The rise and fall of German PV

At the highpoint of its solar craze in the mid-2000s, Germany sought to establish long-term global leadership in the sector. Politicians encouraged solar companies to set up shop in eastern German regions that had been hit hard by the deindustrialisation that followed the fall of the Berlin Wall.

But the boom was short-lived. Worldwide overcapacity, substantial feed-in-tariff cuts and brutal declines in panel prices have driven several high-profile German solar firms to bankruptcy, while others have had to endure painful restructurings to survive.

Q-Cells, the world’s leading PV manufacturer five years ago, became insolvent last year and was taken over by South Korean conglomerate Hanwha — which is now using the well-respected Q-Cells brand name in much of its solar business around the globe.

The once-mighty SolarWorld has seen its share price fall from a high of $66.50 in 2007 to under $0.60 last month after a series of huge losses. It is currently in negotiations with a Qatari investor that could end up giving its creditors a major say in the company. SolarWorld’s net debt had swelled to an unsustainable €780m ($1.02bn) in 2012, from €718m a year earlier, and doubts linger over whether the company can make it through the current crisis.

“Europe as a manufacturing location is in trouble,” says Matthias Fawer, an analyst at Swiss bank Sarasin. “Companies such as SolarWorld will continue to struggle.”

Germany’s industrial giants have started to shun the solar sector after a brief period of enthusiasm. Siemens said last year that it will exit its solar business, which is expected to lose about €300m this year. So far, Siemens hasn’t found a buyer. If the solar business cannot be sold, the company may simply ramp it down, Siemens boss Peter Löscher warned in May.

Bosch also recently pulled the plug on its solar adventure after it piled up €2.4bn in losses over the past four years. It too is looking for a buyer, to save more than 3,000 jobs.

Even if the EU tariff on Chinese solar products goes ahead, the issue of overcapacity will remain.

“Once module overcapacities have been reduced, and when the market will have gone through an expected adjustment this year, then we’ll see who is left,” says Karsten von Blumenthal, a clean-tech analyst at First Berlin Equity Research.

And as a mature solar market, Germany cannot grow at the same pace forever, says Conergy chief executive Philip Comberg.

“The relative importance of Germany will diminish as new countries are joining in and the world market grows with them,” he tells Recharge.

One thing is clear: even after a consolidation, and despite anti-dumping duties, profit margins will remain quite low in solar manufacturing, raising the question of whether it is even worth producing in Germany.

As Von Blumenthal predicts: “We’ll end up with a much smaller solar industry in Germany.”