By Tsvetana Paraskova - Jan 05, 2025
The German solar industry is experiencing a significant downturn due to decreased demand for residential solar installations, driven by falling energy prices and rising interest rates.
German solar companies are also facing intense competition from Chinese manufacturers offering lower-priced products, leading to financial difficulties and job losses.
The decline in the solar market threatens Germany's renewable energy goals and highlights the challenges faced by the solar industry in maintaining growth and competitiveness.
Germany’s solar boom has slowed to a trickle and turned into a bust for domestic manufacturers of solar panels and PV system installers and providers.
Following a breakneck surge in solar power installations in 2022 and 2023 at the peak of the energy crisis, German solar capacity additions slowed toward the end of 2024, with residential installations bearing the brunt of the decline in demand.
Households were more eager to have rooftop or ‘balcony solar’ installed in 2022 and 2023, when power prices in Germany spiked during peak energy crisis, than they were in 2024.
Moderating energy prices as the crisis eased coupled with high interest rates for consumers. For some of them, higher upfront costs at higher interest rates and falling power prices compared with the 2022-2023 highs could not justify investment in residential solar systems.
As demand declined, German solar power firms began to struggle with lower revenues and earnings. Domestic companies also faced increased competition from Chinese manufacturers, which offered lower-priced products.
As a result, the German industry sank further into the red as their attempt to compete on prices meant that their sales prices were below production costs.
This situation has created hardships for Germany’s solar companies, pushing some of them into insolvency and forcing many others to slash jobs and seek business restructuring to adapt to the glut of offerings and low sales prices.
Between January and September 2024, solar remained the key contributor to Germany’s renewables growth, energy think-tank Ember said in a November analysis. From January to September, wind and solar combined exceeded fossil power generation in Germany for the first time ever, reaching a record 45% share, according to Ember’s data.
However, the pace of solar growth slowed. In 2023, Germany’s new capacity additions doubled compared to 2022, but growth slowed to 3% for the first nine months of 2024 compared to the same period of 2023.
In the latter half of 2024, solar installations – especially residential solar – declined and left many German manufacturers and installation providers scrambling for a future.
Photovoltaic (PV) systems provider ESS Kempfle filed for insolvency in October.
PV project developer Fellensiek filed for insolvency a month earlier, due to liquidity problems.
Solarmax, a provider of residential PV storage systems and inverters, also went under provisional insolvency administration in November. Solarmax could not withstand the plunge in prices as a result of Chinese manufacturers’ low prices.
Other German companies laid off employees amid a collapse in residential solar demand, business daily Handelsblatt reported in September.
Berlin-based start-up Zolar was forced to cut more than half of the jobs.
The years 2022 and 2023 saw a boom in the solar industry, but 2024 would be “pretty tough,” Zolar’s boss Jamie Heywood told Handelsblatt in September.
German inverter manufacturer SMA Solar Technology announced in November job cuts that would affect up to 1,100 full-time positions worldwide by the end of 2025, about two-thirds of which would be in Germany. SMA Solar cited a “very challenging” market for the home and Commercial & Industrial (C&I) segments.
“The solar industry is going through a transformation,” said SMA’s chief financial officer, Barbara Gregor.
The case for residential solar investments has been undermined in recent months by declining subsidies and rising investment costs, economists and researchers at the Wiesbaden Business School, Hochschule RheinMain, wrote in a scientific article at the end of last year.
“In addition, electricity price uncertainty has risen sharply, making the economic benefit of using self-produced electricity from residential photovoltaic systems risky,” the authors, led by Carlo Kraemer, wrote in the study.
The decline in the residential solar market is not unique to Germany—the EU market overall saw a drop in these installations last year, industry group SolarPower Europe said last month.
Across the EU, demand for residential rooftop solar fell in 2024 as the impact of the energy crisis faded, SolarPower Europe said. New home solar installations declined by almost 5 gigawatts (GW) compared to 2023, with 12.8 GW installed, SolarPower Europe found in its annual report.
“European policymakers and system operators can consider this year’s report a yellow card,” said Walburga Hemetsberger, CEO at SolarPower Europe.
“Slowing solar deployment means slowing the continent’s goals on energy security, competitiveness and climate.”
By Tsvetana Paraskova for Oilprice.com
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