Solar has been in the news of late, as Chancellor Angela Merkel's centre-right coalition government agreed to legislation that, if carried out, will reduce the feed-in tariff for solar energy by an additional 16 percent starting July 1. Supporters of the measure argue that the cost of solar technology has fallen faster than the feed-in tariff has decreased. The solar industry counters that an additional eight percent reduction in the feed-in tariff would be a reasonable response to this fall in prices. They are quick to point out the feed-in tariff system's success, which is predicated on the expectation that the cost of technology will fall as demand rises. But they argue that 16 percent reduction could aggravate a crisis already hitting solar companies.
The German solar voltaic industry, which was booming just a few years ago, has lost global market share as Chinese companies like Suntech undercut German producers with cheaper products. Only two German companies, SolarWorld and Solon, are left in the world's top ten. Conergy and Q-Cells, two important German solar players, both suffered setbacks the last year. “The basic technology is easy to copy, and it's all about the mass market to lower costs,” said Jörg Mayer from the Renewable Energy Agency in Berlin. “This is the perfect situation for Chinese to come in and close the gap.”
Still, there is good news in the industry, which had a turnover of €9.75 billion, not including exports, at last count. And the industry enjoys popular support even if political backing is flagging.
Solar panel producers in Germany are, in some ways, suffering from their own success. Having kick-started the global market for photovoltaics, German companies are now forced to compete with a growing number of international competitors. And global markets, still dependent on various governmental incentives, can be fickle. Last year, for example, Spain capped subsidies for solar panel installation at a fifth of what it had supported in 2008, so panels produced for the Spanish market weren't sold. “In worldwide terms, there's a huge production capacity,” said Mayer. “We need a unique selling proposition – for example, better quality, a better technology for turning solar energy into electricity.”
At home, some grumble that the solar companies are making too much money with current feed-in tariff rates. The CSU, the Bavarian sister party to Merkel's conservative Christian Democrats, on the other hand, is pushing for a lower feed-in tariff because they say photovoltaic solar farms are ugly and a blight on Bavaria's beautiful landscapes. Negotiations are ongoing, but the German Solar Industry Association isn't unduly worried about the outcome. “Let me ask you which you'd rather have out your window,” said David Wedepohl, spokesman for the German Solar Industry Association. “A coal plant? Or a solar field?”
The much smaller solar thermal industry, which produces heat rather than electricity, does not use a feed-in tariff. Heat from solar thermal tiles can't be transported (or ‘fed-in' to any grid), so solar thermal is used exclusively for heating on-site. Solar thermal tiles, which collect warmth rather than light from the sun, have been promoted using a combination of grants and loans – a strategy, said Mayer, that has worked well, but will not as effective as it could be as long as it remains largely voluntary.
Today, there are 1.2 million solar thermal rooftops in Germany, and a law passed in 2009 requires a minimum of 15 percent of any new house's heat be supplied by solar thermal tiles. Will this have a large impact? Mayer thinks not. “We have a shrinking population,” he said. “We passed a very good law that will impact an insignificant market. What would be more important is regulation for existing buildings.”
Still, the solar thermal market is on the rise, growing 60 percent in the EU and Switzerland in 2008.