Germany’s residential solar panel industry is facing “a lot of distress” after a downturn in consumer demand triggered a wave of bankruptcies and lay-offs in Europe’s biggest and most important market for the sector.
Many companies distributing and installing rooftop panels have gone bust, been taken over or forced to adopt changes in strategy.
While the bust and resulting glut of panels have led to a sharp fall in prices for consumers, industry figures warn that they have hit sentiment among investors and are threatening to damage a sector that is crucial to meeting Europe’s ambitious climate targets.
Dries Acke, deputy chief executive of industry lobby group SolarPower Europe, described the situation as “not a positive trend”.
“To some extent this is consolidation after a few exceptional years,” he said. But he added: “You cannot have a green transition with red numbers. The sector needs to be profitable.”
Demand for photovoltaic panels in Germany boomed in the wake of Russia’s full-scale invasion of Ukraine in 2022, as consumers confronted with soaring energy bills turned to solar power.
Manufacturers and distributors grew rapidly, increasing production and distribution capacity, hiring staff and training installers.
Germany installed 15 gigawatts of solar capacity in 2023, according to SolarPower Europe — up from 7.4GW the previous year and a record for any European country.
Solar start-ups in Germany “were expecting the double-digit growth rate to continue and for each of them to individually capture a significant market share”, said Dina Darshini, who heads LCP Delta’s solar and battery division.
“But actually, the opposite has happened — the market has shrunk in 2024, there are more players, and everyone is trying to vie for a smaller market.”
The drop raises questions about Germany’s target of installing 19GW of new solar capacity per year between now and 2030 as part of a drive for Europe’s biggest economy to be carbon-neutral by 2045.
After five years of rapid acceleration across all types of solar, the pace of growth in the world’s fifth-biggest market for photovoltaic panels slowed in 2024. Germany added 16GW in new solar capacity in 2024, compared with 15GW in 2023 and 7GW in 2022, with the drop in residential solar offset by continued growth in commercial rooftop installations and solar farms.
The slowdown in demand growth — which has also hit solar markets in Belgium and the Netherlands — has partly been caused by higher interest rates that have pushed up the cost of the consumer financing deals that usually form part of a solar package.
At the same time, the flooding of the European market with cheap solar panels and components from China has created fierce competition. That has heaped pressure on European manufacturers such as Switzerland’s Meyer Burger, which in September announced it would cut a fifth of its workforce, and squeezed the margins of companies offering rooftop installations. Generous government subsidies have also been gradually reduced.
Zolar, a start-up that has raised close to €300mn in funding since its inception in 2016, announced in September that it was abandoning its business of selling solar panels to homeowners and cutting more than 50 per cent of its 350-strong workforce.
Chief executive Jamie Heywood described a “peculiar” situation where the cost of installing a solar system has fallen significantly but, owing to lower energy prices, customers also have fewer incentives to turn to solar panels. “Although customers can save money within the life of their system by moving to solar, the payback is less attractive than it was,” he told the Financial Times.
The company, whose investors include Singaporean sovereign wealth fund GIC, has decided to pivot to offering services to the thousands of small local businesses that hold about 80 per cent of the German solar installation market. “While I’m excited about opportunities in the installer space, it’s been a difficult decision to have to take,” Heywood said.
Zolar is not the only company to have struggled. Berlin-based Eigensonne, a solar panel supplier, declared bankruptcy at the end of 2023. ESS Kempfle, a solar panel supplier in southern Germany, warned in August of “dark clouds” over the industry as it announced a restructuring plan including job losses.
Industry insiders expect Germany’s biggest players, which include prominent start-ups such as Enpal and 1Komma5, to survive the turmoil. But they have not been immune from the pain.
Growth plans at Enpal, which is backed by SoftBank and TPG and was valued at €2.2bn in 2023, have been affected by a “turbulent year”, according to the company’s “chief evangelist” Wolfgang Gründinger.
He said the company had been able to capitalise on the upheaval to double its market share in the solar sector, and had also benefited from diversifying into heat pumps and smart meters and launching an electricity trading platform.
However, Gründinger cautioned, “if many companies go bankrupt it’s not good for us either. Investors see it and say: the market is going bust. And you can’t plan.”
Another big player is 1Komma5, valued at €1bn in 2023, which bills itself as a one-stop shop for residential green energy, including solar systems.
Chief executive Philipp Schröder said that despite the difficult market, the company’s orders continued to grow in 2024, thanks mainly to its AI-driven tool for optimising energy use in homes. But it has scaled back M&A for the time being, preparing instead “to advance more aggressively” into batteries as well as energy optimisation.
There have still been some bright spots for the solar sector in 2024. Demand has continued to grow for mini photovoltaic systems that are installed on balconies.
Industry figures remain optimistic about the medium to long term, pointing to the fact that although 3mn residential rooftops in Germany are equipped with a solar system, there is room for much more.
“We expect the market will recover,” said Darshini of LCP Delta, pointing to a large well of untapped demand from corporate customers and rising electrification rates as German households and businesses continue a drive to decarbonise.
“It is unlikely to come back to the height it was in 2022-23 — unless there is a major stimulus package or event. You’re more likely to see a slow gradual uptick towards 2030.”
That was echoed by Fabian Heilemann, a Berlin-based venture capital investor whose fund Aenu has backed companies including Zolar.
“Mid to long term the market is intact,” he said, insisting that even with concerns about the re-election of Donald Trump and the rise of populist parties in Germany, “the energy transition is not going to go into reverse”. But he warned: “In the next 12 to 36 months there will be a lot of distress.”
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