Solar Without Subsidies

The strategies historically employed to spur expansion of the solar (PV) market are almost always “product oriented.” They are typically based on the progressive lowering of prices through economies of mass production, combined with subsidized buy-down programs or feed-in tariffs for residential and commercial users. Lowering cost per watt is seen as the key to unlocking a vast potential market for photovoltaics.

Numerous past studies and development efforts have promoted this “product path” to solar (PV) market expansion. PV products are subsidized or supported with the primary goal of achieving economies of mass production and eliminating barriers to use. Examples include:

  • federal and state buy-down programs
  • coordinated government procurement of PV
  • elimination of barriers to capital formation
  • legislative packages supporting distributed energy
  • legislative and regulatory assistance to states
  • prohibition of restrictive covenants and ordinances

At the same time, steps are taken to make the product (PV) more attractive to the consumer. These include: legislation that encourages deployment of PV systems, sales tax exemptions, interconnection standards, net metering laws, and other programs designed to ease or eliminate barriers to adoption.


Here is a classic example as stated in a research report by the Renewable Energy Policy Project (REPP):

The product path requires government involvement to increase the diffusion rate of consumer [PV] products through setting market rules, making strategic purchases, and other innovative support.

This product-centric approach emphasizes pushing photovoltaics into various applications or markets under the assumption that lower prices, attractive financing options, and the absence of barriers to implementation, will automatically lead to consumer demand.

In contrast, the underlying belief in free-market enterprise is that people do things for their own reasons. So low price and ease of implementation do not exclusively drive market expansion. People must want to buy what is being offered. And motivating people to want something — especially if it’s technical in nature — requires the influence or involvement of preceding groups of people in the marketplace.

Most for-profit organizations working to achieve mainstream market adoption focus on winning over groups of buyers in sequence according to their psychographic profiles. This involves identifying a group of early buyers who initially value a product offering, and then communicating or promoting a combination of tangible and intangible benefits in ways that lead to the sale of product. After capturing the first group, the organization refocuses its collective attention on the unique needs of the next group, and so on. In this way, a succession of customers act to pull the market forward as the product is adapted or “positioned” to address their varying needs.

Electric power in all of its forms has always been subsidized in one way or another. But rather than rely on government involvement, the objective for an emerging industry like solar should be to create a sustainable market where subsidies and buy-downs are no longer necessary. Keep in mind however that lower cost by itself is not enough. Many factors other than price influence market adoption and sustainable market development.

 

Warren Schirtzinger is dedicated to helping organizations accelerate the adoption of disruptive and renewable-energy technologies. He believes technology must be humanized before it leads to progress.

Schirtzinger is the owner of High Tech Strategies, Inc. a consulting firm specializing in strategy and marketing. In his work at High Tech Strategies, Schirtzinger studies the effects of disruptive technology on people, business and society. As a result of his work, Schirtzinger has helped leading companies, associations, non-profits and startups humanize their innovations so they are adopted and put into practice.

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Warren Schirtzinger has made the understanding of market dynamics surrounding disruptive innovations the core of his life’s work. He is widely recognized for his expertise in solar market development and CleanTech product management. Since 1991, Warren has consulted with leading organizations in the solar industry, and also in high technology. Warren pioneered development of the Marketing Chasm framework that addresses the challenges companies face when transitioning from early adopting to mainstream customers. Highly regarded as a dynamic public speaker, Warren is the founder and CEO of High Tech Strategies, Inc. where he serves as an advisor to solar companies, utilities and energy education organizations, and draws upon best practices derived from his extensive work. Earlier in his career, Warren was a principal at Regis McKenna, Inc., a leading high tech marketing strategy and communications company, and for the decade prior, an engineering and marketing executive in Silicon Valley.

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