Preview of the German PV Market Executive Briefing 2010

EuPD Research is the leading market researcher in the field of renewable energies, with a strong focus on international PV markets. For more than ten years, Markus A.W. Hoehner, CEO of the German-based research and consulting institute, has observed the development of global energy markets. With an international team of multilingual research analysts, business consultants and specialized marketing experts, Hoehner advises both the “big players” in the PV branch as well as market newcomers.

PV Group recently spoke with Markus A.W. Hoehner, founder and CEO of Hoehner Research and Consulting GmbH, a business group consisting of EuPD Research, a primary-data based researcher, and 360|Consult who implements sustainable business strategies for sustainable companies.

PV Group

Your company is active in the business of market research and consulting for more than a decade now. Please review the history of the international PV markets and give us an insight in the recent developments so far.

Hoehner

Our business group has been one of the first institutes that strongly focuses on the emerging markets of sustainability. With our core brand – the primary-data based researcher EuPD Research – we have been observing and analyzing the international PV industry. While the young PV industry boomed in the first years and huge growth rates were recorded all along the value chain, the initial “gold rush” has given way to an increasingly competitive market environment nowadays. When reviewing recent developments in the industry, one will come to the conclusion that the PV business has finally come of age. While the generation of solar electricity has formerly been regarded as a niche technology suitable for a small group of ‘greenies’ or ‘do-gooders’ at best, the application of photovoltaics today is widespread in all social classes – including investors, businessmen, politicians and even former critics.

PV Group

So, does that mean solar electricity is already a competitive mass technology and a mature alternative to conventional energy production in general? How about Germany, by far the largest PV sales market in the world?

Hoehner

Not just yet! Even if solar electricity is indeed already competitive to conventional energy sources in some regions – which is great – the majority of all country markets is still dependent on a political promotion, even the leading sales market, Germany. This is due to the enormous initial investment each market participant has to shoulder before starting mass production. Furthermore, high investments are especially required in the field of research and development in order to keep up with the technical evolution. This, as well as tremendously declining prices for solar modules within the last six months, makes it very difficult for the manufacturers to assert their market position in these days.

PV Group

Which effects have caused this development?

Hoehner

This tense situation which one can currently observe in the international PV market is due to a very complex situation where diverse tendencies interfere with one another. On the one side, the global financial crisis and therewith the threat of looming cash-out problems has put even established manufacturers on the spot, and forced them to outsell the competitors at all costs - sometimes even on “suicidal” terms and conditions. But on the other side, even the competition in general has intensified over recent years. Whereas the sheer availability of PV systems has been the only market hindrance in the past, in 2009 and in Q1 and Q2 2010 we are facing decisive oversupply problems. This will not change significantly in near the future.

Coming from this very comfortable historic position, most markets participants must actually learn or relearn sales basics. This is where our consultants advise the clients not only to scale down prices – what sooner or later leads to a ruinous dumping policy – but to broaden their product portfolio and include e.g. after-sales services. But what we are seeing right now is that nearly all suppliers are still acting on one single axis – the price level. Right now, this naive policy especially boomerangs on the established industry because the Asian manufacturers, for instance, take the same line and start crowding out the providers of upscale PV systems by dumping prices. Due to a robust governmental promotion for the domestic economy and a fast-growing but insular home market, the Asian industry, especially the Chinese, will certainly be able to endure the current market situation – and this most likely even better than most of the so-called established players.

By now, one result of this needless narrowing on price policy can be observed in Germany, formerly known as a very robust market due to a very strong political promotion. Caused by the tremendous decline in prices and driven by the consumerist associations, the German government has now reacted with a massive cutback in solar promotion - a foreseeable decision that worsens the market position especially for German manufacturers and upscale European producers and benefits foreign providers of low-price systems.

PV Group

So, could you just comment on the latest developments in German solar promotion and can you depict the possible aftermath?

Hoehner

In February, the German Federal Minister for the Environment, Norbert Röttgen of the conservative party (CDU) presented an amendment to the Renewable Energy Act (EEG). The key points of the newly adjusted incentives anticipate a 16 percent reduction in feed-in tariffs for solar electricity from rooftop systems as of July 1, and a further reduction by 11 percent for open-space systems on conversion areas. According to Mr. Röttgen, large-scale systems on agricultural fields will receive no funding whatsoever in the future. These cut-backs will only be stipulated into German law after a consultation in the German Bundestag and the German Federal Assembly; our experts assume that the amendment will come into effect without any major changes. This will lead to drastic changes in the industry and also raises the question, whether Germany can maintain its leading role in the global PV market. An in-depth analysis of the possible aftermath for the German PV market will play a major role in the “German PV Market Executive Briefing 2010”, which EuPD Research will host on May 11, 2010 in Frankfurt on the Main. Together with our strategic partners PV Group, Solarpraxis AG and the German industry association BSW Solar, we will address crucial topics including suitable strategies for PV companies in times of uncertainty and appropriate reactions to shrinking margins and shifts in the segmentation. Another very explosive topic may also include the planned discussion concerning the post-promotion era in Germany.

For additional information on the upcoming “German PV Market Executive Briefing 2010” by EuPD Research please visit http://www.eupd-research.com/Workshop2010/.

PV Group, The Grid – March 2010