Coordination Failures in a Coordinated Political Economy: The Collapse of the German Solar Industry

Around 2010, the German solar industry was at the center of far-reaching hopes. Poised to create 'winning coalitions' for a green industrial transition, successive governments had built *the* world-leading industry for the manufacturing of photovoltaic panels – ranging from advanced machine tool-making and silicon processing through to inverter production and solar system design. Report after report lauded the country for unlocking through policy access to one of the key industries of the future. Public policies in support of the industry included heavy final demand support through feed in-tariffs, KfW-programs, local industrial recruitment and skill development programs, and public R&D policies. In the late 2000s the industry sank into mere chaos. By the end of 2012, global producers managed approximately double the manufacturing capacity they could reasonably put to use. Continuously declining prices and spiking losses caused a series of bankruptcies, international trade conflicts, and protection measures. By around 2015, almost the entire value chain had disappeared and with it a significant basis for support of green energy policies. The paper explains the collapse of the industry with political gridlocks resulting from the broad support coalition involved in German solar policies. When the value chain was forced to restructure in reaction to East Asian competition, industry interests had grown diverse to a degree that undermined the credibility of all attempts at a coordinated response. The paper positions this explanation of the death of the German solar industry against technological determinist and structuralist-materialist accounts of how green industrial policies fail. The former maintain that certain technologies are inherently driven towards commodification and hence impossible to nurture in high-wage varieties of capitalism. The latter see fossil fuel interests at work, striking back after 10 years of policy defeats.