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German solar sector pulls in big investors

Subsidies for Germany's solar energy industry will see smaller cuts and the sector is set for consolidation in what many say is the crucial next step in its development, writes AFP’s Lenaig Bredoux.

German solar sector pulls in big investors
Photo: DPA

Global electronics group Bosch was first off the mark, announcing the purchase last week of German solar energy equipment producer Ersol. Bosch is set to spend more than 500 million euros ($770 million) for a majority holding in Ersol and could invest up to 1.1 billion if it decides to take full control.

Analysts at the private bank Sal Oppenheim called it “the boldest move so far in what we see as the start of a consolidation process in the solar industry.”

Matthias Fawer of the Swiss bank Sarasin who wrote a study on the sector, had a similar view. “It is a very positive sign for the the photovoltaic industry that a major

company is entering the market,” he told AFP. “This is proof the market is reaching maturity. Others may follow.”

WestLB analyst Peter Wirtz added: “Other large industrial groups are potentially interested in entering the sector as part of their long-term strategy.”

The main reason is solar energy’s growth potential in light of soaring oil prices and a possible depletion of the earth’s fossil fuel resources. “The market is going to grow by more than 20 percent per year over the next decade,” forecast Carsten Körnig, head of the German sector federation BSW.

In Germany alone, which leads Europe in the solar energy field, sales are expected to double within three years to 10 billion euros in 2010, according to a study by the Ifo and EuPD Research institutes. Turnover is then tipped to quadruple by 2020 and to multiply seven-fold by 2030.

“And it is not only in Germany, in every country in the world we realize we don’t have enough energy sources,” Körnig told AFP.

That said, not all solar energy pioneers will profit from the anticipated boom, analysts say. The sector attracted hundreds of entrepreneurs but represents only around one percent of total German energy production. “Many companies are too small,” Wirtz said.

Created for the most part in eastern Germany, companies must compete with Chinese rivals that are also in their early stages but will undoubtedly grow as well, putting pressure on prices. Major investments, meanwhile, are required to develop technology that is still in its infancy.

BSW estimates that solar energy will only be able to compete with fossil fuels in five to seven years. That is the time needed for large, specialised companies to emerge and to attract investment from traditional industrial groups in the automotive and machine tool sectors.

“It is important that during this phase of expansion, we do not lack capital. So that we make the competitive leap successfully,” Körnig said. He said he was satisfied that a draft law adopted which after much debate would extend the period during which the sector benefits from subsidies. “At term, there will be large companies and niche players,” said Wirtz at WestLB.

Meanwhile, jobs in the sector should grow, according to Ifo and EuPD Research, from 41,000 last year to around 110,000 by 2020.

ENERGY

German government announces fresh relief package for high energy costs

With Russia's invasion in Ukraine exacerbating high energy and petrol prices, Germany is set to introduce a second relief package to limit the impact on consumers.

German government announces fresh relief package for high energy costs

The additional package of measures was announced by Economy and Climate Protection Minister Robert Habeck (Greens) on Sunday.

Speaking to DPA, Habeck said the wave of price increases throughout the energy sector were becoming increasingly difficult for households to bear.

“Extremely high heating costs, extremely high electricity prices, and extremely high fuel prices are putting a strain on households, and the lower the income, the more so,” he said. “The German government will therefore launch another relief package.”

The costs of heating and electricity have hit record highs in the past few months due to post-pandemic supply issues. 

This dramatic rise in prices has already prompted the government to introduce a range of measures to ease the burden on households, including abolishing the Renewable Energy Act (EEG) levy earlier than planned, offering grants to low-income households and increasing the commuter allowance. 

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

But since Russia invaded neighbouring Ukraine on February 24th, the attack has been driving up energy prices further, Habeck explained.

He added that fears of supply shortages and speculation on the market were currently making the situation worse. 

How will the package work?

When defining the new relief measures, the Economics Ministry will use three criteria, Habeck revealed. 

Firstly, the measures must span all areas of the energy market, including heating costs, electricity and mobility. 

Heating is the area where households are under the most pressure. The ministry estimates that the gas bill for an average family in an unrenovated one-family house will rise by about €2,000 this year. 

Secondly, the package should include measures to help save energy, such as reducing car emissions or replacing gas heating systems.

Thirdly, market-based incentives should be used to ensure that people who use less energy also have lower costs. 

“The government will now put together the entire package quickly and constructively in a working process,” said Habeck.

Fuel subsidy

The three-point plan outlined by the Green Party politician are not the only relief proposals being considered by the government.

According to reports in German daily Bild, Finance Minister Christian Lindner (FPD) is allegedly considering introducing a state fuel subsidy for car drivers.

The amount of the subsidy – which hasn’t yet been defined – would be deducted from a driver’s bill when paying at the petrol station. 

The operator of the petrol station would then have to submit the receipts to the tax authorities later in order to claim the money back. 

Since the start of the war in Ukraine, fuel prices have risen dramatically in Germany: diesel has gone up by around 66 cents per litre, while a litre of E10 has gone up by around 45 cents.

READ ALSO: EXPLAINED: The everyday products getting more expensive in Germany

As well as support for consumers, the government is currently working on a credit assistance programme to assist German companies that have been hit hard by the EU sanctions against Russia.

As reported by Bild on Saturday, bridging aid is also being discussed for companies that can no longer manage the sharp rise in raw material prices.

In addition, an extension of the shorter working hours (Kurzarbeit) scheme beyond June 30th is allegedly being examined, as well as a further increase in the commuter allowance.

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