How bright is the future for German solar power?

Despite growing pressures for consolidation, Germany’s burgeoning solar power sector is predicting a buoyant end to the year with growing export orders helping to boost the industry’s 2006 earnings forecasts.

Shares in leading Germany’s sun power companies have edged up in trading in recent weeks following a raft of upbeat earnings reports from the nation’s solar energy sector. The boom in sun power is helping Europe’s biggest economy to emerge at the forefront in promoting the renewable energy sector.

But key figures in the industry have been warning Germany’s 13 key sun power companies should be braced for a wave of consolidation in the coming years as they move from a manufacturing phase to mass production.

Under pressure

One of the latest to point to growing consolidation pressures, was Hans-Martin Rueter, the chief of Hamburg-based Conergy AG, Europe’s biggest solar energy group who recently told the Financial Times’ German edition that the sector would have to face up to a shakeout in the coming years.

“In the next two to three years the branch will face consolidation,” Rueter said. “We want to be part of the consolidation (process),” he said.

Concerns about high oil prices and the push towards reductions in CO2 emissions means that the global solar power industry is expected to grow at between 25 and 30 per cent. The world’s conventional power giants have already moved to invest in renewable energy sector, notably in eco-friendly Germany.

Booming

Underscoring the boom that has been underway in renewable energy in Germany, alternative power sources now represent about 10 per cent of electricity generated in the country.

About 25 per cent of solar cells installed worldwide are currently produced in Germany, the nation’s Solar Industry Federation said.

Indeed, reflecting the rapid growth of the industry worldwide and underpinned by generous state handouts at home, Germany’s solar power companies – most of which have now gained stock market listings – have unveiled strong results for the first nine months of the year.

Strong turnover

While Solar cellmaker ErSol reported a 122 per cent surge in turnover during the first nine months of the year, Q-Cells posted a 95 per cent jump in turnover during the first nine months and SolarWorld said its turnover grew by 32 per cent during the same period.

In line with the rest of the industry, Conergy reported bullish foreign orders saying that overseas sales had almost quadrupled during the first nine months. It said it expects full year total group sales to soar by at least 50 per cent compared to 2005.

Deutsche Solar, the solar wafer offshoot of SolarWorld, which derives a large chunk of its revenue from outside Germany, has set itself the goal of manufacturing 12 per cent of the world’s solar wafers by 2008.

Green east

Last week Conergy said that it planned to spend 250 million euros (320 million dollars) transforming a defunct chipmaking factory in the German-Polish border town of Frankfurt an der Oder into what it said will be the world’s first fully integrated mass volume solar wafer facility, employing up to 1,000 people.

The decision to invest in the Frankfurt an der Oder factory represented the biggest expansion move by Conergy in its eight-year corporate history.

Conergy’s plans set up a factory in Frankfurt an Oder brings to three the number of solar businesses in the city and as a result underscores the concentration of sun power companies in Germany’s former communist east.

Already more than half the German solar power industry’s total annual turnover of about three billion euros comes from the nation’s eastern half, which has attracted the greatest share of the one billion euros that has so far been invested in the sector in the nation.