After making impressive progress over the last ten years, the U.S. solar industry has entered a period of uncertainty. The good news is a renewed emphasis on the principles of technology adoption will allow the solar industry to fly right through these dark clouds of uncertainty.
On the positive side, U.S. solar industry revenues have grown from $42 million in 2007 to $210 million in 2017. Nearly half of utility-scale capacity installed in 2017 came from renewables, and about half of that was solar.
Cloudy Skies Over Solar
This new uncertainty is caused by a combination of factors: a 23% drop in residential solar installations in the first three quarters of 2017, implying the solar industry is running out of early adopters to sell to; a new 30% tariff on solar module imports; and new competitors with proven skills in renewable energy entering the market.
Regulatory uncertainty increased when Congress tried unsuccessfully to cancel tax credits for installing new solar capacity, and the tax cut bill that was enacted in December of 2017 includes some changes that may affect credits for investing in solar.
Solar companies could benefit from taking a closer look at the techniques used by most high-tech managers. Applied correctly, these proven high-tech strategies could help solar suppliers avoid the upsets caused by changes in government subsidies, tariffs and regulations, and/or the saturation of the early adopter market.
In order to become competitive over time solar must be refined and improved with the help of a sequence of users, starting with innovators and early adopters. This dynamic, called the technology adoption lifecycle, is critical to the success of any new product or technology. Without the adaptation and improvement that’s demanded by early users, mainstream customers (the bulk of the solar market) will not adopt the product.
Most high-tech industries working to accelerate market adoption, focus on winning over groups of buyers in sequence according to their psychographic profiles — innovator, early adopter, early/late majority and laggard. This involves identifying a group of early buyers who initially value your product offering, and then communicating or promoting a combination of tangible and intangible benefits in ways that lead to the sale of your product. After capturing the first group, companies refocus their collective attention on the unique needs of the next group, and so on. In this way, a succession of customers act to pull the market forward as the product is adapted and then “positioned” to address their varying needs.
What’s the best way to transition from the early market to the mainstream market? The answer is standards.
Technology adoption is all about standards. To succeed with mainstream consumers, one company’s components must work with components from other companies. In fact, mainstream customer demand standardization as a way to reduce the risk of adopting something new.
Technology moves so quickly that standards set by committees usually come too late. Instead, the most common path is for the industry to organize itself around de-facto standards championed by a single firm with the clout to make them stick. Examples in high tech include: Intel with microprocessors, Cisco with networking/telecom gear and IBM with personal computers.
By bringing order to an otherwise chaotic marketplace, the standard can serve as a foundation from which many companies can sell compatible products, strengthening the solar industry as a whole.
The solar industry has flirted with the idea of standardization on many occasions in the past. The Orange Button initiative promised standardization of solar data. The electric utility SMUD offered standardized solar systems in their service territory to reduce costs and attract reluctant customers. And just recently The Rocky Mountain Institute has proposed the use of more modular, standardized and preassembled solar products
These are all great beginnings. But their effectiveness has been limited by the solar industry’s limiting focus on reducing cost or improving efficiency. The solar industry needs to realize that standardization is a product attribute that attracts mainstream customers.
Electric power in all of its forms has always been subsidized in one way or another. But rather than rely on government involvement, the objective for an emerging industry like solar should be to create a sustainable market where subsidies and buy-downs are no longer necessary.
Every company in the solar industry wants regulatory certainty. Until that time comes, solar suppliers can offset government-induced and market-transition upsets by doing what high-tech industries have always done: focus on winning over a sequence of buyer types, and offer standardized products tailored for the mainstream market. These are the cornerstones of unsubsidized market adoption.