But Matthias Engelsberger had something else on his mind that year. The 21-year veteran of the German parliament, the Bundestag, was retiring at the end of the term, and he had one year left to make his mark. He decided to stake his legacy on an industry that was still in its infancy: renewable energy.
So Engelsberger, a member of the conservative Christian Social Union, made an unusual move: He reached across the aisle to a young colleague of the upstart Green party, Wolfgang Daniels.
"I was the energy policy speaker for the Green party at the time," recalls Daniels; Engelsberger died in 2005. "And at some point we were talking, and we said, 'Yeah, we have to try something to cross party lines.'"
The result of their collaboration, which raised eyebrows in both of their ideologically distant parties, was a simple one-page law, the 1990 Electricity Feed-In Law. It provided modest incentives for the development of renewable energy by requiring energy companies to buy small-scale renewable electricity, at a fixed above-market price, from households and businesses that produced it.
The bill initially didn't receive much attention. "This all took place at a time when German reunification was on the agenda, so we were working in the shadows," says Daniels. "At the hearings, people said, 'Yeah, OK, we'll let that pass. It won't have any serious impact on the overall energy supply.' They saw it as a gimmick. It wasn't like everyone knew that this was the beginning of a completely new development."
At the time, Daniels and Engelsberger had their sights set on wind and hydropower. Solar power, which provided less than 0.001 percent of Germany's electricity in 1990, was an afterthought and didn't begin to take off until the feed-in tariff law was revised in 2000 and again in 2004 to boost the subsidies for renewable energy, particularly for solar.
The results were spectacular. Annual solar installations in Germany jumped 20-fold from 2000 to 2005 and another eightfold from 2005 to 2010, catapulting Germany into its unlikely role as the world leader in solar power. Only it worked a bit too well. With German demand for solar modules exploding, production boomed and prices began to plummet. A solar panel in Germany now costs just half of what it did three years ago -- good news for Germans looking to generate electricity from their roofs, but devastating for companies trying to turn a profit by producing and selling panels.
Germany is famous for its prowess in manufacturing specialized technology. The country's redoubtable Mittelstand -- small and medium-sized firms that produce things such as high-quality machine parts -- has kept German manufacturing growing and has helped bring the national unemployment rate to its lowest level in more than 20 years, even while the rest of Europe sinks deeper into economic crisis. But solar cells are no longer specialized technology -- they're now easily churned out on a massive scale. And when it comes to this kind of manufacturing, there's no one better than the Chinese.
"You can't beat China at its own game, which is primarily high-volume manufacturing of largely commoditized products," says Shayle Kann, managing director of the solar unit at the energy market analysis firm GTM Research. "Solar has pretty much gotten to that point."
China has seen its market share of solar cell manufacturing explode in recent years, climbing from 26 percent in 2007 to 62 percent last year, according to GTM Research. It is home to eight of the top 10 solar cell manufacturers in the world, according to market research firm Solarbuzz. (The one U.S. company on the list, First Solar, recently announced a restructuring that will see 30 percent of its global workforce laid off, including the 1,200 workers at its plant in the German city of Frankfurt an der Oder.) Meanwhile, Germany's market share, once the highest in the world, is at 5 percent and falling. Just four years ago, Q-Cells was the world's leading solar cell manufacturer.
Klaus-Dieter Maubach, who sits on the six-member board of management that runs Germany's largest electric utility, E.on, predicts that there won't be any German solar panel manufacturers left in five years.
"They have to contend with competitors in Asia and a global oversupply of production capacity," says Maubach.
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