Germany’s solar power industry is the latest to flop as subsidies ebb.
The Wall Street Journal editorializes,
This week Solon became the first publicly traded solar-power company to file for bankruptcy in Germany. Despite cost-cutting and a round of last-minute negotiations, the Berlin-based photovoltaic equipment maker can’t make its deadline to repay €275 million in loans.
You could call Solon a European version of Solyndra, the California solar-cell maker that filed for bankruptcy in September after blowing through a $535 million loan guaranteed by U.S. taxpayers. But Solon also represents a broader bust in alternative-energy sources that’s been more than a decade in the making.
Germany’s Northern European climate never made it an obvious boom-site for solar power. Nevertheless, since 1990 Germany has been imposing some form of what are now called “feed-in tariffs”—mandates that force utilities to pay above-market prices for wind, solar and other so-called renewable sources of energy. These guaranteed long-term prices deliver renewable-powered electricity at retail prices 46% above conventional sources, according to research by Bloomberg New Energy Finance.
For that premium, Germans bought an electricity market that relies on renewable energy for more than 20% of capacity today, compared to 6.3% in 2000. They have installed more solar panels than any other country in the world. Between 2010 and 2011, the number of photovoltaic installations in Germany increased 76%, according to the German Association of Energy and Water Industries.
As the solar glut grew, the government of Angela Merkel decided it wouldn’t make Germans subsidize high-cost energy forever. Berlin has been ratcheting down the mandated tariffs for the last few years, and in October it said the price-floor for solar power would drop by 15% in 2012.
Meanwhile, China continues to produce solar cells and other equipment far more cheaply than its European and American competitors—for which it has earned an anti-dumping investigation by the U.S. Commerce Department. Solon’s bankruptcy comes after months of job cuts and restructuring talks across the German industry.
The only wonder in all this is why anyone is surprised. Spain offered a gloomy precursor to the Solon bust in 2008, when it reduced its own solar giveaways and saw the industry tank. German solar-cell manufacturer Q-Cells is cutting 250 jobs and said in November it expects its full-year operating loss to come to “hundreds of millions” of euros. The same month Bonn-based SolarWorld announced a 30% revenue drop from the year before and continued to trim jobs.
Over in Britain, solar firms SolarCentury and HomeSun remain in court, trying to force their government to abandon its plans to cut feed-in tariffs. If they succeed, they’ll buy themselves a few more years with enough subsidies to keep them off the Solyndra/Solon path. Maybe they’d be better off dropping the lawyers and adopting a business plan that makes profit less dependent on political favor.