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Strategy recommendations for solar industry executives:

A transition from market followers to market makers

July 2016

 

We discuss ground mounted  PV projects in the global context of competing for large-scale electricity generation.  Early waves of PV projects have been stimulated by government policies to reduce carbon emissions.  The motivation of this market driver (though it remains important) is not sufficient, by itself, to sustain or escalate the high growth rates now expected of PV companies.

 

PV business development has been “market following” - flocking to the markets announcing payment programmes for solar projects. Recently market regulators have adapted from offering predetermined power purchase tariffs to auctioning tariffs.  The policy change has reduced profit margins.  In addition, the growth rate of the “market following” approach is limited by regulatory caps or legacy infrastructure ability to absorb renewables.  We propose an alternative strategy of “market making” steps to deliver more rapid , profitable, and diverse market growth.

 

Target the Big Gaps   

A key advantage of Solar PV is the universality of its business model. In addition, project planning is modular and highly scalable.  Hence, PV projects are capable of widely and quickly delivering electricity like no other resource.  By changing a compact set of data inputs, the project financials are immediately and accurately calculated for any location.  PV companies can easily plan for and target the markets with the biggest electricity gaps.  We estimate and rank these gaps by multiplying the population with the lack of electricity supply per capita (difference between a target requirement and current consumption) - to calculate the second factor, we take a conservative western European country benchmark of 4500 kWh per capita for the target requirement (about that of Portugal).   The top ten with electricity shortages:

 

Market

Gap in TWh/a

GDP per capita

India

4942

$1k-2k

China

968

$7k-9k

Indonesia

964

$3k-4k

Nigeria

813

$3k-4k

Pakistan

779

$1k-2k

Bangladesh

684

$1k-2k

Ethiopia

451

< $1k

Brazil

409

$11k-12k

Phillippines

389

$2k-4k

Mexico

312

$10k-11k

 

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