Management of Technology_solar industry review(my report)

Introduction

With the oil price reach USD100 and more and more serious global warming, cheap, clean and renewable energy become badly demanded. As a clean and renewable energy, solar energy can potentially fulfill the demand with available amount of 89000TW which greatly exceeds global energy consumption (10TW). Now the question is how we can make it cheap and available to everyone. One of the promising products in solar energy industry is Photovoltaics, a technology that converts light directly into electricity.

Development history

In 1839, Nineteen-year-old Edmund Becquerel, a French experimental physicist, discovered the photovoltaic effect while experimenting with an electrolytic cell made up of two metal electrodes. In 1954, Bell Laboratories discovered silicon had photoelectric properties and quickly developed Si solar cells, achieving 6% efficiency. 1 year later, Hoffman Electronics’s Semiconductor Division announced a commercial PV product at 2% efficiency; priced at $25/cell and at 14 mW each, the cost of energy was $1500/W. After that, the development of PV enters a rapid improvement path of transform efficiency and cost reduction. Nowadays, the common commercial PV product can achieve 20% transform efficiency and the average cost per installed watt for a residential sized system was about USD 3 to USD 7.  

Review of PV industry: Market sector, Technology issue and Major players

Currently PV industry divides into 5 market sectors:

l        Building Integrated Photovoltaics (BIPV) these are PV arrays mounted on building roofs or facades

l        Non-BIPV Electricity Generation (grid interactive and remote) this includes distributed generation (e.g., standalone PV systems or hybrid systems including diesel generators, battery storage, and other renewable technologies), water pumping and power for irrigation systems

l        Communications PV systems provide power for remote telecommunications repeaters, fiber-optic amplifiers, rural telephones, and highway call boxes.

l        Consumer Electronics – a few examples are calculators; watches; portable and landscaping lights; portable, lightweight PV modules for recreational use; and battery chargers.

l        Transportation – examples include power on boats, in cars, in recreational vehicles, and for transportation support systems such as message boards or warning signals on streets and highways

Major Players (Top10 listed in below table) can be divided into mainly 2 groups:

l        Traditional big company that split out subsidiary to focus on solar industry. For example, Sharp began researching solar cells in 1959 with mass production first beginning in 1963 and now is the world’s largest photovoltaic module and cell manufacturer

l        Newly form company with certain innovation and grow rapidly. First Solar, formed in 1999, manufactures PV modules with an advanced thin film semiconductor process that lowers the Cost of Solar Electricity comparable to coal produced electricity.  

In my view, there are 3 main technology challenges for PV industry:

1.        Further increase conversion efficiency with low cost and clean way. Now the conversion efficiency of most technology is around 10%-20%, means almost 70% energy wasted. Also silicon based material production of PV cause pollution of environment with by product.

2.        Solar electricity is not available at night and is less available in cloudy weather conditions. Therefore, an effective storage or complementary power system is required.

3.        How to integrate and develop multifunction product with PV is a large field for innovation. For example BIPV is one of the fastest growing segments of the photovoltaic industry.

Discontinuous and continuous innovation of Photovoltaics

I prefer to define Discontinuous Innovation as innovation that emanate from fundamentally different new knowledge in one or more dimensions of a product or service to extend and refine the current market, or explore new market. This definition more focuses on discontinuous knowledge instead of products and market. In the innovation history of PV, we can observe 3 types of innovations evolve exchange and promote each other. When Hoffman Electronics first launched its 2% efficiency and $1500/W energy cost PV product, it is a typical disruptive innovation compare to existing energy products like fuels and coals. At that time, pv performance is inferior in key paramerters like energy cost and the initial market is very small, but it is based on totally new photoelectron knowledge. After that, pv products follow the incremental innovation to improve its performance. The conversion efficiency keeps going up while the energy cost keep going down. Until certain stage, the accumulated technology booster radical innovation in which the performance improvement is in order scale. The photovoltaic (PV) market has grown extensively since 1992: PV production has been doubling every two years, making it the world’s fastest-growing energy source, and every doubling of the volume produced prompted a cost decrease of about 20%. Suddenly people found the solar energy become affordable. And even more it is clean and easy to deliver in remote areas. Now the PV products begin to show its disruptive impact on energy industry. However, in my view, disruptive innovation isn’t necessary to cause revolution, but revolution may be caused by disruptive innovation. When we talk about 6Trillion energy market, the revolution cannot be achieved only by disruptive process of PV.

The innovation strategy for future PV industry

Whether the PV innovation is incremental, radical or disruptive is not important, more important is how we define the strategy to embrace the innovation in term of technology issue, market development issue, and management issue in different innovation stages. Few technologies are intrinsically disruptive or sustaining in character. It is the strategy or business model that the technology enables that creates the disruptive impact. In my view, there are 3 options for PV players:

1.        Disruptive strategy: focus on niche market such as third world countries which have no modernized electricity supply system. Try to provide low cost solution to fulfill the low end market demanding.

2.        Radical innovation: focus on R&D (including new materials, new process, and new methodology) to achieve radical improvement of conversion efficiency. For example, first solar spent US100M and 6 years to develop new process for thin film PV. With the 16% conversion efficiency and USD 1 energy cost advantage, they expect 1.6 billion revenue in 3 years.

3.        Develop a dominant design for multifunction products that integrate PV. To win the allegiance of the marketplace, M&A will be needed for cross-industry collaboration.

4.        Business model adjust to fulfill the current demand with proper marketing strategy. For example, in 2007 investors began offering free solar panel installation in return for a 25 year contract to purchase electricity at a fixed price, normally set at or below current electric rates. This strategy is a bit similar as Xerox rent out the printer instead of selling.

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