What has proven to be the most difficult issue facing the solar industry during the past year and what are some key strategies to ensure long-term growth?
Responses will be updated daily, and we encourage you to lend your own voice to the discussion in the comments below.
Richard Bozicevich, VP of Business Development, TUV Rheinland PTL
The solar industry is undeniably growing worldwide, and so is the trend to build large-scale, multi-megawatt photovoltaic (PV) power plants. The costs of PV modules and, therefore, system costs are falling, resulting in lower costs per kilowatt. For this reason, banks and investors are finding solar energy an attractive energy market option. This is a key element for the industry’s growth.
However, ensuring long-term bankability of power plants is a major challenge for project planners and investors. Some of the greatest operational failure risks include planning errors, installation defects, weather-related damage, and product performance related reductions in output during operation. The quality of power plants needs to be assured to enhance their bankability and increase cost-efficiency, thus making the solar energy industry worthy of continuous investment.
Project planners and investors can achieve this goal by thoroughly planning, researching and verifying every detail of the power plant design, construction and operation. Specifically, they can partner with the appropriate industry organizations to perform the following:
- Selecting suitable components and modules;
- Testing module output performance to verify the output forecast and nameplate ratings;
- Performing site evaluation;
- Evaluating plausibility of the plant design;
- Ensuring quality of the installation;
- Ensuring plant safety;
- Conducting system monitoring during operation; and
- Verifying plant output.
Richard Bozicevich is vice president of business development for TUV Rheinland PTL, where he directs North American operations for solar technologies. Previously, he has held management and executive management posts for a variety of Silicon Valley start-up ventures. Bozicevich holds a Bachelor’s degree in Electrical Engineering from Michigan Technological University.
Check back tomorrow for more insights.
Lead image: Podium via Shutterstock
Nat Kreamer, CEO, Clean Power Finance
“It was the best of times, it was the worst of times” for the solar industry in 2012. Downstream companies enjoyed the lower hardware costs and greater access to vendor financing in the United States while upstream companies struggled to sell equipment above their marginal cost. Upstream overcapacity is driving consolidation, which should translate into improved scale.
While downstream companies selling and installing solar enjoyed higher margins in 2012, it is likely that heavy downstream competition will reduce those margins in 2013, pushing companies to either grow or specialize.
We see a trend of more solar companies focusing on their strengths to drive profit amid declining system prices. For example, in the case of customer acquisition, this often means a company that is great at installation will stop selling directly to consumers and partner with a company that is great at acquiring consumers. Another example we see is more installation companies out-sourcing all of their logistics and/or procurement to large distributors that enjoy comparative advantage in economies of scale, which is the key in logistics and procurement.
In addition to work by private companies, the Department of Energy’s SunShot Program is investing hundreds of millions of dollars with industry participants to develop solutions that drive down soft costs, which will improve industry competitiveness and profitability.
Improved scale and specialization is the key to the solar industry’s growth. Consequently, the entire value chain needs to optimize before solar can become a major source of U.S. electricity generation.
Nat is the CEO and a member of the board of directors of Clean Power Finance. Nat’s original idea to finance solar for consumers led him to co-found SunRun, which he led as the company’s president and CEO. Nat was the president and member of the board of directors of Acro Energy Technologies, a residential and commercial solar integration company. He created the Chicago Climate Exchange market-making business for Pioneer Futures, a division of MF Global.
Randy Bishop, CEO, Verengo Solar
I see the internal fighting among solar companies as the most troubling issue facing the industry today. The conventional oil and gas companies and utilities must love the fact that the industry has been fighting each other in the media over the onshore vs. offshore panel production and what constitutes “unfair” competition. At a time when our relatively new business is just beginning to take off, this infighting is damaging, distracting and destroys the credibility of the entire solar industry.
Let’s keep our eyes on the big picture: the sun provides usable energy every day that also generate jobs for Americans. The U.S. economy is struggling with a current unemployment rate of 8.2%. The solar industry is one the fastest growing industries in the nation. Unfortunately the media and many of our politicians ignore the job growth and successes, and instead focus on the failures and fighting in our industry.
The strategy for moving forward is obvious. The companies currently fighting over solar panel tariffs should work to negotiate an industry-wide resolution as suggested by SEIA last May. Cooperation and collaboration, not government intrusion, is what our industry needs.
It’s time to stop issuing negative press releases and get back to talking about the good news we all see in our jobs every day. Verengo recently held a job fair in Fresno, an area with an unemployment rate of over 20% and some of the worst air pollution in the state. Three hundred fifty people showed up, and our hope is that 40 or 50 of those attendees will be working in the solar industry by the end of year. That’s the kind of story our industry should be telling.
Randy Bishop and the co-founder and CEO of Verengo Solar, a residential solar installation company that operates in California and New Jersey.
Zhe Jiang, CEO, Upsolar
The solar industry has experienced unexpected shifts in policies and market demand, leading to a tumultuous environment for players across the supply chain. Federal incentives are cooling across Europe, and the U.S. Department of Commerce handed down its decision to place tariffs on cells imported from China.
For module manufacturers, a tough road lies ahead. As prices continue their steady decline, the surviving players in this commoditized marketplace will be those that focus on product differentiation and manufacturing flexibility — two ideologies central to Upsolar’s business model. While we’re confident our company will weather this storm, our hope is that 2013 finds solar in a place where we’ve turned our attention away from battling each other and are instead focused on advocating for the industry as a whole.
Looking at the broader industry, the time has come for us to learn how to survive without government incentives. To ensure long-term growth, companies must adapt their business models and product portfolios to reflect sliding BOS costs and begin promoting solar systems as consumer products.
Upsolar CEO Zhe Jiang has more than a decade of experience in the renewable energy industry. Prior to founding Upsolar in 2006, Jiang served as group controller at EDF Energies Nouvelles, Europe’s largest developer of renewable energy facilities. He received a Master of Economics from Reims Management School of France.
Tor Valenza, Founder, UnThink Solar
As the founder of a solar marketing and communications firm, I know this may sound self-serving, but I sincerely believe the solar industry’s lack of aggressive, bold marketing/PR/communications to the public and to politicians is our biggest challenge today, and here’s why:
Solar PV (and thermal) works and is now competitive in many markets in the U.S. and the world. With solar PV’s current price trajectory of installed costs at $2 to $4/watt in the near future, now is the time to build more public attention for solar coming into its own as a reliable and affordable energy source for residents, businesses, and utilities.
Despite our exponential growth, the solar industry is still under constant attack from fossil fuel interests portraying themselves as “not that bad,” “clean,” and a “provider of jobs,” especially in the United States. We need to poke holes in green-washed fossil fuel PR campaigns and show that solar is an affordable and reliable energy solution today, not just tomorrow.
Better PV technology is not necessarily the answer. If solar PV efficiencies stayed at 15-21 percent at its current cost trajectory, we could still provide a significant amount of solar power to the world and displace dirty fossil fuels.
I know the above may sound simple and self-serving from a solar marketer, but I’m a solar advocate first, and I genuinely want our global solar industry and technology to grow quickly and profitably. But to do so, we must overcome being outspent by fossil fuel lobbyists and green-washing PR firms that lull the public into believing old solar myths.
In summary, the solution to today’s challenges is more effective, creative, widespread solar communications and education. That, in due course, will lead to rapid growth and scale, lowering prices, increasing profits, and eventually funding the technology innovations of tomorrow.
As founder of UnThink Solar, a strategic communications firm, and a solar advocate for more than 25 years, Tor Valenza a.k.a. “Solar Fred” helps solar companies reach solar customers through innovative messaging, branding, and social media communications. His firm’s clients have included AEE Solar, Free Hot Water, Panasonic, SolarCity, and others. His RenewableEnergyWorld.com blog offers free solar marketing advice.
Paul Detering, CEO, Tioga Energy
Incentives are a temporary but vital component to the solar industry as we strive to increase volumes and decrease costs. At the federal level, the solar investment tax credit will support new growth through at least 2016. The real challenge comes at the state level, where a plethora of incentives are being designed to spur local markets.
This hit-and-miss exercise has come in a variety of flavors. In 2011, we’ve seen New Jersey’s SREC market collapse and Massachusetts’ attempt to correct these issues for its own program, creating an overly complex financing nightmare in the process. We’ve seen the blink-and-they’re-different programs plaguing various states and incentives in Hawaii that always seem to be on the brink of death. California’s performance-based incentive is a notable exception, although the program’s success caused it to run dry in less than five years when it was expected to last for ten.
So, what can we learn from these floundering markets? Clearly, a successful incentive design needs to offer three things: transparency, long-term stability and monetization. When this strong foundation is achieved, state-level incentives will serve as our bridge to grid parity.
Additionally, as we glide down the learning curve, module and system prices will continue to hit new lows. The time has come, then, to turn our attention to reducing solar’s “soft” costs. For our part, the Tioga Energy team released its power purchase agreement into the public domain — ideally the first step toward developing a uniform document across the industry and slashing the resources required for PPA negotiations.
In both cases, the solution to our woes lies in working together for the greater good. If key stakeholders can unite to share resources and develop best practices, we will find ourselves at the center of a self-sustaining industry with the ability to truly transform the power sector.
Paul Detering is the CEO of Tioga Energy, a leading provider of renewable energy services to commercial, non-profit and governmental organizations. A veteran leader of early stage technology companies, Detering has more than 20 years of experience in the clean technology, telecom and software industries.
Chris Tilley, CEO, SunLink
What is the greatest challenge facing the industry today? In a word: stability.
In order for the industry to reach its potential, we need to restore stability on a number of fronts. Volatility in module prices, the financial viability of key industry players, the cost and availability of debt and, in the U.S., tax equity, the forward value of REC’s and other key incentives have created an uncertain and difficult environment for project sponsors and hindered growth.
All of these factors will eventually stabilize, and, under nearly every foreseeable outcome, the solar industry will grow. The industry’s progress in bringing down costs has been spectacular, and the future is clearly bright in the medium to long term. Today’s challenge is how to manage through the near-term volatility and shorten its duration.
The key to this growth is to hold steady on growth. The political will to accomplish this stability is being tested in Europe by the debt crisis, in the U.S. by the unfortunate politicization of solar, and in Asia by the slowing economic growth.
Now, more than ever, the solar industry needs to remind political leaders of the long-term benefits of solar in addressing the serious problems we face: environmental degradation, global warming, energy security and sustainability. These issues will remain long after the current economic volatility subsides, and a robust solar industry will be an important part of the solution.
We also need to push for stability at the local level. Permitting requirements vary greatly from one jurisdiction to another. In the U.S., building codes lack sufficient detail in certain areas, such as its inadequate guidance on design for wind.
Wherever policy makers and permitting officials can add clarity, it will also bring stability. And a stable business foundation is, above all, the solution the industry needs.
Christopher Tilley, CEO of SunLink Corporation is a licensed engineer with wide range of international business experience. Chris holds and MSME from Purdue and an MBA from INSEAD. The effect of wind on solar arrays is a key area of interest with papers on the topic available at www.sunlink.com/researchanddevelopment.
Jamie Hahn, Managing Director, Solis Partners
One of the most difficult issues facing the solar industry over the past year has been uncertainty in the marketplace due to changing public policies and reduced incentives at both the federal and state levels.
Just as the United States solar industry started picking up steam, the Section 1603 Treasury Grant Program expired, reverting back to an investment tax credit. While some companies where able to qualify projects under the program’s “safe harbor” provision, allowing them to stay busy through the first half of the year, new solar project development and investment has started to shrink due to the lack of supply of tax equity in the market.
Additionally, the 100 percent bonus depreciation allowance was reduced to 50 percent in 2012, and will revert back to the standard MACRS schedule in 2013. This will further impact investors moving forward.
At the state level, specifically in New Jersey, the state’s Solar Renewable Energy Certificate (SREC) market, which is a major financing mechanism for solar projects, took a precipitous drop, making it even more difficult to get projects financed. This was due to an overbuild scenario in which the state surpassed its Renewable Portfolio Standard (RPS) mandate. While legislation has recently been passed to stabilize the SREC market, SREC prices have been depressed for more than a year.
The key to making sure the solar industry remains active is transparent and long-term public policy at both the federal and state levels — at least until solar reaches grid parity. Fortunately with decreasing installed costs, along with the high electricity prices in some states like New Jersey, that’s not too far away. However, for much of the country consistent policies that offer incentives for installing solar are extremely important.
Jamie Hahn is co-founder and managing director of Solis Partners, a leading provider of solar energy systems. Solis develops, designs, engineers and constructs solar power systems for the commercial, utility and non-profit markets. Solis offers a variety of project finance structures.
Nancy Hartsoch, Senior Vice President of Marketing and Sales, SolFocus
The most challenging issue in the global market today may best be characterized as “sustainability.” With dramatic cuts in the pricing of solar panels due to oversupply and strategic country focuses on market dominance, the solar market has grown rapidly. This is very good from the standpoint of higher amounts of clean electricity and thus positive impact on climate change issues.
However, the question remains whether this is a sustainable market since product is being sold at next to no profit margin, each week multiple companies are going out of business, and many of the doomed companies have been provided opportunities via government incentives and tax payer investment. All of these factors have created an environment of skepticism about the real value of solar as a mainstream source of energy. What needs to be done to make the market sustainable?
First, we need to continue to advance solar technology, striving to get more and more electricity from less equipment. As in other tech sectors, solar companies must stay dedicated to commercialization today, and advancement for the future. Without this focus, the industry will in the longer term be challenged by available capital to manufacture systems, and land constraints for deployment.
Second, projects need to be financed, and the private sector for the near term is extremely conservative. The government can play a big role, not via direct subsidies, but by enabling solar deployments through low-cost, available capital. A “Green Bank” would bring significant sustainability. Without that then solar manufacturers are going to have to continue to be creative with insurance products and the like to remove the risk from investors, or the dollars will not continue to flow.
Last, solar companies should look at a global footprint — the sun knows no boundaries and companies need to follow that lead, which may increase the cost of doing business, but can dramatically reduce risk and market uncertainty.
Nancy Hartsoch is the senior vice president of marketing and sales for SolFocus. Nancy also serves as the chairperson of the CPV Consortium, an international group charged with advancing CPV technology worldwide. Her 25 years of experience includes solar and semiconductors with companies including Acer Laboratories, American Microsystems, Pacific Technology Group and Appian.
Ben Santarris, U.S. Head of Corporate Communications and Sustainability, SolarWorld
The most difficult issue facing the solar industry today is China’s drive to seize global solar-industry dominance, using illegally dumped and subsidized products without regard for other nations’ interests, international trade laws or WTO obligations.
China’s recent ascent, predicated on unfair trade, has injured not only the U.S. industry but also the global industry, leading to dozens of shutdowns and bankruptcies in what should be growing, thriving industries.
For all to see, this technocratic tyranny details what amounts to economic aggression in annual iterations of its Five-Year Plan for solar and six other world industries. The Chinese government terms them “strategic” industries, meaning those that it is resolved to gut and own at virtually any cost.
The list of solar corporate road kill around the world has mounted to the dozens and dozens — producers of finished products, factory equipment, raw materials and factory services.
As China’s across-the-board subsidization has enabled its export-intensive industry to seize world market share at dumped prices, China has systematically decoupled supply and demand to a degree of distortion that no factor of production — neither debt nor pricing nor cost — is rationally or efficiently valued to the benefit of the industry’s long-term development.
Much of the U.S. industry grasps the harms of such anticompetitive tactics in support of an export drive that is careening off its rails and short-changing future years of industry progress in exchange for the possibility of one more week’s unsustainable results.
To address this issue and ensure solar’s long-term growth, countries need to start by enforcing their trade laws. The best way to ensure a strong solar industry is to maintain a strong solar manufacturing industry, where goods are priced appropriately based on cost, not government export goals.
Until then, organic industry and market challenges — and solutions — will remain hard to discern.
Ben Santarris is U.S. head of corporate communications and sustainability for SolarWorld, where he has worked since 2008. He worked the previous eight years as a business journalist at The Oregonian, the last several years as business editor. He previously worked in various editing and reporting roles in Washington state, Pennsylvania, Connecticut and Boston.
Kevin Smith, CEO, SolarReserve
The most difficult issue in the U.S. continues to be establishing the value proposition of large-scale solar energy with utilities, regulators and politicians. This includes not only convincing stakeholders that solar energy is now competitive on a price basis, but also how to further consider the benefits of energy security, diversity, long-term price stability and the environmental advantages of solar in overall price evaluations.
Many polls have revealed that consumers have begun to support solar. Unfortunately, consumers aren’t really the decision makers in utility-scale applications and energy policy. The ability of conventional energy suppliers to affect policy has limited the growth potential.
The key to advancing our energy policy is taking a long-term view rather than making decisions based on short-term pricing on conventional fuels or failing to recognize the environmental costs that come with conventional energy supply. Solar is much more cost effective today than new-build nuclear or “clean” coal, even when ignoring the environmental benefits of solar. Natural gas prices are low today, but continuing to have natural gas dominate power generation as it has over the past couple of decades is a risky proposition that raises the stakes on both environmental issues and energy price stability.
If you fast-forward into the energy future, it’s pretty clear that solar energy will dominate the landscape. Every day you see more countries expanding their solar energy plans — Europe, China, Australia, Canada, Chile, India, South Africa and more. Even the world’s largest oil supplier, Saudi Arabia, has recognized that dwindling oil supplies are inevitable and are dramatically ramping up solar implementation. It would be a shame if the U.S. is one of the last countries to recognize the value and importance of solar energy.
Kevin Smith is chief executive officer at SolarReserve where he leads the company’s efforts to develop and build large-scale solar energy projects. SolarReserve has more than 3,000 megawatts of projects in development across the US and internationally.
Dan Gretsch, Vice President, SOLARHOT
The most difficult challenge facing the industry over the past year is also the greatest opportunity going forward — the speed of change. A lot of players in the space built their business plans on a certain planned growth in their target markets or in their target technology, i.e. CSP focusing on utilities or PV start-ups focusing on getting “high cost” silicon out of their product.
While solar has tried to act as the market disrupter in the energy space, solar executives have been serially blind-sided by changes in their own market dynamics. Obviously, having your target market disappear or your chosen technology lose it’s competitive advantage can unbalance the best of companies, but the reason so many solar companies have been failing at all levels is because the industry as a whole has been focusing on the top line and ignoring the profit line.
If we want to be around and thrive we need CEOs and managers that are focused on the bottom line as much as the top line. Focusing on the bottom line might mean that as an integrator you have to pass on a big job because the developer has squeezed you so much that it no longer makes sense for you financially. Focusing on the bottom line might mean that manufacturers capitalize more slowly proving the profitability of their product before pursuing the large investment.
I think the key to leading the industry into a bright future will be players in the solar space treating their businesses with the same attention to the numbers that every other industry does. Next time you solicit a round of funding imagine the investors response if you were offering to manufacture, distribute, or install toilets. Would your investors be so impressed with your numbers that they would still invest? Or maybe they would pass on toilets but only invest because they are star struck — you are selling an investment in solar.
Dan Gretsch is VP and co-founder of SOLARHOT, a premier solar thermal manufacturer based in the Raleigh North Carolina area. Dan has his Bachelor’s and Master’s degrees in Industrial Engineering from Georgia Tech. Dan is Chairman of the Board of Ecolibrium Solar a ballasted PV mounting systems manufacturer.
Brooks Herring, Vice President, Solar Frontier
It has been a challenging year for manufacturers of all PV technologies due to the imbalance of supply and demand. CIS technology is no exception. But it has also been a year of great expansion and success. This year, CIS broke into the mainstream.
Along the way, the main challenges we have faced have been to gain broad acceptance of our technology, and address oversupply issues in the market. We have overcome these challenges by showing customers that CIS really does generate more kWh in actual installations — and, after all, kWh is what drives project economics.
As we move forward we will ensure long-term success by continuing to focus on optimizing production scale merits, ensuring highest quality, and delivering on a technology roadmap that will continue to offer more kWh to customers worldwide through the power of CIS.
To meet the challenging business environment and drive down systems costs, we have recognized the need to broaden the scope of our customer offering and provide services that include complete systems, helping developers fast-track through the process of getting a project permitted, constructed, and grid connected.
These strategies have attracted more and more customers to Solar Frontier’s CIS offering, and we are building a strong network of sophisticated business partnerships and customers around the world.
Brooks Herring is a Vice President for Solar Frontier K.K, a 100% subsidiary of Showa Shell Sekiyu K.K. Solar Frontier is the world’s largest manufacturer of CIS thin-film PV modules. Brooks has led the International Business, Corporate Planning, Supply and Distribution, and Brand & Communications for Solar Frontier.
Scott Sklar, Founder, The Stella Group, Ltd
The challenges for all sectors of the global solar industry involve dealing with the countries and companies that are scaling-up manufacturing that drives commodity prices down, continued global subsidization of fossil and nuclear fuels, and industry maturity that is setting up an era of mergers and acquisitions.
What First Solar and China have shown the world is that solar photovoltaics can be scaled like microchips, which seriously hampers mid-sized manufacturers and newer innovative technologies.
The International Energy Agency in October 2011 released a report stating, “Global subsidies for fossil fuel consumption are set to reach $660 billion in 2020, or 0.7 percent of global gross domestic product, unless reforms are passed to effectively eliminate this form of state aid, according to the International Energy Agency. The IEA estimated such subsidies at $409 billion in 2010, compared to $312 billion in 2009.”
Just like other electronics and energy industries, the maturing solar industry will drive the thousands of solar technology and component companies to merge to build economic and corporate strength to tackle global markets. The concentrated solar, photovoltaics, and solar water heating companies are numerous and are just beginning to enter the stage for consolidation. The first symptom is bankruptcies, but this actually just subjugates the investments so others can pick up at “sale” prices.
I predict that in the next decade we will begin to see the merger-acquisition phase in full swing, which will begin positioning more than one hundred companies for global markets rather than the one thousand plus companies we have now. According to Bloomberg Energy and Pew Trusts, private sector investments in renewable energy topped $269 billion in 2011, and the market is still growing at double digits. The global market size and technology maturity are at a threshold for an entire repositioning of the industry in what will be the next stage of unprecedented growth in a more rough and tumble global marketplace.
Scott Sklar runs a clean energy technology optimization and strategic policy firm, The Stella Group, Ltd, which he founded in 1995 and came on full time to lead in 1999. Previously, Sklar served as Executive Director for 15 years of two national trade association concurrently, the Solar Energy Industries Association and the National BioEnergy Industries Association.
Jason Morris, Executive Vice President, Schwartz MSL
The most difficult challenge facing the solar industry this year has been a public relations problem, with too much media and political attention focused on the struggles of publicly traded cell and module companies and DOE loan-guarantee recipients. This focus has overshadowed what will be a record year in U.S. adoption, aggressive incentives in Japan and states like New York, Massachusetts and California, and a banner year for downstream players.
To ensure long-term growth, the industry must tell a more balanced story that illustrates a future of how solar fits within a diverse energy mix and better market to residential customers. The industry also needs to continue to innovate and drive down LCOE through lower balance-of-system costs and development of lower-cost storage technologies. The future of the industry is incredibly bright, and I expect that with election-year politics and the trade dispute behind us, 2013 will be even better.
Jason Morris is an executive vice president with Schwartz MSL and co-leads the firm’s cleantech and energy practice. He has spent the past five years working closely with innovators up and down the solar value chain, including companies in manufacturing equipment, module manufacturing, inverters, CPV, integration and finance.
Paula Mints, Principal Analyst, Navigant Consulting
Unfortunately the industry’s significant expansion over the past few years continues as one of the most significant challenges facing solar today and is a significant factor holding crystalline technology prices at historic lows. Rumors of low prices and expectations of even lower prices are likely the most significant factors standing in the way of a necessary price increase.
To overcome the expectation of “cheap,” the solar industry should consider retooling its story to focus on quality. Solar electricity is a high quality, reliable, long-lived electricity generating technology with minimal O&M. All solar systems need maintenance (cleaning), and the likelihood of a system needing an inverter replacement is close to 100 percent. However, no energy technology is maintenance-free and the necessity of maintenance is a non-argument that misses the point of solar.
The true value of solar is independence from utility rate volatility — and this is particularly true for distributed generation. The challenge of changing the industry story to one of energy independence is daunting, but it is crucial to the future of solar. We need to redefine ROI industry-wide so that it stands for “Return on Independence,” because the value of independence is too high to be quantified.
Paula Mints is principal analyst, PV Services Program, and associate director in the energy practice at Navigant Consulting.
Mark Cerasuolo, Strategic Brand Marketing Manager, OutBack Power
The biggest challenge facing the solar industry is politicization, which is to be expected in an election year. However, solar is an unusually partisan issue. Ironically, solar energy is now more cost-effective than nuclear, which was heavily government-subsidized for generations. Solar is uniquely cartel-, utility- and monopoly-free, and unlike most wind and hydro systems, the resulting energy can be used at point-of-generation.
So at the intersection of big money and big government, solar — a politically divisive topic and the target of negative scrutiny — faces an unusually stiff headwind. Taking the politics out of the agenda and replacing them with economic objectivity and reason is the key to stability, which is what the solar industry needs to reach its full potential.
A prime example is the multitude of incentives promoting solar. State and federal incentives offset part of the cost of a solar installation, and with net metering policies users can save more money by selling unused electricity generated by their solar panels back into the utility. However, the myriad state and regional net metering policies are changing.
To ensure long-term growth, incentives and programs that accelerate installations need to be consistent. For example, Washington state has a good production incentive program. When the incentives are up for renewal or facing expiration, the solar industry sees a surge of installations before the window closes. This hinders long-term growth.
We need less rollercoaster growth that is filled with ups, downs, and non-growth periods, and more of a smooth ramp of constant progress. This can only happen when the industry is consistent about incentive policies and programs and when users understand that the pricing pressure faced by the solar industry works in their favor. This results in efficient solar technology becoming more and more affordable.
Mark Cerasuolo manages strategic brand marketing at OutBack Power, a designer and manufacturer of balance-of-system components for renewable and other energy applications. Cerasuolo has also held senior marketing roles with leading brands in electrical and electronics products, including Leviton Manufacturing, Harman International, Bose Corporation and the Consumer Electronics Association (CEA).
Levent Gun, CEO, Ampt, LLC
At an industry level, there are several macro forces at play. First, decreasing and uncertain solar incentives, such as feed-in tariffs, are making projects more difficult to finance. This puts incredible pressure on project developers to lower capital costs of PV plants. Second, the high-growth opportunity of solar has attracted countless new entrants who have been in an arms race to gain cost advantage by scaling capacity. So, there is oversupply through much of the supply chain. Third, shifting solar incentives and massive competition cause companies to serve multiple and moving end-markets, which is expensive and difficult to execute.
These dynamics are prompting solar players to sell products at low, or zero, margins and cut investment. This is especially true for PV module manufacturers and, increasingly, inverter manufacturers who are finding it more and more difficult to differentiate on anything but cost. It is a potentially vicious cycle of margin losses leading to under investment, lack of differentiation, and eventually market share losses or implosion.
To overcome these challenges, solar players must avoid this death spiral. They should protect cash flow, but also invest in the right markets and technology. They must innovate.
Companies should adopt disruptive technologies, such as module-level DC/DC power optimizers, that can lower overall system costs and increase energy production to decrease risk of returns. These types of technologies are quickly becoming a key component in the design of the lowest-cost PV systems by deploying fewer DC cables and combiner boxes, and lowering the cost inverters.
Winners in the industry will need to have the foresight and financial ability to continue to invest in innovation and select the right technologies. This strategy will result in a differentiated offering, protected margins, and a growing market share. This ensures that these companies will be well positioned to capture the growing demand for solar over the coming years.
Levent Gun has more than 25 years of technology experience. Prior to joining Ampt as CEO, Levent was president and CEO of Kleer, a wireless audio semiconductor company. Levent holds a Ph.D. in Electrical Engineering from the University of Maryland and undergraduate degrees in engineering and mathematics from Bogazici University in Turkey.
Jigar Shah, Partner, Inerjys Fund
The most difficult issue facing solar today is the looming global trade war started by SolarWorld. At a time that solar is emerging as a cost effective solution for over 20 percent of global electricity sales, we have to stay on track for cost reduction and quality improvements.
Tariffs at any point in the global solar value chain are counterproductive and make solar less competitive against fossil fuels. Disruptions in the free flow of solar goods will raise prices, eliminate jobs and hurt businesses at every level of the global solar industry. We urge all countries to avoid unilateral actions that impede trade and resolve conflicts in a bilateral or multilateral context. Lowering, not artificially raising, the cost of solar should be a global goal.
Another important issue is solar grid integration. We have the technology to integrate solar at high penetration rates in most parts of the world, but solar installations will slow down in some important countries until we establish consensus in the U.S.
Moving forward we must figure out how we exempt solar from these costly tariffs through negotiated regional trade settlements outside of the trade court process. We also must convene the smartest solar folks and start engaging utilities on how to accommodate distributed generation at scale. Lastly, we need to devote many more resources on sales and marketing in the emerging economies. With high diesel usage, solar is cost effective without subsidies.
Jigar Shah is an entrepreneur and visionary committed to leveraging the next economy by solving the challenging issues of our time. Shah has recognized this as “The Impact Economy,” also the title of his upcoming book. Jigar was the founder of SunEdison and CEO of the Carbon War Room.
Juan Suarez, Senior Director of Engineering and Program Management, Unirac
“Grid parity,” “lowest levelized cost of energy,” and “PV < CE” are phrases that dominated the solar industry’s lexicon for the past few years. But for those tracking the financial performance of companies across solar, the more critical trend and phrase lately is, “the race to the bottom.” The ever-accelerating push to reduce costs in photovoltaics has put many companies on life support and has others facing margin compression and profitability evaporation. And oh by the way, compared to most industries, the growth is spectacular.
Profitable, sustainable growth is the solar industry’s biggest challenge in North America. The race to the bottom creates an environment where short term decisions produce revenue growth, sometimes at the expense of long-term financial health. As all companies seek to avoid commoditization, investments in quality and innovation become more difficult. Who can worry about next year, while fighting for survival now? The answer is simple, the market winners.
Quality and reliability will become more evident as more solar is installed. Financiers are starting get real data from system performance that will affect how they influence purchasing decisions by developers and EPC’s.
Innovation is not just for manufacturers anymore. Installation contractors, EPC’s and developers are demanding and participating in the development of new installation process, new materials and sophisticated logistics such as pre-panelization, removing module frames and adhesives.
The companies that find the fortitude, and more importantly the dollars, to invest in quality and innovation are perfectly positioned to take share and realize profitable growth.
As Unirac’s senior director of engineering and program management, Juan Suarez tripled the company’s patent portfolio in less than two years, and led the engineering and product development process to achieve ISO 9001:2008 certification. Juan is a highly accomplished speaker and author on solar industry topics. He has a bachelor’s of science degree in industrial engineering from New Mexico State University, with a minor in math.
Mark Bronez, President, Hanwha SolarOne USA
The solar industry struggled for the last year with a supply-demand imbalance and tight credit lines, which drove less competitive companies out of business and will continue to do so for the next few years. To be competitive over the coming year, solar companies need a strong project finance capability, attracting project equity and debt at low cost.
Additionally, PV panel costs have fallen sharply in the last year, but entire balance of system costs need to fall accordingly to make solar more competitive. The industry will need to invest more in research and development, and solar companies need to form strategic alliances across the value chain to improve overall product offerings.
Mark Bronez is the president of Hanwha SolarOne USA Inc., overseeing operations in Canada, Mexico and the U.S. Bronez brings 10 years of experience in the solar and technology industries to Hanwha SolarOne, with past employers including SunPower Corp., PowerLight Corp., Harris Corp., and Bradford Co.
David Gudmundson, CEO, GreenVolts, Inc.
The most difficult issue facing solar this past year has been the precipitous drop in pricing, driven by an over-supply of commoditized PV modules with little to no differentiation. This has led to a market where companies are left to compete solely on price, which ultimately can stunt long-term growth. To continue the cost reductions critical to achieving and surpassing grid parity, we need to transition from the low-efficiency, commodity-based products of today, to higher-performance, functionally integrated systems that will secure solar’s place in the power generation landscape.
Integrated solar systems have the power to add value for all stakeholders across the solar value chain — operators, managers, financiers, end users. No longer will customers have to worry about piecing together a system from a laundry list of suppliers. This paradigm shift in the market will give customers something they’ve never had before — an entire solar system, specifically designed so that all components work together optimally, with built-in energy management software providing sophisticated monitoring and control, available from a single provider.
In addition to integrated systems, we see another trend on the horizon: the emergence of large power generation companies in the solar market. One recent example is ABB, with others expected to follow. These companies can potentially provide power and interconnect equipment, automation, EPC and support services that can result in a complete sun-to-grid solution.
As a result, we expect to see an industry transformation where new leaders will emerge with broad portfolios, expertise in every aspect of power generation, and strong balance sheets. These new players have the “power” to fuel long-term growth by providing complete solutions, bankability, and the proven ability to execute at the scale that the solar industry needs for the future.
David Gudmunson is the CEO of GreenVolts and has a proven history of building high-performance businesses across a number of industries, including networking, optics, telecom, government and defense. His experience spans the globe in the technology and engineering fields, for companies such as JDSU, Cisco Systems, and Boeing.
Gaurav Naik, Principal, GeoGenix
One of the biggest impediments facing the solar industry over the past year — and historically — is the public’s perception of the cost and effectiveness of solar. The general public falsely thinks solar is much more expensive than it actually is and that it is not an effective technology.
When I got into solar in university back in the early 1990s, the technology was nowhere close to being competitive. It had very selective applications, it was very niche, and had a very specific value proposition. It has taken close to 15 years for technological enhancements to make solar competitive with traditional forms of electricity in markets such as Germany, Portugal and island nations that are using diesel to generate electricity.
As technological improvements continue to take place and as costs continue come down, the technology will only get cheaper and more effective, which will create new markets and new opportunities. Last year alone, the price of solar panels and installations fell 40 percent.
Solar is a real technology when it comes to energy generation. As time goes on, it will become more and more of a compelling business case for different applications, which we are seeing play out worldwide right now. However, the public needs to recognize its true cost and effectiveness to ensure the widespread application of solar. Whether it’s a large public awareness campaign coordinated by solar advocacy groups such as the Solar Energy Industries Association or by individuals in the solar industry — from integrators to manufacturers — the general public needs to know how solar can serve as an affordable, reliable source of clean, renewable power.
Gaurav Naik is a principal at GeoGenix, a residential and commercial solar integrator in the mid-Atlantic region. Naik was formerly involved in the research and development of crystalline silicon solar cells for terrestrial applications as well as thin-film CIGS cells for space applications. He holds a bachelor’s of engineering degree in photovoltaics and a master’s degree in electrical engineering.
Michelle Ostiguy, Director of Photovoltaic & Barrier, FLEXcon
To say that it has been a year of continued solar expansion can be somewhat misleading since it depends upon what area, both geographically and economically, is discussed. Some sections of the world certainly are posting a small but steady growth in solar development, but many others see slowed growth and, in some cases, halted production altogether.
While the Department of Commerce has made its preliminary ruling against China in an anti-dumping suit brought by, among others, CASM (Coalition for American Solar Manufacturing), which has given a slight uptick in marketing and sales momentum, there are other difficult factors facing the solar power industry. A major roadblock is the severe cutback in tax incentives both for the manufacturer and the consumer.
The overall economic malaise has caused many government agencies and municipalities to severely reduce or, in some cases, eliminate tax incentives that at one time made it more attractive to both produce and install solar power systems and devices commercially and residentially. Many communities can’t afford the potential decrease in tax revenue that would result in giving tax breaks to solar manufacturing companies, especially start-ups, and a few communities have decided to concentrate on other forms of renewable energy such as wind power.
The anti-dumping suit was a long-sought-after attempt to level the playing field for solar manufacturers in the United States, and a similar suit may not be far behind in Europe. But until the overall economy strengthens to the point of increasing the available investment capital to grow the solar power industry even more, steady to slow growth can be expected.
Before serving as director, Michelle served as market development specialist for photovoltaic and launched FLEXcon multiGUARD®, a global line of backsheets. Michelle holds a Bachelor of Science degree in Business Administration from Stonehill College and an MBA from Nichols College.
Chris Thompson, Solar Business Unit Manager, Eaton
The solar industry in the U.S. and worldwide has had strong growth over the past few years. As the industry has grown, we have seen projects grow in size from commercial projects at a few hundred kilowatts to utility-scale applications that are up to hundreds of megawatts. With project growth, vendor bankability and balance of system solutions (BOS) designed to support larger utility installations are becoming even more important.
Owners and investors of utility-scale projects have millions invested in equipment, so it is imperative that key component suppliers stick around to support the projects. Utility-scale projects are expected to deliver 25 years of energy production — the reliability of vendors to support those projects and the availability of replacement parts is crucial to project success. The best warranty and operating performance does not matter if the manufacturer is not around to back it up.
As vendor bankability improves, financing risk is reduced. This then leads to reduced financing costs and the viability of a greater range of projects.
Additionally, with the proliferation of utility-scale solar projects, BOS should be engineered to support megawatt requirements and operating conditions. Commercial-scale solutions have been shoehorned to fit utility-scale applications, adding installation time and equipment costs. New equipment, like utility-class inverters, high power DC switching devices and DC circuit breakers, are specifically engineered for large-scale installations and help drive efficiencies and build value. Every BOS component plays a critical role in harvesting solar energy.
Single-source suppliers are providing integrated solutions and on-the-ground support to improve controllability, reliability, delivery and safety in solar applications at every level. This approach simplifies engineering and businesses processes and helps foster growth.
Christopher S. Thompson is the solar business unit manager at Eaton, a diversified power management company. Thompson has more than 20 years of experience with power electronics and can be reached at [email protected]
Eric Peeters, Vice President of Clean Energy, Dow Corning
The most difficult issue has been the trade case brought against Chinese solar manufacturers. Though the preliminary finding regarding imports of Chinese-made solar panels is intended to protect the U.S. market, the consequences of this decision will have exactly the opposite effect, proving devastate the growth and adoption of solar technology in the U.S., job growth, and our competitive leadership in this industry worldwide.
Both the U.S. and China will benefit by removing barriers to trade and promoting collaboration and open trade policies. Trade discussions in fast-growth, new technology industries like solar are best served by government and business leaders working together to develop constructive trade policies that foster growth and cooperation within the industry. Resolving trade concerns through an adversarial confrontation serves only to impede technological advancement and job creation, as well as the path towards energy independence.
While the trade issue as well as consolidation and economic challenges have been the focus within the past year, the solar industry has seen continued innovation and steady growth. New technologies that drive down costs and improve performance continue to be introduced. Efforts towards open trade and collaboration will continue to foster innovation and help make solar more competitive with traditional forms of energy.
In his 18 years with Dow Corning, Eric Peeters, vice president of Dow Corning’s Clean Energy business, has served in several science and business leadership roles. Eric has a master’s degree in Chemical Engineering from the Catholic University of Leuven and a Master in Technology Enterprise degree from the IMD.
Chris Robine, President and CEO, SPG Solar
One of the most difficult issues for the solar industry — and also one of the biggest opportunities — has been the continued decline in the price of solar photovoltaic (PV) panels. While these lower prices are helping increase solar adoption, it is placing the buying emphasis on price and the lowest cost option today. Unfortunately, this focus on silicon and panel prices and does not account for the overall lifetime cost of the system, which is where the real ROI for solar is found.
To ensure the greatest lifecycle savings for consumers and long-term growth for the industry, we need to ensure that we look carefully at all of the customers’ needs first, and not just the need for a low price today. We need to convey the importance of designing and engineering a system correctly the first time, ensuring it is built to last with a superior operations and maintenance plan, and smart financing.
It is a balance between cost and quality. Selling projects based on low panel prices and components needs to be balanced with quality and long-term reliability. As an industry, we need to work towards greater parity between panel costs and balance of system costs through technology and policy innovations. This is why I think a key growth strategy for companies is to be vertically integrated from design and engineering to products, installation and maintenance. Vertical integration allows for greater control of cost and quality.
Chris Robine is president and CEO of SPG Solar. He spent over 14 years at General Electric (GE) where he most recently was the CFO for GE Renewable Energy. Chris has also served on the board of PrimeStar Solar, an emerging solar thin-film technology and manufacturing company.
Alan King, General Manager, Canadian Solar
The biggest issue facing the global solar industry this year is market uncertainty. A lack of consistency in government support has created an atmosphere of uncertainty leading to project delays, price drops, and a decline in hiring and expansion plans. In the United States this is not new: the absence of a strong federal energy program and lack of standardization in state-to-state programs are issues we have dealt with for some time now. What is troubling is the lack of a federal energy policy and the willingness to enact tariffs that hinder trade rather than encourage it.
Solar deployment creates jobs, which is the single most pressing need in the U.S. today. The stronger the industry becomes, the more jobs we create. This was clearly demonstrated in 2011 when U.S. job growth in solar far exceeded that of most other industries. Unfortunately, rather than recognizing this and supporting further growth, the industry has been sidetracked by unnecessary and unwise trade action.
We should be finding positive methods to address and encourage global trade rather than implementing punitive tariffs. One strategy for government support with the potential for tremendous impact is to increase the current investment tax credit for projects containing U.S.-manufactured content. This activity would help level the playing field for U.S. manufacturers without harming the growth of the industry as a whole. A 10 to 15 percent increase in the ITC could also encourage foreign companies to set up manufacturing in the U.S., thus creating domestic manufacturing jobs.
The industry needs to remain committed to serving the needs of our valued partners by offering competitively priced, high-quality products. We should work together not just to maintain the gains we have made over the last decade, but also to increase the adoption of solar as a mainstream source of clean renewable energy.
As general manager of Canadian Solar USA (NASDAQ: CSIQ), Alan King is spearheading the company’s commitment to one of the fastest-growing solar markets in the world. He has hands-on experience with U.S. solar policy on both a national and state level and is actively involved in the Solar Alliance and the Solar Energy Industries Association (SEIA).
Tobin Booth, CEO, Blue Oak Energy, Inc.
Success. We are all looking to achieve some level of success in the solar industry. Whether it’s monetary, leadership, technical or an acknowledgement, we are all in this nascent energy industry to achieve some personal goal or reward. But success, as Winston Churchill once said, “…is going from failure to failure without loss of enthusiasm.”
Overall, uncertainty is the most difficult issue facing the solar industry. We have seen feed-in tariff (FIT) rates slashed in Germany, retroactive FIT cuts in Spain, and bureaucratic delays in Canada. Here in the U.S., we have a fragmented regime of incentives, taxes, licenses, and net metering laws. We have the heavy burden of uncertainty that begins with the current economic woes and extends to the retired tax credit grant program, the lowest natural gas prices in history and a rocky election year.
Ten years ago solar modules were $3.50 per Watt, and we wanted to jump for joy when solar modules hit the $1.00 per Watt threshold. We have achieved this significant milestone, yet uncertainty caused us to skip the celebration.
We need to gain a broader perspective to see a clear picture of the solar landscape: this is a consolidation point. Companies of high quality and solid balance sheets are going to control the future. We must embrace this destiny because, for the foreseeable future, there will be many more uncertainties that depend upon tax credits and government regulations.
If the regulatory nature of the solar industry is our biggest challenge, then we will thrive. But we will have more of the same if there are continued economic hardships, high costs of capital, middle market players, multiple profit and overhead markups on goods and services, and limitations in the tax credit markets.
As a collective industry, we need to consolidate and dampen the rollercoaster ride we have chosen. Otherwise, we might just lose that enthusiasm that has kept us here through many failures and a few successes.
Tobin Booth is the founder and CEO of Blue Oak Energy in Davis, California. With more than fifteen years of experience in renewable energy, Mr. Booth is a recognized national leader in solar electric photovoltaic energy systems, and has been a board member of SEPA since 2009. Mr. Booth holds a BS in Mechanical Engineering from Colorado State University.
Wendy Arienzo, CEO, ArrayPower
The biggest issue facing the solar industry is steady demand. 2012 is the year of global uncertainties, and if there is one thing that is bad for business, it is uncertainty.
European governments, sensitive to a changing political climate as well as looming economic austerity measures, are responding with reductions in and restructuring of feed-in tariff programs with a net effect of cooling demand. Germany has been the mainstay of solar demand but has modified its feed-in tariff to focus on smaller installations and residences. Italy opted to continue incentives in its Conto Energia 5, but through an extremely complex program. The softening of the European market combined with an uncertain future of incentive programs results in serious doubt that Europe can continue as the bastion of solar.
China presents the fastest growing global market — however, this is largely a China for China market stimulated by the government to boost outtake for Chinese module production. But for how long?
On the home front, the U.S. continues to suffer from a lack of consistent energy strategy and an ambivalent attitude toward renewable incentives. The 1603 Treasury program failed to be extended and, if that was not enough, the Department of Commerce supported tariffs on Chinese cells — both serving to quell demand. We cannot minimize the destabilizing effects of an election year, the lack of an articulated energy policy by either party and increasing anti-renewable energy lobbyism.
The time has come for the U.S. to stand behind Secretary Chu’s energy vision and drive consistent actions — ranging from R&D funding to financial tools — to support the solar industry. Reaffirming commitment to state RPS goals and deploying tools to streamline permitting and financing processes will go a long way toward driving confidence and ultimately, industry growth.
Wendy Arienzo brings 30 years of semiconductor industry experience to her role as CEO of power electronics company ArrayPower, providers of the Sequenced Inverter. Her previous experience includes technical and management positions with IBM, Phillips and NXP Semiconductors, as well as a stint developing polycrystalline silicon cells in Italy.
Jayesh Goyal, Global Vice President of Sales, AREVA Solar
When viewing the overall industry and examining its challenges and opportunities, I think we need to move beyond a discussion of just silicon prices and expand our focus to other factors that are increasingly impacting the sales decisions of utilities and other energy customers. Due to global economic challenges this past year some concentrated solar power (CSP) planned programs were delayed.
To ensure long-term growth of the industry, we must, among other factors, continue to raise awareness for and diversify our offerings with proven and dispatchable CSP and emphasize localization in our supply chains.
As electric utilities add more renewable energy to their portfolios due to environmental standards and sustainability goals, they are faced with the challenge of delivering clean power regardless of weather conditions or time of day. Advancements in CSP solutions, such as easy integration with fossil fuels and storage options, allow the industry to overcome the intermittent nature of solar and address grid stability concerns.
We must also demonstrate a global execution capability while addressing the need for localization. Understanding the regulatory and market differences of each country and then adapting our expertise for best-in-class service delivery is vital to creating a vibrant international business. And, since many CSP technologies primarily use standard commodity materials like glass and steel, they can create local jobs and boost local economies. We see this in countries like India where, for example, a 250-MW CSP project currently under construction is becoming a source of local jobs and manufacturing.
Over the past decade, the solar industry’s growth has been phenomenal, but to ensure long-term growth, we need all technology segments to succeed, and that includes greater awareness of its benefits and wider CSP adoption globally.
Jayesh Goyal brings more than 17 years of technology leadership and business development experience to AREVA Solar, having executed large, complex energy projects on a worldwide basis. He is responsible for driving global sales and marketing for AREVA’s CLFR solar steam generators for power generation and industrial process steam applications.
Tucker Ruberti, Director of Segment Marketing, Solar Energy, Advanced Energy
Contrary to what many people hear in the news, the solar industry is quietly riding a hot trend: record low prices combined with incredible growth in a variety of markets. With that in mind, perhaps the number one challenge for the industry overall will be to help fight the misconceptions that still linger around solar and better communicate its successes.
Many inside and outside the solar industry believe it is doomed due to the unfortunate failure of a handful of solar companies. While these companies did teach us some tough lessons, the industry experienced its best quarters on record, creating jobs and driving megawatts of projects.
Solar is doing well for a variety of reasons. First, the cost of PV modules is falling rapidly, which has been bad news for the high cost and least efficient producers, but great news for the rest of the industry. Lower module costs are bringing more buyers onto the scene.
Another important trend is that the secure returns of PV projects have brought in a new wave of money and new financial instruments. The fact that Warren Buffet’s company has come into PV and is securitizing projects is possibly the most important news for the long-term growth of the industry. Costs will continue to be squeezed out across the supply chain in order to achieve the best possible LCOE for project financiers and end users. This virtuous cycle will open new markets, which will drive greater volumes and even lower costs.
With all of that said, the general public, even industry insiders, could stand for a little bit of education on these promising trends. Solar is here to stay for a variety of residential, commercial, government and utility customers.
Tucker Ruberti has worked for Advanced Energy in Bend, OR since 2007 and is currently director of strategic product marketing. He has worked in the energy technology space since 1993 for a broad range of companies including Westinghouse, General Electric, the New York State Energy Research and Development Authority (NYSERDA) and IdaTech.