The weak solar development showing for the first two Quarters of 2011 might have us wonder what happen to the solar industry. To get a pulse on the industry I sent out the following question to over 2,600 of my linked in contacts and thought it would be good for you to read what the professionals in the solar industry think about the reason why. In some cases I will give you the name and company of the respondent and in other cases I will not.
Recently in the news there have been mergers, plant closings & Chapter 11’s. What is the cause of all this flux in the solar industry? Most solar experts believed that 2011 would be a stellar year in the U.S. with 100% depreciation and the 1603 cash grant. What do you believe was the reason for a week 1st& 2ndQuarter?
I think that any growing technology goes through these changes and there is various aspect of the situation. I’ve seen many prosperous renewable business industries in the 80’ go through mergers and closings. They also faced the fact that they were developing when the market growth was at the beginning of the “wave like” stages, therefore suffering hard stepping stones and often unable to capitalize on their product development or patents timeframes.
As the market looks attractive, there is a rush into the industry of new business talent. Many succeed because they have great visionary leaders building great business alliances and targeting specific areas of the market. There are businesses that are successful in near related markets such as balance of systems components or electronic equipment that can easily translate into new business divisions in the renewable green opportunities. This can be successful when they run as separate divisions without corporate overseeing them directly and causing their failure. Sometimes as their core business is more important they overlook the right combination of talent, investment and business strategy to succeed.
When the market grows due to incentives, the big fish moves and tries to eat the smaller fish by merger, purchasing or taking a big share of the market. They get the big money from PPAs, bonds, investments and more but basically from their business relations and key contacts. Finally, the most common failure is due to income dependency of an improperly managed sales pipeline, so when the expected sales does not occur or are delayed by external factors, it hits them hard on their operational income. Maximo Torres
The customer value decision of solar equates to the homeowner utility cost versus the cost of the system and the payback time. Since housing is on the downward slide, the equity in the home is Zero or minimum and banks are not lending on second mortgages since recent CA law prevents paybacks of seconds on short sales and foreclosure. Solar works best in $2200+ annual utility costs climates. The money needed to add solar is not available. The customer is tapped and just not that interested after the quote has re-roofing and added electrical costs to their existing home. The quotes die and the salesman push is diminishing. In addition, rebates for CSI are at the 80 cents level.
I heard on the radio today an ad where the claim by the homeowner is his electrical bill is (o) with 50 solar panels. Imagine that retail cost to install to get (o) billing, no mention of payback of rate of return. I must say wholesale costs of Solar Panels costs have dropped over 40% since 3rd quarter last year. Steven Lefler
My response to this respondent is: Actually, I feel the housing market will eventually be in a position where there will be a boom in solar. It will start by the end of next year at the latest, but by June we will see many more homes having solar placed on them. This is my prediction. Mainly because installation prices are way down and people have not been spending which means their accounts are growing. They will invest into the right thing and solar is that right investment. Robert Benedict
The solar experts were simply wrong. Why would we have expected a stellar year for solar when every other segment of the economy is having a difficult time. With the exception of social networks, gold traders and the oil/gas industry we all had a weak 1st and 2nd qtr. The uncertainty driven by the debt and the deficit is keeping investors out of the market. Further they are burning up available funds in order to keep their existing ventures from going under. Nicholas Verini
From an executive recruiters experience the majority of the solar clients I have worked with don’t really know who they want to be. Their business model and job openings change daily. Also, many were expecting more investment dollars so we have seen a number of solar companies merge with others or have been bought out, often by larger, European companies. There is a shakeout going on. Those companies who are focused and have a strong business model (and some capital) will win out. Suzanne Rey
With a published unemployment rate of 9.1%, it’s actuality around 18.0% in reality, there has been an influx of people and Capital into the business in the last few years (me for one, 25 years on Wall Street) because it is one of the few Industries that is growing in this Country it has attracted a lot of unemployed from other industries.
Most of them really don’t know what they are doing, I know I didn’t when I started but I read perpetually in order to learn as much as I can. I have had numerous conversations with people who call themselves `COO’s’ of Solar firms who don’t have a clue. As the low hanging fruit becomes scarcer and scarcer, in terms of jobs, the people who don’t know what they are doing will get washed out. Capitalism can best be described as Darwinism. It’s the human element that softens it…sometimes.
What’s the old saying about new businesses? 90% of them fail in the first 5 years…seems about right. Scott Webb
Removing of incentive from two biggest markets, Germany and Italy reduced market demand globally. Also, US market is just starting to mature, but there is too much capacity compared to current demand, once US market takes off, it will provide breathing room; however, it is going to be very tough for 2nd and 3rd tier companies to hold on…Reza Zarif
I believe we are in for another Q1 & Q2 of 2009. Oil and CNG markets have continued to make very a very positive impact JOBS impact so far this year; all while CRUDE & CNG prices continue to fall. Nick Tucker
Investor uncertainty based in congress unable and unwilling to pass tax law and renewable energy policy for more than one year. Same as last year…Gregory Miller
With all the interesting responses I will continue with two more articles that give you other solar professional’s responses. I have also gathered all my response to these respondents and will present my responses in a summary. In the summary I will address the question of why the solar industry has seen so many changes recently and what we can expect for the remainder of this year.