The US government has spoken. Instead of extending the 30% ITC or allowing this crucial tax credit to decrease to 10%, it will be replaced at the end of 2016 with a refundable production tax credit, PTC, which is based on electricity generated after the system is built. In news that certainly does not make up for this action, the 2015 solar budget increased by 9.8% from $257.1-million in 2014 to $282.3-million in 2015.
From the budget: “FY 2015 funding supports the SunShot Initiative goal to achieve a cost of solar power of $.06/kWh to make solar power cost-competitive without subsidies by 2020. This includes solar photovoltaic R&D; activities that enable a 50% reduction in non-hardware “soft costs”; and development and demonstration of innovative solar energy manufacturing technologies to increase U.S. competitiveness, in support of DOE’s Clean Energy Manufacturing Initiative. FY 2015 funding also supports development of advanced thermal storage and supercritical CO2 power cycles so that concentrated solar power can achieve base-load grid parity.”
While it is gratifying to see renewed support for domestic manufacturing, it is difficult to understand the US government’s purpose in replacing the ITC with the PTC, nor are the significant downward expectations for the cost of solar electricity potential outcomes of which are abandoned systems, bankrupt systems and disappointed investors.
It is possible that the US Government reasons that the installation cost is low enough currently to switch to a system that rewards output. It is unlikely that consideration was given to the potential consequences of this significant change, which range from business as usual (with only the well-healed able to participate), to a rapid cessation in deployment. The new plan throws support for solar deployment back into the laps of the states and does nothing to defray the capital costs of solar construction and will most likely slow the market for solar in the US. Before it slows, however, there will be a mad rush to complete projects before the deadline. Given the long development timeline for most projects, this means that some will not be completed by the deadline and will not be available for the ITC, having to settle for a PTC.
1) It requires curiosity first and foremost
2) It requires constant learning and relearning
3) It sends you on an investigation every single day – the clues are in the data
4) It focuses on specifics, data, and unbiased results but does not ignore the nuances of human behavior
5) Overtime, it allows you to identify the historical and current trends that define an industry’s behavior
6) It is constantly challenging
7) It teaches you to let go of preconceived notions as they institute bias
8) It is critical thinking on steroids
9) Done correctly you are jettisoned out of your own vacuum and forced to consider the entire environment (macro micro everything) that can have an effect on behavior
10) It constantly pings the imagination as the unexpected must be considered and factored in, that is, markets and industries are made up of people, and the actions of people are often impulsive, reactive and illogical, that is, natural disasters, among other things, will act on human nature to produce unexpected results.
One of the things I love about market research is that it allows you to professionalize your curiosity. To me, it is art and science, you begin with a blank canvas — the subject matter — you must then develop an unbiased result by asking the correct neutral and un-leading questions that will elicit responses that, with the appropriate sample size, will be representative of the population studied. Market research should be methodical and consistent and the process should always be more important than the result. When you find yourself hoping for a specific response this will leak into your research and weaken the result by instituting the researcher’s bias. A market researcher should not be trying to prove anything. A market researcher should also be aware that misleading results are entirely possible — for a variety of reasons. Asking someone what they shipped, bought, what they paid, what they sold it for in a vacuum without questioning the responses, meaning asking many questions of an appropriate population and cross checking everything, will lead to skewed results. The joy in market research is in the process, not in being able to announce the results.
One of the primary purposes of market research is to establish through primary research (typically through surveys) the behavior patterns of industries (or consumers) over time so to accurately and carefully predict (forecast) future behavior — most of the time research is conducted for the purpose of establishing current and past market size so as to forecast future market size.
Research into consumer attitudes and experience is also important as attitudes and experience have an affect on future market size and can help identify new business models or approaches to market.
Clients benefit from objective research from different research perspectives as long as they are clear on the methodologies used,
There is no right or wrong in market research — there are degrees of accuracy all dependent on the research methodology and the consistency with which it is practiced.
In fact, an insistence on being right and on someone else being wrong indicates a bias — research practitioners should not be trying to confirm their own analysis or prove another researcher’s analysis wrong – setting the research experiment to eliminate (wherever possible) bias is job number one. Falling in love with your own outcome (forecasts) institutes bias – market research, when carefully approached, will deliver a high degree of confidence in the results with the understanding that black swan behavior can happen.
The point is to lessen uncertainty and enable clients to make good or at least better decisions.
Read a perspective on South Africa-based solar startup PTiP’s CIGS pilot line announcement at http://www.spvmarketresearch.com/notes-from-the-solar-underground.html
Read Notes from the Solar Underground at http://www.spvmarketresearch.com
In January, SunPower announced a $220-million loan from Bank of America Merrill Lynch to support expansion of its solar lease program. In December, Bank of America Merrill Lynch was the lead, and one of six lenders, involved in increasing SolarCity’s credit facility to $200-million.
Residential solar leases are increasingly looking like a trend and not a fad. Why? This model enables homeowners to install PV systems without the high upfront cost of installation thus emulating the traditional utility model of renting electricity. For solar businesses committed to this particular model the initial hardware investment should be more than offset by the eventual high margins. For investors, there are those eventual high margins to look forward to ensuring (maybe) either a profitable exit or repayment at a profit.
Though this model looks as if it is a winner for both parties (lessor and lessee) it is too early to make a judgment in this regard. In the future, lessees may not appreciate the escalation charge that is a part of all the lease structure. Also, in the future the difference between financing a PV system and leasing a PV system may make cost of leasing (as time goes on) seem less and less like a good deal.
For businesses engaged in the solar lease model, it is too early to assess the costs of unimaginable outcomes such as another US housing crash – foreclosures and abandoned homes and solar leases, or, continued strong growth in the housing market that encourages homeowners to trade up (an owned PV system may be an asset, a leased one may not be an asset). Legislated and thus enforced standardization of escalation charges (among other things) could take a hunk out of margins. New connection charges from utilities could annoy lessees. Direct competition from utilities with their own lease models could well make this model less attractive (hint, partner with local utilities now before they figure out how to capitalize on this potential revenue stream).
Finally, remember that everything changes – everything – and sometimes the changes are swift. The example in this regard is the feed in tariff model in Europe – back in the day (and this day is relatively recent) practically everyone thought that this was the incentive model of the future and investors believed FiT systems provided a safe and reliable investment. Now every investment in a FiT installation is one retroactive change away from going bust.