It takes at least three years to develop a solar pv market

Feed-in tariffs in more and more markets will help the industry become subsidy independent

The best examples are the current leading markets Germany, Italy, Belgium and the story of Spain. It took these markets at least three years to arrive at a level of more than 100 MW of newly installed PV power annually.

By nature, sales people tend to be very optimistic once an incentive scheme is announced in a new market. “This market will be booming and huge, we heard of a pipeline of more than 1 GigaWatt”. Haven’t we heard these lines in the past, soon after their new feed-in tariff was introduced in Spain, Italy, Bulgaria, etc.?

The realistic market growth curves

The facts show how reality works. In Spain, after the introduction of one of the most attractive feed-in tariff regimes ever, and in an overwhelmingly sunny country, the first year 'only' 11 MW were installed. The second year, the market boomed to a 'staggering' 23 MW, exploding to a 96 MW in its third
year of existence. Why did it take 'so long'?

PV better than Madoff?
Let’s face the facts: most people on this planet still don’t know what a solar panel is. “Where will the hot water come out? And where do I find the battery?”. How can you expect a banker to believe that your project with blue panels, yes, without water connection, will generate electricity, and is a reliable bankable project because the government is paying you a guaranteed 20 year 15% ROI? Sure baby, my neighbour also believed Madoff offered a good investment opportunity...
For the same reason, why should private and business customers and roof owners be smarter than bankers? (ok, admitted, bankers haven’t shown much intelligence in the last years)

Educating your grandmother
It takes time to introduce new technologies in a market. Certainly if these are only related to a commodity (electricity) and only attractive if they come with new, sometimes complex government regulation, like a ‘feed-in tariff system (FiT)’. Try to explain that to your grandmother!. And let’s not forget the local permitting processes and interconnection agreements with big and usually fast institutions like energy utilities.

The development of the global PV market is all about education. Education of a whole new business infrastructure to develop supply chain and education of customers. And every country or market has its own particularities.
The experiences in Germany, Italy, Spain, Belgium and all these other markets show it again: after 3 years party time really starts. So, have patience, but trust, that markets like the UK, Ontario, Bulgaria, etc will definitely provide substantial market volume in a few years (if the FiT will remain in place).

Party time after three years
It is likely that in time, more and more people will have learned about ‘blue panels’ producing electricity and giving good financial returns. Plus, well experienced and educated bigger solar pv companies with a track record in for instance Germany, will expand their activities in more and more countries. Helping local companies to educate their market quicker. The good thing is also, that more and more countries have started with feed-in tariff regimes. The number of emerging markets is growing rapidly. Most of them still in their infancy, but give them a few years and they will really start to boom. And with so many new markets joining, the best of the global PV market growth party is yet to come!

Will governments keep the faith?
The worst what could happen is that governments start to loose faith in the feed-in tariff model, because of what is happening now in Germany and happened in Spain. Once the business infrastructure is in place and the story goes around (after 3 years), it is a challenge to control the market growth engine. Markets keep on booming. Spain showed that a resolute break will have a disastrous effect on the domestic business infrastructure. The money invested to build up a market and business infrastructure can be thrown away in one year.

More anniversary parties will help the market become independent
A well designed annual FiT degression in pre announced steps helps. Sudden and panicked interim cut backs usually have a contra-productive effect. People take a run ‘on the last high tariffs before they are further reduced’.
The Feed-in tariff has proven to be the best incentive scheme to develop a domestic PV market and business infrastructure. With well built in annual reductions of the tariffs, the FiT model is still the ideal way to bridge the limited number of years this financial support is still necessary. With the PV industry expanding and developing rapidly and cost coming down quickly, solar PV is on track to stay on its own feet, without the need for any financial support. In many major markets, this is only a few years away... Germany is already celebrating its 10th anniversary with their FiT. If other markets follow this example and Germany pushes the right buttons, the global PV market and industry will see a further continuous growth and subsidy independence within a decade for the major market segments like residential applications.

The solar future in inevitable and the best is yet to come. Let’s educate!

The German PV market in 2011

What will happen in the German PV market in 2011? It presently looks like this year will show record figures for newly installed PV power, like last year. Customers want to make use of the current feed-in tariff, before this incentive will be reduced at the beginning of 2011. Since the government announced additional reductions of the tariffs in 2009, sales rocketed. It looks like the further feed-in tariffs are cut back, the faster the market is growing...With another reduction following on January first 2011, this is likely to boost sales till the end of this year. So, what will happen next year? Will the government be surprised when they see record numbers at the end of this year and decide that another feed-in tariff reduction will be necessary in 2011? Will they get scared that the public, their voters, will no longer accept the premium they pay on their energy bill to subsidize the feed-in tariffs?

Consolidation
One could conclude that the subsidies are still too generous. They could think that a further feed-in tariff reduction will cool down the spectacular growth....But, will that happen? Well, the global solar industry can certainly not survive without the German market, which takes more than half of the world market. So, in order to survive and keep their market share, the industry will have to reduce module and system prices. This will reduce their margins and profit. But, it is better to lose part of your profit than being forced out of business. This is what we call the 'consolidation'; survival of the fittest. Only the companies able to bring down cost and accept lower margins will stay in business.

Further feed-in tariff reductions will cause the market to grow faster
So, let's imagine, the German government will further reduce the feed-in tariffs in 2011, in order to 'cool-down' the market growth. My feeling is that this measure will be counterproductive. The faster it will reduce the tariffs, the more urgency the customers will feel to 'buy their own solar system', before this incentive gets reduced even further...And the industry will consolidate even faster. Cost and prices will need to be adjusted. This means acceptance of lower margins, or grow faster in order to reduce cost of production. This could help to hold and expand their market share in the fast growing German market.

Can the growth be cooled down?
Does the German government have any other solution to cool down a fast market growth? Frankly, I do not know how. Introducing a market cap for its feed-in tariffs will lead to a run on this incentive as well, and will force companies out of business, because there are no sales after, say 'May, since the cap has been reached'.

Too big to fail
Germany has chosen for renewables and the people and customers like it so much, there is simply no way back. Does it matter? No, Germany will lead the way in photovoltaics in the future. It has simply grown too big. It can't be ignored anymore. Not by the government, not willing to stop this job-machine, not by its population, which embraced solar PV and not by the global PV industry, because the market is simply too big to lose. Yes, it will cost the German energy user money and slightly raise their energy bill for many years. But energy bills will be raised anyway, due to increasing cost of conventional energy sources like coal (carbon taxes) and oil (scarcity). In the long term, these same customers and voters only benefit from more solar and renewables. For example with more predictable and stable energy prices. Germany will build up a large and still growing share of clean and sustainable energy supply. And, let's be honest, who would not prefer such a country to live in and leave that for your children?

Germany and solar pv is like Google
Germany sets the trend in renewables and is market leader. As technology innovators, Germans will always be able to make money on solar. German industries, investors and entrepreneurs can be found everywhere around the world. They have the knowledge, experience, industrial and innovative power, people and money to maintain world leaders. I think, that the German market will keep on growing. In 2011 and onwards. And fast as well. At this speed, it might even become the first market reaching grid-parity, when the cost of solar power equals the retail cost of conventional electricity. This will speed up the market even more and create more business opportunities around the world. Germany, and its solar industry infrastructure, could become a Google in solar pv. Too big and important to fail. Leading the way with forward thinking. And Google is still not doing too bad...