Germany: The sun goes down on solar
4 April 2012
The company was one of the drivers of Germany’s energy turn-about. Today, solar cell manufacturer Q-Cells is the fourth and most symbolic of the solar energy companies to be sliding into bankruptcy. Competitive pressure from China can be blamed, but so too can Berlin’s subsidies policy.
It wasn’t that long ago that Q-Cells, once the biggest solar cell manufacturer in the world, was seen as an energy company of the future. Even in the midst of the financial crisis it was still considered a money-making machine and candidate for DAX, a blue-chip stock market index trading at the Frankfurt stock exchange.
It was around Q-Cells’ manufacturing plants in the town of Bitterfeld-Wolfen, in a former brown-coal area in Saxony-Anhalt, that the so-called Solar Valley, named after California's Silicon Valley, grew up.
Since then it has grown a lot darker in Solar Valley. With the collapse of Q-Cells, the valley is going through its darkest hour. The energy company of the future is threatening to become an energy company with no future. In 2011 Q-Cells lost €846 million. Today Solar Valley is threatened with a clearcutting of jobs, though many of the 2,200 employees of Q-Cells are still at work.
Thousands of small companies will suffer
Bankruptcy is a new shock for the German solar industry. This is the fourth major bankruptcy so far, exposing the serious crisis in the industry and making it clear just how far behind Germany's solar companies have been left by their Asian competitors – despite the billions in funding. And now, of all times, just when solar power is gradually becoming competitive. The blows keep coming faster.
In December 2011, two industry giants slid into bankruptcy: the Berlin-based Solon, and Erlangen’s Solar Millennium. At Solon, the Indian company Microsol took over the core business, and of nearly 1,000 former employees only around 400 still have their jobs. The demise of Solar Millennium hit thousands of small investors.
In March 2012, more companies reported bankruptcy. One was Scheuten Solar, which just eight years ago in Freiburg unveiled the largest solar panel in the world.
The German solar energy crisis is hitting all those companies that made the wrong business decisions – those that were aware that the market was changing at a record pace, but who were too late or too slow to react.
The solar subsidies were a highly effective political tool for jump-starting the new eco-technology, but now, in a quickly maturing market, they are swiftly losing their significance. This is not so much because the government cut back on the funding, however. For those companies that made mistakes in management years ago, the subsidies could not have saved them anyway.
Q-Cells is the best example. The company first started to try to shift more of its production to Malaysia in the summer of 2011 – but it had already been clear for a long time that the Germans could not compete with the Asian producers.
Products that are easily copied
Warnings had been in the air for years. As a product, after all, solar cells are technologically relatively simple to produce and to copy. Although the production is done by machine, in a country like China almost everything in a factory is cheaper, from the bricks in the walls to the cleaning staff. The solar industry is also currently enjoying a high priority in Beijing, and many manufacturers are tapping into loans from the Chinese government on very good terms.
Companies like Q-Cells that were established in Germany have not had a hope for years; they simply have not felt the full weight of the competition. It was the subsidies for solar power between 2009 and 2011 that caused demand to skyrocket, a demand that grew so fast that even competitors Q-Cells had left behind were able to shift huge volumes of their modules.
Ironically, it was the boom in subsidies that proved the German solar companies’ undoing, because the great demand fuelled the industrial mass production of cells, particularly in China.
In 2011 alone prices for modules dropped by 30 to 40 percent – far faster than the Germans were able to push down production costs – and strong falls in price are also expected for 2012. And the competitive advantage of the Asians over the Germans is still growing. In 2008 only 33 percent of world production came from China; last year that had risen to 57 percent.
On April 1, the Federal Government will make significant cuts to the solar subsidies, and over the medium term competition will likely arrive in other areas of the German solar industry as well – for companies such as Centrotherm, which builds machines that make solar cells. Although developing such machines is more complex, more and more Asian machine manufacturers are now exhibiting their own products at industry trade shows such as Intersolar.
There are, though, German solar companies that have not just cashed in on the high subsidies, but that have used them to develop a competitive business model. One is the Juwi company, which has drawn up plans for extensive solar farms and is developing a second business area in wind energy.
In addition, new businesses can be expected to crop up in the German solar market, especially in the service sector. Some may be companies that take over the maintenance of solar parks, or direct marketers that help plant operators sell their electricity on the energy exchange.
In Germany’s Solar Valley, though, most of the lights may be out soon.
Translated from the German by Anton Baer