Strengthening Solar, part 3

This will complete my summary of how the market for solar energy can be strengthened through demand development.

The true source of module pricing pressure is project developers seeking the minimum price that can be paid to maximize internal rate of return. Forcing manufacturers to compete on price and performance will lead to wholesale margin compression, precipitating a shakeout of high-cost, undifferentiated suppliers.

GreenTech Media Research, 2009 Global Photovoltaic Demand Analysis and Forecast, March 31, 2009

The ruination of entire sectors of the economy has been due to such price-based competition.  So it is my sincere hope that the solar industry can avoid “commoditization.”

As parts 1 and 2 of Strengthening Solar hopefully established, enhancing and reshaping demand can improve both volume and margins for the solar industry.  This can come about through good marketing.  Unfortunately, the industry is already in a tough place with oversupply, rapidly decreasing prices/margins, and low marketing budgets.  Even I wouldn’t ask a solar CEO to authorize a multiplication of the marketing budget, and I’m not shy about that sort of thing.

What the industry can successfully do is band together for the sake of the whole category.  It should pool marketing funds to build demand – emotionally fueled demand – for solar electricity.  This is not without precedent:

As Baba Shiv of Stanford, and many others, have shown in research, a branded, emotional value proposition will result in higher margins and growth.

Eventually, specific purveyors of solar offerings will need to invest in brand distinction among competitors, but for now, the solar category itself needs to be branded.  Solar electricity can be desired over other sources, even though there is no perceivable difference in the consumed product (a flow of electrons, a bright light bulb).  I assure you, Jim Rogers of Duke Energy can tell you about emotional power, observing the occupants of his front yard, who would rather have solar than the new Cliffside coal plant.  People can be encouraged to care where their electricity comes from, and that drives choice and margin.

Think about it:  people didn’t connect labor ethics with clothing until recent years.  Now, a shoe company using children to make shoes would be gone in a week, even if they were cheaper.

There is a fixation with “grid parity” price (the price at which solar vs. traditional sources is equal).  Thus, the markets are being trained not to pay a premium for solar — to value it only for the watts delivered (there is some mention of avoiding fossil fuel cost increases, etc., but price is the top of mind issue).  Again, sophisticated research has shown that people devalue things sold on price.  There is much more to recommend solar energy, and these merits can be amplified through an industry-wide campaign.

If the industry can focus on the health of the market, all participants will benefit, vs. racing to the bottom in a price war.  Think of the solar market as a pie, with diameter (volume), and depth (margin).  Right now, it’s small and thin, a tartlet.

image

Even if today’s stronger solar companies invest their limited advertising budgets to consolidate share, they may only end up with a slightly larger portion of a tartlet, vs. banqueting on a much bigger pie later.  The upside for the market is SO large, it makes more sense to focus on growing the pie, both depth and breadth (= profit).

image

So, I’d like to suggest the creation of a program, sponsored by a body of solar industry players (such as SEIA).  The program would be funded through a set-aside of a small portion of revenue, and perhaps underwritten by the federal government’s clean energy stimulus funds.  It would act to understand the motivations of the customer, develop top-of-mind awareness among the right target audience, increase consideration rates, raise the image of solar, and drive leads to installers.  Pull to go with the government’s policy push.  Net:  more people would desire solar at higher prices.  Yum yum.

I have specific ideas on how this program would work, and will happily discuss with people of serious intent.  Please comment here, or reach me at craig (at) inventivebranding (dot) com.

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2 Responses to “Strengthening Solar, part 3”


  1. 1 Bart July 24, 2009 at 12:51 pm

    I think you’re being beaten to the punch by, welll, the PV industry itself. Never have I seen PV companies launch marketing campaigns the way they have since the end of the undersupply era. It has been years since PV companies have even needed much of a sales force, let alone advertising, and now everybody is doing it. Maybe not quite as a single entity, as you advocate, but I have seen ads for PV companies in mainstream publications, installers in local general-audience publications, and a couple of cell-only manufacturers getting their customers to stick “so-and-so inside” or “powered by so-and-so” badges to modules containing the company’s cells.


  1. 1 Strengthening Solar, part 2 « Offering Trackback on July 14, 2009 at 7:42 pm

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