One of the key Energize America principles is to strive to
Make the right choice the easy choice.
Right now, throughout the United States, structural issues of regulation, financing, taxation policy, and otherwise make it difficult for individuals, businesses, communities, and governments (at all levels) to make the right choice when it comes to holistic approaches to energy choices. Â Home Owner Associations (HOAs) ban solar power; tax policy favors deducting energy costs now versus longer-term deductions of building improvements to reduce energy use; purchase and operations budgets are separated, hindering investment in better quality purchases that lower long-term operating costs; and so on …
What creates these disincentives and what might be done to change the situation? Two recent studies from Top Line Strategy offer some insights when it comes to solar power.
For an interesting look at a potentially critical arena for moving the nation toward a more prosperous and sustainable future, Top Line Strategy has published two studies in relation to solar power, suggesting paths toward faster expansion. Â For me, their work has true insight and merits consideration …
The first report is What the Solar Power Industry Can Learn from Google and Salesforce.com (co-author from Sun Light Electric). Â This looks critical obstacles keeping solar from going ‘mainstream’. Â With growth at some 44% per annum, hard to see a problem. Â The authors, however, point out that the semi-conductor industry provides a cautionary tale —
history demonstrates that even hypergrowth industries are subject to ups and Â downs and concurrent shifts in market share as some market players successful navigate challenging times. The Semiconductor industry is a great example. Â Despite growing by 30,000% over the last forty-five years, the industry suffered several painful downturns including six separate years when revenues actually shrank.
Thus, the potential is there for serious problems.
To start with, the study describes solar power in a way that mirrors issues discussed in The Innovator’s Dilemma. Â When discussing solar — which they equate to PVs —
One of the unique aspects of solar electricity is that is most attractive to the smallest electricity users and not major industrial users and commercial power producers.
What does this mean? For a variety of reasons, the true “market” for solar is the individual as solar best takes on high cost electricity (at this time), which is that electricity charged full market rates: e.g., the individual homeowner who pays retail rates with no options for discounts.
In addition, there is minimal economy of scale. Â Buying 1000 kilowatts of solar PV for a rooftop doesn’t signfiicantly reduce costs. Thus a homeowner should be able to buy solar for about the same cost as a major business operation.
Thus, solar’s top potential market space: 106 million homes.
But, what are key challenges for faster solar PV penetration? They lay out five:
- Lack of Confidence in “Solar Power” Technology
- Large initial investment
- Lack of Standards and Best Practices
- Concerns about impacts on resale values
- Lack of an Effective Channel to Serve Small Accounts
Each of these is well discussed in the report. How, however, to think about speeding solar adoption.
Introduce Preconfigured PackagesÂ
Auto manufacturers learned years ago that offering customers unlimited flexibility in choosing the configuration of their cars was a losing business practice. It introduced incredible cost to their systems without offering much incremental benefit over having a handful of packages.Â Â
Today, the solar industry is still operating under the unlimited flexibility paradigm. Â Nearly every PV system is custom designed to the unique specifications of the property, driving up sales costs, installation costs and equipment costs (since each vendor incurs the cost of selling their components separately and ancillary components, such as inverters, are rounded up to the next size).
Preconfigured packages, perhaps for 1, 2, 3, 4 and 5 kilowatt systems, would positively impact practically every customer objection. Â By eliminating design costs and simplifying installations, it would make it profitable to sell smaller systems, stimulating the development
of a high quality channel for smaller systems. Smaller systems also lower the initial investment and reduce aesthetic concerns.
Well … to put it simply … they are right. Â
Other recommendations include:
- Simplify Interconnection and Permitting Processes for Small Systems
- Solar Power Loans Terms Merit More Favorable than for Other Loans Made to
Homeowners and Small Businesses
- Implement Manufacturer Financing
All-in-all, what do their concepts add up to: Making the Right Choice the Easy Choice when it comes to solar PV installations.
It is an excellent report, well worth examination by anyone interested in these business case challenges, their relationship to policy, and solar energy.
Let’s take a quick look at some of the material from another recent Top Line Strategy report on solar power: Massachusetts Surprising Candidate for Solar Power Leadership
Massachusetts isnâ€™t the first place that comes to mind when you think of solar power. Most people think of California where plenty of sunlight and a $3.2 billion subsidy program have combined to create a thriving solar industry. When asked which states are likely to follow California as a hotbed of solar power activity, most people respond with Arizona, Nevada, or Florida. However, it is Massachusetts, and not those Sun Belt states, that is the second most economical place in the country for solar power.
Have to say, I wouldn’t have put Massachusetts near the top of my list in terms of best economics for solar power.
This surprising finding comes from the fact that the economics of solar power are driven by a combination of latitude, cloud cover, and the price of electricity. In Massachusetts, high electric rates and relatively light cloud cover combine to make it number two on the most economical list. Nevada, Arizona and Florida rank third, tenth and eleventh respectively. While Florida is the furthest South, it is also very cloudy and has electric rates that are only slightly higher than the national average. Nevada and Arizona rank first and second in terms of the amount of total sunlight but enjoy cheap power.
Okay, this is starting to make sense to me. Â Need to think holistically — amount of sun, cloud cover, and overall electricity prices.
For a region concerned about its job base, this natural competitive advantage in solar power presents Massachusetts with a golden opportunity. Not only can solar power deliver clean energy for the state, it can also position Massachusetts as a leader in what the U.S. Photovoltaic Industry Roadmap envisions as a $44 billion industry employing 260,000 people in the United States by 2030. The only missing ingredient is a solar power subsidy program.
Okay, perhaps this is the hint … actually, that is the key point of the report: introduce subsidies and you can change Massachusetts’ solar energy picture and competitive situation with solar power. The report provides some data and explanation as to how much subsidy is required to make solar power competitive fiscally (at least if one worries about COST TO OWN rather than cost to buy). Â And, what is the result for Massachusetts.
In Massachusetts, solar power currently requires a 26.8% subsidy. Our calculations show that a 10 year program that funded enough solar equipment to generate 5% of Massachusettsâ€™s electricity would cost $80 million per year.
For $800 million, in a decade Massachusetts could be generating 5% of its electricity from its rooftops? That sounds pretty good. Along with windmills and, perhaps, tidal power, this suggests serious options for Massachusetts
Figuring out how to lower the burdens to make the right choice is critical to helping turn the nation toward a more sustainable and prosperous energy future.
Solar is far more than PV (passive solar design, solar water/air heating) and there are options developing other than solar PV for solar electric (such as Stirling systems). Â The studies I was looking at focused on photovoltaiics.