From the Economist -excerpt – 18 March 2010 – Germany’s biggest idea is that German engineering and environmentalism will join forces to provide industry with a second wind. “Whoever is first to conquer green-tech markets will have an enduring export advantage and create jobs,” [according to German Chancellor Angela Merkel]

Green tech is a broad and slippery concept. Just about anything can be done more cleanly, and it would be surprising if Germans were not the first to do it in industries they lead. The German government has been sending steady green signals to the market for years. It passed a trend-setting recycling law in 1991 and was a pioneer of “feed-in tariffs”, obliging utilities to buy power generated by renewable sources at prices that reflect their higher costs. Now renewables account for 15 per cent of electricity and German manufacturers of solar cells and wind-power turbines are among the world’s leaders.

The place to be

In energy-saving fixes for cars with traditional engines, such as lightweight materials and stop-start brakes, “Germany is worldwide absolutely in front”, says Christian Malorny of McKinsey. Even the Mittelstand has joined the general green mobilisation, in part because its German customers demand it. Licon, which makes machinery for the car industry, puts energy-storing brakes on its own machinery.

Using a broad definition, Roland Berger, a consultancy, reckons that the global green-tech market was worth €1.4 trillion in 2007 and is likely to grow to €3.1 trillion by 2020, outstripping vehicle production. Germany is well positioned, with market shares of 30 per cent in power generation and 20 per cent in “sustainable mobility”. Green tech could create 1m new jobs by 2020. “This is a good and growing story,” says Roland Berger’s Torsten Henzelmann.

But Mrs Merkel’s hopes of conquering green markets are optimistic. Competition there is as hot as anywhere else, as the solar industry is already finding out. The Chinese have jumped in with lower prices. Last year demand slumped along with prices of silicon, the main raw material for solar cells, dealing a double blow to firms locked into higher-priced silicon contracts. Now the government wants to accelerate the cuts in the feed-in tariff for solar power, which is four times the going rate for electricity. Q-Cells, the biggest firm in “Solar Valley” in the eastern German state of Saxony-Anhalt, has already shifted some production to Malaysia. High-value-added photovoltaic products will be made in Germany, says Q-Cells’ Marko Schulz, but simple products will move abroad.

It might seem odd that makers of fast cars for people unfazed by the cost of fuel should worry about retooling them for a greener age, but the Germans reckon greenery plays to their strengths. Besides, they have little choice. Under EU law carmakers have until 2020 to reduce CO2 emissions significantly. BMW is determined that this should cause no loss of Fahrfreude (driving joy). They use the catchphrase “EfficientDynamics” to describe their efforts to reconcile the two. These are mostly “easy things” like fiddling with aerodynamics or pumping coolant “on demand”, says Hans Rathgeber, BMW’s head of vehicle architecture. Improvements to conventional cars will go most of the way towards meeting the EU emissions targets, says McKinsey’s Mr Malorny. The final stretch will require adoption of radically new technologies, such as battery power.

Will German carmakers master a technology that came of age as a power source for video games? The answer matters not only to the industry but also to the country’s future as an innovator. BMW says that electric vehicles will not replace conventional cars or hybrids for the foreseeable future: their range is too short and they take too long to charge. But the company will be ready. It is developing new “mobility concepts” for large cities. Last year it signed an agreement with Bosch, a German parts-maker, and Samsung, a Korean electronics firm, to buy batteries for an urban electric car. What makes a BMW is not the fuel source or even the engine. According to Ulrich Kranz, the company’s resident futurologist, cars are “a huge interactive system” that BMW manages.

But even futurologists can be surprised. Profitable ideas can come from anywhere. That is why Mr Lienkamp at TUM leads a team that is developing its own ideas for a commercially viable electric car. An innovative society is one that hedges its bets by having as many thoughts—and thinkers—as possible.   Read the whole story