Chasing the Sun - German and Chinese Solar Firms Battle for Survival, Obama pushes for Solar Energy.(
Spiegel).Germany was proud of its supposedly future-proof solar industry and subsidized it to the hilt. But then the Chinese got in on the act and started making much cheaper solar cells.
Now, following a glut in production, companies in both countries are fighting for survival.
Michael Zhu gazes at the watch he's placed in front of him on the glass table in his office. He'll have to get a move on. He has to walk over to the factory and continue to work on forcing the Germans out of the very market they've created.
Zhu is the vice president of Suntech Power, which has an annual output of 10 million solar panels.
No company in the world makes more than his, and no country in the world buys more than Germany.
"We really have to thank Germany," says Zhu, whose office is in Wuxi, a city on China's eastern coast. He raves about Germany -- about the clean air, about the politicians who decided early on to subsidize the production of green energy, and about the country's eco-conscious customers. Nearly one-third of the modules from his factory are sold to Germany.
Reiner Beutel stands in his solar technology plant 8,500 kilometers (5,300 miles) away, in Bitterfeld-Wolfen, and says he's not prepared to simply admit defeat.
"We intend to undercut the Chinese on price," says Beutel, who is CEO of German solar cell maker Sovello.
He raps on the aluminum frame and says, in English: "Made in Germany." Beutel wants to save the German solar panel. Though he's fighting an uphill battle, he still believes he has a chance.
Nevertheless, he was hit by yet another setback when his company filed for bankruptcy two weeks ago. Now he's hoping to find new investors who, under the more favorable terms of the insolvency proceedings, are prepared to put money into this future-oriented industry.
Beutel is engaged in a fight being waged between two continents and two economic systems. In China, the communist government controls the economy, meaning that it steers and supports large, private companies, including manufacturers of solar panels, like Suntech. Its competitors, German manufacturers of solar technology, suspect that companies like Suntech have only grown so powerful thanks to government assistance and that China is providing its solar companies with cheap loans.
In a sense, it's a battle of state capitalism versus market capitalism. But there's not a genuine market for solar modules in Germany, either. Instead, there's a market that politicians created in 2000 with the Renewable Energy Sources Act (EEG), which promised tens of thousands of green jobs and now steers half of its €14 billion ($17.6 billion) in annual funding toward the solar industry.
People in Germany aren't buying all these solar modules because the sun shines particularly often in their country. They're buying them because they will receive subsidies known as feed-in tariffs for the electricity for 20 years. The state has guaranteed every producer of solar power a price that was initially 50 euro cents per kilowatt hour higher than the market price.
Since making solar modules is no longer difficult, more and more companies have entered the sector in recent years, not only in Germany and China, but also in Japan and Korea. However, the subsidies available in Germany have not been limited to electricity produced by German-made solar panels, as politicians did not specify where the modules should come from. In Italy, by contrast, power customers receive a bonus for installing solar panels made in Europe. As a result, the German subsidy program has had an effect across the world, and primarily in Asia.
This led to a bubble in the solar-technology market. Manufacturers worldwide were soon making far more modules than customers wanted to purchase, and they started to undercut each other's prices, which fell by 50 percent last year.
Since then, one manufacturer after the other has filed for bankruptcy, more than half a dozen in Germany alone since December.
Many solar-panel production facilities are in eastern Germany, in Brandenburg, Thuringia, Saxony and Saxony-Anhalt, where Bitterfeld is located. In April, the town lost Q-Cells, the city's first and best-known solar company. Its production halls are located across from Beutel's factory in Solar Valley.
By contrast, there are 12,000 people working in the production halls underneath Zhu's office in Wuxi. Every morning and every evening, when their long shifts begin, the company picks them up with 55 shuttle buses that circulate through the various districts of this city of over 6 million.Zhu is in charge of product development, which these days mostly means he has to find a way to produce solar panels even more cheaply. Zhu's strategy for combating falling prices -- which, in turn, could lead to yet another deterioration in prices -- is "aggressive cost-cutting."
The idea is for the workers to assemble the modules even more quickly. Laminating a solar panel -- that is, gluing the cells between films -- takes 18 and sometimes up to 20 minutes. Perhaps 15 minutes would be enough, Zhu says.
They also have to reduce the amount of materials they use, he says, so they've made the modules' aluminum frames even thinner.
Sensing that this could prompt some criticism, he points to a document with a blue and white emblem and the words "top brand." Since just recently, his modules have been allowed to bear this emblem.
It's awarded by a company that tests photovoltaic products, and the best thing about it is the fact that the tester is based in the western German city of Bonn. "A German seal of quality," Zhu says, pausing briefly for effect.As the union representative explains, whether men or women, all workers who start out at Suntech should be high school graduates and healthy.
The starting wage is 2,500 yuan a month -- a bit more than €300 ($430) -- without overtime or bonuses and before tax. There are five days of paid vacation per year as well as health insurance.Germany will soon no longer be the most important market for his solar panels, Zhu says.
Over the past eight years, Germany's market share of the global photovoltaic industry has dropped from nearly 70 percent to less than 20 percent. But if the Germans decide to continue supporting sales in their country for a while, he'd be happy. Inexpensive modules plus government subsidies add up to excellent deals for his German customers.The Germans have shelled out over €100 billion alone in funding for the solar panels that have been installed to date.
This is paid for by all electricity customers, who will soon be shelling out 4 cents per kilowatt hour on their utility bills to support solar power. "Everyone wants to beat the competition -- that's normal," says Zhu in Wuxi. The Chinese-American entrepreneur has learned how capitalism works. When the state intervenes, he says, capitalism is always smart enough to ensure that something other than what the state wanted is ultimately achieved.
No, he says, he's not afraid of the Germans anymore. What worries him are the competitors in his own country.
Hmmmm.....America better be prepared to pay very high energy bills if Obama is reelected.Read the full story
here.
