Germany’s residential solar panel industry is facing “tremendous hardship” as weak consumer demand has led to bankruptcies and layoffs in Europe’s largest market for the sector.
Many companies that sell and install rooftop panels have gone bankrupt, been acquired, or been forced to change strategies.
Panel failures and resulting gluts have led to plummeting consumer prices, but industry insiders say they are hurting investor sentiment and damaging a sector critical to meeting Europe’s ambitious climate goals. It warns that there is a risk of giving.
Dries Atke, deputy chief executive of industry lobby group SolarPower Europe, said the situation was “not a positive trend”.
“After several years of extraordinary times, we have seen some degree of consolidation,” he said. But he added: “You can’t use red numbers to make a green transition. This sector needs to be profitable.”
In Germany, demand for solar panels soared as consumers faced with soaring utility bills turned to solar power generation following Russia’s full-scale invasion of Ukraine in 2022.
Manufacturers and distributors grew rapidly, expanding production and distribution capacity, hiring staff, and training installers.
Germany will install 15 gigawatts of solar power capacity in 2023, up from 7.4 gigawatts the year before and a record for a European country, according to Solar Power Europe.
“We expected that German solar startups would continue to grow at double-digit rates, with each company gaining significant market share individually,” said Dina Darshini, head of solar and batteries at LCP Delta. said.
“But in reality, the opposite is happening: in 2024, the market will shrink, there will be more players, and everyone will be trying to compete for a smaller market.”
The decline calls into question Germany’s goal of installing 19GW of new solar capacity per year between now and 2030, as part of Europe’s largest economy’s efforts to become carbon neutral by 2045. is being cast.
After five years of rapid acceleration in all types of solar power generation, the pace of growth in the world’s fifth largest solar panel market slowed in 2024. Germany added 16GW of new solar capacity in 2024, compared to 15GW in 2023 and 7GW in 2022. Declines in residential solar were offset by continued growth in commercial rooftop installations and solar installations.
The slowdown in demand growth, which is also hitting the solar markets in Belgium and the Netherlands, is due in part to rising interest rates that have driven up the cost of consumer financing transactions that typically form part of solar packages. are.
At the same time, cheap solar panels and components from China are flowing into the European market, creating fierce competition. That has increased pressure on European manufacturers such as Switzerland’s Meyer Berger, which announced in September it would cut a fifth of its workforce, squeezing profits for companies offering rooftop installations. Generous government subsidies are also being gradually reduced.
Zoller, a startup that has raised nearly 300 million euros in funding since its founding in 2016, announced in September that it would abandon its business selling solar panels to homeowners and cut more than 50 percent of its 350 employees. did.
Chief executive Jamie Heywood said the cost of installing solar systems had fallen significantly, but the “unique” situation was that falling energy prices meant there was less incentive for customers to rely on solar panels. Explained. “Customers can save money over the life of their systems by going solar, but the rewards are not as attractive as they used to be,” he told the Financial Times.
The company, whose investors include Singapore’s sovereign wealth fund GIC, has decided to shift its focus to providing services to thousands of local small and medium-sized enterprises, which account for about 80% of Germany’s solar power installation market. It was decided. “While we are excited about the opportunity in the installer space, it was a difficult decision to make,” Haywood said.
Zola isn’t the only one struggling. Berlin-based solar panel supplier Eigensonne declared bankruptcy at the end of 2023. In August, solar panel supplier ESS Kempffle in southern Germany announced restructuring plans that included job losses, warning of “dark clouds” looming over the industry.
Industry insiders expect Germany’s biggest companies to weather the disruption, including notable startups such as Enpal and 1Komma5. But they weren’t immune to the pain either.
Empal’s growth plans, backed by SoftBank and TPG and valued at 2.2 billion euros in 2023, have been affected by a “turbulent year,” said Wolfgang Gründinger, the company’s “chief evangelist.” .
He said the company was able to take advantage of the disruption to double its market share in the solar power sector, and also benefited from diversifying into heat pumps and smart meters, as well as launching an electricity trading platform. Ta.
However, Gründinger warned: “If a lot of companies go bankrupt, that’s not good for us either. Investors look at that and say, ‘The market is going to collapse.’ And I can’t make plans. ”
Another major company is 1Komma5, which is valued at €1 billion in 2023 and bills itself as a one-stop shop for residential green energy, including photovoltaic systems.
CEO Philipp Schroeder said despite a tough market, the company’s order book will continue to grow in 2024, thanks in large part to AI-powered tools to optimize energy use in homes. He said he continued. However, for the time being, the company is preparing to scale back M&A and instead “move more aggressively” into battery and energy optimization.
There are still some bright spots for the solar power sector in 2024. Demand for small solar power systems installed on balconies continues to increase.
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Industry figures remain optimistic for the medium to long term, pointing to the fact that in Germany, 3 million residential homes have solar PV systems installed on their rooftops, but there is room for more.
“We expect the market to recover,” LCP Delta’s Darshini said, citing untapped demand from business customers and rising electrification rates as German households and businesses continue their efforts to decarbonize. pointed out.
“A return to 2022-2023 highs is unlikely unless there is a major stimulus package or event. We are more likely to see a slow, gradual rise into 2030. Masu.”
This sentiment is echoed by Fabian Heilemann, a Berlin-based venture capital investor whose fund Aenu backs companies such as Zolar.
“In the medium to long term, the market will be intact,” he said, adding that despite concerns about Donald Trump’s re-election and the rise of populist parties in Germany, “the energy transition will not be reversed.” he claimed. But he warned that “there will be a lot of hardship over the next 12 to 36 months.”
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