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Our perspective on the current state of the German Retail Solar industry: Part 1 - demand side

Aktualisiert: 9. Apr.

1️⃣ >> Falling electricity prices <<... weaken demand for solar PV as best alternative. Retail electricity price levels have come down from their peaks and with less price volatility than in 2022. However, winter hasn’t really started yet. Power prices will likely go through more volatile cycles in the coming months and and subject to temperatures, electricity prices may go up again in the short-term

2️⃣ >> Falling PV system prices <<... incentivizing the ”lets wait and see” attitude of customers > something that the industry has seen numerous times over the last 20 years. This time is no different. Manufacturers (not only Chinese ones) try to turn finished goods in stock into cash before year’s end. This may go into Q1/24, when Chinese demand tends to be lower and factories continue to roll. The question is, how long until customers think that the bottom is reached and demand will pick-up again – which it will. Often times in the past, demand has picked up in Spring, when the Sun shows its force!

3️⃣ >> Recession risk / high interest rate environment <<... overall reduced investment activity around housing, even for things that are must-haves (vs. solar PV as ”nice-to-have” for most). Key reasons are: 🔹 the higher interest rate environment leads to additional monthly financial burdens (if financed) and better investment alternatives 🔹 in an environment with a potential recession, individuals will invest and finance carefully 🔹 Insecurity about future interest development. How long will the current interest rates stay? Does it pay off to push out investments? ▶️ Result: reduced demand for residential solar PV for now... but: 2022 was an exceptional year in terms of demand. Now we come back to a longer term, sustainable growth path. These phases are difficult to manage, especially in industries built on a relentless growth narrative.

❓What does it take now: Good management teams and calm investorsManagement teams need to step up: dealing with growth and at the same time supply chain imbalances that impact profitability. Managing growth-hungry teams.Investors should stay calm - hey, you got into solar because growth and returns can both be high, but volatility is higher, too. Accept the learning curve, and stay the course.

❗Final takeWe believe in healthy demand for many local and national solar PV companies – with vast growth potential (> 8M suitable roofs left in Germany alone) for those making it through the rough weather – a real management challenge.Stay tuned for part 2 – the investor / financial side.What do you think?

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Tobias and Christian

We build Cleantech Bridge Equity Advisors based on our first-hand experience in driving innovative cleantech business models and connecting investors with new asset classes.

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