Office of Technology Assessment at the German Bundestag

Torsten Fleischer

Export potential for technologies for the use of regenerative energy resources

TAB report no. 042. Berlin 1996, 179 pages

Summary

In a few decades, renewable energies (water power, wind power, and solar power as well as the use of biomass and geothermal energy) will be important pillars of energy supply worldwide. Given the current low starting level, they represent a classical growth market of the future. While this long-term assessment meets with broad consent among experts from research, the energy supply utilities, industry, and politics, it is still a matter of debate whether exports of technologies for exploiting renewable energy sources will achieve sizable proportions even on a medium term (time horizon, five to fifteen years) and thus increasingly supplement exports of traditional power plants.

Within the framework of international development policy, and in view of growing environmental pollution from the use of fossil energy sources, and also of forthcoming international agreements on climate policy, renewable energy sources are becoming more and more important sources of hope. The vendors of commercially viable technologies are often favored under present world market conditions by the existence of consistent technology, industrial and export policies as a supporting measure. This is particularly true of small and medium-sized enterprises. This must not necessarily lead to a dichotomy between development policy and export promotion. Other closely related aspects are siting problems and problems connected with the globalization of production.

The main objectives of this status report are the assessment of worldwide export submarkets, the evaluation of the export opportunities existing for German vendors in the exploitation of renewable energies, and the specification of important factors, specific to a country and a technology, which determine foreign trade. Finally, options will be derived from these assessments indicating how to make better use of the export potentials that become apparent.

By way of introduction, the current situation of German exports and the domestic production of selected goods for the use of renewable energy sources is outlined. As far as can be seen from official statistics (which include many uncertainties, such as the obligation to maintain secrecy, classification problems, technologyspecific data problems), the production of a few selected items for the use of renewable energies in Germany between 1976 and 1993 increased from some DM 170 million to DM 630 million in real terms (expressed in prices of 1991); this corresponds to a growth by 8% per annum. Over the same period of time, for the same items, the export value measured in prices of 1985 increased from approx. DM 18 million to approx. 300 million (18% per annum). These increases in production and export by far exceed the average increases in production and export of German industry, thus possibly indicating the great future importance of this market segment of energy conversion plants.

The worth of exports of components, such as generators, instrumentation and control systems, heat exchangers, employed in technologies for the exploitation of renewable energy sources cannot be separated from the statistics. Experience has shown German industry to be very strong in fields such as machine building and electrical engineering; consequently, the worth of exports of these »intermediate products« is likely to reach an order of magnitude which should not be underestimated. It is also striking to see that export flows depend very much on natural conditions and on the boundary conditions applicable to renewable energy sources (such as energy policy and environmental policy, funding measures) in the buyer countries, and that (national and international) development programs exert considerable influence. Unfortunately, many data about renewable energies are missing in the official statistics; hence, the picture obtained is incomplete.

The export potential was analyzed on the basis of global energy requirement projections compiled by the Worid Energy Council (WEC) in 1994. These projections forecast an increase in the use of renewable energy sources from 65,000 PJ (2200 million TCE) in 1990 to 96,000 PJ (3300 million TCE) in 2010 (+ 50%).

With an estimated total volume worldwide of approximately DM 165 billion per annum, the market of large hydroelectric plants, on a medium term, will continue to be by far the largest single market among the technologies tapping renewable energy sources. It is followed by other submarkets at a volume lower by one order of magnitude (around DM 10 billion/a): »modern biomass", small hydroelectric plants, solar thermal facilities, and wind power (cf. Table 1).

In the past 17 years, the exports of goods for the utilization of renewable energy sources from Germany grew by some 18% annually in real terms. Assuming a decrease of this growth to an average of approximately 10% per annum, exports of the technologies selected would rise to approximately DM 1 billion by 2005. As explained above, this total includes a number of components not separately shown in the statistics and not expressiv attributable to the use of renewable energy sources, such as generators, other electrical components, and heat exchangers. Because of their high contents of »know-how", these make up a large share of German exports of technical installations exploiting renewable energy sources. Right now, they amount at least to DM 3.5 billion, as can be seen from information supplied by specific vendors. Assuming slightly lower growth rates of 4% in this area, as deliveries already have reached a very high level and are closely connected to the sector of large hydroelectric plants, which grows at a less dynamic rate, exports of electrical components and heat exchangers in connection with the use of renewable energy sources can be estimated to run up at least to an additional DM 5 billion in the year 2005.

Table 1: Medium-term estimate of worldwide annual investment volumes into technologies for exploiting renewable energy sources

Renewable energysource	Billion DM/a
Solar thermal	12,8
Photovoltaic	1,0
Wind power	6,0
Geothermal	2,6
"Modern Biomass"	10,5
Small Hydroelectric	11,6
Large Hydroelectric	117,0
Wave or tidal energies	3,5
Total (rounded)	165,0

Source: FhG-ISI 1996

This method of calculation results in a total export potential of at least DM 6 billion for 2005. Viewed against today's exports of DM 4 billion, this corresponds to a fraction of nearly 4% of the worldwide average annual growth of DM 165 billion.

If, on the other hand, the export growth of components directly covered in the statistics is assumed to be 15% on the average, which means a fivefold increase in exports within 12 years, the worth of these exports in 2005 would have reached approx. DM 1.6 billion (in prices of 1991). If, at the same time, a growth of 5% is assumed for other components (including electrical ones), the aggregate export potential is seen to be approx. DM 7.5 billion, or a share of approx. 5% of the average annual addition of new plants.

The German export volumes mentioned above also include exports of engineering services and financial services, especially in planning and project design, but also in maintenance and operation, in addition to the exports of goods. These exports of services are very difficult to estimate precisely. An order of magnitude of, at present, more than DM 100 million seems to be quite plausible. This part of the market certainly is going to grow as fast as the exports of goods (i.e., between 5% and 7% annually), as the potentials in threshold countries can be tapped only if increased service shares are offered by the industrialized countries, especially services in planning, financing, and plant management.

Estimating the export opportunities for German vendors shows the following picture for specific technologies:

Future export potentials for technologies exploiting renewable energy sources can be tapped by German vendors in particular in

• components and primary products whose manufacture requires a high degree of technical and manufacturing know-how (and in which German companies have a technological lead), and in
• complex systems requiring optimum interaction of all components.

Correspondingly, good future export opportunities can be expected to arise in these areas:

• Hydroelectric plants, especially large plants with, traditionally, large export volumes and for which considerable growth potentials are expected to arise worldwide;
• well harmonized wind power plants, rotor blades optimized in terms of aerodynamics and safety, and control systems and remote monitoring components;
• unit-type power plants (complete systems and motors, respectively) operated on biogas;
• silicon wafers for photovoltaic modules and photovoltaic application systems;
• components (concentrating collectors) and complete installations for solar thermal power plants, and systems components for geothermal applications.

Moreover, research and development work in new technologies, some of it quite advanced, is also expected to give rise to good export opportunities. This includes, for instance, new battery systems (including battery management systems), translucent thermal insulation, Stirling receiver generators, fuel cells (e.g. in combination with biomass gasification), vegetable oil engines, and holographic-optical daylight systems.

Slim export chances for German vendors, and increasing imports and import surpluses, respectively, are expected to arise in solar thermal plants for water heating, and in firing systems for biomass (such as wood chips and straw, the exception being standard components).

Manufacture is expected to remain mostly in the country, on a medium-term basis, for hydroelectric plants and wind power plants (with a growing export share despite increasing local manufacture in the buyer countries within joint ventures). Also components for solar thermal power plants (mirrors), unit-type power plants fired with biogas, biogasification units, and photovoltaic systems (sophisticated primary products and application systems) are likely to be manufactured mainly domestically ("know-how lead") also in the future, as well other systems components (such as generators, measurement and control systems, remote monitoring and actuating systems). On the other hand, production is likely to be moved abroad increasingly for solar thermal collectors (e.g. in subsidiaries) and small heat pump systems. No conclusive assessment is as yet possible for photovoltaics. Although part of the production of photovoltaic cells migrated abroad, some tentative approaches can be seen to maintain Germany as a production site for silicon raw material and photovoltaic systems.

Export potentials and competitive advantages can be exploited by German manufacturers not only offering their plants on the world market, but also including services, complete with planning, project design, financing, operation, and training of the operators, or arranging for those services. Undoubtedly, part of the procluction of low-tech components unavoldably will be shifted abroad. On the other hand, this might open up opportunities for exports in preparatory areas, for instance in plant design and machine building (such as foundry and manufacturing plants) and, by generating additional income in low-wage countries, add to the purchasing power and thus improve import chances in those countries. In addition, German manufacturers could open up for themselves new opportunities by designing innovative application solutions and complete service packages, for instance, in solar or wind operated sea water desalination, biomass fuels with the corresponding engine concepts, »electrofarming« (electricity Generation with biomass gasified by allothermal processes).

For some applications of »new« renewable energy sources, domestic demonstration markets are very important. At the same time, these technologies must have a sizable natural use potential in Germany. What is even more important: they must be in the commercialization phase. In mature technologies/applications already widely used, such as hydroelectric plants, domestic "demonstration markets" are of comparatively little importance.

On the other hand, the importance of demonstration projects abroad is underestimated. They serve both for testing under specific conditions on the spot and for establishing direct contacts with buyers, customers or users. In those cases in which the use of a technology exploiting renewable energy sources is not relevant in Germany, or is not effective because of natural conditions (such as thermal sea water desalination, solar thermal power plants), foreign demonstration projects are an important prerequisite for potentially opening the market to German companies trying to penetrate a market.

Options

The options existing, irrespective of specific technologies, to promote exports of technologies for the use of renewable energy sources are subdivided into demand-oriented, mediating, and supply-oriented measures. Attention is concentrated especially on demand-oriented options because, on the one hand, the goods and services to be exported should meet the requirements and conditions in the importer countries as much as possible and, on the other hand, the boundary conditions existing in those countries can be influenced also by the German Federal Government (either bilaterally or through international agencies). Another instrument of great significance are mediating measures; the governments of some competitor countries (such as USA and Japan) use them intensively for export promotion.

Measures can also be taken with a view to specific technologies:

• In wind power plants, it is specific application development through public R&D grants.
• For photovoltaic systems, it implies a more pronounced orientation of public R&D, with the participation of vendors, towards specific (application) markets in countries and target groups with high purchasing power.
• in solar thermal collector systems, it means improvements in components (heat measuring equipment, control units, recirculation pumps).
• For solar thermal power plants, it implies the participation of German vendors in the first plant to be operated along commercial lines.
• With heat pumps, it means offering a system composed of heat pumps and cryogenic units.
• In the case of geothermal energy, it implies improving domestic boundary conditions in support of energy policy and funding policy, and participation of Germany in the »IEA Implementing Agreement on Geothermal Energy".

The options also include the globalization of production locations in order to take into account specific competitive advantages of German manufacturers. This implies a number of things:

• On a medium term, German manufacturers should concentrate on making high-tech components and access the market by international cooperation. Deficits in supporting services, such as sophisticated maintenance activities, are easily compensated by means of cooperative schemes abroad.
• Where the dislocation of labor-intensive manufacturing processes leads to a cheaper product, this may accelerate market diffusion of the respective technology, because of more favorable prices, not only in the low-wage country concerned, but also in all countries supplied from there, which is to be welcomed for reasons of climate policy. German manufacturers of badly needed systems components involving a high level of know-how would also benefit from this development.

As information and data about export markets for renewable energy sources are not always up to date, some suggestions for improvement are made below:

• For a more thorough analysis of the export potentials of technologies for the exploitation of renewable energy sources, detailed inquiries should be made among German vendors and foreign institutes of the power industry. These inquiries should be conducted for specific technologies and for specific countries.
• Successful boundary conditions helping the application of renewable energy sources to gain ground should be researched and documented in the light of past experience in specific countries and for specific technologies (such as solar thermal collectors in Israel; biomass utilization in Austria; use of wind energy in Denmark; use of wind energy and small hydroelectric plants as well as the use of landfill and sewage treatment gases in Germany; use of photovoltaic systems in Japan).
• Concepts adapted to specific regions and technologies should be developed by the government (German Federal Ministries of Economics; Education and Research, Economic Cooperation, and Foreign Affairs) and the industrial associations and companies involved, respectively, in which those recommendations are taken up in a specific case which were mentioned in the 1994 Discussion Group arranged by the German Federal Ministry of Economics (such as the inclusion in bilateral economic discussions; supporting exhibition; funding of demonstration plants; training of personnel).
• Adapting foreign trade statistics to the requirements of exporters, politics, and science as quickly as possible could be very useful.