Just 20 years ago, solar power was largely the domain of geeks and wonks. Most projects were developed purely for research purposes or as proof-of-concepts. Technology was infantile and fractured. Just a handful of people — generally extreme environmentalists with deep pockets — boasted home solar capabilities.
Fast forward to today, and solar roof tiles are the ‘concept’; large scale solar generation is the norm. Solar is now a mainstream technology — governments want to invest in it, consumers want to own it, investors want to profit from it and regulators understand it. Consider, for example, the fact that the UK installed nearly 9,000 megawatts of solar capacity in the last 7 years alone. Or the fact that, between April and September 2016, solar provided more power to the UK’s grid than the existing coal fleet.
Yet solar is not a ‘privileged’ technology. Solar projects are now operating in virtually every market around the world. Technologies have become standardized and global. And almost everyone — including the world’s poorest and most isolated citizens — can now tap into cheap solar power at home.
The rapid globalization and adoption of solar technology is clearly a remarkable achievement. But what has allowed solar to thrive where other technologies have struggled? What is different and unique about solar? More importantly, what can other sectors learn from the solar success story?
I recently had an opportunity to discuss the globalization of the solar sector with Jonathan Maxwell, Founder and CEO of Sustainable Development Capital LLP (SDCL), an investment banking firm focused on energy efficiency project finance. And he notes that solar has shared many of the same benefits as other technologies and infrastructure sectors.
“Much like other capital-intensive industries and sectors, solar has certainly benefited from the historically low cost of capital over the past few years, and that has allowed markets to be fairly active in the solar market, from the development and construction phase through to operations,” he notes. “The global drive to remove carbon from the energy mix and the recognition that resources continue to be strained also add impetus to solar and other alternative energy sources.”
At the same time, it is clear that solar has enjoyed some very unique benefits as well. For a variety of reasons, solar has become the poster child of politicians and community groups alike. In all corners of the world, governments have created incentive programs and tax breaks to encourage the adoption of the technology. And international efforts to reduce carbon emissions have given solar a unique platform for growth and global cooperation.
Solar has also benefited from a massive push by China to dominate the solar panel manufacturing market. And this has catalyzed a rapid fall in the global cost of solar panels which, in turn, has helped unlock new solar developments.
Yet it is the simplicity of solar that has perhaps done the most to drive its rapid growth. There is a simplicity to the technology. Besides the fan used to cool the electronic components, there are no moving parts in a ‘traditional’ solar solution, meaning less complexity, as well as lower upkeep and maintenance costs.
There is a simplicity to the feedstock. Solar is available to everyone around the world, but is particularly abundant in regions that are in the most need of new, cost-effective energy sources. And, as Jonathan notes, solar is stable. “Other technologies face challenges related to fuel prices, security and quality; dealing with spent fuel is a constant challenge for some technologies. I think the market appreciates the simplicity of the entire solar value chain,” he notes.
The growth of the market has also led to simplicity in the way projects are structured and financed. “The massive growth in deployment has driven down costs and helped to establish a track record, standards and servicing capabilities that improve confidence for investors,” Jonathan adds.
For infrastructure players and participants, the key lesson should be that — with the right support, enablers and leadership — it is possible to radically alter the trajectory of a new idea or technology. But there are other insights that can be taken from the solar experience:
Clearly, not all of solar’s advantages are able to be duplicated by other technologies or infrastructure sectors. But the core advantages — contract simplicity, successful deployment and standardized approaches — are possible to replicate. It’s time to learn some lessons from solar.