Top solar-industry leaders believe their sector, now in flux, is likely to consolidate around a handful of global companies, and that which countries win and lose will depend on how the consolidation plays out, according to a report from Stanford University's Steyer-Taylor Center for Energy Policy and Finance.
The report, "Avoiding Sunstroke: Assessing National Competitiveness in the Global Solar Race," reflects the conclusions of some 20 top executives of solar companies from five countries who met at Stanford for an unusual day-long scenario-planning exercise to try to answer a crucial question about the small but rapidly growing solar industry: What will it look like in 2025? Which sorts of companies, and which countries, will do what?
The report, detailing the views of the executives who attended, says the global solar industry is likely to develop based on a pattern of "glocalization": A handful of global companies will dominate the industry, and they will locate different parts of their businesses in different countries based on their sense of where they can make the most money. That conclusion belies a claim, heard often in industry and policy circles, that China has "won" the solar industry and that other countries — the U.S., Germany, and others — have "lost" it. But this "glocal" view of the solar industry's growth suggests that many markets around the world have critical — and potentially profitable — roles to play as solar technologies and markets evolve.
This report, like the workshop on which it's based, is qualitative rather than quantitative. It does not endorse the views of those at the workshop. It is intended to provide a snapshot of what one influential and representative slice of the global solar industry thinks about the industry's future. Each of the scenarios it explores is a plausible future.
The workshop was organized by Stanford's Steyer-Taylor Center for Energy Policy and Finance, a joint initiative of Stanford Law School and Stanford Graduate School of Business, and the German Federal Ministry for the Environment. Jeffrey Ball, scholar-in-residence at the Steyer-Taylor Center, and Jonas Meckling, senior adviser at the German Federal Ministry for the Environment, wrote the report.
Top executives from solar companies based in China, Germany, Italy, Korea and the U.S. participated in the workshop. They lead companies that produce polysilicon, solar panels, inverters and other components; that lease solar systems to consumers; that finance solar installations; and more. PwC U.S. helped structure and moderate the workshop's scenario-planning sessions.
The executives at the workshop charted how the industry might develop in four scenarios that revolve around two key factors: the level of penetration of solar energy in overall power markets, and the extent to which national solar markets are open or closed to foreign-based companies and to the integration of solar power into the national energy mix.
A Snapshot of Four Scenarios
Solar power generates more than 8% of global electricity, roughly 25 times the current level, and national barriers to its expansion are low. Major oil, power, chemical and electronics companies enter the industry. China and Korea dominate in solar manufacturing. The U.S. and Germany dominate in technological innovation.
Solar produces more than 8% of global electricity, but countries impose protectionist measures that make costs higher than they otherwise might be. China is triumphant, tapping its big domestic solar market. In the U.S., the military is a major solar player.
Solar generates less than 1% of global electricity, and barriers in many nations break it up into a patchwork of limited local markets. One impediment: Utilities in many countries enact policies that many consumers perceive as raising solar energy's costs.
Solar is utterly insignificant. It produces less than 1% of global power; countries don't care enough about it even to impose barriers to try to grab its spoils. Solar grows only in markets with severely underdeveloped conventional electricity systems. Among them: many African countries, and India.
The "glocal" view of the solar industry detailed in the report suggests several takeaways:
- Solar manufacturing is likely to concentrate among a handful of global companies. They might be based in China or other Asian markets; they might be based in Europe or the U.S.
- Regardless of where these companies are headquartered, they're likely to do much of their manufacturing in Asia. They're likely to do the final manufacturing step – assembling their actual solar modules – in end markets where domestic solar demand is large enough to justify an assembly plant.
- Several wild cards could change the calculus about where in the world it's most profitable for a global solar manufacturer to manufacture: regional differences in energy prices, raw-material costs and wages; global transportation costs; and technological advances that reduce the need for factory-floor labor or that radically change the kind of photovoltaic device that the market wants.
- Manufacturing is only one piece of the solar business. Other pieces – research and development, manufacturing of tooling, commercialization of new technologies, financing, marketing, and the installation and maintenance of solar projects – offer broad opportunities for countries to play to their comparative strengths.
By Barbara Buell