Economic Development: The Future Is Bright

Workers install structures for solar panels in Brandis, Germany, for what will be the world's biggest solar energy facility

Sebastian Willnow / AFP / Getty

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Q-Cells is a model for the job creation the German government hoped for when it passed solar legislation. Although highly educated and technically skilled, the country is struggling with a 10% unemployment rate. Building an advantage on the next big technology, goes the thinking, could drive economic growth. "We feel there's a chance for Germany to be innovative, to create an industry and possibly be the leader," says Cornelia Viertl, a senior adviser at the German Federal Environment Ministry. Public awareness of environmental issues and a desire to be less dependent on Russian natural gas have created a favorable climate for renewable energies. According to law, 12.5% of the nation's electricity must come from renewables by 2010, up from the current 10%; 20% must be renewable by 2020.

But at what cost? Claudia Kemfert, an energy expert at the German Institute for Economic Research, warns that Germany's solar industry will falter if current policy changes: "The major point of criticism says that [solar] is too far from being competitive. It's a political question of whether the country wants to keep subsidizing it." Utility companies must now pay 8.36 euro cents per kW-h to windmill owners; for solar, the price is far higher, at 51 euro cents. The utilities charge about 20 euro cents per kW-h, with consumers paying an extra 0.5 euro-cent charge per kW-h to fund green energy.

If fossil-fuel costs rise, though, the U.S. could become more competitive. "As an industry we are probably five years behind Germany," says Rhone Resch, president of Washington-based SEIA, who compares solar with the software and computer industries in their early stages. "But the U.S. market is starting to wake up." SEIA projects the U.S. will be the world's biggest market, with $25 billion in revenues, within five years.

SolarWorld AG, headquartered in Bonn, could be one of the beneficiaries. Founded in 1999, the company began as a distributor of solar modules, then added module production. Today it also produces cells, markets "plug and play" solar systems and develops and installs solar parks. "I didn't want to be squeezed between producers and the market," says CEO Frank Asbeck. "As a dealer, you are dependent on your suppliers, and when the market gets good, they kick you out."

In July the company acquired Shell Solar's crystalline-silicon solar business, which makes solar-grade silicon, wafers, cells and modules in California, Washington and Germany. This year revenues should increase 43%, to $630 million, making it the second largest integrated solar company in the world, after Sharp. For Asbeck, there's no question about which direction a solar company should go in: "You have to be fully integrated, or you don't have control."

In Hamburg, Conergy's CEO is convinced that the business will outgrow the need for government support. He thinks his company has a good shot in the U.S. market, where solar has received lukewarm federal support. "Americans," he says, "love to get German engineering." Even the subsidized kind.