Opportunities and challenges in solar energy industry: A perspective on business strategy

Abstract

The energy outlook of the world clearly establishes the shortage of energy sources, projected to be 14 TW by 2050 and 33 TW by 2100. This outlines the need for alternate energy sources and the drive is magnified with the environmental damage wrought by the fossil fuels. The renewable energy sources have massive potential to fill this energy gap for conceivable future while being extremely friendly to the environment. Within the gamut of renewable energy sources, Solar Energy commands a special place as it not only offers the highest potential (to provide 10,000 times the total current commercial energy consumption all over the world) but also has the modular flexibility to be deployed on any scale. There are two major technologies used in Solar Energy Industry (SEI): i. Solar Thermal ii. Solar PV. Solar Thermal uses the heat energy generated from solar light in various applications. Solar PV directly converts solar into electrical energy and provides better prospects for meeting electricity needs. The value chain in SEI includes the following components: Silicon suppliers, Wafer manufacturers, Solar cell manufacturers, PV module manufacturers, Project developers and finally the End users. One of the major deterrents for solar energy to be adopted as the energy source of choice, despite its practically unlimited potential, is the prohibitive costs associated with solar energy production (currently costs 3 to 6 times the next best alternative). The major cost component within the Solar Energy development is the cost of production of solar panels. Also the current PV cells typically convert sunlight into electricity with an efficiency of only 16%. The cost concerns shall be addressed with innovation in cell technology (nanotechnology), improvement in material purity to improve efficiency to theoretical maximum of around 30% and also improvements in storage and economies of scale in manufacturing. A research report by McKinsey contends that by 2020 at least ten regions with strong sunlight will have reached grid parity. India energy outlook presents a grim picture of energy source shortage. India, with 1/6th world population, has only 0.8% of known oil & natural gas resources. Hence the energy dependence of India on other countries is increasing every year. The current per-capita consumption of India is very low (531 kgoe as compared to 7913 Kgoe in a developed country like USA) and with the increase in GDP the energy shortage situation would be further aggravated (energy requirements projected to grow at around 6 percent annually). The potential of renewable energy sources in India offers to not meet the energy needs of India but also be an energy exporter. The Government of India has taken note of the massive potential offered by Solar Energy and has put in place several regulatory incentives to catalyze the development of Solar Energy Industry. The Rs. 4500 crore National Solar Mission launched in 2008 has ambitious goals to achieve 20,000 MW by the year 2022. SEI caters to different types of customers ranging from affluent class concerned with healthy lifestyle to remote rural poor for whom it is the only source of energy. SEI companies are targeting different customer segments taking advantage of the regulatory support. The ultimate dream of energy independence of India using SEI is not without challenges like the need for closer Industry-government cooperation, need for focused R&D, the need for standards, the need for customer awareness and the need to drive down costs. But overcoming these challenges would represent major break-through which is likely to shape the future of mankind.