Germany’s once-promising solar power sector is facing significant headwinds. According to recent market research conducted by SEB Research, Germany’s solar power production superseded demand, creating a decline in energy prices. This decrease in prices has adversely affected producer profits and stalled any expansion plans in the sector. The future of solar power in Germany was predicted to be extremely bright at one point, but it is currently experiencing a downfall.
HISTORICAL LEADERSHIP AND RECENT DECLINE
Historically a global leader in solar power, Germany slipped to fifth place in 2021 in terms of electricity generated through solar power, as reported by the International Renewable Energy Agency (IRENA). On the other hand, as per IRENA’s 2023 rankings regarding the capacity of solar power, Germany holds the fourth spot.
According to the Fraunhofer Institute of Solar Energies (ISE), the trend of solar energy adaptation started around 2000. It reached its highest point in 2012, with annual additions stretching up to more than 7 gigawatts (GW), according to ISE data. The adaptation of solar power installations climbed until it massively declined between 2015 and 2017. However, the sector picked up pace again, and the government increased the capacity of solar power plants in 2023.
Research by Fraunhofer ISE shows that the increased capacity ranged above 14 Gigawatts (GW), two or more times higher than the initial plans of 9 GW.
FACTORS INFLUENCING EXPANSION
Although the expansion now seems counterproductive, the plans were executed with various aspects such as investor interest, national climate goals, and the political climate of the European Union in mind.
For instance, the Chancellor of Germany, Olaf Scholz, focused on boosting the growth of the solar power sector in the country after analyzing the investor interest demonstrated in the ground-mounted solar PV action in 2023. The volume of bids superseded the auctioned capacity, according to the Federal Network Energy (BNetzA), and a need for expansion was seen.
The push for expansion also aligned with Germany’s objective to achieve energy independence, especially following Russia’s invasion of Ukraine. According to the International Energy Agency, Germany’s Climate Law has set the target to produce 80% of its electricity from renewable sources by 2030, as laid out by the country’s Climate Law.
Also read: EU passes new law which mandates 40% domestic green tech production
SOLAR POWER GROWTH AND CHALLENGES
Since 2000, Germany has seen a need to adopt solar power; thus, the country’s solar panel producers and service companies have significantly increased. Investors rushed to capitalize on the trend, and the country witnessed the growth of its solar power, with the capacity snowballing. From an initial capacity of 6 GW, it went up to 36 GW.
Despite these efforts, Germany’s solar industry has encountered substantial challenges. Between 2013 and 2015, solar photovoltaics expansion plummeted by 80%, primarily due to competition from China, which produces solar panels at relatively lower costs.
According to a report by SolarPower Europe, China leads the race of solar PV with its functional solar power systems. In 2022, China’s capacity reached 403 GW, compared with Germany’s 68 GW. China alone accounted for 34% of the world’s solar capacity in 2022.
Also read: China’s electricity consumption set to surge by 6.5% in 2024
IMPACT OF GLOBAL COMPETITION
Competition from China and other nations led major solar players in Germany, such as Q-Cells and Solon, to draw their shutters, even with trade barriers employed to restrict the damage from foreign competition.
German solar power companies now face intense competition from Asian manufacturers but continue to lead in solar module system integration research and innovative applications. While foreign market leaders focus on large-scale projects, future growth is expected from small-scale prosumers.
These companies now offer integrated solutions for homeowners to store surplus solar energy at home and share or trade electricity with neighbours. With home technology prices falling, they are set to benefit from the trend towards self-supply and decentralized production, reducing reliance on support rates.
