Why Solar Industry Will Flourish Despite Slow Economy

The solar industry will grow despite the slow and poor economic times of 2009.  That’s the official word from the Net Impact Conference at Cornell University.  So why does solar work as a business model?

Solar Makes Financial Sense (Even for Utilities)

The advent of “Compliance Markets,” legislation that forces utilities to incorporate a given percentage of production from renewable/solar sources, has added to the amount of technology being deployed.  These compliance markets are starting to ramp up after the early years of small beginnings.  Solar is also a long-term and abundant resource.  If utilities don’t become active in the market, they will lose their market share as the price per watt comes closer to grid-parity.

Also, the long-term cost of solar is lower than endless payments to your utility.  Think of it as renting versus owning your power. If you rented for a lifetime, you could have bought the structure many times over.  Buying outright is appealing and cost-effective, too.  That alone is enough to sell most on it.

Now, the only trick is the financing.  Earlier this year, banks weren’t even financing solar installations on Wal-Marts and Macy’s stores because they were waiting to see how those businesses weathered the financial crisis.  It’s more or less the same for residential buyers – tough, but brightening up again.  One of the members of the discussion said his business is “…coming out of the woods [of the financial crisis].”

Price Per Watt is Falling

This fact has driven some manufacturers like GE to close US plants and move them overseas.  The financial side of the industry is faring better than manufacturing, though.  For companies like Solar City, which essentially lease roof space from homeowners, there’s a much lower financial risk due to lowered technology costs.  Also, this allows for an installed cost on utility-scale systems larger than 50MW in the double-digit dollars per watt, which is moving towards competition with building a natural gas power plant (at least in California).  Price per watt is dropping across the board, however, due to silicon costs coming down $350 per kilo over the last few years.

So Where are the Jobs? (They Do Exist!)

It was mentioned in the discussion that for every one conventional factory job, ten are created in the field.  In the case of thin-film PV, a highly automated manufacturing process, it may be one job in the factory to 100 in the field.  This is significant because it shows that despite PV panel production moving toward China, there will still be jobs created in America.  Think about it like this: the US doesn’t make a lot of those cheap (or not so cheap) toys, but Americans are employed in the sale of them.  That means the jobs are created downstream from the factory.

Mostly, the panel recommended three key areas for those looking at solar industry jobs: Engineering, Financial Officers and Installers.  These jobs are thought to be the backbone of the emergence of solar technology as a true player in the large-scale utility market.  It was also noted that installers are not necessarily highly skilled in the PV/Solar realm.  Most installers today are companies with a construction focus that have some experience in electrical, foundation work or roofing.

Hot Markets

The hottest market during the slow economic times is the utility provider market.  Financing is hard to come by and the members of this discussion noted prominently that a solid balance sheet is crucial to being able to get their foot in the door of a deal.  Without solid and historically proven data, banks have other areas that are more secure, higher-yield areas to invest in.  Home solar is coming along with the advent of new legislation, but that is only beginning to be seen by the industry.  Hawaii, Ontario and California were tops among those listed.

Why Solar Hasn’t Caught on Yet

Americans move every 5-7 years, and financing for solar panels doesn’t really accommodate that.  You don’t generally take the panels with you.  Some cities (notably in CA) are beginning to offer creative ways to incorporate the cost into a tax base, which make the panels less of a direct financial burden on a single household.  Germany has a very strong residential market, but people there move far less frequently.  Increased amount of moves lowers the effective value of buying into long-term power production for a home.

Education is just not there yet.  European companies are baffled when they come to America because of the 150-200 separate “markets,” or areas of certain pro-solar legislation, such as tax credits.  In Europe, the money is usually available from federal sources, greatly simplifying the matter.  This tricky bit of all-over-the-board US policy actually is a deterrence to go solar because of its vastly confusing nature. One of the panel members cited a solar installer in Rhode Island that had completed only 80 installations out of 1,000 total leads.  This was largely due to a lack of education or an inability to effectively educate the consumer.

But don’t let the recession scare you.  Analysts say that by 2020, the current US PV market with be 20 times what it is today.  That’s almost room enough for everybody.  Oh, and don’t go running out to develop the hot new product.  Largely, businesses and banks rely on the tried and true before they are willing to get behind it with their pocket books.

Panel participants in the Net Impact podcast are: Tim Derrick of Axio Power, Bill Jordan of Jordan Energy and Food Enterprises, Robb Jetty of Recurrent Energy and Robert Petrina of Yingli Solar.

Click here to listen in!
Photo Credit: Social Math & Hardy Solar

Posted on December 7th in Solar Funding by Craig.