There’s a dark secret about the sunny solar industry.
It is not very profitable.
The surprise is justified: After all, you hear about the fantastic growth of solar sector. The world just crossed 200 GW in installations. It is already a $100+ billion industry worldwide. 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 in the first 40 years!
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 of that.
And that leads us to two questions:
Question 1: Just why aren’t folks making good profits in such a high growth industry?
Question 2: More important, is it possible to make excellent profits in this fascinating 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
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. Living on the cheap, dependent on government doles, and also dependent on the government whims and fancies.
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 source.
Solar is durable. You can use it to convert your rooftop into a new room (with a view).
Solar is modular. You can 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 around the world only on solar power. Where exactly have you been living?
Solar power systems can have as much software and intelligence as could a smartphone. Enphase has a nice Hawaiian story here for you.
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? Solarville, anyone?
Useful innovation is possible for every component of solar, not just the cells, 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 small ways.
For mainstream solar to become driven by innovation, we the industry need to stop thinking we are just replacing the existing utilities and systems, be it for electricity or heat.
The moment we in the industry start thinking we are creating new markets, and selling solar energy as lifestyle -Or aspirations – Or comfort -Or entertainment, we are suddenly 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.
I will be glad to know your thoughts on how we can make this happen. Do let me know through your comments. Thank you.
Some solar power pics that go to show that solar could be inspiring, cool, awesome, and yes, even sexy.
A nice looking sunflower patterned solar panels in an Austin, Texas retail lot (source: Inhabitat)
James Cameron with his beautifully architected solar array (Source: Popular Mechanics)
A stunning solar power architecture to charge the Volvo V-60 Plug-in Hybrid. (Source: FastCo Design)
Still with autos, here’s a cool carport for BMW (Source: Motor Authority)
And still on the creative side, here’s a cool solar furniture (Source: Crooked Brains)
A wow solar yacht. Meet the world’s largest solar powered boat designed by Swiss manufacturer, PlanetSolar. (Source: Green Earth Blog)
A super flexible solar panel (source: Selfie with Solar @ Solar Mango)
And a flexible solar panel being “rolled out” (Source: Technopost)
Colorful & Transparent Solar Panels (Source: Onyx Solar)
Solar Shingles that Seamlessly Integrate with the Roof (Source: Dow Powerhouse)
Elevated Solar Panels have Facilitated the Rooftop to be Converted to a Room at a company in Bangalore, India (Source: Selfie with Solar @ Solar Mango )
Lightweight, foldable solar panels that can be carried anywhere (Source: Solar Paper @ Kickstarter)
One more for solar-on-the-go – solar backpacks (Source: BikeBiz)
Solar in flight (Source: Solar Impulse)
And coming down to earth, solar is not just solar PV. Here’s a rudimentary solar thermal dryer (Source: Selfie with Solar @ Solar Mango)
Still grounded to earth, but this time, solar trash cans (Source: GE)