Germany

The German labor market is quite different from its global competitors. It is much more efficient, as the industry in Germany has overall lower soft costs and gener­ally larger systems. As noted in Chapter 5, 42% of Germany’s 2012 PV installations were >1 MW,[96] so just by nature of efficiencies of scale, we would expect lower labor intensity.

While Germany has long been an efficient labor market, Germany Trade and Invest reports that its productivity has increased dramatically since 2005.[97] This increased efficiency translates to a yearly average decrease to labor unit costs of 0.3% for the period 2005-2010.[98] [99] The report credits “highly flexible working prac­tices, such as fixed term contracts, shift systems, and 24/7 operating permits” for these decreases, particularly in the face of rising costs elsewhere.11

As noted repeatedly in this text, the German installation sector is significantly larger and has grown at a much faster rate than the rest of the world. It has outpaced the United States by about 2.5 times from 2005 to 2011, and has about 3.6 times
more cumulative solar PV installed.[100] This alone is likely to represent about half of the differences in soft costs between the United States and Germany.[101]

Germany is often thought of as a production state, however, recent declines in manufacturing based on pressure from China and collapsing subsidies have devas­tated the market. In 2011 and 2012, at least 12 German cell manufacturers filed for bankruptcy. Official statistics state that at the end of 2012, only 6000 workers were employed in the sector. This is a dramatic decline as it represents between 25% and 30% of the industry.

The story is the same all across the globe. Even in the face of dramatic demand – side increases, the supply of panels remains too high. Whether based on overzeal­ous production, global competition, market manipulation, or other factors, the glut of product has prices in a sustained free fall.

Employment data are less granular in detail for Germany than for the United States. At the time of print, it is estimated that the PV industry in Germany employs 100,000 workers. Given that the overwhelming majority of the 120,000 workers in the United States are engaged in PV work, and that Germany installed nearly twice the PV that the United States did reflects just how much further along Germany is in terms of labor efficiencies than the United States. Of course, this analysis says nothing of component, materials, or finished product manufacturing, nor does it address logistics, sales, or other categories. However, given all the data, it is clear that Germany is at least 30% more efficient than the United States on a jobs-per-megawatt basis.

As installations peak and global supply for product create headwinds, Germany is poised to compete in the next generation of PV, the thin film market. This opti­mism stems from several data points. First, the weakest competition has fallen, and remaining companies are stronger. Second, thin film offers expanded opportunities for installations, which benefit German building stock. Finally, Germany has tremen­dous human capital assets.

The human capital assets stem from the nation’s long history as a production giant, as well as its more recent strength in solar energy. Germany has a highly skilled and specialized market, including numerous engineers and technicians. Its 312 PhD grad­uates per million inhabitants rank second among OECD nations.[102] There are now 300 renewable energy courses at universities and connectivity with other high-tech sectors.[103]

Germany also has an intriguing dual education system, in which students get training and experience. This has been noted as a critical combination in employer surveys in the United States and abroad. This system offers high quality skill devel­opment and provides employers with easy access to pre-screened talent.

The investments in human capital and the differences in labor wages draw sharp distinctions with the United States. According to analysis by the Lawrence Berkeley National Laboratories, some US jobs pay significantly higher wages in the sector, including those in skilled technical fields, such as electrician. These occupations have scattered training and there is a shortage of such skilled labor in the United States, as opposed to Germany which does a much better job at aligning supply with demand. However, the same equilibrium appears to have increased wages in some nontechnical categories, such as administrative tasks, vis-a-vis the United States.

Overall, the German labor market’s efficiency and diversity of technology and value chain strength should weather the short-term volatility in the industry. It is likely that after a few years of flat to declining year over year employment, the job market will rebound and provide long-term, stable, employment.

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