Their huge losses in the first half of 2009 have led several solar companies to re-think their strategies. Q-Cells, Germany’s largest solar company, decided to lay off 500 of its employees. Some of these companies have already started moving their facilities to Asia to cut production costs.

In 2008, Chinese companies had a share of around 33% of all the solar modules produced worldwide. And the Asian companies put together produced more than 50% of all solar cells. Highly competent Chinese companies like Suntech, Yingli Green Energy and LDK Solar are giving German pioneers like Q-Cells, Solarworld and Conergy a tough fight.

The German solar sector has always claimed its products to be superior quality than the Asian solar modules. But Michael Schmela, the editor-in-chief of Photon Magazine which covers the solar sector refutes these claims. “There are differences in quality between different companies but it is not that German companies are necessarily better than any Chinese products. So we also see a lot of good quality Chinese modules.”

The longevity question

An aspect which is currently being debated about the Asian companies is that of warranties they provide on their modules. “Basically every company is giving these kinds of warranties,” says Michael Schmela of Photon.

“These are power warranties on the modules. So in order to compete, every company is giving these kinds of warranties, so this is really nothing to differentiate.”

However, Jenny Chase, who leads the solar team at New Energy Finance Limited in London, questions the longevity of the Chinese firms. “The main difference will not be a technical one,” she says.

“It will be about warranty and how much you trust that company to be around in 20-25 years, for a claim which you might want to make. For most of the German or US companies, there’s probably going to be someone left for your warranty in 20-25 years. It's not that the Chinese companies might not do that, but there’s not so much faith that they will.”

German monopoly in mechanical engineering

Though the German companies have started moving their production facilities to Asia, a part of the solar energy sector continues to flourish in Germany: that of production equipment.

Michael Schmela says, “Germany is not only big in manufacturing solar cells, but they are also having many mechanical engineering companies that are supplying the production equipment and this production equipment is bought by Asian companies and it’s unlikely that this core product of the German economy, mechanical engineering will move abroad. So that means the German solar sector will profit in any case.”

Recently, Germany's largest and the world's second biggest solar park was inaugurated in the country's east. The Lieberose park spread over 400 acres will produce enough power to run 15,000 households.

While the German solar industry posts poor figures, the solar energy companies are now urging the government to discourage investors from buying Chinese panels and cells which they allege come with improper support. All eyes are now fixed on the European Union and the German government's next step.

Author: Pukhraj Choudhary
Editor: Grahame Lucas