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The Sun Is Setting on Eastern Germany’s Solar Industry

Germany’s once proud and profitable solar industry is going down. In recent months  disappointing earnings results, factory closings and bankruptcies have followed in quick succession. Thousands of people have lost their jobs, and more will follow.

Spiegel reports:

The solar industry, once a beacon of hope for an eastern German economy that struggled for years to revive following reunification in 1990, is undergoing a brutal phase of consolidation. There is a massive surplus of global production capacity and the bad news for eastern Germany keeps getting worse. Last December, the Berlin company Solon, which employed hundreds in the Baltic Sea coast town of Greifswald, filed for bankruptcy. Aleo-Solar, based in Prenzlau north of Berlin, lost over €30 million (about $40 million) last year after turning a profit of €31.8 million in 2010, leading many to fear for their jobs there. . . .

Odersun [a German solar company headquartered in the eastern German town of Frankfurt an der Oder] declared bankruptcy in March and Conergy [another German solar company also located in Frankfurt an der Oder], while pledging to return to profit this year, has seen its share price lose 99.6 percent of its value in the last five years. Many doubt the company will survive. Worst of all, however, was the announcement earlier this month that First Solar [an American solar company] was closing both of its factories in Frankfurt an der Oder; 1,200 people will soon be jobless as a result.

Though Germany’s solar industry is declining across the country, the east has been particularly badly hit.

Despite some urban bright spots, including the cities of Dresden, Leipzig and Jena, the eastern German economy has been growing more slowly than that in the west for the last two years, raising fears that the post-reunification disparity between the two regions may be growing again instead of shrinking. Not a single company listed on the German blue chip stock exchange index DAX is based in eastern Germany.

Unfortunately, things do not look sunnier on the horizon. Angela Merkel’s government recently announced plans to cut subsidies for the solar industry. The subsidies contributed to a solar boom that has begun to cost Berlin a lot of money. Cutting the subsidies has obviously angered a lot of politicians, especially in the east, and it looks likely to make life tough for solar companies and the people who work for them.

Years ago, East Germany got hammered by the failures of hard socialism: a lousy economy, a huge secret police garrison state, a giant wall to keep you in, guard towers to shoot you if you tried to leave. Now it is discovering the limits of the (much nicer) soft socialism of subsidies, targeted investments, and green unicorn hunts.

The problem with hard socialism is that it doesn’t end even when you want it to; the problem with the soft kind is that it can’t last although you wish it would.

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  • Walter Sobchak

    The southernmost major city in Germany is Munich, which is north of Seattle, the northernmost major city in the US, outside of Alaska. Why the Germans thought they could use solar panels for anything other than snow sheds is beyond me, and it brings the vaunted German analytical capability into severe question.

  • Brett

    @Walter Sobchak

    It’s because they won’t use nuclear power anymore, and the other alternatives are wind and imported Russian natural gas. Since wind power isn’t doing so hot, that leaves imported natural gas, which Germany will likely become even more dependent on in the next decade.

  • Brett

    EDIT: There’s coal, too, which Germany is also becoming more dependent on with the stagnation and decline in nuclear power there.

  • Jacksonian Libertarian

    Governments are incompetent at picking successful products, or even useful subjects of research. Remember how Japan was going to takeover the chip market with government directed industrial development through their MITI agency, and how a consortium of chip makers in the US put together a company to develop cheap memory chips, and beat the Japanese without using a single taxpayer dime?

    Governments and Politicians are arrogant know-it-alls and think they can just order something and throw money at it and it will just happen. But they are coming to realize that they are incompetent at hunting the Green Unicorn, and if they want to eat, they are going to have to put something less illusive and more practical on the table.

    Because Unicorn is NOT what’s for dinner.
    Obama will have the stir fried dog with soy sauce.

  • Jbird

    How large a roll do green indulgences and environmental tax credits play a roll in these poor and seemingly illogical investment choices? I believe that solar power will eventually be a good power source, but our technology is still too inefficient to produce large scale power plants based on the sun.

    @Walter: last I heard solar power was proving a boondoggle in sunny Spain as well.

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