by Sascha Rentzing

The photovoltaic industry is increasingly under pressure: On the one hand, additional capping of feed-in tariffs become more and more probable while on the other hand Chinese suppliers are beginning to crowd the German market with inexpensive yet technically superior modules. Can German manufacturers still hold their ground?

The fact that the German photovoltaic (PV) industry is willing to make concessions in regard to the production of solar power is an absolute novelty. The tariff reduction set forth in the renewable energy bill (EEG) could be cut by a further 5 percent by mid-2010, according to Matthias Willenbacher, member of the board at the German Solar Industry Association. The tariffs were already reduced at the turn of the year as scheduled – by 9 percent for roof systems and 11 percent for large-scale outdoor power plants. According to Willenbacher, an additional step may be possible on July 1.

For manufacturers, however, the time of big profits is over. In spite of mass production expansion and technological progress, manufacturing costs have not dropped anywhere near as much as sales prices for the modules. This has shrunk their margins. “The price level is not satisfactory,” says Waldmann. And there’s no trend reversal in sight. Since the global module supply is larger than the demand, the industry has no chance to push higher prices through for the time being. While it’s true that the boom in Germany is diminishing the huge supply fabricated by manufacturers during the crisis, it will not disappear entirely. According to market researcher iSupply, 8.55 GW worth of modules were produced in 2009, but only 5.16 GW installed. This leaves 3.39 GW for the international industry to depreciate.

The situation is not likely to relax in 2010: It is expected that 14.56 GW of modules will be manufactured globally and only 8.34 GW installed. And markets continue to develop slowly. Whether France, Italy or Greece, none of the Mediterranean countries will even come close to the GW l

imit with their annexes. In China and Japan the installation numbers also bob around in the lower three-digit MW region. According to experts, only the United States is on its way to becoming a true mass market: For 2010, the European Photovoltaic Industry Association (EPIA) expects installations of at least one GW there. But even with that a huge amount of modules will remain for Germany, as Bernd Schüßler, spokesperson for Photon magazine, emphasizes.

Equipment from GermanyThe companies could produce less in order to alleviate pressure – this, however, seems to be taboo. Thin-film market leader First Solar intends to manufacture 1.55 GW in 2010 – 550 MW more than in the previous year. And, after slowed growth in 2009, the Chinese PV concern Suntech plans to increase its production by as much as 900 MW to 1.6 GW of cry

If Berlin curbs annexing with massive additional cuts in solar subventions, the pressure on the industry will intensify. German companies could easily get crushed between the price-aggressive competitors from the East and West under these circumstances. Particularly the Chinese have a decisive competitive advantage. “Companies such as Suntech and Yingli can produce more cost-effectively than their European competitors,” explained Jess Pichel, an analyst at the U.S. investment bank Piper Jaffray. This is possible due to lower salaries, as well as a technological advantage in regard to innovation and productivity. “China’s top manufacturers produce with state-of-the-art fabrication technology from Germany,” says Pichel. And the Asians use their advantage mercilessly in the contest for market shares. Several companies have already announced massive price reductions for 2010.

While it does hold true that U.S. and Chinese rivals ignite competition, the German solar industry is not entirely blameless for their difficult situation.

“Several companies lost sight of their costs during the boom phase,” explains Götz Fischbeck, an analyst with BHF Bank in Frankfurt. They received, for example, sufficient supplies of raw materials at relatively low prices during the silicon shortage thanks to long-term contracts with chemical companies. The Asian newcomers, by contrast, were forced to purchase silicon at much higher prices on the spot market and thus to keep other costs at a minimum in order to operate profitably. “The Chinese are now profiting from this,” Fischbeck adds.

So far the German solar industry has not found a suitable answer for the strong Asians. The first reaction was to demand measures against alleged price dumping, and quality, social and environmental standards. Meanwhile, however, the industry has recognized that this is not the way to go. According to Andreas Hänel, head of system supplier Phönix, one should press for more innovations and quickly cut costs.

Innovations Again in FocusQ-Cells, which with a loss of close to 1 billion EUR in the first three quarters of 2009 is among the biggest losers of the financial crisis, notes: The company plans to introduce a multi-crystalline “next-generation solar cell” in 2010 that transforms at least 17 percent of sunlight into electricity. Their current multi-cells manage 15.5 to 16.4 percent. At the same time, Q-Cells subsidiary Solibro is creating furor in the thin-film field with the development of a module of copper, indium, gallium and selenium (GICS) that features an efficiency factor of 12.3 percent. No other thin-film panel achieves higher efficiency. “We’re doing everything we can to advance our technological leadership,” says Q-Cells technologist Peter Wawer. Meanwhile, Solarworld, located in Freiburg, Germany, is establishing a “technology campus unparalleled in Europe.” Next to the already completed wafer technical school, a new cell and module research center is being set up with the intention that “tomorrow’s technologies” be developed here starting in 2010.

During their innovation offensive, the companies can draw on solar scientific input from renowned facilities such as the Fraunhofer Institute for Solar Energy Systems (ISE) in Freiburg, or the Centre for Solar Energy and Hydrogen Research (ZSW) in Stuttgart. The researchers at these facilities have developed various new cell concepts in the past few years that are waiting for industrial implementation. Manufacturers can find manufacturing equipment to this end more or less directly in front of their factory doors: German suppliers are in demand around the world for their machines, robots and solutions for turnkey solar plants and could help their neighboring comrades-in-arms to advance their production technology with their offerings.

From September 28 to  October 1, 2010, PV manufacturers can get an overview of the machine and equipment manufacturers’ product ranges at “solarpeq – International Trade Fair for Solar Production Equipment,” to be held in Düsseldorf, Germany. Companies that offer production technology for thin-film or crystalline PV – whether machines and equipment for the manufacture of solar products or component and raw material suppliers – will exhibit at this event.

The solar industry’s interest in modern equipment “made in Germany” may well already have increased short-term: Manufacturers have recognized that they must promote innovation with complete commitment in order to quickly reduce their costs. Otherwise they will not be able to stand up to their U.S. and Asian competitors.

Sascha Rentzing is a freelance writer. This article appears courtesy of Messe Düsseldorf North America, organizers of solarpeq 2010/glasstec 2010.

Chinese freighters loaded with solar technology head into the port at Hamburg with increasing regularity. (Photo courtesy of www.mediaserver.hamburg.de/C. Spahrbier)

Chinese module manufacturer Suntech produces primarily for the German market. (Photo courtesy of Suntech)

Brandenburg Prime Minister, Matthias Platzeck, and former Federal Minister of Transportation, Wolfgang Tiefensee, install the last module at Solarpark Liebrose in August 2009. (Photo courtesy of juwi)

German manufacturers score on the global market due to the quality of their modules. (Photo courtesy of BMU/transit/Busse)

Recently, numerous modules were fabricated in large-scale outdoor power plants, for example in Solarpark Liebrose near Cottbus. (Photo courtesy of First Solar/juwi)