Germany has become the world's largest market for solar energy thanks to a system of cross-subsidies for renewables. As a result, a strong and active solar industry has emerged. SolarWorld, Q-Cells, Conergy and Ersol, all quoted on Germany's TecDax, have rewarded shareholders with strong gains as petrol prices have surged and world demand has soared. SolarWorld, number two globally in the solar energy business, has a multibillion-euro order book. Its chairman, Frank H Asbeck, says: "By 2020, the global market will reach €400bn and German companies' exports will grow to €80bn." This optimism is underscored by the recent decisions of California and Australia to vastly increase solar energy production. They are supported by large US corporations, such as Google, that intend to slash their carbon use through solar energy. "In 10 years, we expect solar energy to account for 5%-7% of German power production," says Asbeck.

German investment, research and entrepreneurship in solar energy did not just happen. A German householder can sell unwanted energy from his solar system back to the grid at eye-watering prices so that even inefficient and expensive solar systems pay for themselves within a decade. But costs are falling rapidly. "We expect householders to reach break even around 2013. In other words, the electricity from the roof panel will then be the same price as from the utility," says Asbeck.

Q-Cells, which makes cells based on mono- and multicrystalline silicon, is another notable beneficiary of the boom. Launched in 2000 by two science graduates with €60,000 seed capital, Q-Cells' sales should reach €500m in 2006, a notable rate of growth. Small wonder that the company and its founders, Anton Milner and Reiner Lemoine, have received several entrepreneurial prizes.

As the industry matures, it is striving to drive down cell costs and raise their efficiency. Prices are expected to fall sharply as more capacity comes on stream, although the price decline may be limited by a shortage of silicon. Large, established companies are muscling into the market. It has attracted one of Germany's most famous entrepreneurs, Reinhold Wur th, whose Wurth AG is the world-leading supplier of fasteners. With regional partners, he has invested €54m in W urth Solar, recently opening the world's first factory for silicon-free solar modules. These use a thin sheet of copper, indium and diselenide (CIS) instead, making them cheaper than silicon-based products and more efficient in the light sunshine of northern Europe. "Solar energy always fascinated me. Even before we launched Wurth Solar, I was sure that CIS had a great future,' says Wurth.

With renewables heading towards 13% of its total power production, Germany is already a world leader in alternative energy, a sector currently employing some 170,000 people. The country is, for example, the world's largest producer of wind energy. But despite such commitment to alternative energy and to energy saving, Germany faces considerable challenges in cutting carbon production. Heavy engineering and chemical industries need reasonably cheap electricity to be competitive internationally.

GERMANY MAKES WORST US GAS GUZZLERS

Despite Germany's green image, the reality is less planet-friendly. Of 92 passenger cars qualifying for the America's 'gas-guzzler' tax in 2006, 65 were German, of which 25 were made by Mercedes-Benz and 16 by BMW.