Economic Development: The Future Is Bright

At Conergy AG's Hamburg headquarters, on the top floors of a futuristic building with a striking, curved glass roof, Hans-Martin Rüter, founder and CEO of one of Germany's most successful solar-energy companies, muses over last year's acquisition of New Mexico-- based Dankoff Solar Products Inc. Outside, it's another gray day in a country that, according to the Solar Energy Industries Association, gets as much sunlight every year as Anchorage, Alaska. "It's a question of timing," explains Rüter, with a shrug and a smile, of the company he founded 10 years ago in his living room. "If the U.S. market had started in 1996, maybe a U.S. company would have bought us."

Germany isn't the sunniest place on earth, but its solar-energy industry is bright. It's a textbook case of government creating an industry through regulation and subsidies. Thanks to a law passed in 2000 and amended in 2003, solar-energy producers command a high price for the electricity they generate, a rate good for 20 years. Can solar become competitive without the government crutch? The case is still open.

The German market has exploded since 2004. Today, because of their speed and flexibility, German solar outfits are outpacing their larger, more established Japanese rivals. But the mavericks leading the pack-- Conergy AG, Q-Cells AG and SolarWorld AG--have come up with three business models as different as they are successful.

Conergy, which Rüter founded in 1998, is the world's largest solar-system-integration company, providing more renewable-energy systems than anyone else. They include solar panels for single-family homes in Germany; a rooftop solar system, the biggest of its kind, for the tiremaker Michelin; and solar electricity for off-grid villages in India. Conergy produces 30% of the components it sells. It also builds wind, biomass and solar-thermal systems.

Rüter says his company's multigreen model is best suited for the market. "With the kind of strong growth that the renewable market is in, we have to think in cycles," he says. "It's important not to be dependent on only one country, one customer or one product." With revenues of about $1 billion expected in 2006 vs. $672 million last year, the company is looking beyond Germany for growth.

Q-Cells AG, based in Thalheim, has taken a different tack. "We thought it was better to concentrate on one step," says Stefan Lissner, head of investor relations. Three of the company's four founders came from Solon AG, a solar-module company based in Berlin. Unhappy with the quality of the cells they were able to purchase, they decided to make their own and founded Q-Cells in 1999. Located in the economically depressed former East Germany, Q-Cells has 869 employees and four factories, and currently plans a fifth. It will need one, with revenues projected to increase 75%, to $660 million, for 2006.