Asian competitors shadow German solar industry

photo by Theodore Scott

With tremendous government backing and support, Chinese firms are quickly catching up to the solar technology technology standards of the Germans and producing them at a much cheaper price. In fact, in some cases Chinese firms are producing the same solar panels at over 60% less the cost of their German costs. If this trend continues, it will spell disaster for the German solar industry but a positive effect to the global consumer who will have access to affordable renewable energy for their own homes.

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Asian competitors shadow German solar industry
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Germany’s solar power industry, until recently the world leader in the technology, is facing an unprecedented crisis, analysts say, outshone by cheaper competitors from Asia, most notably Chinese firms.

Germany’s solar power industry, until recently the world leader in the technology, is facing an unprecedented crisis, analysts say, outshone by cheaper competitors from Asia, most notably Chinese firms.

Q-Cells, the world’s biggest solar cell producer, last week issued a far from glowing set of results, with losses of 700 million euros (984 million dollars) in the first half of the year.

As a result, the German firm said it would cut 500 jobs from its workforce of 2,600 and put others on part-time working arrangements.

The crisis in the German solar industry is affecting small companies as well as giants such as Q-Cells. Only three months ago, start-up Sunline declared bankruptcy with the loss of all its 78 employees.

A glance at the TecDax, Germany’s tech-heavy stock market index, nicknamed “SunDax” for the predominance of solar firms, tells the story, with some companies losing around 30 percent of their value since the start of 2008.

“The fact is that Germany is losing more and more of its market leading position in renewable energy production to the United States and China,” said Matthias Fawer from Swiss bank Sarasin, quoted in German weekly Die Zeit.

“Asian cell and module producers are going to squeeze out the Germans,” Anne Kreutzmann, the chief editor of solar trade newspaper Photon, told the Financial Times Deutschland.

The main reason is simple: Chinese solar power companies are able to produce cells much more cheaply, due to lower labour costs and also the plummeting price for silicon, the raw material for solar cell manufacture.

Whereas German firms are tied in to long-term contracts for silicon deliveries, Chinese firms have been sourcing it from the spot market, where the price has dropped by around 70 percent in the past few months.

According to a survey from Photon Consulting, while it costs a German firm such as Ersol 1.01 dollars per watt to produce a solar cell, Chinese company Suntech can manufacture the same cell for 35 cents per watt.

All in all, production costs for the solar industry are as much as 30 percent lower in China than in Germany, according to a UBS study.

Chinese firms also benefit from state support and the effect has been to push prices for solar cells down significantly in the past few years.

Adding to its troubles, the German solar industry’s export market, which accounts for over 40 percent of turnover, is beginning to dry up in key areas.

For example, following the decision by the Spanish government to stop subsidies for installing solar panels, the market there, which had previously enjoyed 200-percent growth rates, has crashed.

The consequences could be severe for the industry, which in 2008 employed around 75,000 people and turned over approximately seven billion euros, according to the latest data from industry association BSW.

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