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Solar Looking Beyond Europe for Future Demand

http://www.fool.com/investing/general/2012/05/10/solar-looking-beyond-europe-for-future-demand.aspx

Travis Hoium
May 10, 2012

As the solar industry deals with a slump in demand from traditional leaders like Germany and Italy, the industry is looking to emerging markets for demand. China will pick up some of the slack this year, but who else is emerging as companies search for demand for their products, and what should government support look like in the future?

I talked to experts in the industry at the GTM Solar Summit last week looking for answers to these questions. Here's what I learned from them.

A solar power boom close to home
The U.S. is anything but a mature market when it comes to solar, and is actually one of the emerging markets the industry is looking to. I asked Angiolo Laviziano, founder of integrated renewable energy company Mainstream Energy, what drivers are needed to bring the U.S. into sustainable solar growth. Here are a few of his thoughts:

  • The cost curve for the end customer needs to be the focus for the industry. This includes not only module prices, but also balance-of-system costs like permitting and installation labor. As these costs come down, solar will grow in attractiveness to both residents and utilities.
  • Government involvement on a state level is key. Markets vary from state to state and it will be the policies set at the state and utility levels that drive solar, not federal policy.
  • In response to my question about what the best policy is based on what the industry has learned so far, Laviziano said a capacity-based rebate structure where the rebate comes down with higher levels of installation would be ideal in the U.S. The policy and installations would need to be very transparent so that the rebate could be modified quickly and everyone knows when and by how much a rebate would be reduced. Any subsidy would also need to be set at a reasonable level that declines over time with the understanding that it wouldn't last forever.

What Laviziano, along with others in the industry, is worried about is a boom and bust in new markets, as happened in Spain. The feed-in tariff rates were so high that the market was overwhelmed, leading to a bust when the rate was cut.

I asked if a reverse auction, as California just held, would be a good method for bringing down costs for consumers and installing a set amount of solar. Laviziano was hesitant, and so are others in the industry, about who will emerge as winners in such auctions. When cost is the only thing being looked at, you often don't get the best project, just the cheapest. Those two aren't always the same thing; just ask the construction industry.

Emerging markets south of the border
I also talked with Isabelle Christensen, director of North American Operations for JinkoSolar (NYSE: JKS  ) , about how her company is expanding in the Americas.

Jinko got something of a slow start in the U.S. market, failing to be approved by installers like SolarCity when they began expanding. This has caused it to play catch-up, but it is taking a two-pronged approach in the U.S. now and hopes that markets south of the border will be a big part of the future.

JinkoSolar is selling to small integrators and distributors, similar to SunPower's (Nasdaq: SPWR  ) s