Solar: the problem was never the technology

Planet Money has an excellent episode, 616: How solar got cheapI see a parallel here with the recent interest in listening to the world’s poor, citizen reporting, and “feedback loops” in general. Most people think it is about enabling conversations with new technology. But, like the solar panels story, I think it will be about rethinking the conversation and the context that makes it ultimately work.

Quick recap: In the podcast three things happened between 2009 and 2013 that changed the solar market:

  1. China flooded the market with cheap solar panels, because they oversubsidized production and to many companies jumped in. This caused legacy companies in USA, Japan, Germany, and Korea to be forced to cut costs and offer their products at competitive rates, or get out of the market. Most found they could sell a panel for $200 that used to cost $1000 without needing to fold. So the price resettled at $200 per panel.
  2. Financing changed: Companies like SolarCity will convert your home to solar for $110 a month if you sign a 20-year contract. They make money at this price point, and the homeowner saves 30-60% off their existing power bill. Now banks are “owning” solar panels and collateralized debt obligations on panel installations to finance this long-term savings.
  3. Marketing changed: Out is “this is the right thing to do for the environment!” and in is “this will save you money.” Also, they’re no longer talking about the long term return on investment. They’re provided immediate savings on day one, through financing.

What didn’t change: The Technology

I shared this with my team at KeystoneAccountability as an allegory for the feedback business. We are wrestling with the pressure to deliver community feedback to Ebola actors in Sierra Leone and Nepal earthquake recovery actors at lower cost. There’s a tendency to focus on better technology as the answer. I suspect it is more about financing, marketing, and process enhancements around existing technology.

One of them commented, “they [Planet Money] left out that panels have also became a lot more efficient in the last few years.” To this, I replied with some charts:

The efficiency of solar panels has increased every year, but no dramatic improvements have happened since 1996, and they are not projecting any breakthroughs this decade.

solar-efficiency-1950-to-projected-2020

For comparison, this 20% increase in solar cell efficiency in the last half century is pretty small compared to the 10,000,000-fold increase in processor power: (note the logarithmic scale).

Clock_CPU_Scaling

Solar has a theoretical maximum efficiency of 95% on Earth, and we’re hovering around 25% in 2015. But it turns out that we didn’t need to get much more efficient to make solar a viable alternative energy source. The cost of solar energy per Watt decreased dramatically starting in 2009 – when the Chinese flooded the market with cheap panels.

Price_history_of_silicon_PV_cells-1977-2015

Thus, economics and not better technology has caused the price to plummet. This has the effect of making solar look like a more efficient technology, but the energy conversion efficiency hasn’t changed.

Only the way that people think about it and pay for it has changed!

Lessons for citizen listening projects:

  • Let’s stop focusing entirely on the technology. It’s there. It’s sufficient. Even paper surveys can support feedback loops, if needed.
  • Let’s focus more on “flooding the market” with the feedback equivalent of solar panels. This comes in many forms when the goal is to help citizens change their governments. You have the Arab Spring approach, or the Facebook Zero effect (free internet on phones for the poor enables more social change), or maybe some kind of citizen-advised-experts talking to governments (the GroundTruth model), or something else.
  • Market reliable and accurate citizen voice sources: If good, reliable information was coming in from many places and we can show that listening to citizens solves the problem, people will use it.
  • Different financing models: Right now these listening experiments happen slowly and rely on grants for funding, if they are funded at all. More often they’re volunteer led out of necessity, or use tons of micro-payments like Storytelling did in Kenya. What would a 20-year contract on citizen feedback look like for a government agency? Could we cost out the long term savings and deliver those benefits to the payer up front and recoup this cost over the life of a loan? The possibilities intrigue me.
Play All Delighted People (hybrid remix)
MP3

Listen to that podcast!

Postscript

Despite these impressive declines, the United States still has the highest prices where data is available for residential and commercial solar. US installed PV prices are more than double German prices for systems under 100 kW, and much higher than prices in the UK, Italy and France.

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3 thoughts on “Solar: the problem was never the technology

  1. Great post Marc – but I never said that technology CAUSED the drop in price. But it has to have contributed: 25 panels producing today what over 60 were needed to produce 5 years ago has to have contributed reducing the cost – of capital outlay AND installation. Recognising this does not dilute your argument at all.

    Regarding feedback technology – I worry that you could be at risk of throwing the baby out with the bathwater. I agree that the technology exists for collecting data – and that often the most basic technology (paper) can still work best in many contexts. But the technology that will enable people to analyse and use feedback loops effectively is not yet freely available anywhere.

    Its a classic value chain proposition. Just like you cant just focus on increasing productivity without at the same time building markets for smallholder farmers, you cant focus on collecting feedback only without enabling its use. And technology still has a contribution to make here.

    sendng quickly just befgore we get another power cut here in Cape Town ….

  2. Andre – Technology certainly matters (in solar and in feedback) but I think the story is that it is less important a barrier than it is perceived to be. In the past, technology WAS the problem when solar cells were only 15% efficient. Now they’re at 22-25% and so the problem of adoption was these other things. You could still be profitable while selling a 20% efficient solar panel today if the financing, marketing, and context was right, or go out of business selling the MOST efficient panels (because the difference isn’t significant relative to the increased price).

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