First of a Round of Solar Mergers and Acquisitions?

Implications: Ersol, a small, medium priced photovoltaic manufacturer, has been acquired by the German auto giant Bosch Group.  This acquisition will be good for both parties, giving ersol deep pockets and enabling Bosch to combine photovoltaic system with its solar thermal business.  One interesting question will be whether this is the beginning of a round of mergers and acquisitions in the photovoltaic industry.

Analysis: The announcement of the Bosch Group, known primarily for its automotive parts, of acquiring ersol Solar Energy may usher in a round of mergers and acquisitions in the photovoltaic industry.  Ersol is a high quality, medium priced crystalline manufacturer of solar panels.  It has gotten into the three figure megawatt a year production range and secured a long term cell supply deal with Aleo.  In addition, the cloud of slashed German subsidies has been lifted with the rate of the feed in tariff being reduced at a manageable 8% annual rate instead of the more drastic 26% as threatened by political conservatives (interestingly, nothing was addressed about the far larger coal subsidies).

Bosch will provide deep pockets to ersol, as well as the opportunity to pair up solar electricity with their growing solar thermal system offering.  It will be interesting to see whether this deal will trigger other mergers and acquisitions.  However the other remaining major incentive issues, in the US and Spain, are resolved, the photovoltaic market maybe due for a shakeout.  Unlike the more concentrated wind turbine manufacturing market, the top five solar cell/panel makers in the world were just under 40% of the photovoltaic market, and the next ten makers controlled about 35%. 

Dozens of manufacturers have a toe hold in the market.  Ersol reported an output of 53 megawatts in 2007, according to the Prometheus Institute.  That was little more than 1% of global output in 2007.  PV manufacturers like ersol will realize the necessity of growing quickly and becoming much cheaper, or face extinction.  Ownership by companies serious on renewable energy is a likely outcome for many of these firms.