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.

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.

Government Efforts to Promote GUI Collaboration

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.

There are several national policy mechanisms designed to encourage foreign participation in GUI collaboration. One key approach is the provision of low-interest loans to foreign firms. The German government also encourages international conferences to be held on German territory as a means of promoting GUI collaboration. One such event is the Solar Summit Freiburg, held for the fourth time in 2011, which brings together foreign and national businesses, research institutes, and focuses on the global development of the photovoltaic industry.

In 2004, the German and Spanish governments jointly organized a conference to encourage renewable energy development, including solar energy. This bilateral cooperation contributed to improving the efficiency of PV development in Germany (Federal Ministry for the Environment, 2007). The German Federal Ministry of Economics and Technology (BMWi, 2008) also demonstrated interest in attracting foreign participation in GUI collaboration in order to reduce the costs of PV systems and enhance the marketability of German PV products. These efforts reflect a broader strategy of government cooperation with both domestic businesses and foreign firms to advance PV projects.

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.

SWOT Analysis for GUI Partnerships in PV Investment

Entering the market alone: A firm that enters the market independently retains all net profits. However, it forgoes access to full government support and must bear all financial and operational risks alone.

Partnering with the government: Government partnership grants a firm access to funding, logistics, and administrative and financial support. The government also acts as a form of oversight, however, and access to sustained funding will depend on the firm's ability to produce high-quality, affordable solar energy products.

Partnering with a university: A university partner can provide R&D findings that help the firm develop PV technology at lower costs. In return, the firm must contribute to funding the university's research activities.

Partnering with both government and university: This arrangement offers the broadest set of advantages — financial and logistical support from the government, combined with R&D expertise from the university. The tradeoffs are that the firm must accept government oversight and share a portion of its net profits with the university partner.

The paper recommends that a firm seeking to enter the German PV market pursue partnership with the government. Since the 1990s, the German government has shown sustained initiative in promoting the development of photovoltaic energy systems and has actively encouraged both domestic and foreign firms to invest in the sector. By partnering with the government, a firm gains access to easy financing, employee training support, and administrative and logistical assistance. Furthermore, the firm can leverage its government partnership as a marketing strategy — citing the collaboration in its campaigns to enhance credibility and marketability both nationally and internationally.

This paper has analyzed the government-university-industry (GUI) collaboration for the development of photovoltaic power systems in Germany. It explored the government's extensive role in funding PV R&D since 1990, the contributions of universities and research institutes such as the Fraunhofer ISE, and the supportive industrial ecosystem that has made Germany a global leader in solar PV. The GUI collaboration has accelerated PV development and driven down costs, though PV investment remains expensive relative to other energy sources. For firms looking to enter this market, government partnership offers the most accessible and sustainable path to market entry, balancing financial support with strategic credibility.

Dahl, T. (2005). Photovoltaic power systems. Technology White Paper.