The crisis is here. Supply bottlenecks, PV caps, a decline in expansion along with working from home and canceled trade fairs have put considerable pressure on PV companies in 2020. What can we learn from past crises, what are the strengths of the solar industry and how can we as a company overcome the current challenges? To find answers to these questions, we have taken a closer look at the current situation from various perspectives.
1. A Look Back: The Financial Crisis of 2007–2008
At the moment, we are facing a global crisis that is affecting nearly every country and sector of the economy. Looking back can help us find possible routes out of this crisis. The last global crisis, the Financial Crisis of 2007–2008 started in the United States in 2007 and led to the European Debt Crisis.
Banks around the world failed or were taken over by the state. This was accompanied by a sharp increase in the national debt of many countries. This resulted in production cuts and numerous companies collapsed.
It was important to recognize the mistakes and problems and how they changed things and were resolved in coping with the past financial crisis. In the long term, mechanisms – such as requirements that banks now have to hold more equity than before, modified bankruptcy laws, strengthened consumer rights – were introduced to prevent a similar crisis from happening again. (Source: Wikipedia, The financial crisis of 2007–2008)
Crises can therefore also be an opportunity to uncover problems or weaknesses in systems and often require new solutions to be found.
2. Strengths and Weaknesses of the Solar Industry
The solar industry is not immune to the crisis. There has already been about a 13% decrease in expansion. It is good to know one’s strengths and weaknesses in such trying times.
Strengths: The Solar Industry has Experience in Crises
If there is one industry that is definitely familiar with crisis and difficult conditions, it is the solar industry. After years of crisis, the German solar industry grew again slightly in 2018. It hit rock bottom when SolarWorld and Phoenix Solar went bankrupt. This resulted in the loss of 100,000 jobs. Nevertheless, Detlef Neuhaus, the head of the module producer Solarwatt explained: “The crisis was the best thing that could have happened to us.” And this despite the fact that Solarwatt itself went bankrupt in 2012. But Neuhaus is convinced that the worst is now over. (Source: Handelsblatt, Nach ihrer schweren Krise ruft die gebeutelte Solarbranche ihr Comeback aus)
Why? Because the crisis made it clear that the German solar industry had lost the battle for module production and German producers and their companies had to restructure. The future lies with energy management and battery storage according to Neuhaus.
The solar industry in Germany developed new business models for renewable power from photovoltaic there were also accepted by society.
The upward and downward trend over time in the industry can also be clearly seen with the capacity installed per year. Despite all the difficulties and major losses, e.g. module production, Germany still ranks fourth globally. With 49.2 gigawatts as of January 2019, Germany has about 40% of the PV installations within the EU.
Top 10 Countries with the highest installed PV capacity in 2019. (Source: IEA PVPS)
Weaknesses: The Solar Industry has a high degree of dependency.
Two factors have a large impact on the solar industry in Germany: It is heavily dependent on products from China and linked to the underlying political conditions.
Many projects could be completed in theory, but components from China such as modules and inverters are lacking at the moment. These supply bottlenecks are causing a lot of problems for the PV market, partly because of tight deadlines.
As far as the political conditions are concerned, restrictions on expansion and state-funding programs in particular continuously present the PV industry with new challenges. In Germany, there have been positive developments for eliminating the 52-gigawatt cap for photovoltaic plants, but there is still no precise timetable. This means there is an element of uncertainty that comes into play when planning new projects. There are also other political factors affecting the PV industry outside of Germany. In the United States, for example, there is currently increasing time pressure for the expansion of photovoltaic installations. The Solar Investment Tax Credit (ITC) for the installation of PV plants will be reduced in steps starting in 2020.
3. Finding New Ways during Times of Crisis
The industry is currently facing major challenges that will take time to resolve in most cases. In addition, individual companies are facing smaller challenges that require a quick solution.
Within a very short time, working from home for most of the staff had to be organized and entire trade fair concepts had to be newly developed. Solare Datensysteme GmbH also faced these new challenges and had to find ways to implement an effective solution. Being a medium-sized company was certainly an advantage. Due to flat structures and a high degree of flexibility, many measures could be implemented rather quickly, sometimes more easily, and perhaps even better.
It is time for digitization
The “Corona crisis” has already shown us how important digitization is. Millions of people are working from home offices and dependent on the Internet. The economic impact would be even more serious without this option to work from home.
Working from home at this scale is really new and may initially cause difficulties. In addition to the technical requirements, processes have to be reorganized. As a result, everyday working life is changing fundamentally, especially in terms of personal responsibility. This has taken on a whole new meaning in many companies. A positive side-effect is that more personal responsibility strengthens motivation.
The advantage of small teams is another aspect that is now becoming apparent. When working from home, small teams are able to coordinate tasks easier and, therefore, are usually more effective and less prone to crises.
In addition, companies that are not located close to large cities benefit from decentralized workplaces. This is because it is easier to recruit qualified specialists and managers if the new job does not involve moving to a new city.
Most of Solare Datensysteme GmbH departments are now working from home. As a result, the personal responsibility of each individual employee has increased once again, and everyone has a common goal: to overcome the crisis as best as possible. One can already say that the crisis has further strengthened the sense of unity.
Creative Ways and New Solutions
The motto should be: Get out of your comfort zone, don’t focus on the problem, but the results.
A very good example of this is the cancellation of Intersolar 2020 this year. How can you present new products to your customers and how can you turn it into an event? Here too, the solution lies in digitization. Without much fuss, the trade fair is now online. The trade fair stand is presented virtually, giving customers the opportunity to find out about product innovations – just like at a physical trade fair. And now with the comfort from your laptop while lying on the couch.
Corresponding online seminars and interesting lectures complement the virtual trade fair program.
4. Summary: The solar industry is flexible, innovative and forward-thinking.
A crisis can help to better recognize shortcomings and to try something new. The solar industry and its companies possess a high degree of flexibility and creativity. Perhaps this is one of the advantages of a still emerging industry. Nevertheless, there are still entrenched and outdated structures that have become evident during the crisis and that need to be reconsidered.
These certainly include the supply chains and the resulting dependencies. Does it make sense to produce components mainly in just one country? Would other production sites be economical? What precautions can be taken to mitigate supply shortages? The current crisis highlights the industry’s weakness and allows for more precise analyses. It remains to be seen whether these analyses will lead to changes and possibly improvements in the existing structures.
Together we are strong – this has proven itself true again and again in difficult times. One way to move forward together is cooperation. Cooperation can help to strengthen economic centers and bring new products to market faster and more cost-effectively.
Another aspect in favor of renewable energies is the environmental factor. Increased global warming will present the world with further problems. An important factor in slowing down global warming is the increased use of renewable energies. For this reason, PV energy is one of the technologies that will very likely see higher demand in the future.
There is a chance to emerge stronger from the current crisis if we take the right actions and use the strengths of the industry.
What actions have you taken yourself, what actions do you think the PV industry should take? We look forward to your comments!