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Deeply in the red, hardly any demand: The German solar industry is the big loser of the green energy transition. The blame lies not only with competitors from Asia, but also German subsidies.

After the nuclear disaster in Japan and the phasing out of nuclear power in Germany, it seemed obvious that renewable energies in Germany would experience a boom. And it seemed the solar industry would benefit particularly – solar cells are a symbol of green electricity in this country. But dark clouds are gathering in the sky: The solar energy industry is in crisis and threatens to become the loser in the energy revolution.

Example Q-Cells: A few months ago the company from Saxony-Anhalt was seen as the industry leader and was honoured for its strong growth in 2009 even as the “Business of the Year.” Nowadays, almost only bad news emerges from the headquarters of the solar cell manufacturer. In the second quarter of the year Q-Cells has made a loss of approximately 355 million Euros. “2011 will be a difficult year,” says CEO Nedim Cen and announced a group restructuring. The production of solar cells is going to be concentrated in Malaysia and half the capacity in Germany will be closed. Administrative costs are reduced by 30 percent. And jobs will be shed too – how many is still open.

Deep red figures

Solon also has problems. Due to weak demand, the manufacturer of solar modules has widened his loss to 63 million Euros in the first half. Sales fell by eight percent to 222 million Euros. The troubled company must save around 70 million Euros in order to get back to profitability. But the creditors are already getting impatient, Solon-chief Stefan Säuberlich has been negotiating with the banks for a loan extension for months.

Bad news also comes from Phoenix, a solar photovoltaic company. Because of the low demand for solar farms, production is not busy, in the storage buildings the goods are pilling up. In the first half year, the company had sales of 141 million Euros; about 60 percent less than last year. Conergy based in Hamburg made significant losses too. Although the solar company increased its sales in the first quarter by 40 percent, Conergy made a net loss of 13.5 million Euros. The SMA Solar Technology Group has made an operating profit of 90 million Euros in the second quarter but the profit 127.5 million last year. Despite the profit reduction, the company based in Niestetal has clearly exceeded the analysts’ expectations.

Only one solar energy company could report a profit: Solar World in Bonn. Strong U.S. business gave the company a gain of 22.4 million Euros. Nevertheless, sales declined in the first half of the year – from 608 to 535 million Euros.

Instead of being celebrated as the heroes of the energy revolution, the German solar industry is struggling to survive. Causing the problem are rising commodity costs, price reductions and subsidy cuts, according to the manufacturers. Earlier this year, the federal government cut the reimbursement for solar power that is fed into the grid – from 33 to 28.74 cents per kilowatt hour.

The competition pushes up a gear

Additionally, the market environment is weak, complain the manufacturers. Although Germany is the world’s largest solar market with around 54 percent of all systems installed worldwide, almost every second solar system installed in Germany comes from China. Wolfgang Hummel, an energy expert at the Berlin University of Applied Sciences (HTW), expects a “massive price wars and cutthroat competition” – because the Asian companies is moving up a gear and expand their capacities.

By the end of the year, 85 percent of solar cells produced worldwide will come from China, the British market researcher IMS Research has calculated. German solar companies that are already in financial difficulties are threatened in their existence: “The danger is great that some companies will disappear from the market,” says energy expert HTW Hummel.

The German solar manufacturers are not only victims of this development; they are also the cause of it. Because their production was almost always sold out due to high levels of subsidies in Germany, most companies have failed to reduce their costs in time. They have targeted almost no new markets and have not adjusted to the strong competition from Asia. In short: The German solar companies have become too expensive, too slow and too unimaginative.

Wirtschaftswoche, 11 August 2011

Tranl. Philipp Mueller