Foreign Policy: Made In The Shade Foreign Policy's Aaron Wiener documents the rise and fall of the world's biggest solar market: Germany.
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Foreign Policy: Made In The Shade

Photovoltaic panels stand in a solar energy park on June 27, 2012 outside Berlin, Germany. Germany is investing heavily in renewable energy sources as part of a government initiative to wean the country off nuclear, and eventually coal-based, energy. Sean Gallup/Getty Images hide caption

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Sean Gallup/Getty Images

Photovoltaic panels stand in a solar energy park on June 27, 2012 outside Berlin, Germany. Germany is investing heavily in renewable energy sources as part of a government initiative to wean the country off nuclear, and eventually coal-based, energy.

Sean Gallup/Getty Images

Aaron Wiener is a freelance journalist and special correspondent for the Los Angeles Times.

On a former military airfield in the eastern German state of Brandenburg, 88,600 crystalline photovoltaic panels stand in a proud salute. The skies that were filled with zeppelins a century ago are now empty, save for a thick patchwork of dark clouds.

For Saferay, the Berlin-based firm that operates the Dallgow-Döberitz solar park, the sea of deep blue silicon represents easy money. The park runs itself; not a soul is evident there on most days. The only regular personnel are the lawn mowers, who periodically trim the grass so it does not block the panels. All that's needed is the sun — however little of it shines in this particularly unsunny corner of an unsunny country.

"It was easy to set up," Sandra Meissner, the Saferay project manager responsible for erecting the plant in less than two months last year, tells me as she maneuvers her Audi into the solar park, "because all the modules are the same."

But for Q-Cells, the German company that built those modules, that's precisely the problem. The company was the world's largest producer of solar cells as recently as 2008, but struggled when the specialized technology became a mass-produced commodity. Cheap solar panels from China began flooding the market — Q-Cells, no longer able to compete, filed for bankruptcy in April in what the conservative Heritage Foundation was quick to call Germany's "Solyndra moment."

On the surface, the similarities between the German firm and its American counterpart that had failed seven months earlier were striking. Both had benefited from generous public subsidies: In the case of Solyndra, $535 million in federal loan guarantees; in the case of Q-Cells, a German law that required electricity consumers to subsidize producers of solar energy to the tune of $10 billion a year. Both were regarded as models for the future of renewable energy, only to fall victim to falling solar cell prices and competition from China. And both quickly became punching bags for conservatives, who enjoyed a told-you-so moment at the expense of government-backed solar energy.

But the similarities mask a fundamental difference: The federal money spent on Solyndra sparked a public outcry because the U.S. solar market couldn't get off the ground. The funds supporting Q-Cells came under fire because the German solar manufacturing industry had grown too quickly, only to collapse when the subsidies on which it had grown reliant needed to be cut.

Most visitors to cloudy Germany would never guess that the country is the world leader in solar energy, with nearly as much photovoltaic capacity as the rest of the world combined. The country isn't exactly bathed in the sun's rays. A side-by-side solar resource map put out by the U.S. government-owned National Renewable Energy Laboratory, with red indicating brilliant sun and purple denoting thick cloud cover, shows the United States dressed in healthy hues of yellow and orange while Germany is almost entirely frostbitten blue-violet. Aside from Alaska and part of western Washington state, just about every inch of the United States gets more energy from the sun than the sliver of southern Germany that gets the most.

Yet Germany installed 7,500 megawatts of solar panels last year, compared with 1,855 in the United States — a country with nearly four times Germany's population and 28 times its landmass.

But even as solar energy production continues to boom, Germany's manufacturers of solar technology are collapsing at an alarming rate. In the four months preceding Q-Cells' bankruptcy, another leading German solar cell firm, Solon, filed for bankruptcy, as did two major solar thermal firms in the country. Two weeks after the Q-Cells bankruptcy, the Arizona-based module producer First Solar announced that it was shutting down its operations in Germany.

How did this decidedly unsunny country come to dominate the world solar energy market, only to see its solar manufacturing crash to the ground? The roots of the industry's ascent — and its eventual demise — lie in an unlikely conversation 22 years ago.

* * *

1990 was a year of head-spinning change in Germany. The previous November, the Berlin Wall had come down, sending thousands of East Germans across the crumbling Iron Curtain into the West. One by one, the barriers to reunification fell, leading to the official establishment of a single Germany on Oct. 3, 1990.

But Matthias Engelsberger had something else on his mind that year. The 21-year veteran of the German parliament, the Bundestag, was retiring at the end of the term, and he had one year left to make his mark. He decided to stake his legacy on an industry that was still in its infancy: renewable energy.

So Engelsberger, a member of the conservative Christian Social Union, made an unusual move: He reached across the aisle to a young colleague of the upstart Green party, Wolfgang Daniels.

"I was the energy policy speaker for the Green party at the time," recalls Daniels; Engelsberger died in 2005. "And at some point we were talking, and we said, 'Yeah, we have to try something to cross party lines.'"

The result of their collaboration, which raised eyebrows in both of their ideologically distant parties, was a simple one-page law, the 1990 Electricity Feed-In Law. It provided modest incentives for the development of renewable energy by requiring energy companies to buy small-scale renewable electricity, at a fixed above-market price, from households and businesses that produced it.

The bill initially didn't receive much attention. "This all took place at a time when German reunification was on the agenda, so we were working in the shadows," says Daniels. "At the hearings, people said, 'Yeah, OK, we'll let that pass. It won't have any serious impact on the overall energy supply.' They saw it as a gimmick. It wasn't like everyone knew that this was the beginning of a completely new development."

At the time, Daniels and Engelsberger had their sights set on wind and hydropower. Solar power, which provided less than 0.001 percent of Germany's electricity in 1990, was an afterthought and didn't begin to take off until the feed-in tariff law was revised in 2000 and again in 2004 to boost the subsidies for renewable energy, particularly for solar.

The results were spectacular. Annual solar installations in Germany jumped 20-fold from 2000 to 2005 and another eightfold from 2005 to 2010, catapulting Germany into its unlikely role as the world leader in solar power. Only it worked a bit too well. With German demand for solar modules exploding, production boomed and prices began to plummet. A solar panel in Germany now costs just half of what it did three years ago — good news for Germans looking to generate electricity from their roofs, but devastating for companies trying to turn a profit by producing and selling panels.

Germany is famous for its prowess in manufacturing specialized technology. The country's redoubtable Mittelstand — small and medium-sized firms that produce things such as high-quality machine parts — has kept German manufacturing growing and has helped bring the national unemployment rate to its lowest level in more than 20 years, even while the rest of Europe sinks deeper into economic crisis. But solar cells are no longer specialized technology — they're now easily churned out on a massive scale. And when it comes to this kind of manufacturing, there's no one better than the Chinese.

"You can't beat China at its own game, which is primarily high-volume manufacturing of largely commoditized products," says Shayle Kann, managing director of the solar unit at the energy market analysis firm GTM Research. "Solar has pretty much gotten to that point."

China has seen its market share of solar cell manufacturing explode in recent years, climbing from 26 percent in 2007 to 62 percent last year, according to GTM Research. It is home to eight of the top 10 solar cell manufacturers in the world, according to market research firm Solarbuzz. (The one U.S. company on the list, First Solar, recently announced a restructuring that will see 30 percent of its global workforce laid off, including the 1,200 workers at its plant in the German city of Frankfurt an der Oder.) Meanwhile, Germany's market share, once the highest in the world, is at 5 percent and falling. Just four years ago, Q-Cells was the world's leading solar cell manufacturer.

Klaus-Dieter Maubach, who sits on the six-member board of management that runs Germany's largest electric utility, E.on, predicts that there won't be any German solar panel manufacturers left in five years.

"They have to contend with competitors in Asia and a global oversupply of production capacity," says Maubach.

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