Entrepreneurship Opportunities in the Solar Industry

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Entrepreneurship Opportunities in the Solar Industry

Douglas Causey, Adjunct InstructorJackson State UniversityDepartment of Entrepreneurship and Professional [email protected](601) 979-3326

Vershun L. McClain, Ph.D., Visiting Assistant ProfessorJackson State UniversityDepartment of Entrepreneurship and Professional [email protected](601) 979-1038

Mary M. White, Associate Professor and ChairpersonJackson State UniversityDepartment of Entrepreneurship and Professional [email protected](601) 979-2541

Donald Causey, Assistant ProfessorJackson State UniversityDepartment of Entrepreneurship and Professional [email protected](601) 979-3326

ASBE 35th: Proceedings Page -51-

Association for Small Business & Entrepreneurship 35th Annual Conference

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Entrepreneurship Opportunities in the Solar Industry

Abstract

According to Schumpeter, a great economist, technology revolution can create “gales of creative

destruction” that may result in the elimination of existing industries that are replaced by new ones

which offer more sustainable and profitable opportunities (Schumpeter, 1942). This paper postulates

that rapid improvements in solar energy technology represent a rare opportunity to create structural

change in the electricity generation industry while providing the United States with sustainable,

competitive energy alternatives and entrepreneurs with enormous wealth creation opportunities.

Specific topics addressed are current and emerging solar energy technologies, estimated market scale

and outlook, and potential entrepreneurship opportunities.

Introduction

Currently, leadership in the U. S. has made energy independence a strategic initiative. The

United States depends on foreign countries for two-thirds of its needs. President Obama believes our

excessive reliance upon traditional hydrocarbons is unsustainable (Obama, 2009). Thus, he has made a

commitment to renewable energy. Technology changes, coupled with strong interest in using green

energy technology, have made solar energy a priority area for renewable energy development.

Technology in the Solar Industry

Albert Einstein had a keen interest in solar energy technology; he received a Nobel Prize for

work in this area in 1958 (Solar Energy Industries Association). Since that time solar energy technology

has been evolving to address the issues of high installation costs and non-competitive power costs when

compared to traditional sources of energy such as oil and natural gas. The recent escalation of global



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energy prices combined with a renewed interest in green technologies that address such issues as global

warming have fueled tremendous interest and growth in solar energy technology. As shown in

Attachment I, solar technologies began in the 1950’s and accelerated during the energy crisis of the

1970’s. The cost to produce solar energy has decreased from 30 times the traditional cost of energy

generation to less than 3 times the traditional cost (Energy Information Administration/Electric Power

Annual, 2007). Although these improvements are significant, barriers exist that prevent the industry

from gaining truly widespread adoption. Currently, less than one percent of all electric power in the

United States is generated from solar energy. Some barriers that have prevented greater penetration of

the market are inefficient photovoltaic (PV) cell technology, high silicon wafer costs, high installation

costs, and slowly developing regulatory and tax policies.

Many of these barriers are being addressed by emerging technologies. The emerging

technologies include, but are not limited to, increased photovoltaic (PV) cell efficiency, use of solar

thermal collectors to provide low temperature heat for heating and cooling systems, use of energy

concentration systems to heat other fluids that may be used in turbine generation systems, passive solar

systems, solar ovens, and thin wafer technologies. Many of these technologies address the following

areas for improvement: better materials science so that solar energy collection efficiency increases from

around 22 percent (compared to 16 percent in the past) (Davidson, 2007); greater applications such as

space heaters, and heating and cooling systems for commercial and residential uses; time sensitive

energy release systems so that solar energy is used to heat or cool during optimum time periods; mobile

appliances and other devices that can be used for heating or cooling such as crock pots, small ovens, and

others; and energy storage technology that enables optimal energy collection times combined with

energy storage for later transmission to a local or national grid.



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Some organizations such as the Department of Energy, Applied Materials, Sun Power, and First

Solar are doing research in some of these areas (Davidson, 2007). However, solar energy technology is

clearly a burgeoning area for entrepreneurs to exercise their creative energies. The driver for large

research investments in the solar energy field is the enormous potential market that is ready and

waiting for new sources of clean energy technology.

Attachment I

Historical Timeline of Events

50’s 60’s-70’s 80’s-90’s 2000-2010

First photovoltaic (PV)device developed by BellLabs

Energy crisis increasesinterest and use of solarenergy technology

First solar energy generatorstation (SEGS) built

Emerging PV technologyleads to greater efficiencyand solar energy becomesmore competitive withtraditional energy sources

Einstein received NobelPrize for energy powerresearch

Cost for solar generation is30 times traditional costs

Nine plants built in Californiausing SEGS technology

Rapid growth of solarenergy market, rangingfrom 40-50%

New technology leads tosignificant decline in solarcosts generation

Global warming increasesemphasis on renewableenergy

Source: Solar Energy Industries Association

Market Scale and Outlook

The total electricity energy generation market in the United States is approximately 4.2 Billion

megawatt hours in 2007 (Energy Information Administration/Electric Power Annual, 2007). Solar energy

represents less than 2 percent of this market. However, the solar energy market is growing because new

technologies are pushing the cost of solar energy generation to equal or less than traditional energy cost

generation. For example, First Solar is projecting that their cost of energy generation will approach $1.19



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per watt using thin film technology versus a cost of $2.80 per watt for traditional technology. The U. S.

Department of Energy (DOE) is projecting that solar energy cost generation will equal traditional cost by

2015. Thus, competitive solar energy prices are expected to drive solar energy usage from 13 billion

watts to 40 billion watts in about 3 years. This represents a compounded annual growth rate of

approximately 45 percent. Estimated growth rates have ranged from 40 to 50 percent for the solar

energy generation market. Another measure of market growth is the number of PV cell shipments per

year. The numbers of shipments in the United States has increased at over 50 percent annually for the

past 10 years (Energy Information Administration/Electric Power Annual, 2007). As new applications

continue to develop, the market growth trend should remain very strong. Recent tax incentives and

other programs introduced at the state and federal level are designed to increase the penetration of

solar and other alternative fuels into the energy industry (Solar Energy Industries Association, 2009).

Entrepreneurship Opportunities

The growth in the solar energy generation industry represents many new opportunities for

entrepreneurs. One does not have to obtain an engineering degree or some other technical background

to seize upon these opportunities in this industry. They span the entire value chain from PV cell

production equipment manufacturing to management of the national energy grid system. The

opportunities include original equipment manufacturing, PV manufacturing, PV product testing and

delivery, PV cell installation and servicing, new energy storage devices, mobile solar energy based

appliances, management of the solar energy supply to the national grid system, development of

alternative materials to produce wafers or semiconductors, energy usage monitoring devices,

development of heating and cooling systems, development of new hot fluids for cogeneration or

electrical turbines systems, and many others. All of the opportunities can be categorized into three

major categories associated with the energy generation value chain: reduce the cost of power



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generation, improve the speed and reliability of power generation, and expand the opportunities to

apply renewable, sustainable energy technology to new applications across the value chain. Some

general examples of these opportunities are shown in Attachment II. Each area of the value chain offers

business venture opportunities that can create value using one or more of the three major categories.

Attachment II

Opportunity Recognition

Solar Energy Generation Value Chain

Equipment to

Manufacture

PV cells

PV Cell

Manufacture

PV Cell

Installation

Energy

Generation

Energy Capture &

Storage

National Grid

Management

Regenerative

Technology

Development

Source ormanufactureequipment

Semiconductormaterialsimprovement

Cell installation-commercial,residential

Conversion fromtraditionaltechnology tosolar energy

Storage systems Monitor energyflows

Improve collectionefficiency

Producttesting

Reduce cell size

-Thin wafers

-Nanotechnology

Newapplications

-HVAC

-Homeappliances

Scale-upopportunities forexisting systems

Improve captureefficiency

Energy trading andarbitrageopportunities

Value chain costefficiency

Manufacturingoperationsimprovement

Lowermanufacturingcosts

Support services

-Maintenanceand repair

-Warranty

TransmissionNetworkManagement

New materialstechnology



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Cross Value Chain Opportunities

Training of customers, employees, etc.

Operating procedures, manuals development

Value chain integration

Consulting services

Photovoltaic (PV) Cell Equipment Manufacturing

This opportunity pertains to the sourcing of critical inputs necessary to build and operate plants

that produce PV cells. The requirements for these plants will grow as the number of PV panel shipments

continue to expand. Opportunities for entrepreneurs include procurement, training, servicing

equipment, operating businesses as original equipment manufacturing representatives, and distributing

or marketing PV cells from the plant to wholesalers and other customers. Entrepreneurs may also get

involved in applying lean manufacturing and six sigma processes to improve the operation of the

manufacturing processes.

PV Panel Shipments Distribution

This opportunity involves the establishment and operation of distribution networks to supply a

rapidly growing market. This includes warehousing product, inventory management, supply chain

management, and product support (packaging, handling damaged goods, and other activities).

Integrating information systems to manage the supply chain is also included in this category.



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PV Panel Installation

This opportunity requires the entrepreneur to establish a business that will procure panels for

direct installation in residential or commercial buildings. The commercial buildings could include schools,

apartment complexes, office buildings, and small shopping centers. This business could be established

using a variety of arrangements with a local utility such as direct purchase of panels from the utility then

installation, or simply allow the utility to purchase all equipment and supplies so that the entrepreneur

can focus on installation and service. Duke Energy has established an arrangement of this type with

entrepreneurs in the North Carolina marketplace (Duke Energy, 2009). This program could well be the

precursor to many similar approaches to building out the solar panel installation market. The solar

energy technology is also focused on supplying other energy intensive systems such as HVAC systems

and mobile appliances. As these technologies develop new opportunities will emerge for entrepreneurs.

Conversion to Solar Energy Generation

The transition from traditional energy sources to solar powered systems will require installing,

replacing, or modifying the equipment and infrastructure within the electrical industry. Entrepreneurs

can perform a vital role assisting with planning and implementing these energy systems conversion

projects. Other opportunities will emerge in the area of sizing the solar system and expanding it as

commercial needs grow. This ability to right size the new system to an old system could represent a

challenging and interesting business opportunity.

Energy Captivation and Storage

Once the energy has been generated, the electrons have to be captured and used or stored.

Opportunities will exist to improve efficiency of energy captivation and storage during this crucial step in

the value chain. This process will also enable the global movement of energy across networks, or the



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national grid, to improve the efficiency of energy use across the country. Also, technologies will be

developed to enable energy captivation across different appliances or platforms such as fixed storage

units, mobile devices, as well as traditional panels. Effective management of the flow of energy from

the storage unit to the national grid is another fruitful area of consideration.

National Grid Management

Once the individual solar systems are installed and operational, power will be generated from

multiple sources. Some of that power will be consumed immediately, the remainder may be sent to

higher demand locations for consumption. This global energy exchange should present opportunities for

managing the network, participating in energy exchange and trading arrangements, and possibly

identifying arbitrage opportunities. This downstream opportunity is far from developed but should

present yet another area for wealth creation.

Technology Regeneration

Once the entire industry has achieved significant scale on the operational level, new

opportunities for increasing efficiency and effectiveness will emerge. The solar energy industry will

continue its path of evolution toward better technology that should be integrated across the entire

system. Once again, new entrepreneurship opportunities should emerge from this process. As change is

implemented across the entire system, that change will precipitate the need to reconsider all of the

individual value chain areas for additional improvement opportunities. This virtuous cycle may continue

for many years.



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Cross Chain Opportunities

While the case for opportunities clearly exist within each of the value chain areas, there is yet

another group of opportunities that can be identified by evaluating the overall chain as an integrated

whole. Evaluating this chain in such a manner reveals opportunities for training through out the system,

opportunities to develop operating procedures and manuals at all levels, opportunities to troubleshoot

and smooth out the performance of the entire system and to enhance integration. These examples are

but a few of the many system-wide opportunities that may emerge. Astute entrepreneurs will identify

opportunities to create consulting firms and other service organizations, such as internet information

providers targeted to improve the value chain. These consultants will become integral to maintaining

the virtuous cycle of change previously mentioned in this article. The opportunities will also shift as the

industry evolves through the traditional business cycle of industry growth, maturation, and decline. This

industry is clearly a long way from finishing the rapid growth stage and should present enormous

opportunities for aspiring entrepreneurs.

Conclusion

There is significant entrepreneurial opportunities within solar industry. “The global production

value of the photovoltaic industry in the past five years has constantly performed at a compound annual

growth rate of 35 percent, Ellick Liao, COO of Taipei, Taiwan-based Gintech, said in an October 2008

speech at the Taiwan International Photovoltaic Forum. “Five years ago, most experts predicted that

solar power would only…become a mainstream [fixture of] the global power supply after the year

2035.” Liao targets 2015 as a more likely date for that to happen (Baldwin, 2009).



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References

Applied Materials (2009). Retrieved June 25, 2009 from http://www.appliedmaterials.com.

Baldwin, H. (2009, June 04). Opportunities in solar: The push for renewable energy is pullingmanufacturers into the market for photovoltaic cells. EMSNOW. Retrieved June 25, 2009 fromwww.emsnow.com/npps/story.cfm?id=39721.

Davidson, P. (2007, August 26). Forecast for solar power: Sunny. USAToday. Retrieved June25, 2009 from www.usatoday.com/tech/science/environment/2007-08-26_N.htm.

Duke Energy (2009). Retrieved June 25, 2009 from http://www.duke-energy.com.

Energy Information Administration/Electric Power Annual 2007, p. 16.

First Solar. (2009). Retrieved June 25, 2009 from http://www.firstsolar.com

Obama, B. (2009). Inauguration address, January 20. 2009.

Poole, B. (2008, September 26). Tax credit extension brightens solar outlook. Tuscon Citizen.Retrieved June 25, 2009, from http://www.tusconcitizen.com.

Schumpeter, J. (1942). Capitalism, Socialism and Democracy. New York: Harper and Brothers.5th ed. London: George Allen and Unwin, 1976.

Solar Energy Industries Association. (2009). Retrieved June 25, 2009 from http://www.seia.org.

U. S. Department of Energy. (2009). Retrieved June 25, 2009 from http://www.eere.energy.gov.



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Entrepreneurship Opportunities in the Solar Industry