In my previous posting, I basically touched upon some innovation in solar energy. Technology is important because it will change our daily lives. However, it is more intriguing for a business school student to think about what the solar energy industry look like, thereby fostering positive changes in the way we live. I just read an interesting article from Economist, indicating that solar power companies are struggling. But the survivors will have a bright future. I found this is interesting and would like to share three arguments presented in article. :)
1. The solar panel is cheaper than the silicon panel even though the efficiency rate is a little bit higher then solar panel. First Solar’s panels have an average efficiency rate of 11-12% as opposed to 14-15% for the silicon ones. Yet they are cheap, costing around 74 cents per watt of generating capacity, compared to well over a dollar for the cheapest silicon panel. And they are getting better, with over 17% efficiency achieved in lab conditions. They also perform well at high temperatures and through dust—making them suitable for deployment out West.
2. Market seriously oversupplied: Demand for solar panels doubled last year, driven by soaring growth in Germany and Italy. However, wider economic ills in Europe this year have given investors further pause, causing European demand for solar panels to plummet. In Germany, annual sales are expected to fall by more than 30%. Despite growth in America and China, global demand for solar sales is expected to grow by less than 10% this year. That leaves the market seriously oversupplied.
3. Cost is the king: Early this year the average panel price was around $1.75 per watt; by the year’s end it could be as low as $1.10. That is less than the cost price for many Western manufacturers and small Asian ones, several of which have already gone bust. To survive, firms will need to keep cutting costs, especially in the non-panel parts of their product, including metalwork and wiring. They must also keep a grip on dwindling sources of credit. This will favour big Western firms and low-cost Chinese ones, especially those with friendly support from China’s state-controlled lenders.
According the argument presented above, the solar energy market is still full of uncertainties. The price of solar power still has far to fall before it is cheaper than electricity generated from fossil fuels—even if governments jack up fossil-fuel prices to reflect the cost of carbon emissions. And there are plenty of cloudy places, including northern Europe, where solar panels may never make much sense. Yet, I would personally see the solar energy or more broadly speaking green energy is a market shift, which is full of opportunities and challenges. Incremental improvements in current technology, breakthrough, and government policy are the factors we need to pay attention to, and I believe it has much to look forward to.
