Something New Under the Sun? - A Case for Solar Energy

Technological and scientific innovation has spurred research into renewable and alternative energies. Pressure from environmental and governmental groups has prompted the investigation of new and cleaner energy sources for the future. This case by Tracy Siqi Li, graduate student at the University of California at San Diego and Philip M. Parker, the Eli Lilly Chaired Professor of Innovation, Business and Society at INSEAD, looks at developments surrounding solar energy, particularly its market potential.

by Philip Parker
Last Updated: 23 Jul 2013

In 1767 Horace de Saussure invented the first flat plate solar energy collector in Switzerland. By the early 19th century, American engineer John Ericsson had designed and demonstrated the solar heat engine. There may be 'nothing new under the sun' but solar power's development as a clean and efficient alternative source is set to have an unexpectedly great impact on the economy, the environment, security and daily life in the future. This case by Tracy Siqi Li, graduate student at the University of California at San Diego and Philip M. Parker, the Eli Lilly Chaired Professor of Innovation, Business and Society at INSEAD, examines how the development of solar energy is changing visions-solutions, strategies, competitions, emerging markets, and profit margins.

The 1990s witnessed a growing interest in renewable energy sources as a means to address environmental problems such as global warming. This is driving programs such as the Million Solar Roofs Initiative and state initiatives in the US promoting renewables in the deregulated electricity generation market. Of all the developing solar power technologies, photovoltaic (PV) technology has the widest application and is the main subject of this case. The US photovoltaic industry is now in its third market development stage. Applications related to photovoltaic solar technologies vary from simple concentrator collectors using devices such as Fresnel lenses, to stand-alone photovoltaic systems to produce power independent of the utility grid. US-based manufacturers had an early market lead based on inventing and patenting PV technology which is now being being challenged countries such as Japan and Germany as interest widens.

Nevertheless, a variety of market-related issues impede the robust development of solar electricity: consumer awareness and education, legislative and regulatory roadblocks and financing. Although current financing for solar energy development comes mainly from the private sector, there is a need for more strategic use of multilateral financing sources to leverage and mobilize private funding. As for individual companies, more commitment is needed to the development of renewables, including PV technology and its applications.

Worldwide, the energy sector is undergoing major transformation and opening the window of opportunity for renewables. The introduction of more efficient distributed technologies has lowered the cost of solar energy, while restructuring and market liberalization have highlighted the importance of consumers as a factor in new energy supply systems. This case aims to provide a succinct overview of current developments in this rapidly developing sector: the multiple opportunities for business opening up as a result of solar technology applications, the central role of solar energy in creating a sustainable future and renewable energy sources, and its ability to reduce dependence on foreign oil supplies and strengthen national energy security.

Including a historical industry perspective, comment on potential product development and current industry forecasts, the case raises many questions for students to consider and resolve.

INSEAD 2003

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