Emerging PV-markets: Learning from the German Model

By Thomas C. Sauer, CEO EXXERGY

Germany is the pioneer market of the PV-industry due to a very early ecological movement with its first political representatives (“Die Gruenen”) as early as 1980. Currently, Germany is still the biggest PV-market with approx. 35GWp installed and new installations in 2013 reaching up to 5GWp. As a result, many of the so called pioneering companies of the PV-market are of German origin though their survival under the new market circumstances seems to be questionable as the market is struggling with overcapacity, a cut in feed-in tariffs as countries have to deal with more and more financial constraints and a shift of demand for PV-systems from western regions such as the EU or North America to emerging countries such as India or Brazil.

Now, the question is: Are there any learnings out of this German pioneer market which can be useful for new emerging markets ? Does the wheel need to be invented again ? Do the same faults have to be done twice ?

Tricky question, with a rather complex answer:

The individuality of each market
After examining closely emerging markets, each market has its own historically and resource based energy mix and therefore its own reason why, when and how to start with solar energy. Such reason can be climate change, the cost of energy, the trade (in-)balance, environmental reasons and of cause economic growth. Legal, cultural, taxation and other circumstances are all different from country to country and even within the country from state to state. As a result, the market entry in these countries as well as the growth perspective for PV-systems varies.

But there are general favourable conditions, which help
The overall macro conditions in emerging markets are favourable for PV-systems: High energy prices and millions of households with still no or unstable energy supply act as show stoppers of economic and welfare growth. The general sunny climate of emerging markets as they group around the tropical and subtropical regions indicates prime conditions for PV-efficiency.
The market start will be more successful, if the general business environment in each country is favourable: Low bureaucracy and corruption, stable low risk business environment, freedom of trade, homogenious transparancy of legal and technical standards and a skilled work force. In particular for the start of PV-systems, grid parity, feed-in priority for renewable and  the supporting / mediating role of government bodies is helpful for paving the way to success.

Hairy issues
Building up a local PV-industry is for many emerging markets a must. Just importing will only work to start off, while long term countries want a share of the value chain of producing PV-systems. A need for a holistic approach concerning energy efficiency, the energy mix and energy supply is vital for success as well as positive public awareness and an overall ecological movement. These issues are comples and do take time and patience. Danger may come from the local and international anti renewables lobby, who want to protect the status quo to further earn the incomes they are used to. Once started in the new market, the marketing of the product as well as a functioning distribution system for products and services for the PV-systems has to be assured. This is difficult, as all new products and technologies need explaining, are not easily accepted and supported. Finally learning from Germany, high quality is important right from the start, as the emerging market runs in danger of losing momentum by bad press about not efficiently run PV-systems.

Feed-in tariffs: Yes or No ?
In Germany when starting with the renewable energy movement and industry, subsidies on all levels were granted such as feed-in tariffs, research funding to build up the technical know-how and of cause start-up help for companies, who took on the challenge of producing the products. As grid parity is in near reach or already achieved in the emerging markets, such direct financial state intervention is not really needed and sometimes even contra productive. With financial help, the general market discussion tends to shifts from the core advantages of PV-systems (low CO-emission, grid parity, decentralization of energy supply etc.) to financial gains of investment. Intervening in an economically sound market also leads to bubbles, which than have to be popped at another premium.

A sunny future
Concluding, emerging markets should provide a sound and friendly economic frame work for renewables without much financial help. The advantages of PV-systems are strong and will surely unfold with the right framework in place. For the established PV-system players, entering in these emerging markets will be still a challenge stemming rather from their own (un-) capabilities of dealing with a new market environment. The speediest and most well adapted companies will be the first to serve and even mold those markets.