Enabling the next wave of solar innovation
New business models were the center of debate at the world’s largest solar tradeshow
It is the closing day of Intersolar Europe 2014 in Munich, where the solar industry meets every year to present the latest technology innovations and discuss the latest market trends. As a sunny weekend lies ahead in Europe, it’s a good time to reflect back on how far solar has come and the opportunities that lie ahead.
The global installed capacity totaled over 135 GW by the end of last year. 2013 was also the year that saw new solar installations overtake wind power for the first time. In another record-setting year for solar growth, China, Japan and the US will be at the forefront of 2014 installations, with new opportunities spreading to Latin America, South East Asia, Africa and the Middle East.
In other words, solar is going global, growing outside of Europe, where it all began. But this does not mean that there isn’t a future for solar in Europe: this is, in fact, a current topic of heated debate amongst both the industry and policy makers. Taking into account that 60% of worldwide solar installations are located in Europe – 25% in Germany alone – there is a lot new solar markets can learn from their elder brother’s experience.
Solar PV growth in Europe has so far been fostered by feed-in tariffs (FiT). A model first adopted in Germany (more information here), this incentive was designed to nurture a relatively new technology that could not have otherwise competed with more established power generation sources. The FiT acted as a catalyzer not only to attract investment and to incentivize new build, but also to accelerate the commercial maturity of solar. This translated in technology improvements and cost reductions, with the average cost of solar installations dropping by over 50% in the last five years.
Europe is now transitioning into a post-FiT market. More competitive solar on one hand, and escalating retail electricity prices on the other have brought about what is known as grid parity: generating solar power on your rooftop is increasingly competitive with electricity purchased from the grid, without any government incentives. Net metering, self-consumption and solar leasing are examples of new business models that will continue to drive solar growth in Europe and in an increasing number of countries around the world.
– Net metering is a billing mechanism in which solar generation is netted from grid consumption over a period of time, usually up to one year. The system owner receives credit from the utility for the excess electricity fed into the grid
– In self-consumption, the user maximizes the use of the generated solar power for their own local needs. As the solar generated electricity is cheaper than power bought from the grid, on-site power consumption can be further optimized by incorporating battery energy storage to be able to use excess solar power into the night.
– Solar leasing enables users to get solar in their rooftops without any upfront investment. The solar system, plus the electricity bill, is covered through a fixed monthly payment to the leasing company. What makes this option very attractive is that the fixed payment is lower than the user’s “normal” electricity bill. No wonder this is a widespread model in the US, capturing over 30% of the residential market!
In addition to these new business models, experts are also exploring how solar generation could interact with the grid. For example, to help manage demand peaks or to provide frequency support several distributed solar installations could be aggregated as a single entity into a so-called virtual power plant that could be operated remotely.
The active debate and the new solutions displayed at Intersolar show that the pieces to enable this next wave of solar innovation are quickly coming together. How fast do you think these new business models will become widespread?