Focus on new markets instead of politics

The German solar sector doesn’t have an easy job, at least if you listen to some well-known representatives of it. Dumping prices from China, lacking political protection and the cutbacks on feed in tariffs are the reasons for the downfall of some in the past very successful companies. But are these the real reasons for the downfall?

Beginning of May 2017, the German Solarworld filed for bankruptcy. The board of directors concluded, that there wasn’t a positive prognosis for the company anymore. There argumentation was mainly based on: Price drops in the international markets. Looking at the global prices of solar modules, this comes as no surprise. Prices have fallen in 2016 alone by approximately 20%. But are falling prices really the reason for some former high-performing companies filing for bankruptcy, where Solarworld is just the latest example of?

Why did none of the failing companies see the signs of the time?

One can argue if these signs were recognised or not. Whether the company failed due to internal resistance, or to Management, who thought to continuously be successful if the lobbying is done to keep the market (and by this, I mean political support) stable. Or whether it was the fact, that back in the days better market conditions existed, to continue doing business as usual. The actual speed of production increases outside of Germany could have been a first indicator for Germany companies that they will lose their competitive edge very soon. Economies of scale is the key word here – basic knowledge of every undergraduate business student.

From a todays perspective it seems obvious, but back then and even today, some companies struggle to find alternatives to their business models. From the module manufacturer to the project developer or even the operator is a transition that was impossible for many to even think of. But, there were some companies, that understood early, that a pure product sale, especially in modules, will result in a price war in the long run. As soon as this was clear, some did not manage to make the transition. Successful examples though are SMA AG, a successful inverter manufacturer, who setup the SMA Sunbelt Energy GmbH as a daughter company to develop projects and perform management of project construction, resulting in a higher number of inverters sold as well as built up of important know-how. Another successful example is D-Hybrid, a company resulting out of the insolvency of the wholesaler Donauer, and specialising on hybrid projects, having a solid market position right now.

How can the solar sector in Germany grow in the future?

One thing is clear: To win money in the solar sector with standard products will not be easier in the future due to the high price pressure coming from Asia. For many companies, the goal must be to reposition. This way, the company can focus on underserved niches or focus on an addition in it’s value chain from a product manufacturer to a service oriented company. Also, a reorientation to new markets seems logical. There are many regions, in which solar energy is a viable alternative to the grid energy even without subsidies. High electrical energy costs and high specific yields per installed kWp are the key to the success of solar PV technology.

Taking advantage of the real boom

It comes as no surprise, that the sunbelt region, which is the sunny belt around the equator, is currently experiencing a solar technology gold rush: The conditions are ideal to realise projects without subsidies and many companies have entered these emerging markets already. Whether it is in South America, Sub-Sahara Africa or South-East Asia.

To not be prone to the same fate again that happened to the German companies in markets based on a feed-in-tariff, they must focus from the beginning. Focus on parts of the value chain, in which know-how and specific knowledge is more valuable then low-cost components. On business models, that are viable independent of political regulations, to remain intact even after possible changes to the support mechanisms. Away from pure sale of products or construction of systems, to long-term viable business models, for example the operation of systems. Or alternatively, the offer of services in this area.

These models will be influenced also by future dumping prices – but not to the negative but rather positive!

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Image Source: Wagdy by Flickr
The article was originally posted on the Energiezukunft.de portal (in German).

Martin Baart

Renewable energy enthusiast. My goal is to reach out and make people aware of the opportunities of renewable energy solutions, especially in developing countries. Word by word.

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