Photovoltaic Business Plan 3000 words











Introduction to a Photovoltaic Company

Business Plan


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The purpose of the proposed company will be the design and manufacture of photovoltaic cells for the purpose of creating electrical energy from non-polluting natural sources such as light.  Photovoltaic cells convert radiant light energy, primarily sunlight, into electrical energy when it falls on the boundary between dissimilar substances such as cuprous oxide and copper or an electrode and an electrolyte.  (Webster’s Dictionary, 2002)  The obvious advantage of photovoltaic energy is that it is produced by a sustainable and non-polluting source.

The benefits of photovoltaic cell power to the homeowner include the reduction of the homeowner’s carbon footprint.  Solar electricity is green, created by renewable energy and releases no harmful carbon dioxide (CO2) or other pollutants.  A typical home photovoltaic system can save about 1tonne of CO2 per year or about 25 tonnes over its lifetime.

A photovoltaic system can cut the homeowner’s electricity bills substantially.  Sunlight is obviously free, so once the initial installation cost of the system is paid, utility costs will be greatly reduced. A typical home PV system can produce about 40% of the electricity a household uses in a year.

There is also the possibility of selling electricity back to the Grid.  If the system is producing more electricity than required at any time in many areas there is the option of selling it to the local electric utility.  There is also the possibility of storing electricity for use when sunlight is not available or if your home isn’t connected to the national grid. It is feasible to store excess electricity in batteries for use as needed.  (energy saving trust UK, 2011)

One of the keys to the growth in home energy systems is the development of “smart grids,” electric grids than can accept power from clients as well as sell it to them.  The basis of a “smart grid” is the electric meter than can measure both inbound and outbound power and allow control of home electric usage by computer even remotely.  It will allow the homeowner to check on usage and combined with differential pricing to reduce usage in peak high cost periods and use more power for things like laundry, dish washing and even recharging electric cars at off peak rates.  Both France and German are working aggressively on the development of “smart grids.” The problem is that each country is developing its own standard for a smart grid, so the products like the software selected may not be compatible. What is manufactured in Germany in compliance with German standards may not be compatible with the French system for example and clearly will not be with the 110-volt system in the United States.  (Stone, 2010)

To this point the discussion has been limited to the opportunities in the residential market or the market for individual consume systems.  There is also a very important commercial market.  One of the important elements in working with this market is that most of the governmental and regulatory problems are not the responsibility of the producer.  In large-scale installations for businesses ad utilities the system will be engineered for the specific client.  It will use the technology and probably many of the standard products of the producer, but the client will be deeply involved in the engineering of the project.  In commercial real estate projects the key element is the “break-even turnkey cost” or BTC.  This is in turn based on the cost of PV (photovoltaic) produced energy as opposed to the cost of energy purchased from the grid.  The element measured is the cost per Kw of power from the grid compared to the cost per Kw from the PV system fully installed and functioning or “turnkey.” (Heric, 1998)  The cost per Kw of large systems has been declining since this article was published and it was possible even a decade ago to justify PV systems in certain locations in the US.

A SWOT Analysis of the opportunities in the photovoltaic industry

A study by a group of distinguished scholars from the European Union produced a SWOT analysis under the auspices of the EU of the “Strengths, Weaknesses, Opportunities and Threats of Photovoltaic Research, Technology Development and Demonstration in Europe” a summary of their findings with comments is presented here.  They viewed the strengths of the European Industry as including strong and high level research and development.  This is supplemented by the excellent communications resulting from various European Community funded projects between photovoltaic research technology and development.  The nature of the technology and its “green” applications are strong arguments in favour of support for sustained research and development of photovoltaic activities. In addition, the underlying importance of small and medium enterprises provides a high level of agile reactions to the market.  Further elements in the decision process are the strength of European producers in disciplines such as thin film cells, organic cells, polymers, BIPV and advanced stand-alone systems.  There are already in existence roof programs that stimulate the PV market.  Further, the European industry is already strong in Balance of System (BOS) and stand-alone systems. (Rantil & Passiniemi, 2003)

The weaknesses of the European research and development and the Photovoltaic industry are inherent in the wide distribution of the industry across the many nations of Europe, which makes difficult or precludes the development of critical mass. This is further compromised in that too few European countries have dedicated PV programs.  There is also a lack of communication between academic and industry researchers, and they have different priorities.  The lack of standardisation of key components even within Europe has already been mentioned above.  Finally, European PV companies, which are often SME, are not making enough profit to be able to develop, on their own ground, new technologies/concepts that are not immediately commercialised. (Rantil & Passiniemi, 2003)

The opportunities for the PV Industry are in large part based on EU policies concerning renewable energy and the Kyoto targets.  The extension/increase of current roof programs and widening to other EU member states creates a more solid base for PV industry.  Co-operation with the building sector helps them to understand what PV can Offer and PV industry to understand the building sector trends.  Cross fertilisation with other industry areas (thin film, glass coating) create possibilities for new production concepts.  Various thin films (other than α-Si), polymer cells and combinations between crystalline silicon cells and thin film technologies open up potential for new cheaper forms of PV module production.  In addition to established markets in developed economies the developing nations offer incremental and growing markets for stand-alone systems and small grids.  . (Rantil & Passiniemi, 2003)

The Threats to the PV industry include the stop and go government funding and programs.  The failure of some of the Photovoltaic research programmes may result in redirection of funding.  In terms of the industry in Europe the strength of the Japanese and US programmes may weaken the European competitors. The success of the European programs is based in large part on roof programmes funded at least in part by government.  If this funding source is reduced it will probably impact the European producers.  The programmes of the electric utilities are not well developed as yet, and further development is probable but uncertain.  (Rantil & Passiniemi, 2003)  Particularly in Germany, there is a potential problem based on the proposed reduction of the FIT (feed in tariff) cut planned for July.  (Richard, 2010)

A PESTEL analysis of the PV Industry and the proposed company

The political elements in the development of a new PV company in Germany are somewhat questionable.  The Deutsche Energie-Agentur – the German Energy Agency chairman, Stephen Kohler proposes that the German electric grid is actually having problems with the volume of solar power feeding into it.  He has called on Germany to reduce the growth of solar power, and in Berlin the subsidies for solar rooftop panels are being reduced by 16%.  (Cernansky, 2010)    At the same time UPI (United Press International) reports that by 2013 Germany will have almost 50 Gigawatts of solar capacity.  The upshot of all the above is that while there are some political questions concerning PV installations, particularly roof top installations, the market will probably show good growth for the next year or two.

The economics of the situation for a new company entering the photovoltaic field, particularly one that will at least initially focus on rooftop installations will be difficult.  Germany is already the world’s largest single market according to iSupply that writes, “Germany’s solar business–the world’s largest market–grew at an extraordinary rate in the second quarter of 2010, causing PV installations to exceed expectations during the first half of the year. In the first half, Germany installed 3.9GW worth of solar systems. Germany’s surprising performance was driven by excellent investment conditions and demand pull-forward prior to a cut of the country’s Feed-in-Tariff (FIT) incentive program in July.” (Richard, 2010)

The problem for a new company is that there are obviously a considerable number of established competitors.  The question for a new company is what strategy is available to establish penetration in what is already a vibrant and competitive market. According to Michael Porter there are three generic strategies. Becoming a low price producer as a market newcomer with no technological advantage is not realistic. Product differentiation in a technological industry where the new company will have to use established production techniques or purchase components from established suppliers is also unrealistic.  This leaves only the focus strategy as in any way viable.  Germany is at the moment the strongest single market for rooftop PV installations in the world, and that is the selected market for the new company.  The focus strategy will not achieve either low cost leadership or technological advantage in the industry, only hopefully in a single market, in this case Germany. (Porter, 1980) Forcing entrance in an established market such as the German PV market will be a significant challenge.

A PESTEL analysis of the environment for a German PV company

The political questions are key in the future development of the proposed company.  Since the project was first discussed there has been a reduction of 15% in the Feed in Tariff as of the 15th of April 2010, and there is some question as to further government funding levels for residential solar power installation. “The drastic short-term reduction of the tariffs in the German renewable Act will have significantly negative consequences on the German solar industry,” In the opinion of Marko Schultz of Q-Cells, one of the largest suppliers of the cells. There is little question that there is strong support from the public and particularly environmental groups for solar projects.  There are, as pointed out above, some important questions as to the impact on the utilities industry in German.

The economics of Germany are the most positive in Europe.  The German solar market is one of the fastest growing in the world.  The impact of the solar power industry on the German energy market is causing some serious displacements, and as of January 2011 the German environment Ministry and the solar industry agreed to cut subsidies for solar installations six month earlier than planned to slow the growth of the market for PV cells in Germany. (Bloomberg, 2011) This is a very significant element in the economic environment for the photovoltaic industry.

Two of the most important social concerns worldwide are energy and the environment.  These are closely related and it is not necessary here to go into the need for less polluting and more environmentally friendly energy sources.  There is little question that a major element in the development of environmentally friendly and sustainable electrical energy is wind and solar power.  One of the primary underlying drives of the solar energy industry is the social concern of the political and public communities. It is clear that, “…for a continued healthy expansion of the PV industry in Germany, the market will need a reliable regulatory framework, appropriate incentives and industrial policies that makes it possible for the industry to achieve its ambitious targets.  (Solar Feeds, 2010)

The technical elements in the solar power industry are first how to produce solar cells and progressively lower costs and higher levels of efficiency, which are closely inter-related.  Moving past the cost efficiency of cells, there are several underlying technical elements in the industry.  The first is the obvious that solar cells work when the sun is out.  In Germany the average of sunny days in Berlin for example is about 198 per year, or a bit more than half the time.  The average number of hours of sun per day is about 5.  The graphic below illustrates the problems clearly.  What this implies is that some method of storing energy or providing a substitute for the periods lacking sunlight must be available.  (, 2011)

This immediately suggests batteries, which are expensive and not a particularly efficient storage medium.  This is a serious problem for the photovoltaic cell, which is good at producing electricity, but not much else and has not storage capacity whatever.  The latest solution to the problem of storing solar energy is thermal, but this has no direct application to photovoltaic cells.  The energy storage of a laptop computer battery and a one litre coffee thermos are about equal.  The thermos can be purchased for perhaps €5 while the laptop batter costs about €150.  There is a further problem in that batteries eventually wear out and must be disposed of in an environmentally acceptable manner. In terms of commercial or utility photovoltaic installations an engineer for Black and Veatch, Larry Stoddard, points out that, “…if I’ve got a 50 megawatt photovoltaic plant, covering 300 acres or so, and a large cloud comes over, I lose 50 megawatts in something like 100 to 120 seconds. That strikes fear into the hearts of utility dispatchers.” (Wald, 2008)

The other problem with PV cells and batteries is that they produce and store electricity in the form of direct current (DC).  Most household and industrial devices utilize Alternating Current (AC).  This usually involves a device called an inverter, which will convert DC to AC.  They are common and not particularly expensive relative to the overall cost of a PC system.  (eHow, 2011)  They are however an additional step in the process of utilizing PV as a source of electrical power.

The environmental impact on the production of power is the main argument proposed in favour of the use of PV cells to channel renewable or sustainable solar energy.  There are however environmental impacts of manufacture of PV cells and the environmentally friendly disposal of cells that have been exhausted by use.  Further problems involve the exhaustion of raw material, the amount of energy used in producing the cells, which is high, about equal to their production of power in the first three of four years of their life, and acidification.  (Aguado-Monsonet, M. (1998)

The legal situation for a photovoltaic company in Germany is little different than it would be in any developed economy.  As part of the European Union German law the situation is uniform throughout the EU. Under a decision rendered by the European Court of Justice in 2002 in the Überseering case, it was held by the court that, “…under European law every member state must accept the legal capacity of companies established under the legal system of any other member state regardless of the company’s actual place of business.  The most unusual element in German corporate law is co-determination, the rather unique provision that provides for employees participation in the management of German companies.

Summary and conclusions

There is little question that the German market for PV products and particularly consumer rooftop installations has been the strongest in the world for the past few years.  There are underlying changes in the market brought about by the success of the product and its impact on the electric utility industry in Germany.  It is questionable that the historic market would have been as strong as it has been without government support and subvention.  The need for sustainable and green energy globally is fact.

There is no question that solar power is at least part of the answer to the global call for sustainable energy.  There are what seem to be some insoluble problems in the photovoltaic approach to the problem.  For the next few years it will doubtless remain strong, and it will always have some share of the market.  The new approach of thermal-solar energy generation which approaches the problems of energy storage and use on demand regardless of weather seems to have much to recommend it and must be considered in terms of the development of any solar energy company, at least as a long term goal.












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