Germany produces more than half the world's solar energy, promising untold wealth for 'Solar Valley', writes Derek Scally

California may have Silicon Valley but eastern Germany is well on its way to capture the title "Solar Valley".

Not only does Germany produce 55 per cent of the world's solar energy, it is also a world leader in producing the innovative technology that converts sunlight into electricity.

The burgeoning solar industry could yet be the silver lining on the economic cloud that has hung over eastern Germany since unification.

Dozens of solar production companies have opened plants here employing thousands of people - an important shot in the arm in a region where up to one in five is out of work.

"Germany's current pole position is not a given," said Carsten Körnig, managing director of industry lobby group BSW-Solar.

"It's down to our technological advantage, long-view company strategies and a stable home market."

Germany seems like an unlikely place for a solar power boom considering its northern European climate guarantees only half as many sunny days as Spain or Portugal.

Despite the clouds, Germany still has a remarkable energy potential, half that of world hotspots like the Sahara desert, according to analysts Solarpraxis.

The fledgling solar industry got off the ground after the last government introduced landmark legislation to boost renewable energy production by guaranteeing prices for renwable energy producers.

Germany's solar companies had sales of €3.8 billion last year in a market that is growing by 20 per cent annually. The sector employs 40,000 people while another 15,000 work in companies that produce solar energy heating systems.

One leading consulting firm predicts that, by 2020, Germany could employ more people in the solar energy sector than in the automotive sector. The best place to witness the solar revolution is in Frankfurt Oder - not the skyscaper-filled western German financial capital but its eastern namesake, a grim town on the Polish border with unemployment twice the national average.

Last year the Hamburg-based energy company Conergy bought a huge plant here, originally built four years ago by a failed computer chip consortium.

The Hamburg company has invested €250 million in the empty grey hall, six football fields high, to build the world's most modern solar component factory.

By the end of the decade, Conergy plans for it to turn out 1.2 million solar modules annually and employ 1,000 people.

"This facility will bring us into a completely new dimension," said Conergy boss Hans-Martin Rüter.

"The hall has incredible dimensions with plenty of room to expand and the close connection between production and research here will guarantee innovation."

Apart from subsidies, lower employment costs and the brand-new infrastructure built since German unification, the company is benefitting from local staff who used to work in the east German semiconductor indutry that was based in the region.

They're not the only ones: just a few kilometres down the road, Conergy's American competitor First Solar has already started production in its own solar production facility that employs 500 people.

It's not just solar component factories that are springing up: 15 of the world's photovoltaic (PV) "solar farms" are located in Germany.

Construction is underway near Leipzig on what will be the world's largest solar farm that will occupy a site larger than 200 soccer pitches and generate 40 megawatts when it opens in 2009.

Solar is still a tiny element in Germany's total energy mix, contributing just 0.5 per cent of the total, but the government plans to increase that to 3 per cent by 2020. The high costs of solar energy production are likely to drop in the coming years, according to a new study by the German government.

It says that technological breakthroughs have cut costs by 60 per cent since 1990, and that solar energy costs will drop by 5 per cent annually from 49 cent per kilowatt-hour (kWh) today to 28 cent in 2020.

Germany is taking a calculated gamble in the face of the rising cost of fossil fuels, the growing backlash against the eyesore of wind turbines, not to mention its plan to close the country's last nuclear plant by 2020.

Solar energy farms seem like a dream compared to many of the alternative energy providers: the plants require next to no maintenance or staff and produce no noise beyond the low hum of the transformer air conditioners.

Rain or shine, it seems that eastern Germany's place in the sun has finally arrived.

Solar stats

7000+ Number of German companies involved in solar energy in 2006

150Producers of solar technology in Germany last year

€1.1bnAnnual turnover from solar heating enterprises