Solar

The Stratification of the Grid-connected Solar Industry

Issue 4 and Volume 2011.

For years there have been significantly more off-grid (remote) sub-applications than existed for the grid-connected market. The introduction and painfully slow adoption of incentives for grid-connected applications did not change the paradigm. Things did not begin changing until several years after Germany launched its feed-in tariff incentive model, and even then changes came slowly and incrementally (much like technology development) until bang, it seemed to change overnight.

The initial multi-megawatt installations were announced with great fanfare; each was the largest system ever. Of course, as with anything in business and life, for every most beautiful, smallest, fastest, largest thing, soon enough there will be another and more beautiful, smaller, faster, larger thing. While the industry was wrapped up in such superlative one-upsmanship, the eventual stratification had begun—pushed along by investors who finally saw a way to make money from solar, from installers who wanted residential and small commercial customers to more easily own a solar system, and in the US by states needing to finally fulfill renewable portfolio standards. In the US, without RPS requirements it is unlikely that the solar industry’s future in the country would be so (pardon the pun) bright.

About applications (or categories, call them what you will) the names are pretty standard. Lately a cottage industry in solar demographics has sprung up around the business of inventing interesting new names to call things; do not be confused, this is primarily marketing. What’s in a name? In business, a name is a brand.

What is interesting is that 97% of PV sales are into the grid-connected application, and this application is currently and formally separating into sub-segments. The only really new sub-segment for the grid-connected application is utility scale—but since it is the big dog on the solar block, it deserves attention. (In the future, some of that attention will not be good; the cost of financing systems >100MWp can be, gently put, prohibitive.)

The residential application can be sub-segmented into single and multi-family dwellings, and further into building integrated or retrofit. Low-income housing is a further subset of single or multi-family dwellings.

The commercial application is basically divided into five size driven areas: small (up to 100kWp), medium (100kWp-500-kWp), large (500kWp-1MWp), multi-megawatt (>1MWp)—and what is called utility scale, which ideally will be at least 100MWp. As true utility scale is just now being deployed, it will take time for a trend to establish, and much longer for this segment to mature. Within the commercial segment there are designations as to customer, i.e. who is first point of sale: is it a utility or an end-user?

The utility-owned segment is also a work-in-progress, but eventually will be assessed by size much as the commercial side of the market. Studying the application segments where solar systems are installed is crucial to identify trends over time, and to recognize where and when these trends began. With such dramatic growth in the solar industry over the past five years (>90% of industry volume was installed from 2005-2010), everyone is on a steep and somewhat treacherous learning curve. One thing for sure though, it is a heck of a ride.

Paula Mints is principal analyst, PV Services Program, and director in the energy practice at Navigant Consulting (www.navigantconsulting.com). E-mail: [email protected].