maandag 30 augustus 2010

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!

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