Subsidies Vital To Make Solar Power Viable

According to Frost & Sullivan, an international growth consultancy company, the commercialization of solar power, despite its technical capabilities, has yet to take off successfully largely in part due to the U.S. Government’s unclear stand on subsidies and regulations. The consultants’ analysis indicates that solar power producers will require substantial federal backing if they are to match prices of fossil fuel-powered, on-grid applications.

Palo Alto, California – January 28, 2004 [] Frost & Sullivan’s North American Solar Power Markets, a part of the Power Generation subscription, revealed that this market generated revenue of US$499.0 million in 2002. Total market revenue is expected to reach $4.24 billion in 2009. According to the analysis, the U.S. Government has been showing interest in the renewable energy sources market, especially in the wake of the extensive power outage experienced on the East Coast and the growing concern about dependence on foreign oil reserves. With subsidies, renewable portfolio standards, tax credits, net metering, and buy-down programs, the government hopes to provide enough incentives to make this a fast-growing energy market. “Government subsidies are expected to facilitate mass production and, thereby, drive prices down sooner,” said Frost & Sullivan Industry Analyst Patricia Seifert. “Subsidies will be necessary for another three to five years until solar power can compete with more common energy sources such as natural gas or oil.” According to Frost & Sullivan, the photovoltaic (PV) energy business, one of the main segments of the solar power market, is still largely dependent on government intervention for on-grid applications, since it is not considered a mainstream technology for electricity generation. “Since PV solar cell prices are not comparable with other electricity alternatives, they are considered a viable option only for remote installations such as bringing electricity to remote villages,” said Seifert. Frost & Sullivan reports that the solar power industry is addressing market restraints in several ways. Simplifying the installation process is helping convince potential residential end users to implement solar power for every-day electricity needs. Being positioned as an “environment-friendly” company, as well as the multitude of state, local, and federal incentives for solar-power users are some of the benefits to commercial end users. To capture a much wider market, PV cell providers have started collaborating with installers, homebuilders, and construction companies to offer beginning-to-end solutions. These include consulting, permitting, design, regulators, roof racks, and inverters. According to the report, although PV technology has been commercially available for many years, some challenges still exist. Inverters, for example, have lower lifetimes than most other components, and manufacturers generally only provide warranties for only five years — considerably shorter than the 15+ year expected lifespan of other PV components and competing technologies, such as engine generators. “With inverters accounting for 10 to 12 percent of the overall system cost, buyers will be reluctant to reinvest a significant amount of money every five years,” said Seifert. Nevertheless, according to Frost & Sullivan, the inverter market is beginning to look up as major telecommunication companies prepare to enter it with high quality products at reasonable prices. These companies can provide complete module-to-inverter solutions, which are likely to increase the warranty period and allay customers’ apprehensions. Frost & Sullivan reports that combined efforts of the government, solar power producers, and solar energy’s inherent quality of non-dependence on volatile fuels are teaming up to increase market adoption and boost revenue growth.
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