TODAY’S STUDY: HOW TO GROW A PV INDUSTRY

Close the barn door, the cow is out.

The U.S., where solar technology went from a bright idea to a marketable product, has all but lost its opportunity to have a homegrown industry.

The domestic market has fallen to fifth place in the world and it may soon be displaced from the top five – by the Czech Republic. Two U.S. PV manufacturers rank among the world’s top 15; China has 7 and there are 2 in both Japan and Taiwan.

In the paper highlighted below, scientists at the U.S. Department of Energy’s National Renewable Energy Laboratory lay out steps by which the nation could get back its solar mojo.

Here’s the takeaway, and it’s good news: The NREL scientists pass no judgment on whether the U.S. can recapture its place as a world leader but they lay out specific steps individual communities can take to build a thriving local solar marketplace and recapture the jobs and benefits of plugging into the sun.

Given the challenges of today’s economy, it is an enticing proposition. Should local leaders be tempted often and widely enough by the possibility (note especially what is happening in New Jersey and Arizona), the nation as a whole could find itself grazing with the escaped cow in a sun-drenched field of opportunity.

Solar Photovoltaic Economic Development: Building and Growing a Local PV Industry
August 2011 (National Renewable Energy Laboratory and Solar America Communities)

Executive Summary

The U.S. photovoltaic (PV) industry is forecast to grow in both the short term and the long term. It represents a significant opportunity for economic development and job creation in communities throughout the United States.

For the purposes of designing economic development efforts, the PV industry is best regarded as two major sectors: PV products (a sector of businesses that manufacture raw materials, PV modules, and other components) and PV energy generation (a sector of services centered on the purchase of components and the installation of PV systems).

The differences between these two sectors are important because they each have unique economic development strategies.

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The PV Products Sector

Within the PV products sector, there are two segments. The dominant segment is based on crystalline silicon (c-Si) modules. There is also a growing segment based on thin-film technology modules. Figure 1 shows the value chain elements for these two segments.

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Metrics, Markets, and Trends

Companies in the PV products sector generally share the following major metrics:

• Product performance (power output in watts)
• Efficiency (percentage of sunlight or energy that is converted into usable electricity)
• Product cost (dollars per watt)
• Reliability (product life and performance covered by warranties). Typically, markets for these PV products are differentiated by their scale, as follows:
• Residential—less than (<) 10 kilowatts (kW)
• Commercial—10 kW to 1 megawatt (MW)
• Utility—greater than (>) 1 MW.

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The PV products sector is also characterized by several general trends:

• A shake-out of manufacturing companies driven by the economic downturn
• Integration of companies up and down the supply chain to deal with the boom-and-bust cycles in raw materials and with the competition from international markets
• Diversification of products driven by the expansion of PV applications.

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PV Products Sector Site Selection Criteria

Understanding how companies in the PV products sector evaluate a location is critical to understanding an area’s competitive position and developing strategies to improve that position. For the purposes of this report, the products sector has been divided into four industry groups:

• Raw materials (such as polysilicon, glass, metal products, and gases) used in the production of panels
• Manufacture of wafers and cells that are integrated into panels
• Assembly of components into panels
• Products (such as inverters, racking, and wiring) that are integrated into and support panels.

Table 1 presents a summary matrix of the PV products sector requirements by industry segment and their relative importance. Section 1.1 and Appendix B discuss these requirements.

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The PV Energy Generation Sector

Figure 2 shows the various segments within the PV energy generation sector. Many companies span multiple segments, and third-party companies (such as financial institutions) may operate across various segments as well.

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Markets and Trends

PV energy generation markets are typically characterized in terms of residential, commercial, and utility scale. PV energy generation services can also be analyzed in terms of the following:

• Project scope. From locally labor-intensive segments, like system integration and installation, to low-labor-intensity segments like project development
• Project integration. Energy generation services that are often bundled together
• Project risk. From existing and proven models of ownership to new legal or financial structures.

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The PV energy generation sector can be characterized by several general trends:

• An increasing separation between owners and hosts, exemplified by the third-party power purchase agreement project structure
• An increase in the participation of electric utilities
• Increased integration of services into single contracts
• Diversification and specialization of services within the PV energy generation sector as increasingly complex project opportunities emerge.

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PV Energy Generation Sector Site Selection Criteria

The location factors and criteria considered by PV energy generation companies are relatively concise and straightforward (compared with PV products companies). They are driven primarily by market proximity, as well as by the criteria presented in Table 2.
Employment Opportunities and Economic Development Strategies

While PV products sector jobs vary by market segment, they are generally stable, highly skilled, and long term. Because of the large investments required, and the high level of competition for these facilities, recruiting or growing a large PV products sector company is complex and can require significant investment, planning, and long-term commitment. Not all communities have the same opportunities, but those that have been successful have capitalized on economic assets while providing incentives to compensate for shortcomings.

PV energy generation jobs tend to be more variable. Installation labor often represents the largest opportunity for economic development and job creation. PV energy generation jobs are dependent on project durations and are often short term. They can, however, be more permanent if the community commits to the long-term development of energy generation projects. Because of local conditions like solar resources and local utility structures, building an attractive market for PV energy generation companies usually requires strong public policy support and investment incentives.

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Conclusion

Many U.S. communities have some opportunity to develop a segment of the solar PV industry. While not every community can recruit a large factory or install megawatts per year of distributed PV on local homes, many have high potential in some segments and can invest in and recruit a part of the PV industry—thereby creating jobs and bolstering the local economy.

Precursors to successful PV industry recruitment include the following:

• Understand the segments of the industry and what is required to operate successfully in an area
• Make a realistic evaluation of how well a community meets the requirements of various segments
• Target a market segment(s) that best meets community economic development goals and whose siting requirements are satisfied by the community’s economic capabilities
• Develop strategies to strengthen advantages and overcome disadvantages
• Market opportunities to target segments.