Germany used to be one of the cornerstones of the European solar industry. But times have changed and what has so far been considered as the avant-garde of renewable energies is facing a grim reality.
A number of German solar panel producers have run into serious economic troubles. The most recent case is the company Q-Cells which filed for bankruptcy earlier this week. For some time Q-Cells used to be the biggest German producer of solar modules.
Another company, Phoenix Solar, is struggling with massive financial problems. The same is true for Conergy which, in addition, suffered from serious management errors. Solon, Solar Millenium and Solarhybrid filed for bankruptcy during the past four months. Even the brightest star on the German sky, Solarworld, is no longer as shiny as it used to be due to a changing economic environment.
Pampered by abundant subsidies Germany´s solar industry saw a massive growth during the past 10 years. However, recently two crucial factors came into play which led to a substantial shift. On the one hand, there was a discussion in Germany as to how much money should be pumped into renewable energies. Economic analyses revealed that more than EUR 100 billion have been directed towards renewables so far. With ever growing installed capacities this amount is bound to grow over the coming years, thus putting a substantial burden on electricity consumers who, in the end, are paying the bill. As a consequence and in order to keep subsidies under control feed-in tariffs have been cut drastically recently.
On the other hand, German producers of solar modules are increasingly suffering from competitors, especially in China. This led to a slump in prices for PV modules (more than 70 % since 2009) which, in turn, increased the pressure on German companies. Being under pressure from two sides, PV producers are now facing a different reality than at the time when solar industry took off.
The figure below shows the development of electricity produced from PV.
Although these the growth rates were impressive, starting from virtually zero in the year 2000, the contribution of PV to the power grid remained rather modest (3 % in 2011). Given the low share of PV in electricity production, the question arises what level of subsidies is considered to be justified. One may even wonder if feed-in tariffs are to be abolished at all.
What is going to happen? Once the market forces have done their work, PV will continue its upward trend, though at a more moderate pace. But most importantly, the vast majority of PV modules will come from China, thus leaving not much room for production in Europe. What is bad news for the solar industry is, in turn, good news for the consumers and for investors who will see lower investment expenses as the prices for modules have fallen dramatically.
PV as such is not to be blamed for the current problems. On the contrary, PV fills a useful niche in the power grid, but not more than that. However, what is to be blamed is a legal framework which created the illusion of a quasi risk-free economy where feed-in tariffs were guaranteed for 20 years and even paid for non-produced electricity in case of network problems caused by the renewables themselves. The price for this illusion was first to be paid by the consumers and now by the people losing their jobs in the companies going bankrupt.
Photovoltaics has certainly a future in Germany as in other parts of Europe. However, its growth needs to be based on a sound economic environment. This process is now under way. It goes without saying that PV will always be a minor player in the field. Nevertheless, it has a role to play and maybe, on a smaller scale and by using smart storage technologies, it may develop into a key power source for local communities.