Germany's Solar Explosion

Q-Cells, the third German solar energy company to be listed on stock exchange this year, saw its shares shoot up to 49 euros ($59.4) within the first few hours of trading, way above the issue price of 38 euros.

The initial public offering (IPO) was oversubscribed nearly 40-times according to a Q-Cells spokesman, meaning that investors had applied for 40 times more shares than were actually on offer. The success of the float is viewed by many as direct proof that the "clean technologies" and the renewable energy sectors have come of age.

Strong interest in renewable energy

Investor interest in solar energy has soared thus far in 2005 after oil prices rose to record highs, increasing the attractiveness of renewable energy sources. Solarworld AG based in Bonn has seen their market value more than double to 1.4 billion euros, making it Germany's biggest solar-cell manufacturer.

Likewise, Q-Cells, based in Thalheim, has doubled sales to 117 million euros in the first half of the year and has already sold its complete 2005 production of solar cells. Net income also more than doubled to 15.3 million euros in the first six months, according to Q-Cells reports.

Christian Reitberger, a member of Q-Cells' board, said "Our view is that clean tech investing is not only something for the ecologically minded idealists, but an activity that can make substantial returns. The fact that it can also be ecologically beneficial makes it a particularly appealing combination."

Government subsidies pushing growth

Germany is one of the largest European markets for solar power, with state financing helping to support the sector by making roof-top solar panels affordable for households via subsidies.

According to federal government statsistics, subsidies for alternative energy sources are expected to double the share of renewable power in Germany by 2010. Currently, companies and individuals who install solar panels pay approximately 57.4 cents per kilowatt-hour for electricity. Compare that with the 1 to 6 cents it costs to generate that amount using conventional power plants.

Subsidies: here today, gone tomorrow?

As far as subsidies for solar power are concerned some investors are quietly raising there hand from the back of the room to ask the obvious question: Will this state support continue? There are risks involved, since any legislation supporting the drive for new sources of energy may be changed or even overturned at whim if, say, there is a change in government.

This was demonstrated recently in Germany, with the conservative CDU/CSU parties threatening to reverse, at least partially, legislation drawn up under the current administration of Social Democrats (SPD) and Greens to phase out nuclear power within a specified period of time.

Making it work in Germany

Despite what many analysts perceive to be "un-naturally high" share prices, the funding that German solar companies are now enjoying from a flurry of successful IPO's can be funnelled back into both R&D and production—a fact which could position Germany as the unrivalled king of the solar power industry.

In addition to Q-Cell's public offering on Wednesday, Ersol (based in Erfurt) made a debut last week, while the smaller Sunline is planning an IPO for late October and Dresden-based Solarwatt may float in the fourth quarter.

With the exception of Sunline, all these firms are based in eastern Germany, where local governments are eager to roll out the red carpet to attract new industry for the economically troubled region.