Germany’s residential solar panel industry is facing “many concerns” after a slump in consumer demand triggered a wave of bankruptcies and layoffs in Europe’s biggest and most important market for the sector.
Many companies that distribute and install rooftop panels have failed, been taken over, or been forced to adopt changes in strategy.
While scrapping and a glut of panels has led to a sharp drop in prices for consumers, industry figures warn they have hit sentiment among investors and are threatening to damage a sector that is crucial to meeting Europe’s ambitious climate targets.
Dries Acke, deputy chief executive of industry lobby group SolarPower Europe, described the situation as “not a positive trend”.
“To some extent this is consolidation after some extraordinary years,” he said. But he added: “You can’t have a green transition with red numbers. The sector must be profitable.”
Demand for photovoltaic panels in Germany increased in the wake of Russia’s full invasion of Ukraine in 2022, as consumers faced with rising energy bills turned to solar power.
Manufacturers and distributors grew rapidly, increasing production and distribution capacity, hiring staff and training installers.
Germany installed 15 gigawatts of solar capacity in 2023, according to SolarPower Europe – up from 7.4 GW a year earlier and a record for any European country.
German solar startups “expected the double-digit growth rate to continue and each of them to individually capture a significant share of the market,” said Dina Darshini, who heads LCP Delta’s solar and battery division.
“But in fact, the opposite has happened – the market has shrunk in 2024, there are more players and everyone is trying to compete for a smaller market.”
The decline raises questions about Germany’s target to install 19 GW of new solar capacity a year between now and 2030, as part of a drive for Europe’s largest economy to be carbon neutral by 2045.
After five years of rapid acceleration across all types of solar, the pace of growth in the world’s fifth-largest market for photovoltaic panels slowed in 2024. Germany added 16 GW of new solar capacity in 2024, compared with 15 GW in 2023 and 7 GW in 2022. with the decline in residential solar offset by continued growth in commercial rooftop installations and solar farms.
The slowdown in demand growth – which has also hit the solar markets in Belgium and the Netherlands – has been caused in part by higher interest rates that have increased the cost of consumer finance deals that are usually part of a solar package.
At the same time, flooding the European market with solar panels and cheap components from China has created fierce competition. That has increased pressure on European manufacturers such as Switzerland’s Meyer Burger, which in September announced it would cut a fifth of its workforce and squeezed the margins of companies that provide rooftop installations. Even generous government subsidies have been gradually reduced.
Zolar, a start-up that has raised about 300 million euros in funding since its launch in 2016, announced in September that it was abandoning its business selling solar panels to homeowners and would lay off more than 50 per percent of the workforce of 350 people.
Chief executive Jamie Heywood described a “unique” situation where the cost of installing a solar system has fallen significantly but, due to lower energy prices, customers also have less incentive to switch to solar panels. “Although customers can save money over the life of their system by switching to solar, the payback is less attractive than it was,” he told the Financial Times.
The company, whose investors include Singaporean sovereign wealth fund GIC, has decided to focus on providing services to the thousands of small local businesses that hold around 80 percent of the German solar installation market. “While I am excited about the opportunities in the installer space, it has been a difficult decision to make,” said Heywood.
Zolar is not the only company that has struggled. Berlin-based Eigensonne, a solar panel supplier, declared bankruptcy at the end of 2023. ESS Kempfle, a solar panel supplier in southern Germany, warned in August of “dark clouds” over the industry as it announced a restructuring plan including job losses.
Industry insiders expect Germany’s biggest players, which include prominent start-ups such as Enpal and 1Komma5, to survive the turmoil. But they have not been immune from pain.
Growth plans at Enpal, which is backed by SoftBank and TPG and was valued at €2.2bn in 2023, have been hit by a “turbulent year”, according to the company’s “chief evangelist” Wolfgang Gründinger.
He said the company had been able to take advantage of the turmoil to double its market share in the solar sector and had also benefited from diversifying into heat pumps and smart meters and launching an electricity trading platform.
However, Gründinger warned, “if many companies go bankrupt, it’s not good for us either. Investors see it and say: the market is crashing. And you can’t plan.”
Another big player is 1Komma5, worth €1 billion in 2023, which bills itself as a one-stop shop for residential green energy, including solar systems.
Chief executive Philipp Schröder said that despite the difficult market, the company’s orders continued to grow in 2024, thanks in large part to its AI-driven tool for optimizing home energy use. But it has played down M&A for now, preparing instead to “advance more aggressively” in batteries as well as power optimization.
There were still some bright spots for the solar sector in 2024. Demand has continued to grow for mini photovoltaic systems that are installed on balconies.
Industry figures remain optimistic for the medium to long term, pointing to the fact that although 3 million residential roofs in Germany are equipped with a solar system, there is room for many more.
“We expect the market to recover,” LCP Delta’s Darshini said, pointing to a large well of untapped demand from corporate customers and rising electrification rates as German households and businesses continue a drive to decarbonize.
“It is unlikely to return to the height it was in 2022-2023 – unless there is a major stimulus package or event. You are more likely to see a slow gradual increase towards 2030.”
This was echoed by Fabian Heilemann, a Berlin-based venture capital investor whose Aenu fund has backed companies including Zolar.
“The medium and long-term market is intact,” he said, insisting that even with concerns about the re-election of Donald Trump and the rise of populist parties in Germany, “the energy transition will not go in the opposite direction.” But he warned: “In the next 12 to 36 months there will be a lot of concern.”
