The Hazards of Exponential Growth for the Solar Industry – and How Innovating Stronger Business Models Is Key to Survival
Abstract
Living through exponential growth can be both exhilarating and hazardous. The solar industry has experienced both sides of this challenge. Installed solar capacity has grown globally from barely 1 gigawatt in 2000 to over 5 gigawatts in 2005 to an expected 320 gigawatts by the end of this yeari , as costs have plummeted by 70 percent over the past decade.ii Forecasts now call for a tenfold power surge, to 3,000 GW, by 2030. Growth that multiplies this fast can be both deceptive and dangerous to those who depend on the sustainability of sustainability. At the same time that new capacity has been roughly doubling every year, we’ve seen a string of business failures, most notably the news that the industry’s largest player, SunEdison, has fallen into bankruptcy with $16 billion in liabilitiesiii, one of the largest non-financial business failures in history. There are red flags and warning signs that put the entire industry at risk. The precarious financials of Solar City recently induced founder Elon Musk to arrange for his other company, Tesla Motors, to acquire it in a financial rescue. The solar industry needs to come to terms with the fact that growing at such a breakneck pace with even slightly wrong business models can be a “train wreck,” as one former CEO put it, with companies collapsing into bankruptcy faster and faster. The solar sector needs to focus as much effort on innovating the way it makes money as it does on innovating the way it produces technology. This paper highlights the obstacles that industry leaders face while also pointing the way toward solutions.
Keywords
Business model innovation, Solar capacity, Power purchase agreement, Photovoltaics, Exponential growth, Sunedison, Solarcity, Elon musk, Tesla motors, Battery storage, Sonnen, Transactive energy.