Beyond the Feed-In-tariff. How solar
companies can continue to stay in
business.
Last month, the UK government announced that it will be ending the feed-in-tariff scheme which has
proved so popular. The impact of the scheme cannot be understated. By 2015, the number of FIT
installations had reached 682,511 surpassing the government’s own prediction of 780, 000
installations by 2020. The number of domestic solar installations also surpassed all expectations and
reaching 640, 344 installations in 2015 when the government modestly predicted 450,000
installations by 2020. Suddenly home and business owners who had never given a thought about
renewable energy were suddenly interested in jumping bandwagon and look progressive at the
same time. The scheme was notably associated with solar PV and was instrumental in making the UK
the most dynamic solar PV market in Europe. In 2010, before the scheme started, the installed solar
capacity in the UK was 0.095GW. By 2017, a 12.7 GW capacity had been achieved.
So, the government has decided to end the scheme under the impression that the technology is
ready to transition from a subsidised one to mainstream one. While a debate about the
government’s decision is worth having another time, it is now up to solar installers and suppliers to
adapt quickly or face extinction. Because the truth is that the end of the scheme will cause a
shrinkage in the solar market and lead to a significant reduction in the number of installations. With
that in mind, these are the steps I believe solar suppliers should take to survive in this new harsh
environment.
1.
Show me the Money! - The good news for the industry is that globally, the
module prices of solar PV have been falling rapidly over the past decade. This has led to solar
becoming the most rapidly growing renewable energy technology in the world. As shown by
the graph below, the price per W of solar PV in the UK has fallen about 26% over the past
five years alone.
This fall in price is expected to continue, though not at the same rate. The increases efficiency that
set the price drop in motion is still set to continue and with countries such as India, China and the US
hoping to realise some highly ambitious PV plans, mass production will continue. This makes solar PV
an attractive investment even without the government subsidies and it is up to the industry to show
investors this. The days of quick back of envelope calculations to show potential customers all the
money the stand to make from their investment is coming to end. Potential customers will need to
be shown, in detail, how much energy they stand to produce from their installation as well as how
this compares to obtaining energy from the rid. This means that an Hourly, daily and yearly
breakdown of predicted energy will be needed to give prospective customers the full picture.
Advances in data science and machine learning makes it easy to predict future solar radiation for any
location. Prospective customers will also have to be shown how the return on their investment
compares to other forms of investment such as bonds and stocks. By taking the initiative to give
prospective customers a deeper understanding of how much they stand to make from their
investment, they can sway prospective customers to consider investments in solar as a long-term
investment that will pay off later. This future ‘pay off’ can be shown by demonstrating how future
increases in the price of energy will benefit them.
2.
Chase the right customers – As the market starts to shrink due to the end of the
tariff, all solar suppliers and installers are going to be chasing the same customers just to
survive. It will be up to businesses to change the way they identify the right customers and
determine the best way to market to them. This is when machine learning comes into play.
Artificial intelligence (AI) and machine learning is being used by several industries to identify
the right customers and it is time for the solar industry to jump on board. By taking the data
on previous customers, using machine learning algorithms to identify patterns in the data, a
model can be built that will help businesses rate the prospects of a potential new customer.
This technology can also be used to determine the best channel to contact these customers.
This reduces the time and money spent chasing the wrong leads and allow businesses pass
on the potential savings to their customers. Though the price of solar is set to keep falling,
been able to offer your customers further reductions will help the business stay ahead.
3.
Invest in emerging technologies – People love new technologies. That’s a
given fact. They want to be part of the story, experience the beginning of something
exciting. This is no different when it comes to solar technology. Advances in the production
of silicon based solar panels has driven the down the cost of solar panels massively over the
past decade. This is still set to continue even though predicting the price of any technology is
always a risky business. Silicon though, has a 29% material limit of efficiency and your typical
silicon-based panel only converts about 21% of energy from the sun. No matter how cheap
we make silicon, the limit of 29% will still apply. Any technology that improves on the
current efficiency of 21% will be greatly appreciated and will go a long way to ensuring that
the industry survives and grows.
One of such technologies is the use of perovskite as a layer on top of silicon to increase
efficiency. Perovskite captures energy from the sun at different wavelengths than silicon so a
combination of the two can increase efficiency. Combination of the two can achieve an
efficiency of 25% which represents a 20% overall increase in efficiency on current PV cells.
Due to the flexible nature, perovskite can be incorporated into the fabric of new buildings,
both in the walls and windows since it can be made semi-transparent. Due to the reduction
in the price of solar, over half of the cost of putting in a collection of panels comes from the
cost of installation. By increasing efficiency of the modules, the number of panels needed to
be installed will be reduced, which will minimize the cost of installation. Outside of
perovskite, other exciting technologies such as using impurity photovoltaic effect (IPV) to
increase solar cell efficiency has shown a lot of promise. This is actually a very exciting
technology and there will be more on that latter. Some mono crystalline silicon PV cells have
also achieved an efficiency of 25%. With the end of the government subsidies, it is clear that
the business that can provide higher efficiency modules at reasonable costs will stand to
benefit. It is now up to businesses to start exploring these options.
4.
Offer Predictive maintenance – The time has come for solar suppliers
everywhere to offer their customers predictive maintenance that can increase the
performance ratio of small installations and solar plants alike. This can be achieved through
operation and maintenance activities and predictive data analytics. By collecting weather
data, breakdown data and performance data, predictive analytics can be used to pinpoint
any malfunctioning and detect when the performance of the panels veer from the expected
values. This is a truly automated process and can reduce operational costs by up to 25%.
While predictive maintenance has been used in large solar farms to improve efficiency,
smaller solar suppliers and installers can offer this for smaller installations by grouping
smaller installations in a broad location to form a sort of ‘solar farm’. The data on all these
installations can then be collected and analysed as one and the service can be offered for a
small monthly subscription fee. Offering predictive maintenance is not only good customer
service, it is simply good business. It also allows the business to create a subscription model
which has proved such as a success for companies such as amazon, Apple, Microsoft and
Netflix.
5.
Attract Different types of customers – Until now, the UK’s solar industry
has had it relatively easy. The popularity of the feed-in-tariff ensured that there was
increased energy awareness in the general UK public and people actively sought out solar
panels and technology. With the end of tariff, the technology will remain popular but one of
the biggest selling points, which was reduced payback time due to government subsidies is
set to disappear. This means that businesses will have to start attracting customers who will
view solar as a long-term investment. These are smart investors who will need to be shown
the viability of their investment. Identifying these customer (both residential and
commercial) and finding a away to market to them will have to be the way forward. So how
do firms go about attracting these customers? This is when the need for predictive
customers analytics become imperative. Not only will predictive customers analytics help
you identify theses customer and the best channel to approach them, it will also help the
firm predict the customer’s lifetime value and offer the right products and services. In truth,
the solar industry is massively behind when it comes to the use of big data to offer the right
services to customers. Data science and machine learning are here to stay, and it is time for
the solar industry to jump on board.
In conclusion, though the end of the Feed-In-Tariff will result in a significant decline in the size of the
solar industry, there are steps that can be taken to ensure survival. The scheme was wildly successful
in increasing the number of both domestic and commercial installations. It was also responsible for
increased awareness in the general pubic about the viability of solar PV as a source of energy and
helped make the UK, the European leader in solar technology. To survive in this new harsh
environment, companies must work hard to offer more services to their clients. By showing
customers a much-detailed breakdown on the return on their investment as well as a daily and
hourly breakdown of energy predicted, potential customers can be persuaded in seeing investments
in solar as a long-term investment even without the government subsidy. Machine learning can then
be used to identify who these potential customers are and how to approach them. By investing in
emerging technologies, businesses can offer higher efficiency panels to these potential customers.
Higher efficiency means lower installation costs, and this can only be good news for customers.
There is one theme that runs through all of this and that is the use of data science and machine
learning. It is now up to the solar industry to jump on that bandwagon!!