Global Economics

German Energy Giants Eye a Greener U.S.


Washington may be struggling with climate change policy, but German energy companies are angling for a piece of the action in Obama's green energy push

When it comes to climate change—particularly the ongoing efforts to create a scheme to combat global warming by the early-December climate summit in Copenhagen—pessimism is pervasive. Few expect a deal to be reached this year. News earlier this week that U.S. President Barack Obama might skip the event entirely is seen as little more than icing on the cake of gloom.

But not everyone is disheartened. Back in February, Obama pledged $70 billion (€47 billion) in tax credits, grants and loan guarantees to transform the United States into a green powerhouse. And this autumn a climate bill is circulating through the Senate that, if passed, could mandate that up to 20 percent of electricity come from renewables by 2020. News of the pledged and potential spending has Germany's green energy giants lining up for hand-outs.

"We are participating very actively in the application process of the stimulus program," Dr. Michael Weinhold, chief technology officer of Siemens (SI) energy sector told SPIEGEL ONLINE. "It has been and is a big market opportunity for us."

Pump Life into the Market

After dipping their toes into the U.S. renewable energy market a few years ago, Germany's largest energy players are now increasing their investments, even as renewable energy sales in the U.S. have slowed under the weight of the financial crisis. The hope is that a potential climate change bill in the Senate and billions in stimulus money aimed at building a clean energy sector in the U.S. will pump life into the market.

"The U.S. has enormous growth potential," Frank Mastiaux, head of the Climate & Renewables division at German energy giant E.on, told SPIEGEL ONLINE. "It's not the most attractive market in terms of revenue, but markets change," he adds.

To that end, E.on (EONGn.DE) invested $1 billion to build the largest wind farm in the world with 627 wind turbines in Roscoe, Texas, which opened this month. E.on has also opened two other wind farms in recent weeks, both in Texas, representing 600 additional megawatts of clean energy. That will bring the total capacity in the United States to over 1,700 megawatts, or more than half of the company's total wind energy capacity worldwide. In terms of the impact to its bottom line, the U.S. market is becoming more important to the company everyday, Mastiaux says.

Stimulus Bill Good for Business

SolarWorld AG (SWVG.DE), a solar power technology company in Bonn, announced this month that it planned to build a new solar power module manufacturing plant at its Hillsboro site in Oregon that would add an additional 350 megawatts of capacity by 2011. The new factory will boost the number of employees working for Solarworld in the U.S. to over 1000.

Siemens AG of Munich in September broke ground on a wind turbine assembly factory in Kansas that will employ 400 workers. Earlier this month, Siemens also announced its plans to acquire solar thermal power company Solel Solar Systems Ltd. of Israel for $418 million. Solel's U.S. subsidiary is currently developing the world's largest solar thermal power plant in California.

Executives point to a change in Washington D.C. under President Barack Obama as a signal that now is a good time to invest in renewables in the U.S.. In February, the U.S. administration passed a $787 billion stimulus bill, which has already started to help. One tenant of the bill launched in August provides $2.3 billion in tax credits for renewable energy equipment manufacturers.

The U.S. Senate is also deliberating over the Clean Energy Jobs and American Power Act, introduced by Senators John Kerry of Massachusetts and Barbara Boxer of California in September. The bill, referred to by some as a Kerry-Boxer bill, seeks to cut emissions, create renewable energy jobs and increase domestic energy production. The legislation builds on a similar bill passed by a narrow margin in the House of Representatives in June.

Seeing Dollar Signs

All of this has renewable energy companies seeing dollar signs. "The U.S. market has grown in part through the new administration's signalled commitment under Barack Obama to renewable energy in the United States, and the market will expand significantly," Boris Klebensberger, chief operating officer of SolarWorld, told SPIEGEL ONLINE.

To be sure, the climate change bill is not guaranteed to pass the Senate or even go to a vote anytime soon. Earlier this month, Carol M. Browner, a top climate and energy official under President Obama, said there was very little chance that a bill would be signed into law by the time world leaders gather in Copenhagen to hash out a successor treaty to the expiring Kyoto Protocols. Some cite the administration's high priority on passing health care reform as one reason.

Even with the stimulus money and the climate bill, success in the United States in renewable energy means overcoming significant obstacles. The financial crisis has significantly slowed orders for new wind turbines, some companies have said. In addition, the credit crunch has made obtaining financing for such projects more difficult. Wind power installations in the U.S. are expected to be down this year relative to 2008, according to the American Wind Energy Association, thanks in part to the financial crisis.

Declining Prices

The global solar power market, in particular, is struggling to absorb a number of new entrants, just as the financial crisis has pummelled sales. That has led to a hardware oversupply in the market, a corresponding price drop and intense competition among manufacturers. Solarworld, for example, saw its sales in the first half of 2009 drop 6 percent to €401.6 million from €427.1 million last year, after witnessing an industry-wide 25 percent decline in prices.

Frank H. Asbeck, chief executive of Solarworld, has been outspoken about Chinese competitors dumping practices, or selling goods in foreign markets below what it costs to make, which he sees as part of the problem.

Klebensburger says the prices in the U.S. are very low, which can lead to dumping. He adds, "We realize that many [Chinese] firms participate in some form of dumping. I think we must at least have an open discussion about the problem."

Henning Wicht, a solar analyst with iSuppli Deutschland, sees solar power installations in the U.S. growing to 513 megawatts this year, up from 300 megawatts in 2008. But he warns that actual instalments in the United States won't go live until next year or even later.

"We are a strong believer in Solar America, but it won't be as fast as many believe," Wicht says.


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