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German solar elite gain from strong demand surge

Strong demand ahead of steep cuts in sector subsidies gave Germany’s battered solar industry a respite in the first quarter, with the country’s two biggest players beating profit expectations.

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Germany’s bellwether SMA Solar benefited from customers rushing to buy solar technology ahead of cuts in subsidies and posted first-quarter net profit of 29.6 million euros ($38.3 million), significantly more than analysts had forecast.

Likewise, SolarWorld, Germany’s No.2 solar player, posted a forecast-beating operating profit of 31.5 million euros, also pointing to strong demand in Germany, the world’s largest solar market when measured by total size.

“In Germany, our results were affected by pull-forward effects in the first three months, which were once again triggered by politics,” said SolarWorld Chief Executive Frank Asbeck, nicknamed “sun king” for his outgoing nature.

The solar sector has come under intense pressure from fierce competition from Asian rivals, overcapacity and falling government subsidies for solar power, driving some players out of business, including German players such as Solon and Q-Cells.

In Germany, which accounted for more than a third of the global solar market in 2011, the first quarter saw strong demand as customers wanted to benefit from incentives - which guarantee tariffs to buyers of solar installations for a certain period -before steep cuts in the subsidies in April.

So-called feed-in tariffs (FIT) have helped Germany’s solar industry blossom over the past decade, leading to a myriad of listings and creating about 150,000 jobs.

The government wants to slow down growth of installations in Germany to 2,500-3,500 MW capacity annually after capacity was expanded by about 7.5 gigawatts (GW) in both 2010 and 2011, and therefore cut incentives by between 20 and nearly 40 percent from April.

“The fact that SolarWorld and SMA have presented such good numbers is a surprise, but should not be overestimated. It is due to the pull-forward effects in light of the subsidy cuts. The industry’s crisis is far from over,” a trader said.

SMA Solar and SolarWorld kept their cautious outlooks of lower sales in the current year as a the market contracts.