Market Analysis

Philip Matthias spent months persuading his father to install solar panels on their company's roof in Thuringia, Germany. The aim was to reduce electricity costs and carbon emissions at their medium-sized metal products factory.

Initially hesitant about the €2.3 million investment, his father eventually crunched the numbers and decided to nearly double the project's capacity. They opted for photovoltaic modules that could not only power the factory but also supply electricity equivalent to 900 households.

"The PV systems pay for themselves in about 7-1/2 years, with a manufacturer guarantee for 20 years. It's a very profitable investment," Matthias told Reuters.

Following the Ukraine conflict and reduced Russian fossil fuel exports to Germany, Berlin has introduced laws to accelerate solar power expansion, aiming to reach 80% renewable energy by 2030.

Encouraged by a feed-in tariff guaranteeing prices for renewable energy producers and falling solar panel costs, German companies are increasingly turning to solar to mitigate high energy costs.

Despite Germany's leading capacity in solar and wind power, small and medium-sized enterprises (SMEs) have not benefited from lower electricity prices due to high grid fees and taxes. Generating their own solar power allows them to circumvent these additional costs.

In 2023, companies consumed about 69% of Germany's electricity, according to BDEW utilities association data.

"As electricity prices in Germany remain high, companies are realizing the economic benefits of installing solar panels," said Marie-Theres Husken, an energy expert at BVMW, representing SMEs.

CORPORATE SHIFT TO SOLAR

New installations of photovoltaic capacity on business rooftops increased by 81% year-on-year in the first four months of the year, surpassing the 1% growth in the residential sector, according to BSW Solar.

A May survey by YouGov indicated that over half of German companies with suitable roofs plan to install solar systems in the next three years. BVMW predicts nearly all manufacturing companies in Germany will adopt solar energy by 2030.

In response to growing demand, Enpal, Germany's largest residential solar developer, announced in April its expansion into the commercial sector.

"The demand wasn't immediate, but the growth will be sustainable," said Melchior Schulze Brock, CEO of Enviria, a commercial and industrial solar startup.

A study in April by the Institute for Applied Ecology in Freiburg highlighted the potential to install up to 287 gigawatts of solar capacity across German roads, railways, parking lots, and industrial areas, exceeding Berlin's 2030 target of 215 GW. This approach could significantly reduce dependence on agricultural land, where permitting can take up to a decade.

Global declines in solar panel prices since last year have further spurred corporate interest in solar energy.

"The market is flooded with competitively priced panels from China, making our current system about 20% cheaper than a year ago," Matthias noted.

Legislation passed in April in Germany has relaxed regulations and increased subsidies for large rooftop solar systems. Pending tax reforms are also expected to boost demand, along with state feed-in subsidies for large-scale rooftop projects.

The last tender for subsidized projects in February saw a 107% increase in offers year-on-year, according to federal grid network agency data.

With a feed-in tariff of 9.3 euros cents per kilowatt-hour, higher than Tridelta's current purchasing price, Matthias indicated that selling future electricity to the grid and buying it back is now cheaper for the company.

Germany's Ministry of Economy declined to comment on companies' electricity trading strategies.

"There's a strong link between feed-in tariffs and the increase in rooftop solar PV projects," said Hugo Willink, Executive Director at Sunrock, a solar roofs developer. Sunrock recently secured an order from Mercedes-Benz to build a 23-megawatt solar project on its factory roofs, underscoring Germany's importance as its core market for the upcoming year.

Paraphrasing text from "Reuters" all rights reserved by the original author.