FRANKFURT, Germany — One summer day 16 years ago, when Paul Grunow was wondering what to do with his life, he saw a magazine article depicting a man playing an electric guitar powered by a solar panel.

“That’s great,” thought Grunow, a PhD physicist who had just returned from his post-doc in Brazil. “I’d like to do that.”

Eager to avoid a run-of-the-mill career, he teamed up with some colleagues to launch Solon, a solar panel manufacturer. His dissertation had dealt with photo-voltaics, so he had the knowledge.

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Their timing was excellent. Four years later, Germany passed its ground-breaking Renewable Energy Act, the cornerstone of its quest to become the green era’s technological leader. Solon and other German solar cell manufacturers capitalized on the government’s solar energy program.

Solon is now one of Germany’s biggest solar energy companies. But due to tough competition from abroad and cuts in government solar support, Solon’s future — as well as Germany’s technological leadership — is uncertain.

Chinese labor is growing increasingly expensive. Still, it’s far cheaper than in Germany. As such, Grunow fears that “the Chinese will ruin everything. It’s just impossible to produce photovoltaic modules as cheaply as they do,” he said.

Top global Chinese manufacturers including Yingli, Suntech Power and Trina Solar have become major global players. Their low-price panels were largely responsible for the bankruptcy of California-based Solyndra, which had received strong support from the Obama administration.

Likewise, heavily-government supported German firms are also feeling the pinch. The business magazine Wirtschaftswoche estimates that almost every second solar panel in the country is Chinese. Meanwhile, German companies have been making headlines by announcing job cuts.

In September, Solarworld, Germany’s biggest solar company, announced it was eliminating 500 subcontracted workers at its Freiberg site. At SMA Solar Technology, 1,000 will have to go by the end of November. And the outlook is grim at heavily indebted Solon SE. Spokeswoman Sylvia Ratzlaff told GlobalPost that the company is considering cutting up to 20 percent of the 450 jobs at Solon’s Berlin site.

In the small eastern German city of Bitterfeld-Wolfen the situation is far worse.

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Known for its various solar energy companies, the city is called Solar Valley. But in August the mood darkened when Q-Cells, the biggest company in town (also cofounded by Grunow), announced another round of austerity measures. In 2009, it laid off 500 workers. So far, the board hasn’t said how many will go this time, but the manufacturer will reduce production in Germany by 50 percent. “Nonetheless, we still hope for a positive outcome, in particular for the solar companies in the city,” said a spokesman on behalf of the mayor of Bitterfeld-Wolfen.

Installing solar panels on roofs is still attractive to many Germans. But since the government said in April that it plans to reduce the remuneration tariff for unprofitable solar energy fed into the grid, consumers are even more eager to buy the cheapest Chinese panels. Moreover, Chinese quality is improving while German manufacturers are struggling to get rid of their more expensive models.

“Of course, I’m worried about the jobs in Germany, and I do feel responsible for them as a politician,” said Hans-Josef Fell, a member of the Green Party. He wrote the first draft of the Renewable Energy Act in 1999, leading to the creation of the solar energy market in Germany. “But in the end, for the sake of carbon dioxide reduction, it doesn’t matter whether the panels come from China or Germany.”

The labor-intensive solar industry in Germany employs 120,000 people. That’s one-third of all renewable energy sector workers, according to the German Federal Ministry for the Environment. The government’s target is to generate 35 percent of energy from renewables by 2020. The current figure is 17 percent, with only 2 percent from solar energy.

Fell said that a mistake some German manufacturers might have committed was not investing enough in research in the face of global competition.

Solon spokeswoman Ratzlaff said: “We see our market opportunity in moving away from standard modules.” In the future, Solon wants to focus on the production of lighter panels for the rooftops of industrial buildings and businesses. Unlike other German competitors, the company hasn’t moved production to Asia yet, though Ratzlaff said that this could be an option in the future.

Grunow believes Germany’s chance to maintain its technological leadership lies in value-added products, such as all-in-one packages: clever heating and power supply systems that allow consumers to be energy independent.

Thinking outside the box, knowing what the consumer needs, Grunow said, “from that step, the Chinese are still miles away.”