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Published: May 29, 2012
 / Summer 2012 / Issue 67

 
 

Solar Comes of Age

A leading solar energy policy advocate explains how this dynamic, rapidly maturing industry can reach its true potential.

The solar industry is entering a dynamic period as costs decline, demand for electricity continues to grow, and competition heats up. The result has been a rise in M&A and vertical integration as solar energy providers seek to carve out a leading role in the market and ensure their access to customers. Some high-profile bankruptcies have captured headlines in recent months, perhaps the most infamous being government-subsidized Solyndra. But as Carrie Cullen Hitt, vice president of state affairs at the Solar Energy Industries Association — the national trade association of the U.S. solar industry — notes, failure is part of any industry’s natural evolution, and solar is no exception. Rather than indicating imminent decline, it points to solar energy’s potential for growth.

Roadblocks remain: The U.S. energy industry still operates within a century-old framework of laws, regulations, and infrastructure, and low natural gas prices are diverting attention, and investment, from renewables. But with the right mix of rules, policies, and incentives, Cullen Hitt argues, great opportunity exists for solar in the years ahead. She spoke about the future of the solar industry in October 2011 at the Wharton Energy Conference in Philadelphia, and then in a conversation with s+b in December 2011.

S+B: What is the current overall state of the solar industry?
CULLEN HITT:
We’re in a time of fairly significant transformation, for three equally important reasons. One is that solar costs have come down dramatically in the past two or three years, largely due to increased efficiencies: Companies have gotten better at doing what they do.

The second reason is that declining costs and increased efficiencies have led to significant competition among providers in the solar space. Particularly in the U.S., there are thousands of providers, and that wasn’t the case five or six years ago.

The third reason is the impact of the current economic and political climate. It’s not necessarily negative, but it does drive the level of tax credits and incentives that exist. What are the policy structures in the various states and at the federal level that support or inhibit solar? What is the next generation of policy?

S+B: How will this transformation affect industry players?
CULLEN HITT:
As the industry matures, more startup companies are getting acquired. The big squeeze right now is on the manufacturing side, but we also see some developers starting to acquire, or merge with, other companies. Pure manufacturers are looking for ways to decrease their sales time line and their distribution costs. Whereas before, they may have worked with 300 different providers, some of them are now using vertical integration to gain direct access to consumers and to have a way to sell their products. In some instances, manufacturers are choosing to become developers — they’re building these capabilities internally. There’s a lot of activity across the value stream.

For example, NRG Energy Inc., a large national energy company involved in all aspects of generation, purchased Solar Power Partners, a solar company in California, in November 2011 with an eye toward helping California meet its aggressive energy goals. And Q-Cells SE, a German manufacturer, is now moving more into the development space — and is currently building Europe’s largest solar park.

S+B: How will the industry evolve in the years ahead?
CULLEN HITT:
Solar is still a young industry. Although it’s been around for a while — people have been making solar panels for 25 or 30 years — it didn’t really take off until five or six years ago. There are a lot of companies in different parts of the value stream, and increased efficiencies through R&D are coming out every day. But they have only scratched the surface. This phase is going to last for a while. Once the economy picks up, however, we’re going to need new sources of electricity, and they’re going to have to come from everywhere, including from solar.

 
 
 
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