Some observations on global solar adoption

I just spent two days at a workshop for solar equipment producers sponsored by Festo AG. (I was invited to support its efforts to build a Festo-sponsored open innovation community.) Several of the speakers offered great statistics, history and other facts about the development of the industry.

Below are a few “stylized facts” about where PV is being produced and used.

1. Solar Price is Relative

Substitute costs are the key driver of solar adoption. If energy is cheap, no one wants expensive RE. If energy is expensive, RE may not seem all that expensive. European adoption is high due to high fossil fuel prices, while US has historically had cheap energy. However, with our high insolation and high (Tier 4 or Tier 5) utility bills California is almost break-even without subsidies today, Hawaii too. Germany is a long way off, China will be decades away at 5c/kWH.

2. Roadmaps Help

The PC industry grew for 40+ years with a a technology roadmap based on Moore's Law. There is evidence that PV cost cuts also provided a predictable roadmap. According to consultant Ruurd Boomsma, the prices generally fell 5-6% per annum, much more slowly than LCD prices over the past decade. (However, prices fell more dramatically in 2009 and it’s not clear if that’s the new normal or a one-time shock.)

3. US is Inherently Messy

It is clear that the US policy regime is more fragmented, confused and contradictory than either Germany or China. Although Germany has Federalism, the RE policy is mainly at the national level, not the staaten. In most other countries, the states/ provinces are relatively weak and the RE policy is made at the national level. Also, RE policies (eg. for residential solar) are better understood in countries with national policies than in the US (where the major policies are at the state level).

4. Jobs Follow the Entire Value Chain

There's been a lot of discussion (and hand-wringing) on the huge shift of PV production to China and elsewhere in Asia. However, the major shift has been for cells. Modules are more expensive to ship and to inventory, and may continue to be produced near (or closer to) actual use. Installer jobs will also remain in the developed economies and perhaps the balance of system too.

5. California isn’t Serious About Green Jobs

California has spent lots of money on RE subsidies and is proud to lead the nation in such subsidies — just as it led the nation in regulating tailpipe emissions for years. However, the state has been trying for 20 years to destroy the local manufacturing base through regulation and taxation. If not for the dot-com boom, this would have been pretty obvious a decade ago, but the lagging recovery (and 12% unemployment is making them visible now.)

Mayors, legislators and governors claim to want green jobs, but their bureaucracies tie up new manufacturing efforts with red tape through opaque discretionary approval processes. (I heard a few choice examples Tuesday). It’s no coincidence that the silicon has left “Silicon Valley: that Santa Clara-based Intel is building factories in Oregon and Arizona and New Mexico but has closed its last factory in Silicon Valley. SV alumni and VCs start companies here because it’s convenient, but the manufacturing is going elsewhere.

Five years from now, I predict there will be no large-scale solar manufacturing in California. The PV manufacturing growth for California and the Southwest will be in Nevada (no income tax), Arizona and New Mexico.