One million photovoltaic installations will be installed in Germany in 2023, as published by the German Solar Industry Association (BSW) at the beginning of the year. That's equivalent to 14.1 gigawatts of installed capacity. For comparison: in 2022 “only” 7.5 gigawatts were installed, and that was already a maximum value. According to the figures, it was a utopian year for the solar industry, a boom year. But do these figures reflect the current situation of the sector, if German module manufacturers and installation companies continue to demand?

A situation you dream of

In early 2022, we see a drastic increase in energy prices in most of Europe, as a result of Putin's war in Ukraine. This caused widespread insecurity among the population. Many people wondered where they could get safe and affordable electricity. Skyrocketing electricity prices, combined with uncertain supply, have sparked public desire for an alternative energy supply.

Consequently, requests for photovoltaic installations and, consequently, sales increased. Customers' greatest wish for 2022 was no longer a price reduction, but an installation as soon as possible. Actually, a situation that all industry participants had dreamed of for a long time.

Warehouse full of Chinese products

Unfortunately, this huge demand exceeded all material and assembly capabilities and, in addition, the necessary electronic components for inverters and storage devices from China were not available at all or were only available at completely inflated prices. End customers had to prepare for long delivery times, some of which extended into 2023 or, in the worst case, were immediately rejected.

Chinese manufacturers saw big business in Germany. Due to high demand, suddenly all materials could be sold, regardless of where they were made and of what quality. So China produced in abundance and the warehouses of Rotterdam were filled with Chinese solar modules, energy storage devices and the like.

A fight at all levels

The situation looked equally good at the beginning of 2023. There was demand and the players' order books were full. However, due to the change in general conditions a slight drop in demand was felt: despite numerous negative reports, there were no bottlenecks in energy supply, energy prices even fell again at the beginning of 2023 and therefore fear among the population disappeared again. .

After a phase of low and even negative official interest rates, the rate change occurred in the summer of 2022. The interest rates to finance a
Interest in photovoltaic systems increased from less than one to more than four percent. During the summer holidays of 2023, demand plummeted like every year, but did not recover.

As all market participants were prepared for growth, not only the warehouses in Rotterdam, but also those of all wholesalers and solar installation companies were full. In the second half of the year, a predatory and price battle began at all levels.

Solar crisis despite high expansion figures?

The BSW figures are correct: 2023 was the best solar year ever. However, the high expansion figures are due to a backlog of orders starting in 2022 and not to sustained high demand.

If there is currently talk of a crisis, it is mainly because demand has fallen to a lower level compared to 2021. However, both the number of manufacturers and installers has increased and all participants are prepared to grow. Therefore, there is too much capacity in the market and too little demand.

The current situation affects German module manufacturers in such a way that they cannot do anything about the price dumping of Chinese manufacturers. But this is mainly because the general conditions for Chinese manufacturers are different from those of manufacturers producing in Europe. Almost 90 percent of photovoltaic installations currently come from China and can be sold here without import duties. However, products from German manufacturers that must be purchased in non-EU countries for production are subject to import duties. A problem that the EU Commission has known about for years but has done nothing about.

Installation companies usually have to face great competition. In addition to startups flush with growth capital, many new installation companies have also emerged over the past 24 months, all of which are now fighting for dwindling numbers of enquiries.

The risk of addiction

The federal government plans to add 13 gigawatts of solar energy in 2024. Given the expansion numbers for 2023, one could look optimistically to the future and be confident that this goal will be achieved. However, given current conditions, it must be assumed that the market will fall back below 10 gigawatts. Unlike early 2023, the solar industry is not starting with such a full order book. Furthermore, important drivers for the installation of a photovoltaic system have been considerably weakened and the issue of energy supply has once again taken a backseat.

But even worse: where will the components come from and what role will German or European products play? In a declining market with excess supply, the suppliers with the greatest staying power in the next price war will win. What is very positive for the consumer is ruinous for the manufacturing companies.

The federal government would do well to set as a goal for the energy transition not only the expansion figures, but also the proportion of European products. Implementing the German energy transition exclusively with products from outside the EU is taking Germany to the next level of dependence. What the industry and the energy transition need are sustainable impulses and protection for German manufacturers. Crucial here could be the resilience bonus for German products discussed by Economy Minister Robert Habeck (Greens), in which operators receive a higher feed-in tariff or the reintroduction of cheap solar loans to finance projects.