Solar Perspectives: SOLON’s Olaf Koester: U.S. – The Land of 500 Markets

by Al Velosa

2010-01-07

Al Velosa is a Research Director at Gartner Inc. focused on the photovoltaic solar market

Since 2006, the global photovoltaic solar market has undergone almost two generation’s worth of changes, in terms of core markets, policy driven demand, supply issues, pricing and technology dynamics.  During this time, Olaf Koester has led SOLON Corporation, the U.S. subsidiary of SOLON SE, based in Tucson, AZ, where it manufactures solar modules and provide intelligent system solutions for solar power plants in North America. Based on SOLON’s customers’ needs – SOLON recently developed the Velocity MW to streamline a PV system’s design and eliminate most of the time, cost and performance risks currently associated with integration. Gartner’s Al Velosa recently discussed the global and U.S. PV markets with Mr. Koester.  Here are excerpts from the interview:


How do you see the worldwide market for PV systems evolving over the next couple of years?


Everyone was uncertain about the market in 2009.  Although the Spanish market has disappeared relative to last year, the German market has stepped up.  Germany may reach 2.5 to 3 gigawatt this year and it will be the market driver for the next couple of years.  I do expect other markets to start growing, and in particular I expect the U.S. market to be huge.


How do you see the U.S. market for PV systems evolving over the next couple of years?


In 2010, I expect the U.S. market to be in the 1 GW range.  However, it is important to understand that this will be for orders, not for finished (installed) projects.  The traditional process of installing a system is very time intensive and can easily take over a year to complete a project. The key need for the U.S. market is to develop its infrastructure and work towards streamlining system design and integration.


Given your experience in Germany, what are the key differences between the U.S. and the German market that you have seen in your work here?


The German market is older and more experienced.  Germany started this process 6 to 10 years ago. Back then the feed-in-tariff was new and difficult.  . Now all the players know what to do, how to do it, and how to get the necessary permits.
The U.S. is a few years behind Germany. However, I think the US market and U.S. companies are more nimble and may catch up quicker to where the German market is today. In particular, U.S. companies tend to think about opportunities and quickly act on them, whereas German companies tend to think about problems, creating delays in the German approach.  Also, the US can leverage what the German market is doing well based on their years of experience, and incorporate much of it into the US market for a faster implementation and growth rate.   However, since the German market has now built up its infrastructure, German firms are able to move quickly.  
The U.S. is still in the early stages of building its PV infrastructure. This is not rocket science- But one of the unique characteristics of the US market is that it is NOT a homogeneous market like Germany (with the Feed-In-Tariffs), each state, and even each state’s local cities, have their own renewable energy policies, and until the U.S. gets consistent policies, it will remain 500 markets, not one market.  
In the longer term, both the U.S. and Germany will be large attractive markets.


How does working with an IPP firm differ in the U.S. versus Germany?


There is a big difference in the business models. In Germany it is clear who the players are and what roles they play because there is the Feed-in-Tariff (the price of electricity is set by law at a fixed rate). Typically, there are 2-3 players per project - a bank, a solar provider / EPC, and the customer, and they know what their price of electricity is.
Here in the US, because there is no fixed price of electricity, the process is much more complex.  There are typically at least 4-5 players and there are price negotiations between all parties - solar provider / EPC and the customer (a retail firm such as a Walmart or a municipal government), a utility who may contribute RECs, an IPP, and a bank to finance the IPP and/or the solar provider.


What critical elements do you see the U.S. utility market requiring from the PV vendors?


With the growth of renewable portfolio standards, rising electricity rates and increasing peak load demands, U.S. utilities are seeking new solutions to meet their renewable energy needs. Scalability, cost and reliability have been the primary challenges in quickly rolling out utility solar fields.  SOLON has addressed these specific issues with its new turnkey, "power plant in a box" solar system.

How do modular PV solar systems fit into this U.S. market?


After the reduction in price for silicon, I think this (modular systems) is an important factor for the PV market in reducing the overall levelized cost of ownership (LCOE).  The U.S. market wants a low LCOE and a reliable energy delivery system Standardized, modular systems allow systems to move from proposal to energy production much faster. It is easier to obtain permits for PV solar power plants and easier to install, contributing to less system losses, higher uptime and output, and faster time to energy realization.


What is your perspective on the need for data from PV systems in the U.S.?


The future need is to connect to the smart grid, so just collecting data is not sufficient – there is a need for smart monitoring and advanced SCADA systems. We will need to respond to the utilities and control the output so the utility can manage the power in the grid - even if this means stopping or storing power for a few minutes. This will become more important in the future as PV energy contributes a larger percentage of the power in the grid.  An implication of this is that we need to be developing storage solutions and intelligent SCADA systems  now, to deliver turnkey smart-grid solar solutions in the not too distant future, and this is what SOLON is doing now.

What is SOLON's strategy for the U.S.?


 The US is obviously a focus for us, and as we have done in the past, we continuously focus on providing high quality solutions to the solar market.  
To achieve this we are focused on customers.  We look at what customers are asking for and work to deliver that.

Where do you see SOLON playing in the varied U.S. markets?


We have 2 core roles.  We sell modules to partners who distribute them and build systems across the U.S.  We also deliver utility-grade turnkey solar power systems with and without financing.


Also, given the varied state by state policies in the U.S., we are working in the markets where the economics work for solar – such as California, the southwestern and eastern U.S.