Germany’s Green Industrial Policy

The report analyzes Germany's energy transition, focusing on the solar PV and wind energy sectors. It evaluates the impact of the Renewable Energy Sources Act (EEG) and its feed-in tariffs (FiT), comparing the economic, technological, and environmental outcomes of both sectors. While wind energy is found to be more competitive and innovative with lower relative subsidy costs, the solar PV sector has faced a severe crisis due to intense competition from Chinese suppliers. The document argues for a systemic approach to green industrial policy, suggesting reforms to the FiT to increase flexibility and competitiveness while addressing grid stability and institutional fragmentation.

• The German wind energy sector demonstrates superior performance across most policy objectives compared to solar PV, including capacity deployment, electricity generation, employment, competitiveness, and technological innovation, while requiring lower subsidy levels per unit.
• The solar PV industry in Germany experienced a rapid expansion followed by a severe economic crisis, with many companies facing bankruptcy or exiting the market due to intense competitive pressure from low-cost Chinese suppliers of cells and modules.
• The feed-in tariff (FiT) system, established by the Renewable Energy Sources Act (EEG), was highly effective in triggering early deployment and market creation, but it failed to focus on the most cost-efficient technologies and created a 'bubble' in the solar PV manufacturing industry.
• Renewable energy sources in Germany provided significant environmental benefits, avoiding 56.5 million tonnes of CO2 emissions in 2012, which represented 17.8% of CO2 emissions from electricity generation.
• Germany's wind energy industry has achieved a strong global competitive position, with its export share of wind converters surging from 10% in 2004 to almost 50% in 2012.
• The EEG electricity surcharge has increased significantly, accounting for 22% of electricity prices for households and 35% for industrial consumers in 2013, leading to debates over distributional justice and the regressive effect on low-income households.
• Germany faces critical infrastructural challenges in its energy transition, specifically a lag in the expansion of high-voltage transmission lines from the North to the South; only 15% of the 1,850-kilometre target for 2015 was achieved by March 2013.
• Subsidies for renewable energy are often more visible than those for conventional energy, but in absolute terms, renewables have received fewer subsidies than most other energy sources, except natural gas.
• The report recommends reforming the FiT by introducing more flexible tariff adjustments, competitive elements such as reverse auctioning schemes, and a stronger emphasis on R&D and innovation over simple capacity deployment.

APA

Lütkenhorst, W., & Pegels, A. (2014). Germany’s Green Industrial Policy. International Institute for Sustainable Development. https://www.iisd.org/gsi/sites/default/files/rens_gip_germany.pdf

Chicago

Lütkenhorst, Wilfried, and Anna Pegels. Germany’s Green Industrial Policy. International Institute for Sustainable Development, 2014. https://www.iisd.org/gsi/sites/default/files/rens_gip_germany.pdf.

Wikipedia

{{cite report |last1=Lütkenhorst |first1=Wilfried |last2=Pegels |first2=Anna |title=Germany’s Green Industrial Policy |publisher=International Institute for Sustainable Development |date=January 2014 |url=https://www.iisd.org/gsi/sites/default/files/rens_gip_germany.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ltkenhorst2014germanys, author = {Lütkenhorst, Wilfried and Pegels, Anna}, title = {{Germany’s Green Industrial Policy}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = jan, url = {https://www.iisd.org/gsi/sites/default/files/rens_gip_germany.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }