Ralf Preu couldn't be busier. The director of the silicon solar cell technology at the Fraunhofer Institute for Solar Energy Systems (ISE) feels particularly good when his pilot system spits out one solar cell after the other. The shimmering blue solar cells are the result of a complex production process at a high-tech factory on the Fraunhofer Institute campus in Freiburg.

Preu and his 200 employees are busy further developing solar cell technology – now a global standard. Their goal is to increase the efficiency of silicon solar cells from 18 percent today to more than 20 percent in the future. Higher efficiency translates into lower costs for electricity generated from solar cells.

Efficiency record

The Fraunhofer researchers still hold the world efficiency record for this type of solar cell. But to remain at the top, they need to continue researching. That means not only increasing the efficiency of solar cells but also reducing their material costs in production.

Ideally, the researchers like to test what they develop in their labs directly with industry partners. This strategy worked well during the solar boom, when numerous German manufacturers of solar cells and modules helped finance their research. The crisis, however, has made companies less willing to pick up the tab. On top of that, Chinese rivals are flooding the market with low-cost solar cells and modules, creating huge pressure on margins.

Today, many midsize and even large solar companies in Germany are struggling for survival. A number of them have already filed for bankruptcy. Researchers like Preu now face financial restraints as their industry partners reduce funding or pull out completely. The Fraunhofer solar cell expert alone has lost about one-fifth of his industry financing.

"We're now working closely with equipment and materials manufacturers and trying to compensate our losses through more publicly funded projects," says Preu.

Solar boom

The abrupt end to the solar boom has also been felt Harry Wirth who, together with 130 employees, is in charge of testing finished photovoltaic modules in a neighboring factory hall. The protective layers of solar cells must remained sealed for 30 years, withstanding heat, cold, moisture and particles. For more than a decade, Wirth received one industry contract after another to develop and test modules that could sustain these dangers.

Now customers are pulling the plug on projects on a weekly basis. That is particularly painful for Wirth who receives up to 75 percent of his research funds directly from industry. "We have lost many of our key customers through bankruptcy," says Wirth, who hopes to avoid reducing staff. Nevertheless, the researcher expects at least half his business will disappear in a few years. "We will need to learn how to cope with customers no longer ringing our doorbell," he says.

Fraunhofer ISE director Eicke Weber is worried about Germany possibly losing its global lead in solar research. Around 70 research institutes in the country are active in this area, and Fraunhofer ISE has emerged as one of the top centers internationally. The number of its researchers has increased from just 300 a decade ago to more than 1,200 today.

Remaining competitive

The rapid growth, however, is now giving way to a need to preserve what has been achieved. For Weber, that means continuing to deliver innovative ideas to German companies to keep them competitive and finding new customers.

About half of Fraunhofer ISE's 73 million euro budget is financed by the solar industry. Experts have begun to ask whether the institute should consider accepting commissioned research from China, if Chinese solar cell and module manufacturers like Suntech become dominant market forces.

"We will not share our core expertise in developing lower-cost, efficient solar cells directly with Chinese companies that only operate in China," Weber says. Research financed by German taxpayers must create jobs and value in Germany, he maintains.

Chinese advance

Whether China's booming solar industry in the future will continue to rely on know-how "made in Germany" remains questionable. Chinese solar companies have benefited from massive government subsidies in the past and, following another recent wave of investment, can expect such support to continue in the future. With its support, the government aims to encourage local manufacturers without their own labs to acquire research expertise and become less dependent on German know-how.

What Chinese solar strategists view as the next important development step is for ICE head Weber nothing less than a declaration of war. Over the past two years, China has assembled the world's largest and most efficient solar manufacturing facilities. The output is three to four more times higher than that of German-based manufacturers.

Such a capability gives Chinese companies competitive advantages that can be further cemented with targeted industrial policies in the research sector, according to Weber. That is one of the reasons why he supports a complaint filed by European solar manufacturers with competition watchdogs in the European Commission. The manufacturers are asking for duties to be slapped on Chinese imports.

Should their application fail, Weber suggests beating the Chinese at their own game by targeting government funds at specific European high-tech sectors such as the photovoltaic industry. But Weber warns that the moment research leads to large-scale production, that production is guaranteed to move to Asia, "because governments there will back loans to companies to build globally competitive production facilities."

Seeking alternatives

Fraunhofer ESI, Germany's top solar researcher, is pegging its hopes on German solar engineering companies. Every second solar cell in the world is manufactured by a German-made machine. "We must ensure that solar equipment manufacturers stay here," says Weber. His appeal comes shortly after the insolvency of Centrotherm, Germany's first midsize solar equipment manufacturer to succumb to fierce competition.