China Price War Draining Jobs in Germany’s Solar Valley

When Thomas Behling returned to his home state of Saxony-Anhalt in 2006, he was drawn by a job in the solar industry and the chance to participate in Germany’s renewable energy boom. He was fired in July.

Behling’s employer, Sovello GmbH, produced its last solar panel on Aug. 26, sending 1,000 workers home after attempts to find an investor to save the seven-year-old company failed. Next door, Q-Cells SE, once the world’s largest solar-cell maker, is being acquired by Hanwha Group of South Korea as soaring debt brought it to the brink of bankruptcy. At least 12 German solar companies filed for protection from creditors in the past year.

Their demise, fueled by price competition from China and a cut in German subsidies from April, has hobbled Saxony-Anhalt’s effort to turn a 350-hectare (1.4 square miles) business park near the town of Bitterfeld-Wolfen into Europe’s solar-power nucleus. Even as Chancellor Angela Merkel pins Germany’s exit from nuclear energy on power derived from the sun and wind, a global glut of solar panels is killing the fledgling firms.

“I believed that I was working in an industry with a future,” Behling, a 31-year-old industrial mechanic, said in an interview. “That it’s over now is very sad.”

The European Union yesterday threatened to impose tariffs on solar panels from China, echoing a similar move by the U.S., as it opened a probe into whether Chinese manufacturers are selling them below cost, a practice known as dumping. Tariffs however will come too late for Sovello and many German firms.

Bosch Closing

The closures aren’t confined to Saxony-Anhalt. Robert Bosch GmbH, the world’s biggest car parts manufacturer that has invested at least 1.5 billion euros in its solar division, said last week it would close a plant in the state of Thuringia by the end of the year. First Solar Inc. of the U.S. said in April it would shutter its biggest European manufacturing site in Brandenburg that employs 1,200 people.

China’s share of global crystalline silicon-cell capacity surged to 66 percent last year from 26 percent in 2006, according to Bloomberg New Energy Finance. Germany’s share sank to four percent from 23 percent six years ago.

Crystalline-based cells are the principal device in most solar panels.

Of the world’s 10 biggest solar-cell manufacturers with a combined production capacity of almost 17 gigawatts, eight were mainly based in China and two in Taiwan as of last year, according to data compiled by Bloomberg. JA Solar Holdings Co. Ltd., the biggest cell-maker based in Shanghai, more than tripled its capacity to 2.8 gigawatts from 2009 to 2011.

Chinese panel makers led by Suntech Power Holdings Co. are grabbing market share from European rivals in a price war that drove solar-panel prices down by about 50 percent last year, according to Bloomberg New Energy Finance.

Price Matters

“Quality matters, but what matters more is price,” Heinz Steffen, an analyst at Fairesearch GmbH in Kronberg, said in an Aug. 30 interview.

The Bloomberg Industries Global Large Solar index has fallen about 37 percent this year as German solar companies including Solon SE, Solar Millennium AG and Solarhybrid AG filed for insolvency. That compares with the 2.7 percent gain in the period by the MSCI World Index, a 1,625-member global benchmark.

The collapse flies in the face of a German plan to use renewable energy as a pillar to rebuild the economy in the eastern part of the country after reunification in 1990.

The policy helped turn a landscape that in the 1980s was dotted with coal-fired power stations that emitted fly ash and chemical plants that pumped waste into local rivers, earning it the title of Europe’s dirtiest region, into a clean-energy hub.

Solar Survives

The government pumped about 375 billion euros ($471 billion) into eastern Germany in the 20 years after reunification, according to a study by the Ifo Institute for Economic Research in Dresden. It led industrial nations in subsidizing renewable energy generators, which supplied 25 percent of the nation’s power in the first half of this year.

German Environment Minister Peter Altmaier said on Aug. 16 that “it’s in Germany’s interest” that the domestic solar industry survives.

Germany’s introduction in 2004 of the world’s first above- market rates for solar energy turned the country into the single-biggest photovoltaic market that same year, prompting Spain, Britain and Japan to follow suit with similar initiatives aimed at generating “green jobs.”

Q-Cells produced its first solar cell in 2001, with 19 workers. Six years later, it had more than 1,700 employees and generated annual sales of 860 million euros. By 2008, it had overtaken Sharp Corp. of Japan as the world’s biggest producer of solar cells.

Purge Overcapacity

“The solar industry needs this storm to purge some of the overcapacities, not just in Germany but in Asia too,” Fairesearch’s Steffen said. “German solar companies still have excellent intellectual property, so there’s hope that some will survive.”

While German cell- and panel makers have largely stayed domestic, the U.S. solar industry, led by First Solar of Arizona, is focusing on thin-film technology and is producing mainly in Southeast Asia.

The U.S. government mainly supports installations with a 30 percent investment tax credit for solar projects through 2016 and has backed projects with billions of dollars in federal loan guarantees. First Solar got $3.1 billion in such guarantees for three projects it later sold.

As Chinese companies took market share from Q-Cells and the failed Solyndra LLC of the U.S. in the last few years, they’ve become burdened with billions of dollars in debt amid the global drop in profit margins they helped instigate.

Chinese Financing

State-owned China Development Bank Corp. has offered at least $47.3 billion in financing since 2010 to support the country’s wind and solar manufacturers, though credit lines were only been partially tapped, according to Bloomberg New Energy Finance.

Employment in Germany’s clean energy industry probably will “stagnate” this year after creating about 31,600 jobs a year since 2004, Claudia Kemfert, a senior energy analyst at the DIW economic institute in Berlin, said in April.

Unemployment in Saxony-Anhalt dropped from about 20.5 percent in 2003 to 11.6 percent last year. That’s still more than Germany’s 6.8 percent national average. The state’s Economy Ministry estimates that as many as 6,000 positions at local suppliers, including glass makers, are dependent on the solar industry.

All Not Lost

Rainer Haseloff, the governor of Saxony-Anhalt, and state Economy Minister Birgitta Wolff traveled to South Korea on Aug. 29 to meet with potential investors, Beate Hagen, an economy ministry spokeswoman, said.

“The solar industry is very important for Saxony-Anhalt and for eastern Germany as a whole,” Hagen said by phone on Aug. 28. “We have the entire solar value chain in our region and we’re doing everything possible so that it stays here.”

Still, all is not lost. Hanergy Holding Group, a Chinese renewableenergy operator, agreed in June to buy Solibro, a thin-film unit of Q-Cells, pledging to raise production at its plant in Germany’s Solar Valley to 100 megawatts.

The Fraunhofer Center for Silicon Photovoltaics CSP in nearby Halle is conducting research into new technologies, and Calyxo GmbH, a maker of thin-film solar panels, plans to more than triple its output to 80 megawatts by the end of this year.

Thin-Film Technology

“Thin-film has a very attractive future,” because the technology’s costs will continuously fall, Florian Holzapfel, the company’s chief executive officer, said in an interview with Photovoltaics International.

Thin-film panels are made by depositing semiconducting material such as cadmium telluride onto metal or glass. While cheaper, they’re less efficient at converting sunlight to power than traditional, polysilicon-based panels. The falling cost of polysilicon has narrowed the price gap between the technologies.

The creditors of Q-Cells on Aug. 29 backed a takeover bid from Hanwha, which pledged to keep manufacturing and research in the Solar Valley and keep 1,250 of the company’s 1,550 global jobs.

“We’re seeing light at the end of the tunnel for Solar Valley,” Hagen said.

Behling, who operated and monitored Sovello’s machines for the past six years, is optimistic he can start working elsewhere by October. While three local companies contacted him after he sent around applications, none of his potential new employers works in the renewable energy industry, he said.

“In life, you have to move on,” he said.

Copyright 2012 Bloomberg

Lead image: Job notice via Shutterstock

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