The solar sector has been growing rapidly, with galloping rates of photovoltaic penetration in key markets. And yet, it remains a relatively minor player by world economy standards, representing about 1% of global electricity generation.
‘In 2014, the solar industry did $120 billion in sales,’ said Howard Wenger, president of business units for SunPower Corp., during the Future of PV executive panel at Intersolar North America in July. ‘That sounds like a lot of money, but there are single companies that make that much. So, we're really still at the beginning.’
Wenger asserts that individual companies and the industry itself must endeavor to scale up to reduce costs further, which is nearly universally regarded as the key to solar's continued growth. However, the relatively small size of the top players in the PV marketplace makes them highly susceptible to the vagaries of national policies and regional economic performance. In many cases, solar companies have been adversely affected or even put out of business in the face of a sudden downturn.
As an example, Wenger points to Spain, a country that was the world's leading solar market a mere eight years ago. Valencia played host for global solar conferences. Much of that growth was a result of the government's feed-in tariff program. Consequently, when the government responded to ‘hockey stick’ growth rates by pulling the plug on the incentive, the market all but disappeared.
A similar situation occurred in Italy, which was the world's largest solar market in 2010, thanks to generous government incentives that built a 10 GW market up from nothing in three years. The end of those incentives dropped the market down to 1 GW-2 GW per year. According to Wenger, the result for the industry – and SunPower – was brutal. ‘Our company had to lay off 150 people in Italy because of that policy change.’
The experience of history begs the question of what the near future holds for the U.S., which is bracing for the expiration of the investment tax credit (ITC) at the end of 2016. The hockey-stick growth of the U.S. solar sector has been largely attributed to the success of the ITC in spurring solar project development.
Al Bucknam, CEO of REC Solar, told the crowd in San Francisco that a drop in U.S. growth after 2016 is, perhaps, inevitable. At the same time, he expects any downturn to be more of a dip and be of limited duration. Part of this has to do with his company's particular focus on the commercial market, which he said will recover quickly. Nevertheless, any sort of market shock is likely to be challenging for solar companies in all sectors.
‘What the numbers don't show is that the post-ITC world of 2017 and 2018 is going to be a different environment,’ Bucknam said. ‘There are going to be tighter margins. There are going to be different financing sources. Solar companies are going to need to have scale and reach in order to be able to have a sustainable business model.’
If the pattern of incentives leading to hockey-stick growth rates followed by a cliff of some sort after the incentives is a recurring one, the overall global growth is serving to mitigate the shocks. The policy prescriptions for solar in various markets are out of phase. Shawn Qu, chairman, president and CEO of Canadian Solar, said the demand rush before the end of 2016 will be followed by a ‘little bit of a ditch,’ but that other markets are likely to take up the slack.
‘If you look at the global market, the total annual installation is expected to continue to grow,’ Qu said. ‘That's because the growth in some other countries, such as China, Japan and India, as well as a few other emerging markets, are going to more than offset the ditch in the U.S. market.’
Stefan Rinck, CEO of PV manufacturing equipment-maker Singulus Technologies AG, said that looking at the big picture, levelized cost of energy for solar power has already made it attractive relative to other technologies and will continue to do so. ‘This is the main reason why the U.S. market is growing and will continue to do so,’ he said. ‘It will grow very, very fast in the future.’
If the fundamentals of solar power – costs and technology – are expected to continue to support global growth, SunPower's Wenger sounded a note of caution from the stage of the PV executive panel. Policies, he said, will continue to drive the fate of PV in individual markets. Until solar companies are able to achieve the scale and resilience to weather political storms, business leaders will have to be very prudent and remain actively involved.
‘This is my call to action,’ Wenger said. ‘Please, if you can give money, give money. If you can just sign your signature, do that. Make your voices heard when it comes to policy.’