What the PV Industry Can Learn from Google

Introduction

It looks like the time has come for the solar power industry. Global warming, concerns about energy security and generous subsidy programs for photovoltaics in Japan, Germany and now California have combined to fuel 44% annual growth rate for the last 5 years (PV News). Forecasts for the future are rosy as well. One example -- the U.S. Photovoltaic Industry Roadmap, published by the Solar Energy Industry Association, envisions that the industry will grow from 340 megawatts of capacity capable of generating 650 million kilowatt-hours of electricity in 2005 to 200,000 megawatts of capacity capable of generating 380 billion kilowatt-hours of electricity in 2030, a 58,000% increase!

Given the industry's recent performance, upbeat outlook, and the enormous investment going into creating new technologies to lower the cost of solar power equipment to make it more competitive with conventional electricity generation, it might seem that the future of solar power is well assured. However, history demonstrates that even hypergrowth industries are subject to ups and downs and concurrent shifts in market share as some market players successful navigate challenging times. The Semiconductor industry is a great example. 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. Furthermore, many of former market leaders are out of the market altogether. While we are very bullish on the long-term prospects for the solar power industry, we also believe that the industry will face challenges -- challenges which left unaddressed have the potential to lead to slowdowns or even downturns and tectonic shifts in market dynamics.

This paper addresses the fundamental challenge the photovoltaics industry faces -- achieving widespread, mainstream adoption. Unlike all other conventional and alternative electricity generation technologies whose scale and economics lead them to be sold to and operated by utilities, photovoltaics are most economical when purchased by smaller electricity purchasers who pay the highest rates. The net result is that for the industry to reach its potential, it will need to sell its equipment to tens of millions of individual home and business owners.

Today, with less than a fraction of 1% of US electricity generated by solar power, the solar power industry is selling to only a tiny group of early adopters. It is in the transition from serving a few thousand technology-loving, risk-tolerant early adopters to serving tens of millions of mainstream buyers where we see a challenge... and an opportunity.

It is a challenge because unless the solar power industry prepares itself to meet the needs of the mainstream, needs that are very different than those of the early adopters, it will face a slowdown and challenging shake-out as it struggles to adapt to the needs of the new mass market. It is an opportunity because those that successfully navigate the transition will grow market share and help grow the market as a whole grow even faster than anticipated.

So why is Google relevant here? Google is a prime illustration of what Topline Strategy considers a "Short Fuse" technology, that is a technology that has a shorter early adopter period and achieves widespread mainstream adoption far faster than traditionally thought possible. When mainstream buyers consider the cost-benefit of a new technology, they consider far more than just its price -- they see hidden costs and potential risks and build them into their purchase decision. Short Fuse technology solutions are ones whose developers anticipate these costs and risks and design them out right from the start. By doing so, they attract mainstream buyers far sooner than solutions created and deployed under the Long Fuse paradigm of slowly building credibility with the earliest adopters before bridging product and marketing efforts to the mainstream. Google's AdSense solution did exactly that for online advertising and rapidly brought millions of new customers into the market -- customers for whom the favorable economics of Internet advertising alone was not enough.

For the solar power industry, the implication is that driving down the per-watt cost of a photovoltaic system is necessary but not sufficient to achieve mainstream status. Our goal for this paper is to kick off the discussion about what the industry needs to do beyond just lowering the $/watt of photovoltaic materials to accelerate its adoption by the mainstream.