Solarplaza Blog

FiT-free PV markets

2012-07-03T01:32:00.000-07:00

'FiT for Free' has nothing to do with feed-in tariffs or solar energy, but is a fitness brand in the Netherlands. Still, solar PV companies in Holland expect to remain in better shape when 'freed from FiT'.

Fed up with the government

Dutch solar entrepreneurs are completely fed up with the inconsistent, unsustainable, discontinuous incentives their government called 'an optimized FiT'. Unanimously, they begged the government and politicians this year NOT to continue this incentive, nor to introduce any new subsidy. The current net metering regulation is sufficient to make the Netherlands, blessed with high energy prices, one of the world's first grid parity markets. This year has already seen numerous projects and new business models started and implemented. And guess what happened... the market started growing – without either incentives or a FiT. And so did the number of new companies. It felt like the market had been freed. No government ruling or control.

Just entrepreneurs and customers.

Tired of FiT

Not only in NL is the solar industry tired of FiTs and the continuous changes enforced by governments and politicians running after the rapidly changing dynamics of the global PV industry. It is hard fully understand what is happening. Once they think they have figured out a nice FiT regime, prices collapse further and we are even seeing local companies break down. Instead of making them happy, these decreasing module prices scare them off. Budgets are running out of control due to the tsunamis of PV applications. The paradox is that the more the governments decrease a FiT, the faster people invest in a solar system. It is customer psychology. In the end, you do not want to be the loser who missed all the good tariffs in the past, being left with the 'leftovers' or even no FiT.

Pain in the roof

For all other stakeholders in the market, such as investors, banks, installers and EPCs, these ever-changing regulations are a 'pain in the roof'. Working with unforeseeable peaks in demand is indeed a business challenge in terms of personnel, cash flow management and purchasing capacity. The frustration could be felt at the latest Global Demand Conference in Munich. All major EU markets – Italy, Germany, France, Belgium and the UK – are now being confronted with new (unexpected) FiT cutbacks. It is the same everywhere, with governments prepared to expect the unexpected. You could almost feel the fatigue among the speakers and participants in Munich. “We are done with this. We need a sustainable model where at least you know what will happen six months from now. Otherwise no business or project planning will be feasible…”

Always expect the unexpected

It feels like the Dutch weather forecast: promised a sunny season and suddenly it starts raining. This feels like a cold shower. For immediately in your family the discussion starts to steer towards a really secure, sunny place, even at extra cost... For the solar entrepreneurs, the situation is almost the same: escape from the uncertain weather. Let's move to where the sun shines permanently. And that is exactly what more companies will be doing – exploring business opportunities in sunny countries such as India, China, Chile, Mexico, South Africa and Brazil. Markets where at least one thing is sure: plenty of sunshine!

And what did the new temporary coalition in the Netherlands do in its wisdom and eagerness to show of its greenness? Introduce a new subsidy, effective 2 July!

It is time to take a holiday and get in shape for the second half of the year...

The Dutch solar energy market: Grid parity and alive and kicking – with no incentives

2012-05-01T02:34:00.002-07:00

Recently, the Dutch module manufacturer Scheuten Solar and the Dutch Solar cell producer Solland Solar both ran into financial troubles. Equipment from the thin-film startup Helianthos was sold in public auction following the breakup of this initiative. On top of this, the government stopped all subsidies and incentives in 2012. One could be forgiven for thinking that solar is now officially dead in this country, which was a leading market with unique projects just one decade ago.

Tiny but independent of incentives
However, much to the surprise of many, today this market is alive and kicking. In fact, there are over 50 initiatives being operated by all kinds of stakeholders: municipalities, corporates, housing associations, environmental groups and enthusiastic civilians. Some of these initiatives are sizable, with a couple of MW. Since the government cut all incentives for solar PV in 2012, the Dutch market has grown rapidly. Numerous new companies have entered the market. Market volume will most likely grow more than 50% in 2012 to more than 45 MW. Admittedly, this is small in comparison to the country's Belgian and German neighbours. But what is exceptional about this case is that this will be a market volume realised entirely without government support. Indeed, it would appear that the government's withdrawal stimulated market growth. How come?

End of crazy stop-and-go policy
First of all, entrepreneurs hate uncertainty – and the ‘stop-and-go’ policy of regularly changing complicated subsidy schemes drove customers and stakeholders crazy. The feeling was, “It is better to have certainty than no subsidies.” The rapid drop in solar module prices and one of the highest electricity prices in Europe are helping to establish a sustainable grid parity market for residential PV applications. Not bad for a country renowned for its cold, windy and rainy climate.

No shocking financial benefit
The interesting situation today is that the government now has little influence. Apart from some general fiscal instruments for commercial applications, the market is mainly based on residential applications driven by net metering.
PV systems can now be purchased on a 10-year payback basis – again without any incentives. However, this is not the sole reason the market has started to grow. The financial benefits of investing 5000 euro for a saving of around 500 euro per year isn’t exactly shockingly convincing – definitely not in a country known for its stinginess. System prices are also still higher than those in Germany. So what is the driving the Dutch?

Green sun-loving Dutch
First of all, a serious part of the population has ‘green sympathies’. Environmental protection has always been a serious topic – perhaps due to the fact that most of the country would not survive melting polar ice, as well as being densely populated. Still, these green tendencies have always been present so do not explain why the market has suddenly started to boom. Furthermore, financial yields were better when the subsidies were in place. No, this does not explain the solar behaviour of the sun-loving Dutch.

No heroic roof conquerors
Why, then, are Dutch people suddenly joining en masse the collective purchase initiatives? Thousands of households have signed up for a 1-3 kWp PV system on their roof within just two months. This is just one of over 50 initiatives running. The attractive system prices offered as part of the massive collective purchase campaign are fine, but not the best available on the Dutch market today, and definitely higher than those Germany.
So why are people suddenly all going solar? My personal opinion is that the market is driven by a few things. One is the relatively low entry cost of just 2,500 euro for a 1 kWp system. An amount that a considerable part of the relatively rich Dutch population can afford to invest for a good cause. Secondly, it is viewed as important that a household is able to make a step towards a form of independence; loosening of the government and the energy utility – the Dutch hunger for independence and freedom. Thirdly, you are no longer alone. Joining a campaign along with thousands of other green enthusiasts helps a lot. We may well have a heroic history at sea, but a lot of fear of the unknown has yet to be conquered with regard to our roofs. An Initiative started by the largest national association of homeowners feels safe and secure. They must have figured out all details in the right way. And if so many are doing the same thing, the system offer must be cheap and of good quality. The massive collective purchasing initiatives offer a form of ‘collective trust’.

Ain’t no stopping us now...
Neither the government nor utility can stop the market now – unless they take unpopular measures such as introducing additional taxes on solar energy. Although politicians have demonstrated their incompetence before, it seems that the market is now free. Creativity rules, new business models and new companies are emerging. It seems that the Dutch have reached the tipping point for grid parity. And more stakeholders will become inspired, based on all the initiatives currently up and running. This will further boost the market.
My prediction is continued growth of at least 50% in 2013. Holland is growing towards the first 100 MW market without any subsidies. We can now become a frontrunner grid parity laboratory for other markets in which incentives will also disappear in the near future...

GUEST BLOG: FIT and 20-GW National Solar Mission lose value in India

2012-04-10T03:22:00.001-07:00

by Bhupesh Trivedi

Here is another game-changer in India. Feed-in-tariffs and the ambitious government-sponsored 20-GW National Solar Mission (NSM) have lost value in India.

Across the country, the existing conventional power cost ranges from Rs 7 to Rs 12 per unit for industrial and commercial users, against the new solar power benchmark price of Rs 7-7.50 per unit at which companies won bid under different government policies in the recent months.

It is obvious that a solar power project developer in India is losing money by selling power to the government at prices of Rs 7-7.50 per unit through a power purchase agreement (PPA) that is mutually obligatory for a period of 25 years.

Instead, it makes a lot more sense for an investor or a project developer to shun 25-year-long (PPAs) with governments and use the ‘Open Access’ system to sell power to industrial and commercial users directly. Such users are paying more than Rs 7.00 per unit for existing erratic power supply and will be keen to pay more for reliable supply. Developers can exercise an option too to raise the cost of power supplied at regular intervals over the supposed lifespan of 25 years of the power project.

That surely raises questions on the significance and value of various state governments’ policies as well as the ambitious National Solar Mission of the central (federal) government of India. If the state governments’ policies and the NSM have to remain significant, the price offered by the government to solar power project developers will have to be become variable over the entire duration of the PPA. If not, it would surely be a losing proposition for a solar power project developer/investor to commit power at such low rates for the next 25 years.

The ‘Open Access’ system enables any power producer to sell power to any user across the country through the national grid, by bearing costs of transmission and distribution losses as well as wheeling and banking charges. These costs may weigh on the profitability of the power project for now. But, committed higher billings over the next few years could provide much higher returns, compared to fixed rates provided under the PPAs with different governments.

The success of the ‘Open Access’ system will also depend on the condition of “minimum committed load” that makes an industrial user to pay a minimum bill amount every month to the local distribution company, irrespective of how much of conventional power was consumed.

But, different regulations in the country have already cleared the way for other precedents where large industrial units set up gas or coal-based captive power plants. A similar arrangement for solar power will ensure that the end consumers and solar power project developers will be able to build mutually-profitable relationships.
At the other end, while the state government policies were expected to boost the solar power sector in the country, the captive or end-user segment offers a much larger market of at least 25,000 MW over the next 5-7 years.

Even if the benchmark solar PV power project cost falls from the current Rs 9 crore to Rs 7 crore, it promises to be a market with a value of Rs 175,000 crore (about US$ 35 billion).

The rules of the game in India have surprisingly changed even though the total installed solar power generation capacity in the country has not crossed 1,000 MW, against state and national governments’ targeted capacities exceeding 30,000 MW over the next decade.

If all solar power project developers were to go for the ‘Open Access’ system, one would wonder about the fate of different state governments’ policies and the national government’s National Solar Mission.

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Bhupesh Trivedi is the CEO of Mumbai-based boutique solar energy consulting company REECODE Energy Solutions. He has assisted his clients with setting up MW-size solar power plants as well as solar engineering companies to dovetail their products and services for the growing market in India. He has spoken at various national and international events and writes regularly for various media. He can be reached through bhupesh@reecode.in and +91-9324246639 .

2012: The transition year for solar energy

2012-04-03T00:40:00.000-07:00

Photovoltaic solar energy is at a turning point in its young history.
It will be the year in which:
- China will grow into a global leading top 3 PV market.
- The German market will continue to grow and prosper despite strong FiT decreases.
- The Belgian people will discover that it is still very attractive to invest in PV despite the reduction in certificate price and disappearance of the tax advantage.
- The Dutch market will start a strong growth because there are no incentives available and the government has no role to play anymore.
- A sunny climate and growing economy (India, China, Chile, Brazil, Turkey, etc.) will be more important than incentives in terms of market growth.
- ‘Diesel parity’ (solar + storage is cheaper than diesel-generated power) has been reached in major markets such as India.
- Spain will reach grid parity for residential PV systems – and this without any incentives, as the government will increase energy prices.
- Italy reached grid parity for residential applications because energy prices are already high, there is an abundance of sunshine and the business infrastructure is in place.
- Solar energy storage will become a serious topic since solar energy is too cheap to simply supply back to the grid at the time of production.
- In India, more projects will be developed for other reasons than being stimulated by the National Solar Mission.
- Japan is closing down nuclear plants and is ready to invest in renewables and massive solar application.
- Investors discover that, by replacing modules after 25 years, a solar power plant is the best and most secure investment, generating increasing cash flows for more than 50 years.
- Middle East countries find out that it makes more sense to use solar PV for domestic electricity production and sell the expensive oil.
- Europe will build more new solar power capacity than any other electricity generation technology.
- South Africa will set the trend as the gateway for solar application on the African continent.
- The development of the world’s first 1000 MW single PV project will kick off.
- The market will change for residential customers from ‘Solar is interesting from an investment perspective benefiting from incentives’ to ‘Solar is interesting as it saves money on your energy bill.’
- Not only will modules become cheaper once again, but inverters as well due to industry developments and competition from China.

Furthermore, the industry will discover that future market development is not dependent on new technology developments, but on the transition towards new and smart business models. Indeed, the "winner" in terms of the Internet was not the inventor of the technical Internet technology, but the smart guys from Google who used that technology to offer new services based on it. In 2012, don’t look for the new solar module types and technology improvements – but rather watch the companies that offer you free solar modules on your roof and energy at a price below current grid prices.

Driving in India requires a good horn, good brakes and good luck...

2012-03-12T06:03:00.000-07:00

Driving in India is a challenge. A taxi driver once answered a question about the traffic regulations with, "You need a good horn, good brakes and good luck!"

As for the development of the PV market in India and Rajasthan, the opposite seems to be the case. Without making too much noise about it, the market in India is booming. Numerous new players have entered the market. Brakes are not required since India is in need of new power and at the same time needs to rapidly support its economic growth. And further development is not a matter of luck. Rather, it seems to be an inevitable natural fact. Even today, PV in India is already a competitor to diesel-fuelled power generators. Up until now, the focus has been on the large PV power plant projects under the National Solar Mission Government Programme. Diesel replacement will definitely become a major market segment. Think just in terms of the thousands of new telecom towers that will be necessary to support the tremendous growth of cell phone usage in India. The hotel manager in Jaipur, where we hosted the Solar Future Conference, stated, “We don’t know much about solar and maybe should attend your conference, as we did not know that solar PV is cheaper than our diesel generator.”

The PV market in the super-sunny State of Rajasthan alone is expected to grow to at least to 1 GW by 2013 and to 3 GW by 2017. But, as often before, this estimate by government officials may very well be too pessimistic and only based on the large power plant projects. Rajasthan offers 320 days of sunshine a year, growing needs for power and a government trying to get PV project development and industrial development of the ground. So, what is missing in order to fire-up this market? The answer: Cheap and easy financing. It is kind of the "chicken and egg" problem: the banks still view solar more as a risk rather than an opportunity. They claim that there is a lack of reliable data on PV power plants currently in operation. But this data will not become available if new PV projects are not financed - unless new projects are built with much cheaper financing from Chinese developers, supplying modules or even turnkey projects.

The government is trying to support local industrial PV development, with local content requirements for the NSM projects. But for a state PV program, for example in Rajasthan, this is not required - and the same goes for private PPA PV projects developed for private companies, or PV plants replacing diesel power. Once good returns are being made on PV-powered telecom towers, foreign money will find its way.
The price of diesel will continue to rise in India, simply because the government will reduce related subsidies. At the same time, PV will become cheaper due to economies of scale in the manufacturing industry. Furthermore, solar PV power with storage will be available at a lower price fixed for 20 years. It is not hard to imagine a very profitable business model for this situation...
Soon, foreign and Indian entrepreneurs will discover these opportunities. If they are unable to obtain financing from local banks, but can obtain much cheaper financing from Chinese PV module and system suppliers, guess what will happen...

In a country where both chicken and eggs are eaten frequently, this "chicken and egg" financing problem should be easy to resolve. Indian bankers should drive off-road more often; PV financing is not about tooting horns and warning about the risks involved. The bankers should take their feet off the brakes. There is no luck involved. Financing PV systems is not so much a risk, but rather a very secure asset providing fixed returns. Solar energy in India is the safe (high)way to travel!

Short thoughts on South Africa

2012-03-07T04:37:00.001-08:00

South Africa: Any bad memories over a lost final at the Football World Championships were swiftly forgotten due to the friendly people in this country. If you can keep on smiling and see a sunny future after a shadowed history, you should be fine.

South Africa has one of the best irradiation levels in the world, a fine infrastructure, phenomenal landscapes, superb ostrich meat and wine – but above all, friendly people. "Welcome to my office" said the cleaner of the men's room. And why not? Isn't the office a place of sit-down meetings were shitty ideas are born and good stuff flushed away...?

The SA Government is serious. Energy utility ESKOM needs more power and is open for PPAs.

The country's growing economy needs fuel for growth, and electricity prices are expected to increase 25% during the coming two years. In addition to the 1450 MW the government will support in the three tender rounds, it has set a target of 8400 MW for 2030. The latter seems way too pessimistic when we look at the potential. With PV becoming competitive very soon, SA looks ready for a growth of at least 30% per year. It was no coincidence that two international experts are predicting an annual market of more than 5 GW by 2015 already. And, let's not forget, in the past such forecasts have turned out to have been on the pessimistic side.

As in any market, there are still a few hurdles to overcome. But we have seen these kinds of struggles in most successful markets. It takes three years to develop a market. South Africa is heading for an energetic and sunny future. I will be back!

62500 soccer fields' worth of Solar panels in Germany - and that’s just for starters

2012-02-02T02:31:00.000-08:00

For all the football addicts out there: Don't worry about the PV industry stealing your treasured pitches. We are talking here about solar PV installed on mainly roofs and ground which would be useless as a soccer field anyway. This figure of 132 million square meters of solar panels is what Germany has installed by the end of 2011, raising its already impressive cumulative amount to more than 24 GW installed PV power.

110 GigaWatts of PV in 2022
This could grow to 290 million square meters by 2022 according to the Federal Network Agency BNA. Personally, I believe this 54 GW of cumulative installed solar power will be reached much earlier. Assuming that the German market only grows a modest 5% every year in the coming decade, more than 110 GW of cumulative PV power by 2022 seems more likely.

Your neighbours start worrying
2011 saw more than 1000 PV systems installed every single working day. You may well start asking yourself whether the German solar installers will soon become unemployed as there will be no more roofs left to cover. But this is not the case. There is potential for tens of years at this rate. There are still countries where one single PV system is breaking news - but in Germany it is more a case of your neighbours starting to worry about you because your roof is still empty...

Grid parity in practice
Won’t the German market shrink this year and the years ahead? From a macro level, it seems logic that when the government reduces the Feed-in Tariff even faster in 2012, market growth will slow down or even shrink. But, from a microeconomic level, things might look different. Why would a successful German installer force himself to decrease his flourishing PV business? Don’t we trust in the German innovative and creative spirit? Won’t these installers be clever enough to develop new business models to keep the PV business going? After all, the German FiT for residential customers will arrive below the price of grid electricity. Grid parity in practice.

Hitting the breaks won’t help
The FiT decrease has been tried during the last years as a break on market growth. It did not work that well, judging by the surprising results of growing sales and a further 7,5 GW of new PV power in 2011. The more the government tries to put on the breaks, the more PV systems are being sold. Psychologically, another FiT decrease will again spur people to visit their installer to get a PV system before another decrease occurs - fired-up and encouraged by all their neighbours who have been a little faster and smarter. After all, you don’t want to end up as the last one in your neighbourhood to earn the least FiT...

Ain’t no stopping us now
So why would thousands of solar entrepreneurs in Germany decrease their solar business because the FiT is decreased again? They have seen that story before. And, not one big module manufacturer will skip the world’s number 1 market because module prices are forced to go down. They will do everything within their power to help their existing and powerful successful sales channel.

New wall paper
110 GW of solar PV in Germany by 2022 represents over 620 million square meters of PV panels. This would mean that more than 12% of the electricity consumption in Germany is covered by solar PV. Or it would save the energy output of at least 15 large coal power plants. In this conservative scenario, Germany will have accomplished a solar revolution from 0% to 12% in only 20 years. Green energy at a stable fixed cost. And there is more good news: After 25 years, the modules can be replaced with newer, more efficient and much cheaper models. The rest of the infrastructure can remain in place - much like replacing the wallpaper and windows in a 25-year-old house. This renewed power solar power plant will produce even more, and much cheaper, green solar energy for another 25 to 30 years.

Price of a beer
All German electricity consumers share the additional cost for these GWs of green solar power through a little surcharge on their energy bill. Around the price of a German beer per month. The government has not paid a single penny from their budgets for this extra green power. And this may well be important reason for success: No government budgets are involved - particularly important during these times when governments continue to lend money from future generations without any sustainable investments being made. The German population does not complain too much about paying this other ‘yellow energy boost'. The price of one more beer is no big deal. The interesting thought experiment is whether Germans would have been as willing to pay for this extra beer if the government had requested the surcharge for additional coal or nuclear plants...

Germans love soccer, beer and solar energy. There is no reason to be pessimistic about the solar future in Germany.

To conquer fear is the beginning of wisdom

2012-01-06T04:56:00.000-08:00

This saying comes from the British philosopher Bertrand Russell who championed free trade. In the current market situation, the fear of unfair competition is one of the reasons behind for the call for import tax measures. But tax measures work counterproductively. Like in sports, implementing new rules doesn’t bring victory – you simply have to work harder and show better results.

The whole world using Japanese modules
In the year 2000 I organized a Dutch PV business mission to Japan. At that time, Japan was the world’s leading PV market and industry. After the trip to some impressive factories and projects, the participating Dutch Government executive concluded that it would not make sense to stimulate the development of the domestic PV industry in The Netherlands, since "The whole world will be using Japanese PV modules soon." Sharp was the world’s number one manufacturer.
A few years later, the government found out that the market was over-subsidized. Germany was then to take over when it introduced its Feed-in Tariff program. Everybody knows what happened next: from 2004, Germany is the world leader in PV market and industry development. Domestic manufacturing in former Eastern Germany was stimulated through attractive incentives. The FiT program did the rest. Germany started an impressive market and industry growth path. Many leading German and international PV companies such as Q-Cells, SolarWorld, Solon and First Solar benefited from attractive investment subsidies for new factories that helped them to produce cheaper solar cells and modules. It also led to the development of an innovative equipment manufacturer industry. All over the world, not least in China, German equipment contributed towards producing low-cost PV modules – and still is.

Without the unification of Eastern and Western Germany, incentives might never have been become available and who knows what the impact could have been on the development of the German PV industry. Of course, back in 2000, when the Japanese dominated the PV industry and market, no one could foresee a German unification. The future remains hard to predict...

Chinese dominance
Today, the Chinese have developed a huge PV industry, starting from scratch only 6 years ago. Who could have foreseen that? And remember that in 2008, the Spanish and German markets were hesitant and reluctant to accept cheaper Chinese modules. Quality was supposed to be less. While at the same time, German companies had rebranded modules produced in China. Nowadays, Chinese top brands are market leaders and fully accepted. After all, parts of these cells and modules are produced in fully automated processes using US and German manufacturing equipment.

Grow your market to grow your industry
So, what does this teach us? The best way to support domestic industry development is to create a domestic market – like Japan did in the early 2000s, Germany seven years ago and China is doing right now. China will sustain their industrial development and stimulate innovation, leading to further reduction of production costs. Cheap solar cells and modules will create new business and industrial opportunities in existing and new markets. Stimulating domestic market development could be a better way to create a flourishing domestic industry.
In a flourishing market, (foreign) manufacturers will likely start local production, because in the end it makes sense to reduce all costs, including shipment, transportation, financing, risk assurance and other costs related to producing goods far away from the market. In addition, most jobs in solar PV are created downstream in the supply chain and not in fully automated upstream production processes. The importation of cheap solar modules should be embraced as a stimulus for market and industry development.

Today China – tomorrow Korea?
No one can predict the future. One bursting real estate bubble in China could shake up the entire financial situation and PV business landscape. What the Chinese PV industry does today could be done tomorrow by India or Korea. Huge Korean industrial conglomerates have already made their first steps in the PV industry. LG, Samsung and Hyundai have serious ambitions and deep pockets. Their diverse activities and huge balance sheets could give them an interesting financial position which will enable them to survive the current consolidation phase in the solar industry. Although some competitors believe that Chinese PV manufacturers are being supported in an unfair manner, their loans from Chinese banks are at high interest rates, up to as much as 8%. Is that more unfair than a capital investment subsidy for production in some US State? Why are some US manufacturers producing in Asia or Germany?

The future: train harder and be innovative
Like in athletics, today’s winner could be tomorrow's number two. It does not make sense to cry over one lost game. Some time ago, Eastern German athletes won many gold medals at the Olympics. They were injected with steroids. It proved not to be a sustainable success model.
Don’t blame your competitors of unfair training practices. Instead, build the best facilities and invite the best competition into your country. Don’t fear them – rather get inspired. It is the best stimulus for new participants. And don’t blame the referee for unfair rules. Instead, improve your skills, exercise, train harder and be innovative. And be aware of your next competitors – they will very likely not be the ones you are competing with today!

Grid Parity: Will We Run to the Shop?

2011-11-29T00:41:00.001-08:00

Pat: “Did you hear the news today?”

Pete: “What news? You mean the neighbours' dog's pregnant?”

Pat: “No, darling, the news said grid parity's been reached.”

Pete: “Grid what? You mean they finally fixed the grid and got everybody connected? It's about time. I don't even know who lives at the end of our street. But on the other hand, having seen some of them, I don't even want to be connected.”

Pat: “No, darling. Maybe it's time you got connected to some of the new developments going on in the world instead of just watching football. For instance, I have my own followers now.”

Pete: “You mean that Scarface from across the street is chasing you again? Let's send our crazy cat to his garden!”

Pat: “No, honey, followers on Twitter. But that's something else. I'd better not even try to explain to you about people sending me messages... What I mean is new developments in the area of renewable energy. Particularly solar energy.”

Pete: “Solar energy in our country? You must be kidding! Every time I go to the football stadium I'm in my raincoat. And on top of getting soaking wet, most of the games are terrible anyway. And they invested all these sunny oil dollars in our team.”

Pat: “Honey, what I mean with grid parity is that the cost of solar energy is the same as we pay for our electricity right now.”

Pete: “Invest in solar? You must be kidding. I'd rather start with an investment for a bigger fridge, so we can cool more beers if my friends come over.”

Pat: “Darling, I think it's a great idea to produce green electricity from our own roof and still not pay more than the neighbours.”

Pete: “Yes, sure - fun! And every cloud will cut off the electricity so I miss the replay of the best goals - although lately those are the opponents' anyway, with all those well-overpaid foreign defenders from sunny countries...”

Pat: “Darling, really, you should follow the news some more. A grid-connected system means you won’t even notice where the electricity is coming from - the roof or the grid.”

Pete: “Great, so we invest and don’t even notice the difference?”

Pat: “Yes, but it will be green electricity. I think we should contribute to making the world a little greener.”

Pete: “Greener? I already agreed to eat a green salad with you every week. My lads say my hair's looking more green than grey. And you want to invest our little savings in this solar energy thing?”

Pat: “Yes, for only €5000 we can produce almost all our energy from the sun. And if you started by watching less football matches on TV - the ones you've already seen in the stadium anyway - we might even manage to produce our entire electricity consumption from our own roof.”

Pete: “And then save what?”

Pat: “Well, nothing at the beginning. But with electricity prices going up, we'll be saving money in a few years.”

Pete: “Who says electricity prices will go up? Politicians? Huh, they promise too much anyway... So, to show you I'm not as negative as you think I am, let me try to understand you... You are intending to mount some ugly green energy panels on our precious nice grey roof to produce solar electricity, and in the next 15 years we might be able to save €30 per year if this solar stuff is €0,01 cheaper per kilowatt-something than what we currently pay to these utility thieves? And for this great news we only have to pay €5000...? We'd be better off growing green salad on our roof to save money! I should have known this green salad would affect your brain...”

Pat: “Darling, now you're exaggerating a little. We can contribute to a better world and save some money in the next 15 years. Don’t you think that's a nice thought?”

Pete: “Let’s keep it as a thought. I think we'd better wait till we can actually make some real money with these green hobbies of yours...”

The solar energy bubble is good for everybody

2011-11-03T04:18:00.000-07:00

Solar module prices have dropped an astonishing 40% in 2011 alone. This is the result of an exploded solar industry where oversupply is now leading to a consolidation phase, including strong competition. This enormous growth of mainly the Chinese PV industry is a result of generous feed-in tariffs for market development in mainly European countries.
On the other side, grants and other incentives for industrial development in China, the USA and Europe contributed to this as well. Both are now leading to what seems to be a solar industry bubble. Bad news never comes alone... In addition to an oversupply, the leading markets are currently facing financial headwinds as well. This means less money available for incentives and project financing. Where and how to sell your products? It all leads to rapidly declining module and system prices.

That sounds like great news, because the sooner we reach grid parity and get rid of subsidies, the sooner we can start exploring the infinite market potential of competitive solar energy. Next year, the solar energy produced by households will be cheaper than electricity from the grid in the world’s biggest markets, Germany and Italy. With solar energy expected to get cheaper, and dirty grid electricity more expensive, the future for solar energy indeed looks bright.

Nevertheless, not everybody seems happy with the current situation. Claiming unfair competition, some industries and politicians are urging for barriers to be imposed on imports of cheap (Chinese) modules, and extra incentives for domestic products.
But, shouldn’t we be happy that Chinese manufacturers are producing such cheap modules? After all, isn’t this what we want? Wasn’t this the original plan and goal: to make solar PV competitive, so that financial (government) support for market development would no longer be needed?

Indeed, Europe has heavily sponsored market development, which has enabled foreign manufacturers to emerge and grow. And, yes, (Chinese) companies have benefited from tax holidays, free land and free infrastructure development, investment subsidies, cheap loans and cheap energy. As such, they have been able to produce at lower cost. Seems unfair? Europe and the USA have seen local industry development stimulated, too. Not surprisingly, most German manufacturing is taking place within the former Eastern German territory. Grants and capital incentives have been made available to build industries and create jobs.
If the Chinese local and central government had not financially supported solar industry development, today's solar modules would have been more expensive. Subsequently, yearly market demand would have been much smaller and grid parity further away. Thus, incentives would have been needed for a longer period.

But this is not the case, because the world is flat – as Thomas Friedman wrote in his book. You can’t stop industrial development in Asia. Because we want everything to be cheap – not only solar modules. From socks, to kitchen equipment, from chemicals, to cars. All US Walmart and European stores are fully packed with products manufactured in China. I bet even a lot of politicians shouting about local solar industry protection are using an iPhone produced in China and watching an Asian flat-screen television at home – and might even be wearing European-labelled underwear produced in China.... Why should solar modules be the exception?

Isn’t it great that the Chinese central and local governments supported the development of their solar industry? Europe and the USA subsidised the market, China subsidised the industry – and in the end we are both benefiting. China has invested a lot of money to build an enormous solar industry. Western solar equipment manufacturers benefited greatly. And Western investors supported the stock-listed Chinese solar manufacturers in New York. Lots of US and European capital is used to build the Chinese module giants, and dividends are flowing back to Western investors.

Now we are facing a solar industry bubble. And in this consolidation phase, only the strongest companies will survive: manufacturers able to cope with reduced feed-in tariffs and able to emerge in markets without any incentives; the strong ones, highly automated with Western equipment, able to produce at the lowest costs, with thin profit margins. Good news for customers and politicians longing for cheap solar energy and market development without costly incentives....

The low costs upstream, with the Chinese solar products (from silicon to modules), mean that Europe and all other markets will be able to achieve grid parity sooner – giving us a future with an abundance of downstream solar business opportunities in local markets, and room for new business models invented by local financial engineers; new local building products with cheap solar cells integrated, and lots of installation work for local electrical installers. We are almost at the point we want to be: low-cost solar energy and a sustainable infinite market. We all want and need cheap (solar) energy – and the sooner, the better. The world is flat. Solar modules are flat. But we don’t want a flat market.

The World’s Biggest Grid Parity Market Could Change Drastically Within Ten Years

2011-10-21T01:26:00.000-07:00

Picture yourself Italy in 10 years' time. Apart from a new prime minister, other things will have changed drastically. Anyone who makes some conservative forecasts for household energy prices in Italy in 10 years' time will see some interesting outcomes. Take a modest 2.5% inflation on the current electricity price for households and you will arrive at around €0,30 per kWh by 2021. This is of course without taking into account any euro or dollar value increase, abolition of CO2 taxes, oil and gas price decreases, (renewable) energy tax decreases and – last but not least – sharply reduced energy consumption due to a wave of environmental consciousness flooding Italy. All of which could possibly happen.

At the same time, imagine a 'crazy' global PV industry growth of 25% per year. Compared to the 50% compound annual growth rate during the last 10 years, this at least can be called a conservative scenario. In line with this, a 5-10% average price reduction per year in PV systems looks feasible. Again based on assumptions that remain to be proved: economies of scale leading to lower production costs for solar modules, technology and cell efficiency that have not reached their limits, the number of markets for PV not coming to a standstill, and – last but not least – the assumption that the currently more than 500 module manufacturers will not collectively decide to compete and lower prices any further. All of which could possibly happen.

Such a 5-10% yearly system price decrease will lead to a cost price per kWh of around €0,12 for solar electricity in 2021 (calculated based on 15-year amortization and 6% interest rate).

To summarize, for 2021 we calculated €0,30 per kWh for grid electricity and around €0,12 for solar electricity. Is it possible for these prices to co-exist alongside each other? How likely is it that people will use the grid if they can use solar energy for less than half the cost?

What about supply security and energy storage? Well, you can assume that the price difference of €0,18 should be sufficient to cover cost for energy storage. Also, much development is taking place in this area. Think about micro energy storage solutions in mobile phones, but also about electric cars, scooters and bikes. All of these are expected to show significant growth trajectories. Will energy storage be more expensive in 2021 than solar electricity production (€0,12/kWh)? If not, the total price for solar electricity plus storage could be less than €0,24/kWh. Still lower than the expected grid electricity price....

Will there be any reason for customers to stay with an expensive, old-fashioned bureaucratic energy company? Or will they opt for new dynamic solar energy utilities supplying green solar electricity, including storage and full 24-hour service at a 15-year guaranteed lower price?

Italy will arrive at grid parity in 2012. It will become the world’s biggest grid parity market and an example for the rest of the world. Within 10 years, the Italian energy landscape could face major changes. Will today's energy moguls remain passive and then be surprised to see new solar energy service providers take over their businesses overnight, like WhatsApp did with SMS...?

We need a solar Twitter

2011-09-26T03:06:00.000-07:00

If you had predicted 10 years ago that you would be able to send messages to hundreds of friends at the same time and free of charge, people would have called you a nice futurologist. Who would pay for the infrastructure? What kind of business model could work with that? Nevertheless, Twitter was invented in 2006 and is now a globally established tool for such short message services.

In the same category of crystal bowl forecasts, it would have seemed impossible to send text messages for free with your mobile phone. Yet, today WhatsApp is conquering the world and forcing existing telecom service providers to come up with new business models. Payment per kilobyte of data just does not cut it any longer. And what about the high-tech cell phones these companies provided for free with 2-year membership? How do they make money?
The most surprising element of these inventions is not the exciting technology but the business model. How in the world is it possible to make money providing free services? What is the business model behind these successes?

The interesting parallel is that the PV industry needs new business models such as these, too. We need to get rid of unpredictable government incentive schemes. Indeed, most people would not be opposed to reducing their dependence on and bills for their energy utility.

Will it be possible to offer solar energy for free in five years’ time? No payment per kwh, but only a flat monthly fee just for the PV system (connection)? Or sharing the solar energy from your roof with your friends and neighbors for free?
Who would pay for the PV system investment (by the way another 30% less than today)? No idea yet, but that does not mean it is not possible! The guys who invented Twitter and WhatsApp did not know upfront either, yet their companies are worth a great deal of money...
Rather than working solely on technology improvements, the solar industry would do well to work on innovations for business models.

The industry needs to get rid of dependence on the yearly-changing government feed-in tariffs, tax advantages and subsidies. Let’s put our energy into universal business models that could work in any country; that have the potential for a niche in the rapidly and continuously growing global PV market. That is what the industry needs most now: to stop the current whirlpool of cost reductions and margin compressions forced by decreasing incentives, which lead to uncertain market demand and hence oversupply and the need for more cost reductions.

The most successful internet companies where not related to better transistors or other “wiz kid” technology innovations. The major success stories such as Google, Facebook, Twitter, etc. all emanated from superb business models based around free services.

A Solar PV Market Forecast for 2014: Which Markets will be in the Top 10?

2011-08-26T04:05:00.000-07:00

Solarplaza recently published the Top 10 of the world’s biggest PV markets for 2010 and previous years. But what will this Top 10 look like in 2014?
If we look back 3 years, we can see how unpredictable market dynamics are. After all, who would have believed that Italy would have turned out to be the world’s largest PV market in 2011? Who would have believed that Spain would have fallen out of the Top 10 in 2011, after being the world’s biggest market in 2008? And what about the global economic situation and other international developments impacting the solar industry and market developments...? It is in fact anyone’s guess when it comes to looking three years ahead... But it’s fun to try - so here is my best guess:

Market Size in 2014 [MW/Year]
1. Germany - 6500 MW
2. Italy - 5500 MW
3. USA - 4500 MW
4. Japan - 3300 MW
5. India - 3000 MW
6. China - 2000 MW
7. Australia - 1400 MW
8. France - 1100 MW
9. Spain - 800 MW
10. Greece - 750 MW

1. Germany
When Germans build cars, they make the best. Why would that be different with PV? Germany is the most developed and experienced market in PV, and the country has the world’s best PV business infrastructure, with thousands of PV companies. Germans have a great ability for technological and business innovations, have a green drive and clear renewable energy goals. All of which are the right ingredients for staying at the top, even after the FiT era. The expected dip in sales in 2011 is probably just a temporary phase, during which Germans are preparing for grid parity in 2012/2013. Being one of the world’s most stable economies, I expect solid market growth, which will be fuelled by the German attitude, “My green neighbor has PV, so I want/must have it too.” Market saturation is still far away, so there is plenty of room for further market growth. International companies believe in the future of German customers too: they are lining up to sponsor German football teams. Like in football, Germans always play in the top league. Losing the number one position to Italy this year might very well be a one-off mistake...

2. Italy
Italy is Italy and things are done differently in Italy. Five years ago a tiny market of 11 MW, the Italian market will be 500 times bigger than in 2006 and become the world’s largest market in 2011. Italians are creative, impatient and like speed. Plus, the Italian market is attractive – and you can’t teach the Italians anything about attractiveness... Maybe the market will face a little fallback after the record year 2011, but I expect them to bounce back, reaching the goal of 20 GW cumulative installed PV power even before 2014. High irradiance figures combined with high energy prices are helping to bring Italy closer to grid parity this year – or at least next year – in the residential market. Some additional taxes or levies on the energy price to finance the feed-in tariff will do the rest. Italy will definitely remain a Top 3 market by 2014. My guess is that, even without a FiT, they will reach 20 GW. Italy is an ideal market and base for new business and financing models based on grid parity circumstances. The business infrastructure is already in place. All major PV players have established Italian branches – and not because of the nice cars! Italy is a market for the future, with electric cars powered by solar energy. Not because they hate the noise of fast cars, but because these accelerate faster than the current Ferrari.

3. USA
The USA will become the world’s biggest PV market. The only question is when... My guess: not yet – but in 2014. The US market might grow at least 50% per year and the potential is enormous with 50 States. But, as per Europe, every State has its own policy(makers) and federal policy is not as sustainable as PV systems themselves. At the present time, most States still have a small market size; easily 10 times less than that of Belgium in Europe. By 2014, several Sunny Desert States will be contributing, with some very large-scale projects (e.g. California, Arizona, Texas, Nevada, New Mexico), and several other States will have well-developed residential and commercial market segments (e.g. New Jersey). But, if the economy is up, the dollar strong, Democrats still in charge, paperwork for PV reduced and the federal tax credit still available, the USA may well become the world’s number one market even sooner. Is that feasible?

4. Japan
The shift from nuclear to renewable energy will help to make the Land of the Rising Sun an increasing PV market. After almost following in the steps of the Samurai by killing its own leading market position a few years ago, Japan is now on the way back to the top. The high energy prices and rapidly decreasing solar module prices help a lot. Also helpful are the mature domestic PV industry, the very well-developed PV business infrastructure – and let’s not forget public awareness. Japanese customers are already familiar with solar PV systems, with PV ads in all media channels. Ambitions and the potential are huge. A modest 30% growth rate per year will put Japan in the number 4 position with a size of around 3300 MW.

5. India
Probably one of the best places on earth for solar energy. The highest irradiance, high economic growth, permanent power shortage and no domestic natural energy sources – apart from abundant sunshine... All major markets have taken at least 3 years to build up their PV business infrastructures – and that is what is happening now in India. In the coming years, cheap solar energy will become unavoidable for all energy utilities in India. BOS cost (labor, engineering, etc.) will be low in India, and with module costs coming down rapidly, there is no better alternative. The Indian PV market potential is infinite. In the long term, India is ready to become the world’s biggest PV market. It will just take a little more time, because it is too hot to work too fast in this sunny country. My guess is at least a 100% growth, putting them into position 5 for 2014.

6. China
Will the Chinese domestic PV market be smaller than the Indian market?
The race might be close. But China might be more focused on industrial development and making money through export first, before developing its domestic market. Irradiance in the relevant populated areas in India is better than in China. And in a situation of no subsidies the market will follow the sun. Besides, there are more power shortages to solve in sunnier India than there are in China. On the other hand, the financial power of China is better, and if the Government would provide the same loans for PV installations that they have for manufacturers, and in the same amounts (billions of dollars) growth could be much higher. Being more manufacturing-driven, my guess is that China will focus more on export and sales and India more on domestic energy supply.

7. Australia
In an overview of countries with huge solar energy potential, Australia cannot be excluded. Although still addicted to coal, Australia might see the (sun)light soon, as they increasingly discover the potential of this clean, reliable, predictable and cheap energy source. And on the map it looks like there is also plenty of space for ground-based solar PV power plants... A natural choice for rapid market development. The Australian market is emerging and a solid 40% market growth per year will bring them into the Top 10 at place number 7 for 2014.

8. France
The time is over for nuclear power. Building new nuclear power plants is too high a (financial) risk. Financing a 20-year solar PPA contract is easier than financing a new nuclear site. Who wants to invest for another 40 years in such power plants, knowing solar and wind energy are favored by customers and voters alike? And will also be cheaper within 10 years? Solar energy will be a natural choice for France. The French love their innovative products and business concepts. And the French like their independence. New players will find their way into solar. And customers love to be independent with their own energy source. Only a 30% year-on-year growth is sufficient to put France into the 8th position.

9. Spain
Yes, why should Spain not regain its place as top-of-the-market? After the burst of the PV bubble in 2009, Spain is crawling back up, and very soon it may no longer need subsidies to make solar PV affordable. Energy prices are rising, and the companies that have survived are stronger and more experienced. Even more important, the Spanish banking sector has sufficient experience. Grid parity is close and Spain is Europe’s most logical and best-suited country for large-scale ground-based PV power plants. At a 30% market growth per year, Spain could end up 9th in the 2014 Top 10. Provided there is no economic meltdown in Europe, Spain could be the reviving surprise.

10. Greece
There needs to be at least one surprise in the Top 10. Greece is the silently but steadily growing market. Shadowed by its economic problems, the Greek market is doing great with over 200% growth per year since 2007. If it experienced just 40% growth in the coming years, it could suddenly enter the Top 10 in 2014. No domestic energy resources other than abundant sunlight and rising energy prices will help to develop Greece into an attractive grid parity market. Just replacing fossil fuels by solar power from all the islands will not only cut costs but will provide a sustainable future again for Greece.

There is always room for more surprises. Who in 2007 would have expected the Czech Republic as the number 3 market in 2010? It only takes 3 years to develop a market and business infrastructure. So if countries like Brazil, Chili, South Africa, Israel and Morocco start next year, they could easily end up in the 2014 Top 10.

The above Top 10 is just a best guess. An interesting experiment to look back on in 2014, to see whether predicting the future is still impossible – but nevertheless fun to do. I can’t wait to look back in 2014 and find out what surprising and foreseeable facts were overlooked...

This forecast is open for discussion and therefore I hope to meet you in Hamburg at our Global Demand Forum, where keynote experts will be sharing their vision on where modules are heading in the coming years!

The rapidly developing solar energy evolution

2011-07-20T05:01:00.000-07:00

Look back just 20 years in time. The year is 1991. There is no Google, no lap-tops or indeed many other things that now look like they’ve been here forever. Cell phones are only for the happy few and the World Wide Web, or what we now call 'the internet’, has only just been launched in August of this year. Then, in the twenty years from 1990 to 2010, worldwide mobile phone subscriptions grew from 12.4 million to over 4.6 billion. And between 2005 and 2010 alone, the number of internet users doubled, and was expected to surpass two billion in 2010. Looking back it looks like a complete revolution has taken place. But if you are old enough to have fully experienced this period, you’ll remember that it just felt that developments were progressing fast but also very smoothly.

So what can this ICT revolution teach us for the application of solar energy? Everybody loves solar energy, but the cost is still an obstacle. It’s not surprising so few people in the world are using photovoltaic solar energy. Will this cost-issue be solved soon? Will there be a revolution?

Looking into the future, ten years from now, the answer is a resounding yes. Let’s assume a conservative 5% cost and price reduction year on year from now on for Pv Systems or solar electricity. This calculation is based on technology improvements, economies of scale and other optimizations such as reduced transportation cost etc. And this is a conservative estimate, since in the past 10 years the yearly cost reductions have been higher. The astonishing and convincing result is that within ten years solar energy, even in the less sunny northern European countries, will be available at around €0.15/kWh. Compare this to today’s current cost of electricity from the grid! And would any sane person predict that the cost of fossil fuel-derived grid electricity will decrease over the coming decade? In the sunnier Southern European countries the cost will be even less than €0,10/kWh within this period. So, who then will still want to buy grid-electricity when solar energy is half the cost?

In 10 years, solar energy will be competitive in all residential PV markets in at least Europe and America. And in 20 years solar energy will be so cheap it will be competitive in any application; residential, commercial and utility scale power plants. Solar cells and modules will be so cheap they will become available in any size, form and color. How will this impact our lives?

Since it will be attractive to generate solar energy from any roof, facade or even any indoor and outdoor surface absorbing (day)light, all industries and consumers will be thinking electric. Solar electricity will become available everywhere at low cost. Small and large scale convenient energy-storage solutions will make the availability of cheap (solar) electricity possible anytime and anywhere in and outside buildings.

Excess solar energy which you don't use immediately can be saved for later, or for charging your electric vehicle - with this cheap solar energy, within 20 years the EV will be much cheaper to drive than an 'old timer' running on gasoline. And the car industry, already investing millions, will have kept up with this power revolution. Mass production will bring down the price of EVs to a level lower than the antiquated fossil fuel cars.

So, we’re looking forward to cheap sustainable energy for everybody around the world, an energy revolution, but has this revolution already started? The solar industry is growing like crazy. And this is not just due to its novelty or to a green commitment. Prices for solar systems are decreasing rapidly. Because of the scale of current investment (much of it Chinese), industrial companies and banks can predict that solar panels and systems will soon be produced competitively, and without depending on subsidies or government support. The investors are not all opportunists either, or crazy. With hundreds of millions being invested today in building new manufacturing plant, the global industry already includes hundreds of manufacturers. They all want to have a share of a market which will take a substantial percentage of the world energy mix within 10-20 years.

And then suddenly, in twenty years, solar energy will be there as if it had existed forever. It will be competitive and it will seem completely normal to everyone to rely on solar systems. Today, we may not see a solar revolution. But, we are already part of a solar evolution - and it’s developing fast.

Who will help PV development more: the green or the greedy?

2011-06-24T02:07:00.000-07:00

"We will enable, help and secure the development of a sustainable future with clean energy supply for our children". Does this sound familiar to you? The websites of the solar investors and sustainable and solar energy funds all declare this great ambition. But, in the end, what counts are the financial numbers. "We need at least 12% ROI on the project. Certainly with all the risks involved". There is this great chorus line, saying "it’s all about the money...".

Better than 2% at your savings account
Have you ever seen a solar fund promoting an offer of a 6-7% guaranteed return on your deposit? It would still be a much better alternative to the 2% on your savings account at the bank, and I bet there is a great future for such an initiative. No one would become very rich, but it would enable solar project developments for private people at a decent return. It would make green and clean solar power development attractive for many people.

The green or the greedy?
Investors could be put aside as greedy people/companies. But the reality is that they accounted for maybe even around 50% of the global market volume and development in the last 10 years. Without the ‘greedy’ investors probably only a handful of large scale projects would have been built. This means the global market demand would have been much smaller. And the market volumes and industry dynamics would have been different. Module and system prices would definitely have been substantially higher. If it was just aimed at the green sustainable-inspired people and customers, the global PV market development would be focused on residential PV applications, on many small PV systems, with just a few exceptions for companies looking for a green image. So, who will help the development of the solar industry and markets more - the green or the greedy people?

Higher returns now lead to quicker competitive prices
The higher the returns offered to investors now, the faster the global market and industry will grow, and the sooner module and system prices will decline due to economies of large scale production; and the sooner green people can buy their clean energy at low prices. Besides this, the investors and financial institutions and banks will get used to solar as an easy, reliable, predictable, trusted, low maintenance technology - a reliable asset with interesting returns. This will be helpful when solar energy becomes competitive and when further market development requires the involvement of big companies, investors and banks.

Global energy hunger
The more investors are facilitated with good returns [RJW1] on their large scale projects now, the faster the industry will grow; and the sooner this will lead to lower production costs and, finally, competitive price systems. Thus, we can sooner reach grid parity where incentives are no longer needed at all. And the investors will have found out that solar PV is a superb, reliable and sustainable asset for further investments, even if the returns are less. They will stay in this growth business because the world’s energy hunger can only increase.

Money makes the PV world go around
Money does not only make the world go round. With solar energy, higher subsidized returns speed up achievement of grid-parity, where government support is no longer needed. A 'quick money shot' with good returns will fire up the PV market and keep it running forever. This 20 year period of FiT-payments will still be ‘nothing’ compared to the incentives, tax advantages and environmental tax exceptions that the fossil fuel industry received over the last 70 years. The PV industry will be like a gasoline engine. The initial ignition takes some (money) fuel. But once it runs, it’s hard to stop. And with solar PV it will never stop as the energy source is infinite and the cost competitive.

Solar module prices come down another 20% in just five months

2011-06-16T03:34:00.000-07:00

Growing industry and government budget cuts force prices to drop

Solar modules prices have dropped by another 20% during the first five months of 2011. Top-brand modules are now available at $1,40 per watt and sometimes even less. Half-way through 2008, the sales price still stood at around $4 per watt. Why are prices plummeting and where will this end?

A decade of continuous growth
Last year, the global solar PV market grew an astonishing 100%. For any industry in the midst of a global economic crisis, this is not a bad result. And it was not the first time this spectacular growth had occurred - it first happened back in 2008. Only in 2009 did the global crisis hit the PV market, slowing growth down to around 15%.
Since 2001, the global PV market showed an average growth rate of 50% of new installations per year. No wonder the solar industrial players invested heavily in capacity expansion. After a decade of continuous growth, it does not look as if there is any turbulence ahead for the solar PV market. After all, governments will continue to seek sustainable energy solutions and fossil fuel independence. And as for the end user, the majority would definitely prefer clean solar energy if available at competitive prices.

Still more industry entrants
Even more stimulated by the glorious market demand figures we saw in 2010, the solar industry invested heavily in capacity expansion. This will bring down cost and sales prices, helping it to reach the holy grail of grid parity even sooner.
But, besides the rapid growth of the existing industry leaders, many new players have been attracted too by the growth figures and market forecasts. New small companies and very large (Asian) corporations have started to produce silicon, cells and solar modules. And why not? Market saturation is nowhere to be seen. It does not look as if the solar energy market will stop growing some day - apart from the odd temporary slow-down.

Government budget cuts
At the same time, governments of leading markets saw budget claims for Feed-in-Tariffs in 2010 go through the roof. In the light of general budget cuts and economic problems, Germany, France, the Czech Republic and Italy therefore decided to cut back the FiTs and other grants for 2011. The purpose of this move is to cool down the explosive market growth and excessive budget claims. Not only did they lower the tariffs (subsidies); the revised schemes mean that smaller and roof systems are favoured over big ground-mounted power plants.
The subsidy reductions are forcing the solar industry to reduce cost and system prices in order to remain attractive to its customers, ensuring it still provides an attractive return on investment. Besides, the shift from fewer large-scale power plants to more smaller-scale systems will be a more costly job in terms of sales efforts.

Governments cutting budgets to cool market growth
The result of a rapidly expanding industry on the one hand, coupled with budget cuts on the other have led to a rapid fall in prices. The industry is growing at full speed, and facing more competition in the major leading markets. Germany, France, the Czech Republic, Italy, etc. are being cooled down with seriously lower incentives. This parallel development produces a cocktail which will bring about a rapid price decline for solar modules, inverters and total solar PV systems....
In order to control further budget cuts, these countries will calculate their FiT levels for 2012 in accordance with market growth in 2011 or on solar module price development. It is even possible that these leading markets will (slightly) shrink in 2011 (Germany, the Czech Republic, Italy) compared to the record year of 2010. Although the dynamics are hard to forecast, the promising emerging markets (India, China, etc) are yet not big enough to make up for any slower growth in these leading markets. Nevertheless, with system prices going down rapidly, it might very well be that we can expect another year of global growth.

Spiral of declining prices
Of course, new markets are popping up. But governments closely follow the leading markets, introducing FiTs and incentives according to the latest market prices. In the UK, the incentives for large-scale power plants were drastically cut, even less then a year after their introduction.
Inevitably, this spiral of developments leads to (rapidly) falling system and component prices. And the dynamics are hard to control. The existing leading industry players will fight hard (i.e. lower their prices) to capture and increase their share of the market. New players will fight hard to enter the market. And if the market continues to grow substantially, governments will lower the FiTs even more in order to control the overall budgets.

Where and when will this spiral end? Well, not until solar system prices have reached a point where subsidies, grants or FiTs are no longer necessary to make solar energy competitive with other energy sources. And in some markets, this is already a close call for certain market segments. Germany and Italy, with high electricity prices, are serious candidates to reach grid parity for residential customers next year.

New era of strong growth on the horizon
Industry leaders and experts forecast that solar modules will be sold for under $1 per watt three years from now. An average decline of module prices of around 7-10% per year. Large solar PV systems and power plants could then become feasible at $2 per watt. This will lead to competitive prices for solar electricity, without any government support.
Inevitably, this development will change the business models. In the near future, solar PV systems will be sold as energy and cost saving devices - whereas currently they are sold as profit generators based on government subsidies. With regular electricity prices likely to increase, and as solar system prices continue to decline in the near future, an infinite market is appearing on the horizon. The solar industry can prepare itself for an era of continuous tremendous market growth. But first it needs to fight to get itself through the coming years.

Solar Power Plants Are a Future Goldmine

2011-05-27T00:34:00.000-07:00

Solar energy too expensive? It depends how you make the calculation. How long will a PV power plant last? The general practice is for investors to base their calculations on a 20- to 25-year period for a megawatt ground-based PV system, using a fixed structure to calculate the return on investment. Does this give a correct calculation? Why not base it on 60 years and consider the replacement of inverters every 10 years and modules every 20 years?

Is a 25-year depreciation period realistic? What is possible with a PV power plant after 25 years? You could replace the modules by super cheap new modules. The inverters will have been replaced 5 years earlier and will still be doing fine. The rest of the system - concrete, cables, steel structures - are not likely to be eaten by rabbits or ants. Permits and grid connection are most probably still valid as well, since the world is desperate for electricity. So, by replacing the modules with new efficient cheap blue gold panels, available for - who knows - maybe as little as $0.50/Wp, the megawatt power station will be as new. Ready to produce electricity for a further 25 years.

One thing is sure: If a PV power plant is completely depreciated in the first 25 years, the production cost for electricity in the next 25 years will become extremely low. Making it a serious contender to compete directly with electricity from coal and nuclear power plants... And who would believe that electricity on the market will be cheaper in 25 years? In other words, the renewed PV power plant will, once again, become an extremely profitable electricity production site...

It is like renovating your house or building. Replace the windows, but keep the walls and structure intact. Maybe a new kitchen and a lick of paint will give the house a value even higher than ever before. So why, in a world of growing energy needs, would a PV power plant be worth less after 25 years? Isn’t it more likely that the plant is worth even more?

Why would coal and nuclear power plants be depreciated in 50 years and PV power plants in just 25 years? Don't coal power plants present higher risks? Who will be able to estimate what coal prices will be in 25 years' time? Or the costs involved for CO2 emission rights? Or, indeed, other emission reduction measures which may be introduced? These figures certainly seem to be less predictable than what the cost of solar energy will be in 25 years' time. However, it will be difficult to ascertain just how much cheaper modules will be 25 years from now...

10 Myths About Solar Energy

2011-04-22T07:57:00.000-07:00

“Solar panels are unsightly, have low efficiency, cost tons of subsidy money and have a high carbon footprint. “
Edwin Koot writes about the 10 major myths about solar energy.

1. Generating Solar Energy Is Only Possible In Countries With A Lot Of Sunshine
The fact is, the energy of the sun is the most evenly spread source of energy in the world. In any part of the world where there is light, solar panels will work. The world’s biggest market for solar energy is … Germany, a country not particularly blessed with long days full of sunshine, but a country with a smart government nonetheless. In the summer, more than 10% of the household electricity in the south of Germany is generated by solar panels.

Of course, when you’re living in the Sahara region, your ROI will be higher, but there are many other factors playing a role, such as the presence of a grid, the local consumer price for electricity, your energy usage pattern, the political stability in a your country, your need for independency from external sources of energy, and many more. As an example, in Northern Alaska it is smarter to invest in solar energy than to pull a cable from a far away power plant or grid connection point.

2. Solar Panels Are Only Attractive In Niche Markets
Solar energy is an attractive product in any place where people need electricity, which nowadays is anywhere in the civilized world - globally. That is a much larger market than just large-scale solar plants in desert areas, which are very competitive markets, because they need creation of new grids, are competing with wholesale prices for electricity and are crowded with many other power-generating enterprises.

When you concentrate on solar panels for household or entrepreneurial use that can be mounted on a rooftop, you can compete against the local consumer and corporate rates for electricity. You can compare this with the market for compact fluorescent lamps, where the consumer at the end of the day saves money by investing a small sum of money. The ROI is made at the end-consumer level: the height of the electricity bill. The investments are very simple, and no new grids or other types of costly infrastructure are needed.

3. Solar Energy Needs A Lot Of Public Financial Support And Could Never Become Competitive
“People will never buy laptops.” “Flat screens televisions are too expensive for the general consumer market.” “Mobile communication is too expensive in comparison with landlines.” These are some of the opinions that we have heard in the past, and how untrue they were! Laptops, flat-screen televisions and mobile phones are now everywhere, because people wanted them, needed them and were willing to pay for them, and finally the prices went down because of mass production methods that could be applied for the innovative products. The same is now happening with solar energy systems.

In the past three years, the prices of solar panels have gone down by half, as a result of the introduction of large-scale production methods. Marketing research shows that innovative consumers want solar energy now. In 5 years, your average consumer worldwide will want his solar panels, just like he wants his smart-phone and laptop. Your consumer will want them, because the solar energy from those panels will be cheaper and greener than the electricity from the grid.

Public funding was created in the past to accelerate this process of acceptance by the general consumer. In the largest markets, the subsidies are now in the process of being terminated. By next year, in Italy and Germany solar energy without any form subsidy will already be cheaper than electricity from the grid. The other European countries will follow this trend soon.

And other countries worldwide will follow, for the simple reason that the global market is getting bigger and bigger and solar systems are getting cheaper and cheaper. That is one thing for sure. The other side is that nobody knows what the costs for traditional energy will be in 10 years. Today, new nuclear plants won’t be even build without substantial government funding, because their future is so insecure.

4. The Efficiency Of Solar Panels Is Still Too Low
True, it could be better. Like cars getting more economical every year, solar panels are getting more efficient every year. Are the current panels not good enough? No, the technology is mature and the panels are good. What is at stake now, is not the efficiency of panels, but the price per generated kilowatt-hour. It is no longer about the type of motor in a car, but about how much fuel the motor consumes per mile.

There will still be new types of solar panels developed, with better efficiency, but the real success of solar energy in the future will lie in large-scale production matters and growth of the global market. A low purchasing price for a solar panel will be the determining factor for low-cost generation of solar energy for the consumer.
Are you waiting with buying a car because the models will be better, faster and greener in 2 years? Not if you need a car right now … In the same way, people need solar panels right now and buy them now, because they help them realize certain goals, such as independency from the grid, lowers costs for electricity and a carbon footprint shift. No new technologies are needed to create a breakthrough for solar panels. They are the breakthrough.

5. Solar Panels Have A High Carbon Footprint And Are Not Sustainable
Solar panels are usually made from silicon. Silicon is found in sand, one of the most widespread natural elements on earth. The ovens used to transform the sand into silicon use a lot of energy - that is true. But the payback time for the energy used to produce a solar panel is only 1 to 2 years. This means that in this time the panel generates the total amount of energy that has been used for its complete production - thanks to the free energy of the sun.

All power generated after the payback time is pure green profit, while solar panels can last 25 to 40 years! Other sources of energy have much longer payback times. Specifically, nuclear power plants have extremely long payback times, so long that it is questionable whether all the power that was generated during their lifetime is enough to pay for the energy used to build and disassemble them.

6. Solar Panels Are Unreliable, Because On Cloudy Days And During The Night They Do Not Work
Right now, the market for wind energy is (still) bigger than the one for solar energy, although the sun is a more reliable source of energy than the wind. But solar energy will soon surpass wind energy, firstly because solar panels can be used anywhere and secondly because they can be implemented in a modular way. This means that is very easy to expand the solar energy system in the course of months or years.

The combination of solar and wind energy is a nice option, but the future lies in the combination of solar energy with energy storage on a local and on a central level, especially now that the market for transport of electricity will grow further.

The market for central storage of energy is also going to be a phenomenal growing market. Central storage of energy in batteries creates the possibility to store the power generated during the day and use it in the night. An example is charging your electrical car at night. Energy storage is already a hot item - you only have to think of laptops, iPods, iPads and electric scooters and bicycles - but solar energy will give this market a big boost. The combination solar power generation and energy storage for later use is a perfect one.

The markets for central storage of energy and for solar energy systems will stimulate each other mutually, because when storage gets cheaper, it becomes cheaper to generate solar energy with the purpose of storing it and using it at a later time.

7. The Big Energy Corporations Do Not Believe In Solar Energy And Thus It Can Not Be Good
Shell finished their engagement with solar energy already. Exxon does nothing with solar energy. Many large energy corporations prefer to invest in coal power plants. But, don’t expect a wholesale slaughterhouse to specialize in gourmet green meat products. Shell has oil in its blood and their business is based on it. Large multinationals are like large tankers on the ocean: they are very difficult to maneuver and cannot make quick changes in course.

Solar energy is a sport for fast and flexible entrepreneurs, with a preference for innovation and sustainability. The market is volatile and ever changing, like the wind in the sails of an elegant and fast sailing ship. An entrepreneur in solar energy has to be like the shipper of such a sailing ship, sometimes tacking in headwind, sometimes easy-going down the wind, but never windless …

And as such, electronic market giant Sharp, a worldwide market leader in solar panels, shows us that some large companies do believe in solar panels. Sharp understood that mass production of solar panels would lower their price, and that ‘mass = cash’. The mass market for solar panels is about to come into existence – and not just in Japan.

Shell has predicted that in 2040, 50% of the worldwide energy will be generated by sustainable sources. Chances are big that sooner or later Shell will buy one of the consolidated winners in the solar energy market. Some of the ‘small’ solar panel producing companies have already grown into large corporations, with thousands of employees and turnarounds of a few billion dollars per year.

Google grew in 10 years to become one of the largest companies worldwide, so why not a company in solar energy systems?

8. Solar Energy Has No Role In The Global Generation of Energy
At this moment, solar energy contributes to only 1% of the worldwide need for energy. But, this contribution could be growing surprisingly fast. Germany is the guiding country, where it is expected that in 5 years, 10% of all energy used will come from solar panels.

And what Germany can do, other countries can do too. For emerging economies, it has already become useless to build large coal or nuclear power plants when solar panels are getting so cheap so quickly. You can compare this with the introduction of the mobile phone in India and other countries that didn’t even have a mature landline grid.

Those grids were never further developed and will never be, because they were made redundant by the introduction of the mobile technology. The same thing could happen with the introduction of solar energy on the markets of the emerging countries. The building of new, large power plants will become redundant, because individual, decentralized power generation is cheaper, more efficient and much more flexible.

The photovoltaic world market has grown in 2010 with more than 100% compared to 2009, and it already started to grow in this way in 2009. If this logarithmic growth percentage of 100% continues, then solar energy will cover the entire global energy needs in less than 10 years!

9. Solar Panels Are Unsightly And Take Up A Lot Of Space
That really depends on taste. Of course, there will always be people who believe a smoking chimney of a coal power plant is the apex of industrial technology and esthetics. Other people don’t mind showing that they are generating their own electricity and therefore have solar panels on their roofs. Anyway, there will always be enough space on earth for all solar panels ever needed.

Mind you, only a relatively small desert area of 200 by 250 kilometers (125 by 155 miles) filled with the solar panel technology of today would be needed to fulfill the total need for electricity of Europe. But, luckily, we don’t have to enter into those beautiful desert landscapes, because there is enough roof area available in Europe to realize this supply. And on a lot of roofs, the panels won’t even be visible.

Also, more attractive panels will be introduced on the market as production methods and innovations proceed. Compare it with the cars of today, which are so beautiful, compared to the vintage cars of the ‘60’s and 70’s … or not?

10. Solar Energy Systems Are Unreliable And Require Maintenance
Solar energy systems do not have moving parts and therefore require no or hardly any maintenance. The most fragile part in a grid-connected solar energy system is the inverter, which converts the DC from the solar panels into AC equal to the voltage of the grid.

An inverter costs about 10% of your total energy system costs. It consists of some pieces of micro-electronics, can last about 10 years, and can easily be replaced for a then probably even low price.

Only in dry and dusty climates, it can become necessary to clean the panels regularly with a little water. If you live in an environment where it rains often, you don’t even need to do that.

A recycling program for solar panels has already been put in place in many countries, so if after 25 years of loyal service you would need to replace your solar panel, the solar energy sector has processes to recycle all panels for 100%. And no coal power plant can beat that.

Imagine the “Impossible” PV Growth Scenario

2011-04-04T03:42:00.000-07:00

Without a vision there is no mission; without a mission there is no action. The vision of a world being powered by solar energy might seem impossible - but it makes sense to seek a way to make it possible.

Man on the Moon
In most cases, the impossible is in fact feasible, if we just try. If you had asked in the 1950s whether it was possible to send a man to the moon, people would most likely have laughed in your face. Only a little over a decade later it happened. Although there are some skeptics who still believe it all happened in a Hollywood studio... but who can blame the disbelievers? In the USA anything is possible.

Now, let’s take a look at solar PV. All of the last decade’s forecasts in global market growth have been surpassed. With the exception of the somewhat modest growth experienced during the “crisis-year” 2009, 2008 to 2010 saw the global market growing an astonishing 100%. Numerous markets, for example Italy and Germany, have demonstrated that a growth rate of over 100% is indeed very feasible. So, if they are in a position to do so, more countries will hopefully follow suit. It is a proven model. The solar industry is growing with increasing speed - so fast, in fact, that analysts are worried about an oversupply situation this year for solar cells and modules.

The “Impossible” Scenario
Now, let’s think of “the impossible.” Let’s envision a scenario of a yearly market growth of 100% for the next decade. How impossible is that in fact? It has been done before. What would be the result within one decade?
Well, that would lead to an annual market size of 30,000 GW (yes, gigawatts, not megawatts) in 2021, just a decade ahead. Conservatively estimated, that is equal to the output of around 8,500 GW of new coal fire plant capacity, or equivalent to 8,500 coal plants of 1 GW capacity each. Not bad. And enough to cover up to seven times’ the forecasted growth in global electricity demand till 2020 according to IEA studies. This means we would cover the growth and part of the current electricity demand. It means in fact closing down fossil power capacity for solar power. If we did just two years at 100% growth - and indeed the industry is eager for growth - it no longer seems so “impossible” after all...

33 Trillion Kilowatt Hours of Solar Energy
According to the IEA, the electricity consumption forecast by 2030 will be around 33 trillion kWh. In order to provide this totally by solar PV, based on an average of 1,600 kWh/kWp system yield (assuming most of this power is installed in sunny regions such as India, China, the Sahara, etc.), this would require 20,600 gigawatts of cumulative installed solar PV power. According to the 100% year-on-year growth scenario, this cumulative amount of solar power will be installed by 2020...

The conclusion can therefore be drawn that a continued rate of 100% year-on-year growth until 2020, which has proven possible during the last three years, will be sufficient to cover the entire world electricity consumption in 2020 and onwards. Imagine... this would not only mean unlimited, clean, cheap, reliable, predictable green power for everybody in PV, but also in grid management, energy storage, etc.

Nike and McDonalds
Like the global market, the Germans, Italians and several other countries have demonstrated that 100% year-on-year growth is possible for a few years in a row. There are over 150 more countries to follow suit. The solar industry proved it is possible in 2010, with 118% cell production growth. And I bet the industry is ready to take up this challenge for another decade. The task is to prove that the “impossible” scenario is in fact possible. We are investing in sending people to Mars - it makes sense to clean up the mess on Planet Earth home first, within the coming ten years.

Nike said it in an advertisement campaign: “Just do it!” And to add another famous slogan to that one: “I’m loving it!” too...

Does it make sense to subsidize large scale power plants?

2011-03-15T03:39:00.000-07:00

More and more markets in Europe are seriously reducing the feed-in tariffs for large scale power plants. It seems like a trend and the focus is to stimulate residential PV application.
That in itself makes sense. Solar electricity produced on your private roof competes well? with relatively expensive electricity from the grid. In many European countries the cost of electricity for a household is almost twice as high as for commercial customers. Hence, it makes sense to stimulate the application of PV by private home owners. And especially in countries like Italy and Germany with relatively high grid electricity prices. In these countries the residential market segment will be the first that achieves grid-parity.

Volume is what we need
Nevertheless, the success of European PV market growth is partly based on the many megawatts installed in large scale PV power plants. Think of the thousand-plus large scale power plants in Spain. Think of the many multi-megawatt ground-based projects in Germany, The Czech Republic, France and Italy, and the big roof projects in Germany and Belgium. These power plants helped to generate volume in system and module sales. And volume is what this industry needs. To get lower production costs we need economy of scale in module production. In order to make big steps quickly, we need large projects. After all, it could take one experienced EPC less than one year to design and build one 50 MW project. But 50 MW in the residential market equals more than approximately 17,000 PV projects of around 3 kWp. That takes slightly more effort and a few more small contractors to sell, design and install all these systems. These hundreds of small PV contractors are not created, educated and ready to install overnight. It needs a good strategy to create jobs, but it is still more difficult to create a voluminous market quickly.

Big investors exhaust the budgets; not the best message to your voters
So why are governments changing the rules during the game, cutting back earlier and more strongly on the FiT for big projects? The main reason is that the markets are growing too fast and available budgets are exhausted too soon. The total cost spread over the rate payers increases too much. And most big projects are investments by big (foreign) investors making an attractive return on investment. So, rate payers’ money flows into the pockets of big financial parties - these days not the best selling proposition towards your (potential) voters.

Financial institutions should learn to embrace and love PV
Nevertheless, we need these big projects - for the creation of market volume and thus rapidly growing industrial production volume, which will lead more quickly to lower production costs and system prices. For the future we also need banks, investors and the financial world to build up a broad experience with big PV projects. We need them to embrace, love and trust solar PV. Once they love big projects, they will start to streamline their processes to do smaller and smaller projects as well. And on the other hand, once they learnt to do a subsidized 50 MW power plant, they will sooner do an unsubsidized 100 MW plant. And so we will see much bigger projects coming up.

Need for cheap quickly installed PV power
And, we should not forget that the market for big projects will soon grow quickly. It’s not just in the USA that utility scale project development is taking off. China, India and, soon, (South) Africa and South America will embrace big PV power plants. It will be the major PV market segment. These countries are very hungry for new power to meet the rapid growth in electricity demand. They need more energy soon, quickly installed, green and cheap. Large PV plants are and will be the best solution.

Big money makes the PV world go round
If Europeans don’t build up the experience (engineering, financing, management, etc) and business infrastructure in their home markets, they might lose the opportunity to compete with the Americans when offering their services elsewhere in the world. Europe needs to have big financial investors, funds and banks all getting used to PV. We need them to educate and develop our domestic PV business infrastructure and our market. This way we can soon sell our experience and services in much bigger markets beyond Europe. Money makes the world go around. And big money makes the PV market grow quicker, makes cost and prices go down quicker and will sooner bring us bigger PV business.

What Do They Know That We Don't?

2011-03-04T08:01:00.000-08:00

Last week, another ambitious Chinese vertically integrated manufacturer, which entered the supply chain last November, published its modest target of 2.5 GW production capacity within 3 years. At full capacity, this company alone would be sufficient to supply the entire US PV market.
And this company is not the only new entrant. You only need to visit a Chinese PV exhibition to get the distinct impression that more solar modules are being sold worldwide than cell phones. With a difference though. In the cell phone business, there are only a few brands. Alongside all these new entrants on the market, the existing top-tier manufacturers are focusing on capacity expansion and forecasting planning ramp-up as well - determined to expand their share of the global market.

European Markets Under Discussion
We all know that the global PV market boomed a tremendous 90% in 2010 compared to 2009. All reports predict a bright future for solar energy. So, from that perspective, it seems logical for new entrepreneurs and major business corporations to step into the lucrative solar industry right now.
Nevertheless, I can’t help but wonder what these new entrants know about the current market dynamics and forecasts in Europe, which in 2010 took 80% of the global market. Indeed, despite the great opportunities, there are nevertheless a few uncertainties which must not be overlooked. Last year’s number 5 market, the Czech Republic, might disappear from the top 10. Indeed, Spain already did so - and there are no signals this market will pick up again in the near future. France is facing a market cap of 500 MW. The UK and Belgium are discussing a ban on large-scale projects. Germany will most probably reduce its FiT by another 15% in July. And this week the Italian cabinet concluded that the FiT Program worked out so well that the original target of 8 gigawatts’ installed capacity might be reached this year. So they need to take stock and think carefully about the next Energy Law, the 4th Conto Energia. Most likely, they will decide to reduce the FiT a little faster and earlier. Luckily, they did not decide to introduce market cap.

Born Pessimist?
Now, I might be a born pessimist, but these developments don't seem indicative of another major boom in Europe this year and the next. So, where will all the modules go? Perhaps I am just missing the bigger picture and developments elsewhere. Maybe the US market is ready to boom and secure global market growth. Or perhaps new Chinese market stimulation programs are still off my radar screen but ready to kick in. Or maybe I am underestimating new markets and new FiT programs such as that in the Philippines, for example.
Or perhaps history will repeat itself, like when the Spanish market collapsed in 2009 and Germany covered all the loss in Spanish demand. Will further new markets perhaps cover up any hiccups which may occur in Europe? Will modules find their way like a river finds the ocean? Would these new manufacturers put their money on this happening again?

Missing Strategic Insights?
In addition to all of this, the price of oil is rising very rapidly. Could it be that we are approaching the peak oil tipping point, with the price of oil only increasing from now on? If so, solar will become competitive even sooner, with solar modules becoming more in demand than ever before. Could it be that these new Chinese producers have strategy reports containing these insights?
The question spinning in my head is: What do these Chinese manufacturers know that we don’t? Or is it perhaps: What do we know that they don’t?

The Market for Solar PV Will Soon Outgrow the Wind Energy Market

2011-02-21T06:38:00.000-08:00

In 2010, global market volume for wind energy was 41 gigawatts, a modest 7% higher than the volume in the record year 2009. In 2010, the solar PV market was 14,5 gigawatts, a growth of over 90% compared to 2009.
The wind energy market achieved this market size in 2006, which would suggest that solar PV is only 4 years behind in its development. In 2009 the ‘gap’ was still 7 years: the PV market volume of slightly more than 7 gigawatts of newly-installed power was already achieved by the wind energy market back in 2002.

Wind and Solar Energy: Similar Growth Paths
Looking at the growth curves of both technologies, we see much similarity (see graph below). Both have gone through the phases of attractive subsidies, individual markets exploding, and markets facing subsidy cuts. But, overall and globally, the wind energy market, and now the solar PV market, have shown nothing but growth.
Now, it seems that PV is catching up with the wind growth path. Looking ahead, the wind energy market is expected to grow 9-15% in the coming years, reaching a volume of around 60 gigawatts in 2014. Solar PV, for its part, may well reach a market volume of 36 gigawatts by that time.

No Market Decline
Particularly encouraging is the fact that the wind energy market has shown no decline since 1996. So there is no reason to suggest that the PV market will ever decline. Renewable Energy is a sector set for growth. Does anyone believe that RE will lose importance in the years to come? Or that oil prices will plummet because oil demands will easily be met by increasing production capacity? Or that growing energy demands can easily be met by new coal and nuclear power plants? Or that the earth’s ever-increasing population will be supplied easily with fossil fuels? And then there is this little CO2 issue driving the need for clean energy.

The Sun is More Reliable
If Renewable Energy in general, and wind energy in particular, are setting the trend for the global PV market, then the solar energy market is expected to grow to a yearly volume of over 50 gigawatts within the space of only 5 years. It would not surprise me if solar PV becomes a bigger market than wind energy some day - my guess being within less than 10 years. PV is more versatile in that it can be applied in many more ways. Apart from the large-scale projects which are driving the wind energy market, PV also has a bright future for decentralized (small) power applications, and in small applications, on- and off-grid, as well as in a vast array of products. And, at the end of the day, the sun is even more reliable and predictable than wind. Wind is sometimes hard to predict. One can be pretty sure that the sun will shine every day...

The Global Market in 2011: Will the Optimist and Pessimist Meet in the Middle?

2011-02-14T03:33:00.001-08:00

The Optimist’s Prediction for the Global PV Market in 2011
According to the optimists in the PV business, the world’s leading and dominant market, Germany, will continue to grow in 2011. Maybe not another 90% like in 2010, but at least a safe 20%. This after an amazing, record-breaking year 2010 with the installation of over 7 gigawatts of PV power. The optimists believe that the industry will be able to decrease its prices, and as such compensate for the German feed-in tariff reductions in January and July. At the same time, these lower (module) prices will lead to explosive growth in other markets with even better feed-in tariff levels, such as those we see in Italy, the UK or Ontario.

This will stimulate the utility scale PV project market in the USA and project development in other robustly-growing markets such as those of Japan, Korea and Belgium. The optimists foresee China and India emerging as voluminous markets driven by new incentives, lower prices and their acute need for more (clean) electricity. And there is more. New markets are popping up simultaneously, starting with new feed-in tariff and incentive schemes such as those in the Philippines or Thailand, or the huge project initiatives in Morocco.
Add up all these forecasted growth markets and the global market could well grow an additional 20-25% as compared to the record breaking year 2010, resulting in a market size of over 18 gigawatts for 2011. And this is without even taking into account the possible positive effects of continuously increasing oil prices.

The Pessimist’s Prediction for the Global PV Market in 2011
The pessimist, on the other hand, foresees the German market shrinking, because the feed-in tariff reductions are too great for the industry, which will not be able to follow with the necessary cost and price reductions needed to keep the system prices attractive for investors. The pessimist foresees too much of a mess in the Italian market. As nobody knows what has actually been installed in 2010, the Government may well interfere in the current incentive scheme. Furthermore, feed-in tariff reductions have been accounted in Italy as well as in other markets. But, how much can we trust this announcement - or indeed, a new Government - in these difficult economic times faced by Italy? The pessimist may also see a Spanish horror scenario looming. Can retroactive measures be excluded? The pessimist also sees the Czech market collapsing in 2011; the Spanish market returning to zero as investors have completely lost faith in the Spanish Government; and the Belgian market facing a difficult second half of the year when strongly reduced module prices will be needed in order to keep investors interested in large-scale projects.

The pessimist foresees that the French market will remain on hold and doesn’t expect to see the introduction of any new incentives to attract investors in large-scale power plants. The pessimist also believes that India and China will not become huge markets in the near future. To develop projects in bureaucratic India will take much more time than expected. Besides, the companies that won the tenders under the National Solar Mission might not be able to build and finance their projects at the accepted low feed-in tariffs. China will focus predominantly on exporting their products rather than on building domestic plants. The UK and Ontario may reconsider their incentive schemes this year, as investors are tending to exhaust the budgets with applications for large-scale ground-based projects, which was not the original intention of the program. The pessimists also see new markets that look promising, but they believe that it will take a few years to develop these into sizeable markets of a few hundred megawatt volume.
If we add up these developments and forecasts, this could mean a global market in 2011 of around 12.5 gigawatts, i.e. 10-15% less than the 2010 figures.

Who Will be Right - the Optimist or the Pessimist?
No-one could have predicted that a volcano would erupt in Iceland in 2010, any more than they could have predicted the oil well issue faced by BP, or the political changes in Egypt. So, who can predict what will happen in 2011 and how this will impact the PV market? Always expect the unexpected. Will the euro survive? Will the dollar fall? Will the Italian Prime Minister survive? Will oil prices continue to rise? Will inflation and interest rates rise rapidly? Will we see oversupply and solar module prices crashing?
There are simply too many factors influencing the future - so maybe the best approach is to believe neither the optimist nor the pessimist, but rather to opt for a more middle-of-the-road outlook. The scenario we arrive at if we take the mid-point of a 15% global market shrinkage (pessimist view) versus a 25% global market growth (optimist view) is a scenario which presents a 5% increase, or a market of around 16 gigawatts of new installed PV power. Not bad in today’s uncertain global economic climate. But, for sure, the wrong prediction.

PV in India: A visit to cold Europe might be helpful for this ‘hot’ market

2011-02-01T02:08:00.000-08:00

India is hot! You can walk around in a t-shirt in streaming sunshine in January, a period that we in Northern Europe call “winter” and during which we may be ice skating or skiing! The Indian food is hot and spicy as well. And the economy in India is “hot” - all excellent conditions which forecast a sunny future for their PV market.

Potentially one of the richest countries
During the Conference “The Solar Future: India” last week in New Delhi it became clear that India is on its way to becoming a solar super power. The question is not if, but rather when. The majority of the experts and participants present at the Conference believe India will be ranked among the major solar PV markets within 5 years.
There is of course good reason to believe this. There is abundant sunshine for at least 300 days per year. The country has much more sun than Spain. The permanent power shortage leads to power cuts, mainly during peak hours at midday, when the sun shines brightest. The economy, population and energy demand are increasing year by year. And India has no energy sources other than the sun. In a way, it is therefore one of the potentially richer countries in the world in terms of potential energy supply. What is needed to kick-start the development of India’s solar market?

Never seen a PV panel
This fundamentally comes down to one thing: education and information. There is no lack of solar entrepreneurial spirit among the Indian people and companies. Many Indian businessmen have been educated in Europe or the US and have close ties to experienced foreign companies, suppliers, EPCs eager to enter India. Indeed, this is not the most difficult part of India’s market development.
More challenging is the financial banking sector. And financing is key in the development of any PV market. Unfortunately, it is not easy to import financing from foreign (experienced) institutions. The Indian financial sector will need to be educated right from the bottom. Indian bankers who have probably never seen PV panels before are now being asked to finance grid-connected project developments costing over 10 million dollars. No wonder they have many questions and take time to evaluate their risks. The country is not familiar with project financing for renewable energy systems, and definitely not used to loans spanning more than 10 years. Basic information needs to be spread. What is solar PV? How reliable is this energy technology? What are the risks involved? Does it make sense to invest money in this energy source?

It takes 4 years to develop a market
As they say, “Seeing is believing.” More real-time monitoring of data, developers with track records, and real panels on the ground are necessary. No doubt this will happen. In a few years these Indian bankers and investors will see that solar projects probably are the most steady cash flow generators possible. It is just a matter of time before the financial sector will embrace solar PV.
As stated in a previous blog, it takes time to educate and develop a market. For most markets it takes some 3 to 4 years to develop into a market of several hundred megawatts in annual installations. Let us recall Spain; in the first year, with the world’s most generous feed-in tariff, Spain did installed “only” 13 MW of new grid-connected installations. Four years later (2008), Spain had the world’s largest market, with 2600 MW. In 2008, the PV market in the whole of India, which is larger in size than Europe with at least four times Europe’s population, installed less than 15 MW. It is expected that this figure could rise to around 500 MW in 2011. Based on the many State programs and initiatives, this figure will surge to more than 2000 MW by 2013.

Take the Indians on a European PV tour
The Indian market will be kick-started by the National Solar Mission and the Gujarat PV Program. These two initiatives alone could lead to more than 500 MW of new installed PV power in 2011. And many more Indian States will follow suit. With a global solar industry looking for larger markets besides Germany, it might be an idea to help the Indian bankers and investors - taking them on a tour of Germany, Spain or the USA; showing them the hundreds of large-scale projects already implemented; teaching them about real-time data monitoring; informing them about financing possibilities and the risks involved - in essence, showing them that solar PV is a mature technology and not rocket science, and hence building their trust. The sooner these Indian financial stakeholders are convinced, the faster the Indian PV market will grow.

Take the Indian bankers to cold Europe
There is no longer a lack of modules or investors in the global market, and there is no shortage of EPCs willing to implement projects in India jointly with local people. The main obstacle is lack of information and trust among financial stakeholders. This does not have to be the most difficult task. Let’s arrange a European large-scale PV project tour for the Indian financial executives. The costs for this will be worth the money as it will help to develop the huge new booming PV market.
Indeed, the biggest problem may well be that of rendering the tour attractive to these Indian visitors - taking them from their hot climate to one which is cold not only in terms of the below zero degrees climate but in terms of frozen economies - and to top it all, non-spicy takeaway food!

Solarplaza is ready to organize this European PV tour for Indian PV financial executives. Which of our stakeholders are willing to contribute?

German politicians are the trainers of the solar industry

2011-01-10T05:47:00.000-08:00

Feed-in tariff schedule for coming years will design the roadmap to grid parity in the world

What will happen with the global market demand for solar PV in 2011? Will we see another magnificent year like 2010, with a record growth of 80% compared to 2009? Or will the global market shrink or grow just modestly, due to a collapsing German market as a result of politicians trying to break the world’s leading market? In this case it could lead to an industry facing oversupply, price erosion and an industry consolidation, with German companies facing financial problems or even bankruptcy. This scenario would mean that a lot of the invested money and the jobs created over the last decade will get lost.

Unrealistic but phenomenal growth in 2012?
What is the problem? The German market grew almost 90% compared to 2009, leading to more than 7000 MW of new installations in 2010. Germany now accounts for over 55% of the global market volume. The average yearly growth rate since the year 2000 is around 67%. It is hard to imagine what this would mean if it continues at the same rate. It would mean that in 2012 more than 20,000 MW and in 2015 more than 90,000 MW of solar power would be installed... It would also mean that Germany would generate more than 25% of its total electricity consumption through solar PV in 2015. Great and phenomenal figures! But with the current Feed-in tariff system, the total cost related to this growth path would be phenomenal as well. And since all electricity users will have to pay for this through a surcharge on their electricity consumption, the price for a kWh from the grid would grow quite high too. This scenario however also means, that grid parity would be reached sooner, and most likely before the year 2015....

“Go-and-stop” scenario is killing
This gives the German government a dilemma. Stopping growth abruptly will not only hurt the global industry, but many German manufacturers and companies as well. But how then can future growth be controlled?
A market cap, like a maximum acceptable volume eligible for the FiT? Lessons learnt from the past are that “caps are killing”. A ‘go and stop’ scenario will lead to a run on the ‘last FiT subsidies’ resulting in an ‘empty bucket’ halfway through the year. What should the companies do the second half of the year? Quickly lay-off employees and hire them again just before next years’ round? It will make the industrial manufacturers hesitant to invest in new machines and equipment for production expansion, hurting Germany in the back as leading high-tech solar equipment supplier.

Controlled steps
It seems better to control the growth by bringing down the feed-in tariffs gradually, but predictably, in pre-announced and pre-controlled steps per quarter, avoiding end-of year rallies. This will give the industry a clear focus and marks for necessary cost reductions. This would not only effect German companies, but as the leading market, it would force the entire global industry to cut cost gradually, since most manufacturers in the world still rely heavily on sales in this market.

Politicians defining the global roadmap
German politicians have the unique opportunity to define the global roadmap towards grid parity in Germany and other countries in the world. The pace can be structured, the goal of grid parity reached within less than 3 years. A continuation of the market growth means larger volumes of modules and inverters are needed and volume is the way to reduce cost of production for modules, inverters and systems. That means grid-parity can be reached sooner and feed-in tariffs can be reduced sooner as well. More manufacturing volume also means the need for more, smarter and more efficient high-tech equipment and machines. Not by coincidence an area where Germany holds one of the best positions on the global market.

Germany: the trainer pushing its athletes
The solar industry is training for the big game when grid parity is reached and subsidies are no longer needed. It looks like a sports team training to get ready for the highest level of competition. In our world: competing with fossil fuel. The athlete trainer of this industry is Germany and all it has to do is push its athletes a little harder each time to be more powerful and efficient, until they are ready for the big game. Now, let’s hope that the German politicians are a bit sports minded and understand the chances for a Gold medal....