Solar Energy Subsidies: How subsidies are putting domestic solar companies out of business in Germany

Today's Financial News - Posted April 15, 2008

Baltimore — (TFN): I spent the Easter vacation back in the Old Country. I landed in Frankfurt, under sniper fire, and spend a few days meandering through Hesse and Bavaria to get to Berlin.

Despite Germany’s state sponsored religion of climate apocalypse, I had no opportunity to show off my global warming fashions. Shorts, polo shirts, and the customary socks and sandals were not needed as we encountered every kind of frozen precipitation the grim heathen gods of the North whipped at us.

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Come to think of it, the one commodity in short supply may have been sunshine. Germany was just as cold and dreary as it was when I grew up, back in the 70’s, when climate scientists were predicting the beginning of a new Ice Age. And just as grey and clammy as it was when the Roman historian Tacitus observed that only someone born here would be able to love this country.

Given the lack of sunlight occurring naturally between late September and early May, it may strike you as odd that Germany is the self-proclaimed world champion of solar technology. More solar modules are sold in Germany than in any other country.

Last year, Germans screwed solar panels generating 1,300 mega Watts of electricity on their red tile roofs. This year, it may be 2,400. Which means that half of global demand for solar cells originates in Sunshine Central Germany.

Not that solar energy is priced competitively. Not anywhere close. One kiloWatt hour of electricity costs around 47 cents… conventional electricity sets you back 5 cents.

But cost and lack of sunlight are no hindrance when money is not an issue. And Germany’s Renewable Energy Law is like a license to print money for solar cell manufacturers. Its subsidies keep the world’s solar cell manufacturers in business.

The only fly in the ointment: Despite the government-funded windfall, German solar companies are steadily losing ground to Asian competitors. Taxpayers’ euros are applied to foreign and domestic alike. And producers in China, India, Malaysia can offer their products far cheaper than high-cost German manufacturers.

Thanks largely to German government subsidies, China now has overtaken Germany as the leading producer of solar cells. The Chinese market share soared from 15% to 28% last year as Germany’s remained at 20%.

By now, seven of the ten largest manufacturers of solar technologies and 65% of globally produced solar cells come from Asia. Even the United States’ First Solar is now relocating large chunks of capacity from its East German manufacturing plant to Malaysia.

I’m all atingle when I hear American politicians promise breaking our dependency on foreign oil by subsidizing alternative energies. And I’m sure Chinese solar cell manufacturers can barely wait for the taxpayer-funded gravy train to take off from Union Station in Washington, DC.

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