A day-long workshop at Stanford Universitys Steyer-Taylor Center for Energy, Policy and Finance; 20 of the worlds leading solar executives (many of whom compete with each other on a daily basis and had never before been in the same room together); Chatham House Rule (quotes reported in the study but not attributed to any particular individual), and four possible future scenarios for how the solar industry might evolve: such was the backdrop for Stanfords Avoiding Sunstroke report, seen by pv magazine and summarized here.
The reports intro stresses that its contents are "speculative, with all the messy uncertainties that define speculation." An auspiciously honest way to begin, and a refreshingly candid admittance that nobody can truly know what the solar industry will look like in 2025, the date given for Stanford’s scenarios. While nobody can predict anything with any great degree of certainty, the 20 executives in attendance that day were, probably, those best able to make an educated guess.
Their conclusion? That ‘Glocalization’ will shape solar in the future: the process of a handful of large, truly global solar power companies dominating the industry but operating on a local, nimble scale in a number of countries. Neither China, Japan, Germany nor the U.S. will dominate; rather, the future of solar will be shaped by those companies best positioned to take advantage of shifting market conditions. But first…
The four scenarios
The point of Stanfords scenario planning exercise was to best anticipate the possible direction solar growth could take. The researchers deliberately set four different outcomes, asking the 20 executives to discuss the likelihood of each one. This exercise proved crucial in identifying where there was consensus among the executives, where there was disagreement and disparity, and in which areas uncertainty reigned. The four scenarios were as follows:
· Global Sun: High penetration, low barriers. This represented a ‘best case scenario’ for solar, a nirvana where a variety of favorable conditions combine to create the perfect solar storm, pushing solar to 8% of global electricity generation by 2025.
· Solar Systems: High penetration, high barriers. A complex scenario defined by widespread solar adoption, albeit within "walled gardens", as one participant put it, where protectionist policies push up prices.
· Sunblock: Low penetration, high barriers. Not the ‘worst case’ scenario on the table, but a situation where utilities threatened by solar are successful in undermining its growth, leaving just pockets of PV-popular regions and a handful of companies nimble enough to survive.
· Total Eclipse: Low penetration, low barriers. The worst case scenario in full flight. The ‘low barriers’ mean that solar isnt exactly tied up with red tape, but rather deemed utterly insignificant by governments, companies and consumers.
Global Sun scenario
Solar’s best case scenario for growth pitched the idea that PV will generate 8% of all global electricity by 2025. All in attendance agreed that such a scenario represented a Utopian future for solar, but most of those at the workshop were skeptical about how accurate this scenario might prove.
Predicated on soaring fossil fuel costs and a rapid deflation of the shale gas boom, allied with rising global fears about severe weather events and further scientific breakthroughs in PV, the solar power market would gain ground on all other energy sources.
Nice in theory, but while many participants certainly foresee that most of those predictions will come true, they were less confident about any significant step change in solar technology. "In the last five years, we havent really seen a technological breakthrough," said one. "All weve seen is efficiency improvements and cost reduction in manufacturing." Such breakthroughs are unlikely to be forthcoming unless governments ramped up their funding for solar R&D, agreed many.
This perfect storm for solar requires all four requirements solar tech breakthroughs, public concern, expensive gas and supportive government policies working in tandem to achieve this scenario, they believed.
However, low barriers to solar adoption were more realistic, agreed most participants, with the consensus being that a few global players will come to dominate the industry, with one adding that this trend is already happening. Their dominance will be known as ‘glocalization’, where these global companies operate in a number of different local markets, often with different pricing structures and supply strategies.
"Because at the end of the day," said one participant, "PV still needs to be assembled locally. The weight and transportation costs are really high." The solar industry could therefore, suggested another participant, come to resemble the auto industry.
The Global Sun scenario also sees China and Korea dominating manufacturing, with Germany and the U.S. leading the way on innovation a forecast that prompted much disagreement among participants.
Solar Systems scenario
Although this scenario is founded on similar drivers explored in the Global Sun scenario (rising fossil fuel costs, growing public support for climate change initiatives, more government-funded solar incentives, and solar-tech breakthroughts), there is one key difference: the global economy.
In this scenario, many countries struggle with high unemployment, prompting governments to introduce a variety of pro-solar policies in order to create jobs in manufacturing, logistics, construction and research. This proviso, however, comes with a caveat: protectionism. Local-content rules are widespread, with imported solar equipment subject to heavy tariffs in order to dissuade the movement of goods from one country to another. Thus, prices vary rapidly from country to country, hindering the free flow of solar goods.
With robust regional barriers, oil and gas companies enter the solar market. "Oil companies are really good at operating with regional barriers," remarked one participant, adding: "In this scenario they enter the solar market big time."
While a few companies will corner the the components markets, modules will be assembled in every country that has a solar market. "These factories will be like bakeries. Every market will have its own," predicted one participant, with regional installers dominating, their growth bound by their own national barriers.
As a result, the larger ones national barrier, the larger it becomes. Enter China. Big enough to "do it all," says one participant, the protectionist measures of other countries put the brakes on complete Chinese dominance, but also put the brakes on their own expansionist plans. China, and to a lesser extent Japan, thrive under these conditions.
"No more cheap debt," is how one participant puts this scenario: a rise in interest rates pulls the rug from under many of the smaller solar players, creating a subdued atmosphere characterized by government barriers and high costs, and exacerbated by America’s shale gas boom transplanting itself to Europe and China. Fossil fuels gain a stay of execution, and renewables are ushered back into the dusty closet.
At the same time, global temperatures embark on a downward if only temporary, nobody knows global trend, taking climate change off the agenda for most people, while alternative renewable energy sources catch up with solar.
PV still resonates in some strongholds, but a global recession sees the U.S., China and Europe reduce their solar subsidies. As a result, the solar industry is one-third the size it is today. A doomsday scenario? "It’s companies fighting over scraps," said one participant, with another adding: "Cheap customer access suddenly becomes really important."
Meanwhile, large utilities enact policies that turn public opinion against solar, such as the charging of fees for residential solar customers to connect their arrays to the grid (something that has already happened). Only in countries where solar power can prove significantly cheaper or easier to deploy than traditional power sources does the market stabilize, notably in Hawaii, and parts of Africa and South America. Germany following the breakup of the European Union is able to act as it pleases on solar-related matters, and reclaims top spot for solar in Europe, buoyed by ready cash and public approval for solar.
However, some of solar’s contemporary bright spots Japan, South Africa, India and MENA turn their backs on solar in favor of either nuclear power or cheaper fossil fuels.
Total Eclipse scenario
A completely dishevelled solar industry in 2025 curses the proliferation of a coal-fired industry grown fat on rising prices in natural gas. Coal dominates China’s, India’s and Germany’s energy mix, with global economic stagnation the leading concern for not only governments, but the wider public.
Hence, research in, and clamor for, renewable energy dwindles. More immediate problems, such as food supply and job creation, take center stage, while possibly wind power nears grid parity with fossil fuels in some parts of the world.
Utility-scale growth in solar falls right back, with solar rooftop installations returning to the levels of the ’80s and ’90s just a few hardy souls fixing panels on their homes. Solar goes back to being "an enthusiasts business," as one participant puts it.
The only source of good news for the solar industry is provided by the U.S. military, which sees strategic and technological advantages in pursuing high-end PV methods. China, its economy having stagnated but its population boomed, turns its attentions to fighting poverty rather than cornering the PV market.
In the developing world, development aid and private financing catalyzes pockets of solar growth, particularly in parts of India, where power blackouts have become more frequent. Africa, meanwhile, "becomes a consumer, not a producer," of solar power, said one participant.
In the industry, just a handful of niche players are able to survive on public money or premium segments of the market, while the rest whither and adapt the skills and knowledge they accrued to other industries.
The good news, however, is that the majority of the executives in attendance at Stanfords workshop felt this scenario was not at all plausible, their confidence stemming from the fact that both stable fossil fuel prices and an apathy towards climate change are highly unlikely to happen.
After being asked to consider all four scenarios, the 20 executives arrived at varying conclusions. There was, however, consensus in some trends that were detected during the discussions. One example is that solar today echoes the landscape of the U.S. telecommunications industry when AT&T near-on monopolized the industry.
The executives saw echoes in todays utility companies efforts to adapt to a changing energy landscape, with solar power leading the threat to their hegemony. Conversely, solars own traditional bedrock solar farms could be undermined by technological advances in much the same way that developing countries bypassed landline telephones and jumped straight to the adoption of cellular technology. Could the same happen with solar?
Building-integrated photovoltaics (BIPV) could also move more center stage, particularly if the solar industry follows the same path as that of the digital camera: technology that improves and improves, becomes cheaper, but is then eventually incorporated into a device that offers far more the smartphone. For solar, could panels make way for PV-generating tiles, glass, paint and other products?
The exact size,direction and makeup of the solar industry is still an unknown quantity. By 2025, anything could feasibly happen, but the participants generally agreed that glocalization will win the day; a conclusion that runs counter to today’s fears that China has built up an insurmountable lead and dominance of the industry.
All countries could well enjoy affordable solar power, with many markets playing a critical role in solar’s growth, serviced by a handful of solar-manufacturing oligarchs operating on a truly global level. To achieve this Global Sun Scenario, governments around the world will have to confidently support solar, and not try to ringfence it behind national barriers.