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Solar Market: Twilight or New Dawn?

Will the solar power market ever hit prime time? This question continues to haunt the industry. Players worry that, despite the obvious utility of solar power to all segments of the global economy, the market has yet to live up to the expectations of many corporate executives, governments, and environmentalists.

There have certainly been many gains over the years. A new McKinsey report says the solar photovoltaic (PV) market has transformed from a “cottage industry centered in Germany to a $100 billion business with global reach.” Fueled by government support, especially in Europe (and more recently in the United States), the market expanded rapidly at the beginning of the last decade.

It's beginning to look like those were the good days. The solar market isn't exactly declining today, but pressure on government finances has forced some countries to scale back support for the industry. Also, the demise of many Western players in recent months has cast a shadow over the sector. Many of the companies that have pulled out of the market were not competitive with lower-cost Chinese players that began supplying products to the sector in recent years.

As EBN blogger Jennifer Baljko pointed out in a recent post, the solar market's “greenest promises are running red with losses,” as a result of “pullbacks in government subsidies” and “stepped up competition from manufacturers in lower-cost regions.” (See: Western Solar Efforts Go Red.)

McKinsey said in a press release that “demand today isn't keeping up with supply.” That is a rather disappointing observation, considering the potential savings for businesses, households, and government institutions.

What will pull the solar market out of its rut, and what does the future hold for the sector? Demand, of course, has to increase exponentially. As crude oil prices continue to climb, the desire for alternate energies will strengthen, and the solar market may benefit as consumers become more open to lower-cost energy sources. However, this won't be enough to light a fire under the solar market. What the industry needs even more is for the cost of PVs to drop significantly over the next few years. This would further lower the threshold for adoption.

Fortunately, that new dawn isn't so far off, according to McKinsey. The research firm identified five areas that it sees as offering growth opportunities in the solar market over the next 20 years. Many household global technology and manufacturing companies, including Samsung, Hanwha, TSMC, and GE, are positioning themselves for growth in these areas.

  1. Off-grid areas:
  2. “Solar power is ideal in places without access to an electric grid,” the McKinsey report said. “Applications include delivering power to agricultural irrigation systems, telecommunications towers, remote industrial sites such as mines, and military field sites. Within this segment, the most significant potential resides in areas that use diesel generators to provide uninterrupted power supply for remote infrastructure.”

  3. Residential and commercial retail customers in sunny areas where power prices rise steeply at times of peak demand:
  4. “Many businesses in places like California, Hawaii, Italy, and Spain already generate their own power using solar applications. In the near term, this segment's growth will depend on the availability of low-cost financing, customer-acquisition costs, and reactions from regulated utilities.”

  5. Isolated grids:
  6. “Small grids fueled by diesel generators require an LCOE of between $0.32 and $0.40 per kilowatt hour (kWh) to be economically attractive. These primarily provide power to remote villages in Africa, India, Southeast Asia, and parts of the Middle East… The current barrier to deployment is the limited availability of low-cost financing in non-OECD regions.”

  7. Peak capacity in growth markets:
  8. “The largest potential for this segment lies in markets where substantial new electric-power infrastructure is set to be built (for instance, India, Brazil, the Middle East, and China) or in countries that rely heavily on imports of liquefied natural gas (such as Japan).”

  9. New, large-scale power plants:
  10. “As with smaller peak-capacity plants, large-scale solar plants are more likely to be built in emerging markets that are expanding their infrastructure aggressively, where the cost of solar will be compared with the cost of a new coal, natural-gas, or nuclear plant. Companies must still achieve breakthroughs in manufacturing techniques to reach this cost threshold in solar.”

9 comments on “Solar Market: Twilight or New Dawn?

  1. MinwooKim
    May 1, 2012

    Japan's FiT in July is among the highest in the world. It's clear that Japan's FiT will shake the solar market. New solar technology will show in Japan. This is it!
    As you know, earthquake in japan is happening frequently. Floating solar panels installation is one of the best solutions for power crisis in Japan. So you have to reduce the vibration to install Floating solar panels. Because, it makes many kinds of problems! The vibration's caused by wind, waves and external forces. New Floating Body Stabilizer for Floating solar panels installation has been created in South Korea. The Floating Body Stabilizers generate drag force immediately when Floating solar panels are being rolled and pitched on the water. Recently, this Floating Body Stabilizer's using to reduce the Vibration of Floating Solar Panels in South Korea. You can see New Floating Body Stabilizer videos in YouTube. http://www.youtube.com/watch?v=moO–q5B92k , http://www.youtube.com/watch?v=nA_xFp5ktbU&feature=youtu.be .

  2. stochastic excursion
    May 2, 2012

    Solar power will always have a consumer appeal from a supply chain perspective, since, in principle, it does not require raw materials to produce energy other than the initial plant and maintenance items.  There are still questions as to whether solar and other renewables represent a viable long-term solution to the energy needs of modern industry.  The existence of many large power plants with renewable energy sources however, means that this form of energy has at least some role in the future of industry.

  3. Barbara Jorgensen
    May 2, 2012

    I see two distinct trends going on here: industrial/corporate/business adoption of solar, which means companies spending money on facilities upgrades or integrating solar in new facilities. Then there is consumer. I think the solar trend will follow what happened with LED lighting: it's expensive, so it takes a significant upfront commitment to invest for long-term savings. Companies may be more willing to do this now that the overall economy is looking up in most parts of the world. It will take longer for consumers to adopt solar–it is way too expensive for me to contemplate, and in the US the tax incentives are just not that good. I'd be more inclined to spend the money if the government would give me a bigger break, but right now the return on investment is just pennies on the $1,000 (at least on replacement windows.) The Obama administration professes to be investing in moving the US forward, but so far they have spent more money in businesses that have gone bankrupt than tax breaks. Time will tell…

  4. Ariella
    May 2, 2012

    Solar power for individual homes really is a long term investment, as it can cost $15,000 to $30,000 to set up.

  5. Anna Young
    May 2, 2012

     @MinwooKim, thanks for your contribution and link. Amazing! Body stabilizer for Floating solar panels-awesome!.I've never seeing anything like it. I'm sure the competition is going to be fierce..

  6. Anna Young
    May 2, 2012

    @Stochastic excursion, Yes, I agree that there are still questions surrounding renewable energy's long term viability. Solar and other renewable energy has its pros and cons. Nothing is completely risk free. We'll continue to have this debate until a new technology emerges.  One thing is clear, solar power is said to be greener than Fossil fuels.  PV I understand compares favourably with all.

  7. Barbara Jorgensen
    May 3, 2012

    Yowza. Out of my league for the moment, but on new construction it's not prohibitive.

  8. Ariella
    May 3, 2012

    @Barbara That's true, and if you really plan to remain in the home for over 10 years, you should be able to recoup the cost. 

  9. Wale Bakare
    May 3, 2012

    One of the reasons for its slow adoption – cost. Being a one-off project as well, its greener capability these factors should drive its market faster. But what about the BANK OF BATTERIES? Cost of putting this in place, i think outweighed all other budget of Solar power.

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