A German planetarium is in crisis when a boom turns into a bust

Germany’s solar panel industry is facing “many concerns” after a slump in consumer demand triggered a wave of recessions and bankruptcies in Europe’s largest and most important market for the sector.

Many companies that transport and install roof panels have gone out of business, taken over or forced to change strategy.

Although the explosion of panels has caused prices to drop significantly for consumers, industry figures warn that they have affected sentiment among investors and threaten to damage a sector that is very important to achieving Europe’s goals. climate goals.

Dries Acke, deputy managing director of industry representative group SolarPower Europe, described the situation as “not a good practice”.

He said: “To some extent this is a consolidation after a few exceptional years. But he added: “You cannot have green change with red numbers. The sector must to be profitable.”

Demand for photovoltaic panels in Germany increased after Russia’s full-scale invasion of Ukraine in 2022, as consumers face rising energy bills. solar energy.

Manufacturers and distributors expanded rapidly, increasing production and distribution capacity, hiring and training employees.

Germany installed 15 gigawatts of solar power by 2023, according to SolarPower Europe – up from 7.4GW last year and a record for any European country.

At the start of Solar Germany “they expected that the double-digit growth rate would continue and that each of them would take a significant share of the market”, said Dina Darshini, who heads the division of solar and LCP Delta battery.

“But in fact, the opposite has happened – the market has shrunk by 2024, there are many players, and everyone is trying to claim a small market.”

The drop raises questions about Germany’s aim to install 19GW of new solar power a year between now and 2030 as part of a plan for Europe’s largest economy to become net-neutral by 2045.

After five years of rapid growth across all types of solar, the pace of growth in the world’s fifth largest market for photovoltaic panels slowed in 2024. Germany added 16GW of new solar capacity in 2024, compared to 15GW in 2023 and 7GW in 2022.

The drop in demand – which has also affected the solar market in Belgium and the Netherlands – is partly due to high interest rates that have raised the cost of consumer financing agreements that are often part of a solar package.

At the same time, the flood of the European market with cheap solar equipment and components from China has created strong competition. That has increased pressure on European manufacturers such as Switzerland’s Meyer Burger, which in September announced it would cut a fifth of its workforceand crowding out the ranks of companies offering rooftops. Many government subsidies have also been gradually reduced.

Zolar, a startup that has raised nearly $300 million in funding since its 2016 launch, announced in September that it was exiting its business of selling solar panels to homeowners and cutting back on 50 percent of its 350 employees.

Chief executive Jamie Heywood described the “unique” situation where the cost of installing a solar system has fallen significantly but, thanks to low energy prices, consumers also have little incentive to switch to solar. . “Although consumers can save money over the life of their system by moving to solar, the payoff is not as attractive as it used to be,” he told the Financial Times.

The company, whose investors include the Singaporean wealth fund GIC, has decided to start offering services to thousands of small local businesses that hold about 80 percent of the German market for to enter the date. “While I’m excited about the opportunities in the installation space, it was a difficult decision to have to make,” said Heywood.

Zolar is not the only company that has struggled. Berlin-based Eigensonne, a solar provider, has declared bankruptcy at the end of 2023. ESS Kempfle, a solar provider in southern Germany, warned in August of “dark clouds” over ‘a industry while announcing a plan to rebuild including job losses.

Industry insiders expect the big German players, including startups such as Enpal and 1Komma5, to survive the turmoil. But they are still not immune to pain.

Enpal’s growth plans, backed by SoftBank and TPG and valued at €2.2bn in 2023, have been hit by a “tumultuous year”, according to the company’s “chief evangelist” Wolfgang Gründinger.

He said that the company has been able to benefit from the revolution that has doubled in the solar power market, and also benefited from differentiating water pumps and smart meters and starting a new electricity business.

However, Gründinger warned, “if many companies go bankrupt, we don’t benefit either. Investors see it and say: the market is moving. And you can’t preach.

Another major player is 1Komma5, worth €1bn by 2023, which stands alone as a one-stop shop for residential green energy, including solar systems.

CEO Philipp Schröder said that despite a tough market, the company’s orders continued to grow in 2024, thanks to its AI-driven tool for optimizing the use of power at home. But it has scaled back M&A for now, preparing to “move forward aggressively” with batteries as well as energy innovation.

There are still bright spots for part of the sun in 2024. The demand has continued to grow for small photovoltaic devices installed on balconies.

Industry figures remain optimistic in the medium to long term, pointing to the fact that although 3mn residential roofs in Germany have solar systems, there is room for more.

“We expect the market to recover,” said LCP Delta’s Darshini, pointing to a large pool of untapped demand from corporate customers and rising electricity prices as German households and businesses they continue to decarbonise.

“It’s unlikely to go back to the heights it was in 2022-23 – unless there’s a big stimulus package or event. You’re likely to see a gradual rise to 2030. ”

That was confirmed by Fabian Heilemann, a Berlin-based venture capitalist whose Aenu fund has backed companies including Zolar.

“In the medium term the market is still there,” he said, insisting that despite concerns about the re-election of Donald Trump and the rise of populist parties in Germany, “the power shift is it will not change”. But he warned: “In the next 12 to 36 months there will be a lot of suffering.”