Over the years we have seen the costs of solar panels steadily come down,
though not to the levels that many experts had predicted. The critical
question always has been, at what point ($/watt) would solar PV make
commercial sense for the rural areas of the developing world?
I personally have never been clear what baselines people were using to
compare against to reach their conclusions. I am not sure how convenience,
reliability, better educational facilities, etc., have been transformed
into financial figures on a spreadsheet.
However, I sincerely believe from experience that solar PV is already very
viable -- provided accessible and affordable financing is created at the
doorsteps of the rural people -- thus I hardly paid attention to the
future predictions of $/watt.
Peak in Demand
We all know now that, in the last 24 to 30 months, the cost of solar
panels ($/watt) is increasing drastically (rather than decreasing as
predicted by experts) and fingers are pointing toward Germany.
The sudden boom in the German market and competition from the
semiconductor industry has led to an imbalance in the supply and demand of
feedstock. This has been one of the causes for the steady rise in solar
module prices.
Adding to the rise in prices has been the lack of availability of smaller
modules, those that are required to power the meager load requirements of
households in the rural areas of India, Sri Lanka, Honduras, Uganda or
Fiji.
Steady cash flow and decent profitability has forced the manufactures to
weave away from manufacturing smaller modules, in order to cater to demand
from Germany and other western countries.
Rise in Disparity
Documentation for the actual rise in the prices of smaller modules over
the last five years, both in 37 watt and in 75 watt supplies, is shown
below.
As seen in the diagram above, prices for 37 watts and 75 watts remained
steady till 2004 and then started to rise. There has been an increase of
20% and 25% for 37 watt and 75 watt, respectively, as compared to 2003
prices. And a 25% increase in price really hurts the pockets of a rural
household in the developing world.
We can keep debating, who needs electricity more -- a German household
(who has a choice between grid and solar) or a rural household in Uganda
(who has a choice between kerosene and solar), but the bottom line is that
the solar industry does not have an immediate solution.
There is also another problem: squeeze in the supply of smaller modules
has increased the working capital requirements of smaller integrators in
the developing world. While in 2004, smaller integrators were getting a
credit period of 90 days, now they have to be satisfied with 30-day
periods. This means that the working capital requirements have tripled.
Unlike Germany, where payment terms from end-users are pretty well
defined, here in the underdeveloped world that is not the case -- leading
to further uncertainty for the system integrators.
Call for Balance
Although the market in many of the countries like India (at least in some
parts) and Sri Lanka were becoming mature -- financing had fallen in
place, system integrators had established good service networks and solar
PV had attained decent awareness levels -- suddenly the steady rise in
prices has thrown the market out of gear.
To get back the levels of market maturity requires immense hard work by
the rural service companies and that is not cheap. It has taken years to
convince people, bankers, etc., that solar PV -- if financed and serviced
properly -- is comparable to other substitutes, but now the explanation
needs to change.
I am not sure what the explanation is. I do know the solution needs to be
addressed by the whole solar industry -- because the divide between the
served and the underserved cannot keep increasing.
About the author...
H Harish Hande, PhD, is managing director of SELCO Solar Light (P) Ltd.,
in Bangalore, India. His company has overseen the implementation of
thousands of installations, whose success are due largely to local
involvement. SELCO also oversaw the Tsunami Solar Light Fund, which raised
the funds to bring solar installations to assist some of the people who
were displaced by the tsunami.
