Global Economics

Iliotec Solar: A Shining Example


The German solar-energy outfit offers one-stop shopping, from planning and professional advice about systems to installation and maintenance

Germans are passionate about being green, whether it's saving energy or reducing pollution. But even engineering graduate Stefan Dobler was stunned by the explosion of demand for the services of his solar-energy installation startup. Iliotec Solar has grown from zero to €54.2 million in revenues ($68.3 million) in eight years and has been profitable since its founding. Last year, sales jumped 43%, and employees nearly doubled to 150.

Of course, it was a stroke of luck that the German government passed a law in 2000 subsidizing the price for surplus electricity that solar systems feed back into the country's electricity grid. That payment—now 51.8 cents per kilowatt hour—allows individuals who install solar systems to break even on the €10,000 investment ($12,630) within 10 years—and to earn money after that. The law was the result of a decade of trial-and-error policy on how to make solar energy economically viable, says Dobler.

GRANDMA'S SOLAR HOUSE

But two years before the law was passed, Dobler and a partner launched Iliotec (which means "sun technology") in his grandmother's home in Regensburg, eventually taking over every room in the house. By 2003, 15 employees were traipsing through his grandmother's front door every day to go to work. Her compensaton: A new solar energy system on the roof of the home office. This year, Dobler, who started operations with no capital and has generated annual profits of more than €1 million ($1.3 million) since 2004, set up his first full-service foreign operation in Marbella, Spain, where a similar law was passed recently to subsidize consumer investments in solar energy.

When Dobler founded Iliotec, he offered green-minded Germans one-stop shopping, from planning and professional advice about systems on the market to installation and maintenance, including a 24-hour hotline. Now 38, Dobler became fascinated with solar energy in 1990 as a student at the University of Regensburg while interning at a German company that built photovoltaic cells for solar systems. At the time, only do-good environmental "freaks" invested in solar systems, Dobler said, since it was not economical. As a student he became passionate about the technology and about reducing carbon dioxide levels. "I wanted to do something for the environment. When you are convinced about something, you hold on and push it," he says. He notes that the 12 megawatts of electricity produced by the systems that Iliotec installed last year saved 10,000 tons of carbon dioxide emissions from being spewed into the air.

This year, Iliotec is expecting sales of €70 million ($88 million), a cooling off after eight years of superheated growth. That's partly because of a global shortage of silicon needed to build solar cells, which this year shrunk the total market for solar systems. But with the supply of silicon forecast to bounce back in 2007, Iliotech aims to hit sales of €100 million ($126.3 million) by 2008.

EYE ON EXPANSION

Dobler and head of strategy Thomas Reindl are now studying which countries offer the greatest opportunity for expansion. One possibility is South Korea, which has recently passed a law similar to Germany's, setting a tariff for individuals feeding energy into the country's national electricity grid. Dobler is also keen to diversify his green product base into solar thermal heat pumps and geothermal systems, which so far make up less than 10% of sales.

Looking forward, Dobler expects solar systems to become less expensive over time. The German law reduces the feed-in tariff by five cents a year, but as solar systems decline gradually in cost, he says, the payback should remain constant. And if other countries get solar economic policy right, Iliotec's growth could get even hotter.

Edmondson is a senior correspondent in BusinessWeek's Frankfurt bureau.

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