Anna Pegels
4. THE ENERGIEWENDE AS INDUSTRIAL DEVELOPMENT AGENDA
4.1. INNOVATION
The World Wildlife Fund and Cleantech Group developed and biannually calculate the Global Cleantech Innovation Index, which gives an aggregated overview of countries’ innovation potential in clean technologies. Among 40 coun-tries, it seeks to identify those with “the greatest potential to produce entrepreneurial cleantech start-up companies that will commercialise clean technology innovations over the next 10 years”
(Sworder et al. 2017:3). It uses 15 indicators related to the creation, commercialisation and growth of clean technology start-ups. According to this index, Germany ranked 8th in 2017, after Denmark, Finland, Sweden, Canada, the US, Israel, and the UK. Germany’s score in general innovation drivers is relatively low, with a rank of 19. The 2014 report attributed this weakness to a lack of “positive atti-tude towards entrepreneurship or level of early stage entrepreneurial activity” (Parad et al. 2014:
41). The 2017 report confirms the weakness in early-stage entrepreneurship, ranking the coun-try second-to-last in this indicator, just ahead of Italy. In contrast, Germany scores first in environ-mental patents, and is strong in clean technol-ogy exports and renewable energy jobs. Despite the low level of early-stage entrepreneurship, its strong industry and established manufacturing sectors allow it to efficiently convert innovation inputs into outputs.
To add detail to this general picture, this section will use disaggregated data on German research
expenditure as the input indicator and patents as the output indicator of innovativeness in clean technologies. Data is sourced from the data ware-house of OECD, OECD.stat, which includes data and metadata for OECD countries and selected non-member economies (OECD 2015). These data-bases provide pre-selected technology groupings such as renewable energies or hydrogen and fuel cells, which will be used in the subsequent anal-ysis. Energy efficiency technologies will not be included in the analysis since drawing the bound-aries for this technology group is particularly chal-lenging (Ekins et al. 2015:44). Any data presented would thus be open to criticism, and comparability across databases would be very limited.
Data on research and development expenditure in energy technologies refer to public expenditures (Figure 11.3). As can be seen, total German expend-iture for research and development of renewable energies has been following a clear upward trend in recent years. Within OECD countries, Germa-ny’s 2014 expenditure for renewable energies research ranked at 3rd, for nuclear energy at 3rd, for hydrogen and fuel cells at 3rd, and for energy storage at 2nd, compared to a 6th rank in fossil fuel research (OECD 2015). Since 2010, renewable ener-gies have been the most highly funded research area. Nuclear energy research funding has stag-nated at a relatively high level, while funding for research on storage technologies has grown from a lower level. Hydrogen and fuel cells and fossil fuels have received comparatively little public research funding.
172 Figure 11.3: Research, development and deployment budget energy technologies, Germany (million EUR)
Source: OECD (2015).
While research budgets are useful as input indi-cators, they do not provide information on the success of research activities. This success is often measured by patent data, since patents can be considered as an output of research activities.
One possible measure of the national innovative strength in specific technologies is the relative patent share, which compares a country’s world patent share in the specific technology with its
share in all other technology patents. Relative patent share is normalized to assume values between -100 and +100. A positive value indicates that the world share of the patent for a certain technology is larger than that of all patents of the same country, and values higher than 20/lower than -20 indicate an innovative strength/weak-ness in the assessed technology (Umweltbunde-samt 2014).
Figure 11.4: Relative patent shares in relevant energy technologies, Germany
Source: OECD (2015).
Energy efficiency
Renewable energy sources Hydrogen and fuel cells
Fossil fuels Nuclear
Other power and storage technologies 100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 200
50 150 250 300
0
-20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
40
-60 60
Renewable energy sources Energy storage Hydrogen and fuel cells -40
20
0
173
Germany: The Energy Transition as a Green Industrial Development Agenda
While the German relative patent share values for renewable energy generation have been declin-ing, they are consistently positive at values higher than 20 (Figure 11.4). Germany thus has an innovative strength in these technologies, likely mirroring the supportive policy environment of the Energiewende. The decline is likely attribut-able to increasing competition from non-OECD countries, in particular China (Ekins et al. 2015).
The growth of the Chinese domestic market, the location of international renewable energy firms in China and the increasing importance of Chinese domestic firms have contributed to increased innovative activity.
Values for hydrogen and fuel cell technologies are positive as well, but below 20 in most years. The picture for energy storage is less positive: while relative patent share values have been increas-ing, they exceeded values of -20 only from 2007, and have been oscillating around zero since. This shows an innovation weakness in energy storage technologies. Competition from Japan and China is particularly strong: between 2004 and 2013, 39 per cent of patent applicants were Japanese, 28 per cent Chinese, and only 7 per cent German (UK Intellectual Property Office 2014).
4.2. COMPETITIVENESS
WORLD MARKET SHARES IN CLEAN ENERGY TECHNOLOGIESMany indicators are available to measure the international competitiveness of industries and most involve trade data. One of the most intuitive indicators is the world market share, which illus-trates the share each country has in world exports for a given product. This section concentrates on Germany’s trade performance in selected renewa-ble energy technologies compared to its most rele-vant competitors in the same technologies.
Germany’s world market share in wind energy converters has been fluctuating around 30 per cent for the past ten years (Figure 11.5). The low world market share before 2005 is explained by the fact that in those years Germany represented a lead market for wind energy—accounting for 45 per cent of wind energy converter installations world-wide in 2002, but falling to 7 per cent in 2005. The pioneering feed-in tariff introduction had created such a strong domestic market pull that early export efforts were effectively stifled (Lütken-horst and Pegels 2014). Since 2008 Germany has been competing for world market leadership with Denmark, which has been a dominant player since the early stages of the technology.
Figure 11.5: World market shares wind energy converters
Source: WITS database, World Bank (2015).
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 80
20 60 100
0
Spain Denmark India Germany
174 Beyond the aggregate data presented in the chart, industry analysts underline the particularly strong competitive position of German companies when it comes to offshore turbines and offshore wind parks in general, as well as large-scale onshore turbines above 5 MW capacity (Lema et al.
2014; Lütkenhorst and Pegels 2014). Most recently the German company Siemens, which is leading in offshore wind technology, bought 59 per cent of the Spanish company Gamesa, which has a strong position in emerging country markets (Spiegel 2016). With about EUR 9.3 billion in annual sales volume, the merger has created one of the world’s biggest multinational wind companies.
A particular driver of competitive strength origi-nates from a classic technology cluster in the four Northern states of Lower Saxony, Schleswig-Hol-stein, Bremen and Hamburg. This North Western Wind Power Cluster has grown into a densely interconnected web of more than 300 partners including globally leading turbine manufactur-ers, specialised component supplimanufactur-ers, wind park operators, local governments and cutting-edge research institutions. The cluster boasts some of the industry’s major innovations, such as the development of the 5 MW offshore turbines and the offshore test site Alpha Ventus.
At the same time, the wind cluster also owes some of its success to the long-standing track record of Germany’s engineering, machinery and
power sectors in general. Without the foundation of highly advanced manufacturing capabilities and skills across a whole range of industries, the German wind energy sector would not have been able to achieve its current global position. Argu-ably, the North Western cluster represents an internationally unique level of sophistication and comprehensiveness, with business players along the entire value chain exhibiting a high intensity of interactions based on shared ambitions and quality standards. The cluster represents a genu-ine public-private partnership and is co-funded by state resources and business membership fees.
In the field of solar photovoltaic cells, in contrast, Germany was not able to gain a strong market position. While the country’s global market share increased from about 7 per cent in 2000 to 15 per cent in 2008, it has fallen back to 2000 levels since (Figure 11.6). Background data show that German exports of solar photovoltaic cells were almost cut in half between 2010 at US$ 8.1 million and 2012 at US$ 4.5 million (Lütkenhorst and Pegels 2014).
Several German photovoltaic companies went bankrupt during this time, such as Solon, Q-Cells and Odersun (Parad et al. 2014). At the same time, the rapid increase of the Chinese world market share is notable. Remaining below 5 per cent until 2004, it quickly rose to 45 per cent in 2014, making China the clear world market leader in the manu-facture and export of photovoltaic cells.
Figure 11.6: World market shares solar photovoltaic cells
Source: WITS database, World Bank (2015).
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 40
10 30 50
0
Japan China Malaysia Germany
15 35
5 25 45
175
Germany: The Energy Transition as a Green Industrial Development Agenda
Beyond the trends on photovoltaic cell manufac-turing, the strong competitive position of German photovoltaic system component manufacturers and equipment suppliers must be emphasized.
Data for 2011 show that the share held by German firms in the global market for specialised photo-voltaic equipment was as high as 50 per cent, and the market share of photovoltaic inverters that transform the direct cell current into alternating grid current stood at 35 per cent (Germany Trade
& Invest 2013). With a share of approximately 25 per cent, the German company SMA Solar is the world market leader for inverters. However, the company has recently been suffering from over-capacity and had to announce significant job cuts in the first quarter of 2013 (Lütkenhorst and Pegels 2014). In total, employment in the German photo-voltaic industry nearly halved in 2013 and 43,900 people lost their jobs (Lehr et al. 2015).
In sum, Germany was successful in creating a competitive wind energy industry that can now reap economies of scale, while the picture is less impressive for the solar photovoltaic indus-try. Industrial policy investments in photovoltaic cell manufacturing did not bear fruit, which is not very surprising, since cell manufacturing is not overly sophisticated and cells and modules can easily be transported, making proximity to markets a less important factor. A large part of cell manufacturing activity thus relocated to China. However, while some firms went bankrupt, other parts of the German photovoltaic industry concentrated on more sophisticated activities upstream as cleanroom production facilities for manufacturing cells, for example, and down-stream as system components such as invert-ers, mounting structures, and cabling. What we observe in the photovoltaic industry is a fairly typical transition: when cell manufacturing was still a cutting edge technology, Germany was a leading producer. Low cost assembly in China crowded German producers out when the tech-nology matured, but German industry was able to build competitive advantages in specialised high-value niches of that industry. German industrial policy could have been more successful had it supported this transition earlier by focusing on technologically sophisticated steps in the photo-voltaic value chain.
PERCEIVED IMPACTS ON COMPETITIVENESS IN