The Wall Street Journal Germany has an in depth analysis of the collapse of German solar module giant, Q-Cells: Too Close to the Sun – The Rise and Fall of Q-Cells.
It’s worse than we thought!
Last Tuesday the solar company based in Thalheim in Saxony-Anhalt, once the largest module manufacturer in the world, very quietly announced its results for 2011 – a blood bath. The company lost 850 million euros and is now teetering on the brink of bankruptcy, with no hope of a rescue. It is the latest in a series of spectacular solar company failures now ripping through the industry. The number of weird economic events keeps surging.
The Wall Street Journal reports how the company was founded by engineers in 1999 amid flourishing hope and optimism in what was supposed to become the cornerstone of Germany’s dreamed “Solar Valley”. The newly elected Socialist-Green coalition government, led by the newly elected Gerhard Schroeder, hailed it as the beginning of a new industrial era would sweep Germany into the 21st century. That future was secured by the passage of the Energy Feed-in Act (EEG) in 2000, which guaranteed producers of green energy fixed rates for 20 years and cheap low-cost credits for solar systems. This led to a boom in the solar industry and wind industry over the decade that followed.
Among the solar companies that sprouted overnight was Q-Cells. By 2005 the company had grown to 750 employees with annual sales of €300 million. Consulting company Ernst & Young named then Chief Executive Milner as Entrepreneur of the Year. Q-Cells expanded production and opened plants overseas, one in USA.
By 2007 the company had grown to over 1700 employees and sales of €860 million and profits of €150 million. Green energy seemed to be the way to go.
Today things don’t look rosy at at all. Q-Cells shares today can be bought for a €0.23, down from its peak of over €80 a few years back (click on 5 J., which is 5 years). Insolvency appears imminent. What happened? Everything seemed to be going right just a couple of years ago. But as the Wall Street Journal writes, everything actually had gone wrong.
As the industry boomed in Germany, thanks to mandatory feed-in rates paid to solar power producers, cheap manufacturers from China got into the act. Asian manufacturers tooled up on a massive scale and produced the modules at far lower prices. The price of solar modules on the global market plummeted. Then came the crash of 2009, the government rolled back the feed-in rates, Q-Cells had also neglected to invest in R&D. Single woes compounded and caught up. Now the company looks hopelessly doomed.
The Wall Street Journal writes:
2011 – the prices dropped further – Q-Cells succumbed to high operating costs. Old production lines at its headquarters were no longer profitable. They are going to be closed, written off, the employees will have to go. By the end of the year the company had booked a loss of €850 million. Even worse: The company doesn’t see any profit until the year 2014. What remains is pure desperation.”
Is there a chance of a rescue? Stephan Wulf of Warburg Research is gloomy. For him the question is “whether Q-Cells can avoid insolvency and if it will be able to find a place on the global photovoltaic market. Looking at the strong competition from China, I have considerable doubt. about the prospects of Q-Cells surviving. ”
Those are hardly words that will encourage investors.
The Tagesspiegel also has a report on how many renewable energy companies rode the gravy train for years, but did not bother to invest in R&D. Now it’s time to pay the piper.
Warmist scientist on supervisory board
By the way, one of Q-Cells supervisory board members is Prof. Dr. Eicke Weber, Director of the Fraunhofer Institute for Solar Energy Systems ISE, Freiburg. and a harsh critic of Fritz Vahrenholt’s and Sebastian Lüning’s skeptic book “Die kalte Sonne“. I guess there’s a lot we could learn from Prof. Weber.