportunities, and Threats — is a powerful analytical tool that businesses can use to evaluate the possibility of entering the German PV market.

Strength: The primary strength of partnering with the German government is access to financial, logistical, and administrative support. Government partnership can facilitate funding and reduce barriers to market entry. Partnering with a university, on the other hand, provides firms with access to cutting-edge R&D findings that can help produce higher-quality PV systems at lower costs (Germany Trade and Invest, 2009). University collaboration also enables the development of PV products suited to both public and industrial applications.

Weakness: A significant weakness is that PV energy systems remain expensive to produce, regardless of the partnership structure. Demand for PV systems in Germany is still relatively low — the consumption rate for PV energy stood at only 0.3% in 2006. Additionally, if a firm partners with a university, it will be expected to contribute funding to the university's ongoing R&D activities.

Opportunity: Although demand for PV energy within Germany remains limited, global markets for PV systems are growing rapidly. A firm operating within Germany's GUI framework can market its products internationally with the credibility of a "Made in Germany" designation. Firms also benefit from access to Germany's highly skilled workforce, as many German employees have strong technical and vocational training backgrounds before entering higher education.

Threat: Firms face competition not only from other PV producers in Germany but also from producers of alternative energy systems. The wind energy market is expanding in Germany, and wind energy remains cheaper to produce than solar energy. As noted in the literature, "suppliers of cheap wind-generated electricity make a profit and dominate the certificate market; on the other hand, electricity from photovoltaic power, which is still expensive to produce, can hardly be marketed" (Federal Ministry for the Environment, 2007, p. 21).

References

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