(A more detailed version of this article was published on LinkedIn – see here for the article)
There’s a dark secret about the sunny solar industry.
It is not very profitable.
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Surprised?
The surprise is justified: After all, you hear about fantastic growth of solar sector worldwide. It is already a $100+ billion industry. And is getting bigger, faster. India vows 100 GW by 2022. China ups the ante with 200 GW by 2020. Hillary Clinton chimes in with promise of 500 million panels in America if she were elected. There are predictions by respectable folks that the world could be installing 135 GW a YEAR by 2020 – equal to the total amount of solar installed for four decades, until end of 2013.
And the industry seems to be shelling out billions too – SunEdison bought Vivint for $2.2 billion recently, and there are talks of $20 billion solar investment by Softbank in India.
Surely this industry is awash with money?
Surely yes, if money represents top line revenues.
Surely not if we are talking profits. Talk to anyone in the solar industry in any part of the value chain, and they will talk to you anything except…profits. Because they make little or none of that.
And that leads us to two questions:
Question 1: Just why aren’t folks making profits in such a high growth industry?
Question 2: More important, is it possible to make profits in this industry?
The answers to the two questions above, not surprisingly, are related. In fact, one word defines the answer to both: Innovation.
As the cliche goes, the problem is the opportunity.
Problem: No Innovation
Also check out: EAI Consulting for Solar Energy – Solar PV & Solar Thermal
Solar energy eventually results in two main end “products”: Heat/cold and Electricity.
Both products are considered to be commodities, utilities, whatever.
Conventional wisdom says commodities are highly price driven, as there is little or no differentiation possible.
So everyone is fighting on price. The cheapest guy wins.
And the cheapest guy simply cannot afford to innovate. Especially if he is from China, because that country thrives on massive economies of scale which in most cases stifles scope.
The world is thus afloat in cheap solar panels, cheap inverters, cheap solar farm construction, cheap power, cheap rooftop solar installation.
A cheap industry. No innovation. Full of suffocation.
Solution: Pro Innovation
Innovation is possible. In anything.
Even in utilities. Yes.
Stuff that are all freely available around us have been bottled or put into cylinders and supplied for ginormous profits. I am talking about 02 and H20.
Gas stations are probably making more profits from their onsite food and grocery outlets than from the main commodity.
Some clever waste management companies are figuring out that the money they make from recycling and composting could add to a decent pile. Not to mention capturing the landfill gas and enriching it to make bio-natural gas.
If the world could come up with a product called insurance, for which fat premiums are paid but neither the buyer nor the seller ever wants to use, innovation is possible in anything.
And innovation is precisely what solar needs.
Thankfully, innovation is remarkably easier in solar than in any other sustainable energy.
Solar is flexible. You could bend it like Beckham. Or you could have it in any color you want.
Solar is durable. You can have it to convert your rooftop into a new room (with a view).
Solar is modular. You could fold it and take it along with you.
Solar can be aesthetic. Ask James Cameron.
Solar can fly. Really? Heck, a guy just flew a flipping plane only on solar power. Where exactly have you been living?
Also check out: EAI Consulting for Solar Energy – Solar PV & Solar Thermal
Solar power systems could have as much software and intelligence as could a smartphone. Enphase has a nice Hawaii story here for you.
How about enabling everyone to be a stakeholder in some form in generating solar power? Check out what CloudSolar and SunPort are attempting. Or the concept of community solar.
Distributed solar is cool. It makes you the owner of a power plant. Surely, some fun, useful, emotional stuff can be designed to make you more involved in stuff you actually own and generate?
How about bifacial panels that can generate extra power for the same area? How about developing mounting racks that are customized for diverse roof structures?
Useful innovation is possible for every component of solar, not just the panels or mounting structures – be it in cables, combiner boxes and of course the brainy inverters,
All the above innovation are possible. And already happening, but only in some small ways.
For mainstream solar to become driven by innovation, we the industry needs to stop thinking we are selling electricity. Or energy.
The moment we in the industry start thinking we are selling lifestyle -Or aspirations – Or luxury -Or entertainment, we are suddenly are staring at fantastic possibilities for differentiation.
Power has power. Sun is fun.
Let us make solar profitable. For all of us. And for the earth.
Also check out: EAI Consulting for Solar Energy – Solar PV & Solar Thermal
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