Despite some downward pressure on solar prices, thanks to declining production costs in China , the solar industry is in a better state than fifteen to twenty years ago. If someone told me back in 1992 or 1997 there would be a competitive commercialized solar industry in 2012, I would have said, “You have been watching too many science fiction movies”. But thanks to not only decreased costs in producing solar panels (dropping to US$3.47/watt) , and improved technology, solar energy is at least given a serious look in the energy market. It’s not some granola munching hippy’s fantasy. It’s the real deal. The global solar photovoltaic market has dramatically increased from US$2.5 billion in 2000 to US$91.6 billion in 2011, according to Clean Edge. Not only that, but solar installations could grow up to 21% this year.
But if you picked up the Globe and Mail’s Report on Business (ROB) weekend edition, it would have seemed like the solar industry would need a little bit of CPR.
“The solar business was once hailed as the future of clean energy, but a spectacular spiral has left a trail of failed companies and an industry in peril. Why are the remaining players believe the brightest days are still ahead,?” (P.B1)
Ok, as the article starts, it discusses about how a tepid global economy and previously mentioned declining costs affecting the growth of solar energy. Then, Richard Blackwell goes further….
“The sector’s problems extend far beyond Ontario. Globally, the solar power industry is a mess.
Just two years ago, solar energy was basking in exponential growth and surging investment, as it promised to be the future of energy. Now it’s picking up the pieces of a colossal bust.
The spectacular downward spiral at solar product manufacturers has left a trail of destruction. Many companies have failed outright, and those that have survived have seen their stock prices plummet as much as 90 per cent.”
I will give the author his due. I believe Mr. Blackwell, put in some effort in making a somewhat balanced article. I will also give credit he does mention that part of the concerns relating to the solar industry now pertain to uncertainty in the global economy, and lowering costs, he gets that right. He also at least tries to give some upside, pointing to a few examples when he talks to some industry insiders. Take for example, when he talks to Ian MacLellan, a former executive with the recently bankrupt Arise Technologies in Waterloo, Ontario. He said in the article the solar industry will likely go through a consolidation period and see a few large players.
However, Ian MacLellan here gives us the most important part of why the solar industry will thrive, not die in the future.
“In the next few years, he (MacLellan) predicts, the manufacturing portion of the industry – like its automotive and computer predecessors – will be dominated by very large companies that can generate economies of scale. Meanwhile, downstream users – those buying and installing panels to generate power – will benefit greatly from lower and lower prices. “Solar in the next 10 or 20 years will become totally ubiquitous,” he said.
Bingo, the missing ingredient the author shovelled to near the back of the story. An important piece to the puzzle tossed to the back of the bus, only to be recovered near the end.
As a former student of economics, one key ingredient in a maturing industry is getting the user-end cost down to make it more affordable for consumers. That will increase future demand.
What is going on right now is building the backbone of the solar energy infrastructure, through the glut of supply in the global market. As that occurs, user-end costs for solar panels will come down, creating necessary future demand. Once it occurs, you will see the adolescent period of the solar energy industry starting to mature, and new opportunities will emerge. For example, as more citizens gain access to solar pv’s there will be increased need to keep up maintenance.
Don’t believe me? It happened in the information technology revolution. After the initial investment boom in IT in the mid 1990’s, the bust occurred around 2000, and investment shrunk. However, what that initial investment did build the backbone of a flourishing e-commerce, and the building blocks of Web 2.0.
The same can be said with mobile phones. Once the cost came down, it allowed developing nations to leapfrog the landline phone, thus giving those who did not have communications tools previously the ability to phone, text and use the Internet with one device, while building their countries more modern economies.
It will be important for everyone to access renewable energy, given climate change, a growing middle class in emerging market countries, who will want better lifestyles, along with an increased global population will squeeze already scarce natural resources.
Maybe, instead solar’s run as an industry is just beginning, rather than near death.