Benefits, Barriers, and Chances
Paula Mints
Time is the primary difference between a fad and a trend. Fads are fleeting. Trends develop over time altering behavior in some relatively permanent fashion. The adverb relatively is used as permanence has become, over time, far less permanent. Fads ebb and flow more quickly than trends. The best way to tell the difference, unfortunately, is in hindsight.
For example, the European feed-in tariff (FIT) model is responsible for jump starting the utility scale (or multi-megawatt) application for solar technologies. The initial highly profitable FITs attracted investors who, forever in pursuit of the holy grail of safe investments, encouraged demand and supply side solar participants to build ever larger installations. Initially, many long time solar participants believed that demand for multi-megawatt installations (particularly for PV) would reach a peak and decline, likely along with the profitable FITs. Instead this trend appears to be here to stay – for better or worse, or, for profit or not-so-profitable. Another example, turnkey equipment sales, appears to have been a fad that faded away relatively quickly – that is, in solar years. Just as dog years are longer than human years and often used as a metaphor for the slow passing of time, solar years are also longer than human years. To gauge the length of a solar year observe announcements and the accompanying timeline creep from announcement, re-announcement and fruition.
Turn the page to see five potential trends and the likelihood of continuation or cessation:
Potential Trend 1: Merchant systems: These systems may or may not be multi-megawatt and are sold without a PPA or tender and potentially without an incentive.
Why this may not become a trend: The high upfront cost of installation, no matter how low component prices go, is a roadblock to many potential system buyers. Moreover, in many countries it is illegal to set up an independent utility from which electricity is sold. For merchant systems to become a trend, laws would have to change and/or deep pocket customers must be found and cultivated.
Why this may become a trend: Utilities understand the efficiency of owning the means of production. Once they become more comfortable with solar in terms of the variability of its resource it will make sense to control it because of a) its free fuel b) low maintenance c) positive PR afforded the utility and d) return of control over profit. Mining concerns are often remote and require reliable power; solar is a long-term investment that when combined with storage (yes too expensive still) or another power source (hybrid) offers a long-term answer to energy requirements. Finally, should laws change the lure of becoming an independent utility; though this is in-and-of-itself probably a fad should encourage system ownership.
Benefits of this trend: Solar (PV, CSP, CPV) is ideal for this potential trend as once installed it is low maintenance (though not zero maintenance), reliable and works well as part of a hybrid installation.
Odds of this becomming a full-fledged trend: 40% this potential trend will get a lot of press in 2014, but to become a true trend (something that brings with it relatively permanent change) more than announcements are needed. The laws of some countries will need to change and the initial gold rush atmosphere (which will bring with it saviors and shysters) must subside. The likely timeframe for development of this trend is five years, but ten years to mature.
Potential Trend 2: Residential Lease Model: Removes the onus of educating energy consumers about owning the means of production and encourages more rapid adoption of PV.
Why this may not become a trend: Currently a U.S. phenomenon, there is no standardization of lease vehicles, little understanding of solar among energy consumers, not everyone owns his or her roof. Its also possible that even when potential solar lessees do own a roof that is young enough in its lifetime to support solar that they will find that once the math is done, a low interest loan that supports buying the system outright makes better economic sense. Other drawbacks include what happens should the lessee want the system removed, or sells the house, or abandons the house. Should there be expensive and well publicized roadblocks to system removal this potential trend would end.
Why this may become a trend: Particularly in the U.S., independence (from practically any interference in anything) is a closely held value. Many energy consumers would like to control energy costs but cannot afford to buy a PV system, plus, the lure of free solar (a promise in many ads for solar leases) is compelling to many. The lease concept is familiar, even though many may find the details confusing. Finally, the concept of owning the means of electricity production has proven stubbornly difficult to get across or to encourage excitement about – the solar lease hops over the need to educate and still may lead to more residential PV system ownership.
Benefits of this trend: More solar is the obvious benefit of the solar lease. The assumption is that seeing more solar in neighborhoods will encourage people to explore owning or leasing a system. There is also the potential of expanding this trend to apartment complexes, wherein (similar to the merchant system) the apartment house owner would sell electricity from the solar installation to apartment dwellers (a group is pursuing this model in France).
Odds of this becomming a full-fledged trend: 67% for better or worse and love it or hate it, the solar lease trend is likely real and will hopefully mature into a vehicle with costs (including escalation) that more closely resemble the true costs of owning a solar system. Escalation charges based on assumed utility rate increases need to be rethought.
Potential Trend 3: Community solar, solar gardens or group-owned solar: Call it whatever you like, typically this model allows people to buy shares in solar installations that serve the community. The installations can be ground-mounted or on roofs on or near community centers or schools and also on reclaimed land (among other areas).
Why this may not become a trend: The initial installation remains costly and community buy-in must be encouraged in order for this to make economic sense. That is, enough people need to buy shares and agree to whatever the terms are or the cost would likely appear prohibitive even though the benefits such as cleaner air and controlled costs in the long term are clear.
Why this may become a trend: The off-grid solar community has much to teach the grid-connected solar community in terms of educating populations, gaining enthusiastic buy-in and finally deployment of a concept that is decades old. In the developing world this concept is not a trend, it is established. Communities with group owned installations are enthusiastic about being a part of an energy generating asset, their participation in ameliorating climate change as well as the educational aspects.
Benefits of this trend: Educating the community about solar technologies, climate change and energy independence is one of the most significant benefits of this trend. Participation in community solar projects and plans also encourages utilities (in the U.S. there is slowly growing utility participation in this model) and energy consumers to work more closely together as well as share ideas and, well, energy.
Odds of this becomming a full-fledged trend: 63% this trend is building slowly in the U.S. and the model can be co-opted by other countries and regions around the world. Studying village grid (micro grid) models in the developing world would offer insight as to how community members learn to work together towards the success of these installations.
Potential Trend 4: Storage: Storage technology is, on its own, not a trend (its R&D is decades old), nor is it necessarily crucial to future grid connected solar deployment. Interest in storage technology for grid-connected deployment is currently high, but interest alone does not a trend make. Storage is crucial for successful off-grid solar deployment and is mature in this regard through the use of lead acid battery technology.
Why this may not become a trend: Storage is expensive and its value, essentially independence from the utility grid, has not been established. The true costs of storage are currently obscured, that is, current prices do not reflect costs. Unfortunately, it may not be possible to increase the price to one that provides enough cushion in the margin for quality control, R&D and profit. As with other technologies, unfortunately, many may enter with potentially viable technologies and many may fail because they could not price product appropriately. Finally, disconnecting from the grid and becoming self-sufficient requires a willingness to conserve, which is rarely popular.
Why this may become a trend: Utilities are showing concern about the growing size of residential and small to medium commercial installations that are sized to cover 100% of the energy needs of the building and its inhabitants. This cuts into utility profits. The only way for utilities to control this is to a) own more solar installations (the means of production) and sell the electricity from these utility-owned assets; b) develop utility solar lease models for their rate payers where the utility installs solar on the roof and charges the roof owner a set rate; and finally c) charge a monthly fee for grid access as back up, among other reasons.
Benefits of this trend: Self consumption and the use of solar encourage a more pragmatic attitude towards energy also encouraging conservation. Storage could allow for true energy independence from escalating energy costs.
Odds of this becomming a full-fledged trend: 31% Storage is still too expensive and a sudden miraculous technological breakthrough is unlikely. Instead, options that do not reflect the true cost and thus teach nothing about the true value of the technology are currently being deployed. This potential trend likely needs ten years and a lot of investment to begin approaching viability.
Potential Trend 5: Solar Deployment in Latin America: Solar technologies are not new to the countries in Latin America. Deployment of off-grid applications in the region is well established. Tender bidding is the preferred vehicle for large commercial installations and there is potential among mining concerns for merchant system sales.
Why this may not become a trend: High import duties in many countries, unstable economies, significant reserves of oil, potential reserves of natural gas (fracking), unwelcoming topographies and low tenders are a few of the risks in the region that indicate the hoped for level of deployment may not come to pass.
Why this may become a trend: The need for reliable energy generating options is strong among the countries in this region and though affordability is not strong, there are entities willing to invest in merchant installations (mining concerns) as well as almost monthly tenders for energy generation in the countries of Central America, South America and the Caribbean. Deployment has begun on a fraction of the multi-gigawatts of potential.
Benefits of this trend: As solar deployment increases and should it begin to tiptoe near the promised multi-gigawatt level, this region is likely to invest in domestic manufacturing, which hopefully would mean cell technology development as well as module assembly. Given the high cost of Greenfield manufacturing, module assembly appears more likely. Nonetheless, the construction (demand) sector would provide necessary jobs and the supply (cell, thin film and module assemble) would provide necessary jobs. Deployment of reliable, clean solar energy technologies could be a stabilizing factor of future energy costs.
Odds of this becomming a full-fledged trend: 44% Though deployment has begun and queues of solar projects in many countries are long, taxes are high and actual deployment is moving at a snail’s pace. A regional economic shock could derail many projects. Tenders are, in most cases, too low to support profitable installations. The highest likelihood is that deployment will continue resulting in a percentage of the expected gigawatts but certainly above past levels of annual installations.
Paula Mints is founder of SPV Market Research, a global solar market research practice: All Solar All of the Time.
This article was originally published on RenewableEnergyWorld.com, and is republished with permission.
