It’s Teatime for American Solar

Hey, check it out: I’m Famous

In other news, I’ve been a bit too busy to post here as regularly as I was, but here’s a few interesting things in the news about solar.

Over in America, the Tea Party are starting to get behind photovoltaics.  Yep, you read that right, not the German Greens but the Tea Party.  This isn’t the kind of thing we’re used to seeing from the free market right, but it makes a lot of sense – after all, installing solar is a great way for businesses and individuals to become more self reliant, and to reduce their dependence on infrastructure provided by the Nanny State and the old utility and resource oligopolies.  In this new era of photovoltaic tech that works out to be way more affordable than doing things the old fashioned way, this narrative makes a lot of sense.  Whether this actually becomes a thing in Australia is another question, as commentators and editorialists tend to like pushing the same barrow they were five years ago, completely oblivious to whether or not whether or not the current commercial environment really makes the argument terribly relevant anymore.  Sorry Tim, but you’re an odd advocate for the SEC and their cartel inheritors, over and against the most free market approach to electricity provision the country’s ever seen.

Large Chinese manufacturers of panels are returning to profit, or at the very least are claiming they have, after the price crashes caused by the enormous oversupply of solar modules caused huge crashes in hard costs of solar.  These price crashes have caused all sorts of trouble for many of those whose businesses rely on making and selling the stuff, as I’ve written about previously.

Satanic hippie rock band Ghost have been booked for the Big Day Out festival in January.  This actually has absolutely nothing to do with solar, I’m just really hopeful that they will do a sideshow in Melbourne and it won’t clash with Rainbow Serpent, where at least some of the stages are powered by photovoltaic arrays during the day.  Hey, look at that, I managed a tenuous link.

And last Friday the Tassie government finally axed their 28 cent per kWh feed-in tariff.  This will no doubt bring forward a lot of demand, making installers super busy for a little while, and then watch while all their business falls off a cliff and more than a few of them go broke.

Eco-Warrior Dicks Are Hurting Aussie Solar

Life’s a complete bitch sometimes.  Like when you’ve gotta choose between doing what’s best for you or being cool to everyone else.  What sort of choice is that?  Are you gonna do the right thing, or the bright thing?  Either way you lose: you either feel guilty, or you shaft yourself.  Lame.

Happily enough, when it comes to deciding whether or not to go solar, you don’t have to make this choice.  The option that leaves you with shitloads more $$$$$$ in your pocket is also the one that slashes your recurrent carbon emissions.  How’s that for a good news story?  Pretty fucking wonderful I’d have thought.  So maybe someone can share it with the mouthbreathers behind the Solar Scorecard website that’s been doing the rounds on social media.

The premise behind this website is simple enough but the message behind it – that government needs to do more to support photovoltaics – couldn’t be more retarded.  For fuck’s sake guys. Do you even solar?

Let me be very clear about something: businesses and homeowners considering an investment in photovoltaics don’t need the government to come in and sweeten the deal.  The deal is already more sugary than the snacks my housemate pushes into his face when he’s baked and watching cartoons.  What we need are more potential customers getting in touch with businesses like mine so they can actually get to the stage where they’re looking at costings and savings projections and seeing just how well they can do.  This is exactly the point where these eco-warriors have decided to piss all over everyone.

If Australians keep being bashed over the head with this message that “The government needs to do xyz to support solar in this country” then sooner or later they might start to believe it.  No doubt it’s just reinforcing something many people already believe, and the fact that nothing could be further from the truth won’t make this message any less effective.  After all, talking people into sitting on their arses and doing nothing is a pretty easy sell.  Those Australians who take this message at face value are inevitably going to say to themselves “Oh well, I guess the government isn’t doing enough right now, so let’s keep running our shit on brown coal until they do”.  The fact that the numbers behind this decision are so goddamn bad won’t even matter, because they’re not going to get to the stage of really look at them.  When dealing with models of a transition to a renewable future and such, you can posit a world where all people are the rational actors of university textbooks, people whose behaviour is a continual exercise in maximising utility, but over here on Planet Earth you’ll find that the humans who inhabit it have the potential to be pretty damn influenced by the messages they hear as they go through their day.  And the message they’re hearing from Solar Scorecard is fucking awful.  It’s kind of fair enough that a lot of Aussies are still yet to get their head around just how many thousand bucks they’re gonna be down if they don’t embrace photovoltaics, because this situation is still so new – but if you’re going to launch a website about solar power in Australia then I don’t think it’s too much to ask that maybe you might wanna know something about the topic.  Have any of the people behind this site actually looked at how much it costs to buy every last kilowatt-hour from the grid right now?  Seriously guys, fuck you.

This message gets worse once you start to consider the recent history of government action to roll out solar.  The story of solar in this country is in no small part a story of government policy settings creating perverse incentives that lead to shitty outcomes.  Consider how many pissweak systems are up on rooftops because of the Howard government’s eight grand handout.  A defender of this scheme might point out that a wussy 1kW system is still more solar than they had on their roof before.  It’s technically true that 1 is a larger number than 0, but it’s also less than 5 – and a whole lot of these guys would have bought the 5 or 6kW system that they actually need, if only they hadn’t been induced to enter the market a few years too early.  It’s taken us years to finally reach a set of policy settings that are halfway rational.  Do we have to turn it all upside down once more?  Can’t we just enjoy this moment in the sun for a bit?  Maybe get some real capacity installed?

This guy’s solar scorecard serves pretty well as a metaphor for the site as a whole: a near-perfect score in validating prevailing orthodoxies, and no regard at all to actually installing anything.

If these guys were honestly motivated by a desire to promote the uptake of solar in this country, then the contents of the site would be very different.  Instead of talking about candidates for public office, they would be making it explicitly clear to electricity users just how far they will be left behind if they keep being indecisive about generating their own electricity.  You could appeal to people’s good nature, concern for the environment and sense of civic responsibility – and there’s nothing wrong with these qualities – but there’s also an unanswerably strong appeal to self-interest to make that shouldn’t be left behind.

The observant reader would note that with this alternate message I’m proposing, the site wouldn’t even be an electioneering effort anymore.  It would be a sales pitch.  Given that the fate of Aussie solar is not hanging in the balance in this election, and that what we need right now is action from the private sector rather than the government, this seems about right.

It’s a little facetious of me to offer this suggestion as I know it’s going to fall on deaf ears.  When you look at the 100% renewables group behind this website and then look through the various local groups behind it, you see “action network” this and “collective” that, and it isn’t too hard to guess that maybe they’re not too interested in any narrative that doesn’t involve having an impact on election results and punishing MPs for holding The Wrong Views.  The idea that government has the settings pretty right and that right now it’s the private sector that needs to catch up probably doesn’t occur to them.  If something isn’t working right then it’s always the government that needs to come and fix it.  I’m also gonna throw out there that a number of them are probably university socialists and their fellow travellers, people with nothing but distrust and contempt for the profit motive, people whose worldviews offer no room for the idea that a little bit of merciless, swashbuckling, take-no-prisoners, cockslap-to-the-face raw market capitalism might be just the ticket.  They’re far more interested in repeating stale and lazy mantras with no regard to or interest in what’s actually going on in the world they inhabit.

In a robust democratic country everyone gets to put in their two cents on the issues of the day.  These dweebs have the right to have their say, even if what they have to say is just plain dumb.  I get that.  Why not do it with some regard to things like truth, honesty, relevance and a connection to the real world?  If all you’ve got to offer is a set of vapid, useless and irritating slogans based on a set of premises that would dissolve into nothing if you’d only spend a few seconds considering them, then just get it over with and join the fucking Liberal Party.

Splat

When you’re sitting in your chair in the clouds and then all of a sudden the aeroplane decides it’s tired of flying, so how about freefalling, the last thing you’ll worry about is how you’re gonna tell when it’s hit the ground.  There are some really obvious giveaways here, like a loud crashing noise and you’ll probably feel some sort of sharp sudden jolt.  You might additionally find that the pilot might tell you that the needle on the altitude meter has stopped moving, or the controls to the inflight entertainment could now be lodged deep inside your brain.  However these specifics play out, the moment where the fuselage meets earth has a certain unmistakeable character to it.  You’re not going to be experiencing any great doubt about whether or not you’ve hit the ground.

“Fuck you El Solar Duderino,” you’re no doubt thinking, “you miserable cheeky fuck.  Salman Rushdie once opened a piece with an aeroplane crash and look how that worked out?  Only a few months later, the Ayatollah decreed that it was every good muslim’s duty to murder the chap.  And you.. you don’t possess even the barest fraction of this guy’s writing talent.  How the hell do you suppose this is going to work out any better for you?”  I appreciate your concern.  It turns out that not every unparachuted traversal of the atmosphere at terminal velocity is meant to be construed as a literal event.  It’s not always the result of forgetting to refuel, or practicing your unicycle moves next to the Grand Canyon.  Often it’s just a device to communicate more vividly a fairly dry and abstract set of data points that would otherwise be hard to picture.  And so it is with the great solar photovoltaic panel price crash of the early 21st century.

One of the qualities of metaphor is that once you explore one for long enough, you eventually find the point at which it breaks.  If a metaphor ever manages to depict something perfectly, then it’s not really a metaphor – it’s the literal description.  A price crash, unlike a plane crash, does not end with a huge noise to signal that you’ve finally hit the ground.  “Nobody rings a bell at the top of the market”, as the old share trading truism goes.  Similarly, when prices enter a freefall, there’s no great crunching of metal and bone and tray tables to announce the journey has met its abrupt but inevitable end.  The only sure way to know the exactness of this moment is to wait around a while so that you can apply your glorious powers of hindsight.  You can never be certain that it’s happening right now.

This is not to say that the matter is completely inscrutable.  There’s plenty of scope to look at the available data, consider the available arguments, and make some sort of educated guess.

First, some context:  Over the past 5 years, prices of photovoltaic panels have fallen from over US$4.00 per watt to under US$0.70.  They have been made cheaper by the same thing that has made DVD players, air conditioners and LCD screens so much cheaper through the course of most of our lifetimes: Low cost manufacturing from China has come on board in a big way very suddenly.

It might be tempting just to look at how prices have fallen over the past few years and then extrapolate that to the next few.  The biggest problem with this approach is the ludicrous result it brings you to: panels being sold for less than ten cents per watt within the decade.  This can be dismissed out of hand, as present prices are already sending some large manufacturers broke, their costs are simply too high for price falls of such a large magnitude.   When I was enrolled at Melbourne Uni and occasionally managed not to sleep through every class of the day, my philosophy lecturer would refer to this style of reasoning as Reductio ad Absurdum.  The aggressive deployment of a dead language makes the concept sound more high falutin’ than it really is – all it amounts to is that if you examine some shit and then see that it leads to conclusions that are unarguably retarded, said shit can be safely rejected.  People who know the latin name will opt for that instead, because it takes less time to say and also you get to sound heaps fancy.  When you say stuff like this just right, you wear an implied monocle.

Nobody is predicting such immense falls anyway.  The most hawkish prediction I’ve seen doing the rounds lately outlines a fall to US$0.50 per watt at the end of the year, and then to US$0.36 in 2017.  At the other end of the spectrum you see people muse that panels might go up a bit as global demand keeps soaring to record highs, manufacturer insolvencies run their course, and chinese wages keep rising.

So, what’s my take on this?  I hate to do this to you guys, but I’m gonna be a total pussy and not make a call on this one.  I’m an agnostic.  I see the current prices sending solar panel manufacturers broke and that tells me that they’re running up against some very firm costs in building the damn things.  To stick around, these guys have to make money – not just to pay for inputs, there has a to be a return on capital too.  Cost structures are not necessarily fixed in stone, of course.  They can change.  Over time, manufacturers are going to work out better ways of controlling their costs, and economies of scale are going to become bigger as new areas of the globe become markets.  Incrememental improvements to the technology will also keep helping to squeeze a little more capacity onto each panel – the price per watt figure can be sent down not just by putting downward pressure on the former part of it but by lifting up the latter.  Then I start thinking about the Chinese approach to industry planning, the different sorts of borrowing costs that chinese capitalists face with their tricky-dick weirdo banking system, state owned enterprises and intermediaries, and the other opaque vagaries of the way you read about how business gets done over there, stuff that’s always just seemed confusing to me, and that’s the point where my brain just shrivels up and I’m left to wave the white flag.  Nonetheless, I try to keep an eye out on what all the experts and talking heads are saying, cos, hey.. I run a solar business.  It’s nice to know where our costs are headed.

Whether we’ve hit the ground or not yet is hard to say.  What I am confident of is that from here we are entering a period of relative stability on this front.  We won’t see massive price changes of the kind that have happened over the past few years: the sorts of price changes that totally change the role of solar photovoltaics in the economy – price changes that have taken the tech from being a long-term investment in the future of the planet and in your own sense of altruism, over to a way of getting your electricity that’s just plain cheaper than not having solar.  Instead we’ll see much less dramatic movements.  For Australians to be looking at panel prices in anticipation of a golden new future still yet to come is probably just another example of shiny object syndrome.  For people in some markets overseas, there’s a little more merit to the exercise, as our grid electricity is a lot more expensive than what can be had in some countries, especially once you consider just how kickass Aussie insolation levels are compared to most other developed nations.

Other tech products might serve as a guide to how this plays out:  DVD players cost over $1000 when I first started seeing them at Brash’s.  By 2003, you could pick one up at the supermarket for under fifty bucks.  But over the past ten years, they haven’t suddenly dropped to 3 bucks each or anything.

Whichever way panel prices are headed from here, the huge falls we’ve already seen mean that the cost of panels is no longer as important as it once was.  Panels no longer utterly overwhelm the cost of grid connected solar the way they did so very recently.  The further this price per watt metric falls, the less it matters.  For years the cost of panels completely dominated the cost of installing a system – accounting for more than every other cost put together.  We’ve all gotten very used to how convenient it can be to look at changes in the price per watt of panels as a useful approximation of changes in the cost of systems.  Panels are still a significant cost in any system, but gone are the days when they would easily cost more than all other parts and labour combined.  The main reason I’ve been so happy to refer to the price per watt of panels throughout this post is simply because it’s convenient for me to do so – not because it’s the best metric I can think of.  Price per watt is largely just what everyone else talks about – it’s easy for me to see what other people are saying about it and to get at the data behind the various arguments.

Here in Australia, exchange rate movements are going to be much more important to watch than long term trends in panel prices.  With the Aussie dollar dipping south of 90 cents, anyone sitting on the sidelines to get better panel prices will see their clever strategy bite them on the butt.  The fact that you’ll be throwing away money by spending way too much on power bills during all these extra months where you don’t own a system will only put you further behind, of course.

Missing Boats

“It’s too late to go solar – now that the $8000 rebate/guaranteed feed-in tariff/solar credits/whatever is no longer available, installing a system just doesn’t make sense”.  You don’t have to look too far to find somebody who will tell you this.  But is this really a thing?  Have the glory days ended?  Did you miss the golden opportunity?  Is now simply too late?  Has the good ship SS Solar already left port?

Most of the incentives were already gone by the time we started Excellence Solar – the last few months of the Solar Credits scheme were still in place, but we knew they weren’t gonna hang around.  I’ve mentioned in previous posts that it was seeing just what a great deal these systems are that made me accept Drew’s offer to start a new business with him.  So you can probably guess where I stand on this one.  El Solar Duderino makes his living from these systems, so you’d no doubt expect him to be talking them up anyway.

Let’s take a solid look at this question anyway.  With so many rebates, preferential feed-in tariffs and other incentives now axed, is it now too late to go solar?  To answer this, I’m going to refer specifically to how things have developed in Victoria, because this is where I live and where my business operates, and it’s by far the situation I understand best.  Some of the things I discuss might nevertheless be relevant to other parts of the world.

To an extent, this is actually a bit of a pointless question.  Any clear-headed, rational consideration of an investment in rooftop photovoltaics should compare the cost of an appropriate system to:

1. the cost of not buying a system at all, or
2. the cost of buying 100% of your electricity from the grid for a few years before going solar later.

Why?  Because those are your actual options.  What are you gonna do if you decide that you really should have bought years ago?  Take a trip to 2008 or 2010 and buy then?  Unless you have a time machine, looking at how you could have done by buying years ago doesn’t really add anything useful to the discussion.  All you’re doing is devoting time, energy and attention to examining an option that simply isn’t available.

But let’s say you have a working time machine, and you’re prepared to use it to buy solar.  Would you really get a vastly better deal buying in yesteryear.  In one word: no.  There were more attractive incentives on offer, but systems cost a lot more too.

If you’re eyeing off a 5kW system – 5 kilowatts is about the right size for a lot of suburban family homes – then the $8,000 rebate that was on offer prior to the means-testing of the Solar Homes and Communities Plan in May 2008 might look pretty attractive.  You might say to yourself “I could call up Excellence Solar and tell em I want a 5kW system built from good components with 10 year warranties, and that wouldn’t cost me much more than eight grand”, and you’d be right.  But back in 2008, there was no Excellence Solar and there was no way you could have got 5kW on your roof for anything like that price.  You were looking at more like $40,000, depending on who did the install and what equipment they used.  Even with the government chipping in, a system that over 30 grand is a lot more expensive that one that costs just four figures.  Don’t forget that this was only for putting solar on your home, so if you’re in the market for a commercial solar installation then this thing that you’re worried missed out on isn’t even a thing.

For the most part, if you were looking at solar photovoltaics back then, you wouldn’t have been looking at a system that’s actually big enough to power your house.  You would have been looking at a pissy little 1kW or 1.25kW system.  I’ve already dedicated a number of words on this blog explaining how inadequate 1kW is, and I don’t feel like adding more.  It’s enough to say that right now you can realistically afford a system that will actually break the back of your power bill.  Even if you don’t have all the money in the bank for the system at the moment, you can do it for the same out-of-pocket cost as what you’re doing already.  Isn’t that a much better position to be in?

“The systems cost heaps more, but I could have made a squillion bucks from the 60 cents per kilowatt-hour feed-in tariff”, you might reply.  Yeah, maybe.  It’s true that minimum feed-in tariffs were a lot higher not so long ago, but your titchy little system was never actually destined to do all that much feeding in.  It’s mostly going to be running your fridge and your computer and so on.  About the only way you could really take a lot of advantage of these feed-in tariffs was to put the system on a holiday house or somewhere that spent a substantial amount of time not using power.  If this is something you were hoping to do, then the ship’s sailed on this one.  I mean, you can still do it, but at 8 cents per kWh instead of 60, the return a system that only ever feeds in is just not terribly exciting.  This is not too big a deal for most of us out there, who don’t own a holiday house in the first place – those that are lucky enough to own one, I think you’ll be just fine without the higher feed-in tariff.  I have nothing against people wealthy enough to own a holiday house – good luck to you all I reckon, I hope to be wealthy and have a country retreat one day too – but if you’re doing that well then you don’t need a handout.

One other opportunity you have missed is the opportunity to get a system much bigger than you need to power your home and zero your bill, and then use the 60 cent or 25 cent feed-in tariff to offset your gas bill or just cash the cheque or whatever.  Again, you can actually still do this, it’s just not a very effective use of your solar dollar.

One thing to understand about grid-connected solar in Victoria in 2013 is that you get the best return on your investment by producing electricity that you use yourself.  A kilowatt-hour from your rooftop solar system that you use at home will save you 33 cents, whereas if you export it to the grid you will get 8-10 cents (some electricity retailers are starting to offer feed-in tariffs a little higher than the state government mandated minimum).  This doesn’t mean you should completely ignore the feed-in tariff:  When considering what sized system to get, there’s no single discrete point at which adding extra capacity to your system stops covering your own use and starts supplying the rest of the grid.  Rooftop photovoltaics produce more electricity on clear, sunny days than on cloudy miserable ones, and more in summer than in winter.  The exact amount of electricity you use varies day to day too.  These variabilities mean that any adequately sized system will inevitably do a bit of powering the home and a bit of feeding in.  The point to note is that once your system gets so large that all your doing is feeding more into the grid, you have reached a point of diminishing returns.  There can be some good reasons for getting a system that’s a little oversized for your present usage – if you’re planning on having kids or buying a massive TV one day or whatever then it can be a good idea to plan ahead, especially considering that with power prices going the way they are, the extra electricity you’ll be using is going to cost so much more in a few years.  But for the most part, the whole practice of adding a few extra kW on the roof just to cash in on the feed-in tariff is not really the effective strategy that it used to be.

If you’re looking to cover your own electricity usage, however, it’s hard to think of a better time than right now to go solar.  Not only are great systems so much more affordable, but buying from the grid has never been so ridiculously expensive.  Power prices have almost doubled in the past five years.  So not only are you paying a shitload less for your system, the saving you’re getting from it is just that much better.  If you don’t get a system, you’re not saving yourself any money, you’re just going to spend the next 4 or 5 years handing over a sum greater than the cost of a good system over to the power companies, who won’t give you anything back except yet another bill.  With runaway electricity price hikes showing no sign of slowing down, why would you want to spend a whole lot more than you have to just to be left holding nothing at the end?

Shot Down in May

If you go about it the right way, a rooftop solar installation can be one of the most dependable and high returning investments you’ll ever make.  If you get a good deal on an appropriately sized system, that’s built from quality parts backed by strong warranties and installed by an electrician who knows his stuff back to front, then it’s hard to go wrong.  I mean, all it does is sit on your building and make electricity when the sun’s out.  The output will vary with the weather and the seasons, but that’s totally predictable and good performance projections allow for that.  Once everything is wired in and your smart meter has been set up to start ticking backwards and so on, the whole thing is downright boring actually, although nowhere near as boring as having to work more hours than you need to, to hand over more and more hard earned cash every month or every quarter to pay bills that only go up and are never going away.

The solar industry, on the other hand, is more volatile than a horse float filled with several layers of rabid and enraged honey badgers all competing in a no-holds-barred beer pong tournament that just switched over to using pints of nitroglycerine because they’ve drunk all the beer.  Anybody who follows solar power related topics in the news is reminded of this regularly – stories about large installation companies and solar manufacturers going out of business hitting the wall come up seemingly all the time.  It’s not only big guys that go under too, a lot of small players go bust and you often won’t even read about them because they’re not large enough to make headlines beyond their local area, or at all.

Watching all these businesses going arse over tit can seem a little weird, because the other thing you’ll notice from following solar topics in the news is just how incredibly popular photovoltaics have become.  Last year, global photovoltaic capacity pased 100 gigawatts.  60 gigawatts of this capacity was installed in 2011 and 2012 alone.  More solar photovoltaic capacity was installed in each of these years than power capacity from any other source.  How can these two things together make any sense at all?  How can so many solar businesses go broke while business is booming?

To understand why so many businesses are biting the dust while so much capacity is being installed, we need to return to two ideas that are fast becoming consistent themes on this blog: the breathtakingly fast changes in the economics of solar photovoltaics over a few short years, and the enormous role that government action has played in bringing solar photovoltaics into the mainstream.

Manufacturers have largely been hurt by the exact same phenomenon that has made so many people keen to install photovoltaics:  the price of the gear has crashed.  Not all booms are the same: a boom in prices works out rather differently to a boom in volumes.  The biggest crash has been in the cost of the panels themselves; Photovoltaic modules that cost around US$4.00 per watt in 2008 are under US$0.60 per watt right now.  This makes the tech economically feasible in vastly more situations than it used to be.  It also means that many manufacturers that used to make a good margin on their product at the old price are making next to nothing at the new one.  To some extent, a few players have managed to protect their margins a little because they can charge a premium on their product.  Some customers are happy to pay extra just to know that they have German made panels on their house, but not everybody can play this card and even those who can are not totally exempt from the pressures of price competition.  A manufacturer’s margins don’t always have to be totally annihalated to zero to send the business broke: it can be enough that they can no longer make enough money to pay their overheads and to service debts incurred to meet capital costs.

Government incentives have played their part because many businesses have been built to take advantage of them and then.  A comprehensive treatment of how this has played out throughout the world would be too long for a blog post like this, and I’m not the guy to give it to you anyway. Different countries have run some very different incentive programs at different times to meet different policy objectives, and I wouldn’t have time to tell you about all of them even if I knew all the ins and outs of every single government program around the world even if I had a thorough knoledge of all of them, which I don’t.  I can tell you a bit about how it’s played out in Australia though.

Widespread rooftop solar installation really got started in Australia in 2008.  At the start of 2008, the $8,000 rebate for residential installs was still available under the Solar Homes and Communities Plan (solar for business was not really very big at that stage).  When this rebate was first devised, eight grand barely made a dent in the cost of a system, but by the start of 2008 it was enough to pay for most of a very small system.

Towards the end of the life of this $8,000 rebate some people even get a 1kW system for free.  So long as companies didn’t mind scraping the bottom of the barrel on parts and labour then they could install the system and make a healthy profit all just from the rebate.  I’ve noted previously on this blog how 1 kilowatt systems suck donkey balls, and there’s no point in shying away from the inescapable truth of this fact.  Systems that puny are really just shit and they deliver next to nothing.  It’d better for everyone if we could just agree not to even refer to such ridiculously undersized contraptions as systems when they’re much better understood as novelty items.  But huge segments of the market really had no idea what system size would be appropriate for their usage (5 years on, a lot of customers still don’t), and when you’re getting the thing for free then it’s hard to argue with the price.  So people built and scaled up entire businesses around this.  They took on employees and to improve margins they imported equipment and started maintaining larger and larger inventories of gear specifically to suit the puny systems that the rebates of the time so heavily preference.  Then when the $8,000 rebate was taken away, they had the rug pulled out from underneath them.  These businesses grew too fast, grew their overheads even faster and weren’t structured to survive a slump in sale numbers.  Such a downturn was unavoidable when the government pulled the rug out from under them first by means testing the rebate, then by canceling it altogether – a move that was inevitable as soon as somebody in Canberra worked out that they were paying for so much more of a system than the owner and direct beneficiary was, a situation that represented terrible value for the taxpayer.  Some of these businesses couldn’t survive even a short downturn in sales volumes, and bit the dust straight away – others found that with government largesse so reduced they were now in the new and uncomfortable position of having to sell their systems on more than just the fact that the Commonwealth would pick up most of the tab.

Now most businesses have to work on making sales to survive, and if you work in one of these then you’re probably thinking “big deal, we have to do lead generation and we have to work on converting these leads, these are not impossible tasks” – and you’d be right.  What you have to remember is that the Aussie solar game is heavily dominated by blokes from a trades background, and not many tradies have a sophisticated grasp of selling.  They’ve never needed one.  When you get right down to it, sparkies and roofers are a bit like crack dealers.  Now I’m not saying this to be disparaging, and I don’t mean that they’re exactly like crack dealers.  I’m not saying that fixing dangerous wiring or leaky roofs is necessarily destroying neighbourhoods and ruining people’s lives, or that it should be viewed as a morally suspect way of earning a living.  I’m not saying they immediately resort to the lethal use of firearms to resolve their differences.

The part where sparkies and roofers are most like crack dealers is that they have a product that doesn’t take much work to convince the customer to buy.  As Chris Rock once put it in his HBO special Bring The Pain:

Yo man, drug dealers don’t sell drugs. Drugs sell themselves. It’s crack. It’s not an encyclopedia. It’s not a fucking vacuum cleaner. You don’t really gotta try to sell crack, OK? I’ve never heard a crack dealer go, “Man, how am I going to get rid of all this crack? It’s just piled up in my house.”

Similarly, nobody ever stands in their living room during a thunderstorm while 8 metric fuckloads of water hammer through the ceiling every second and just stands there scratching their head, wondering whether or not they need the roof fixed.  Nobody ever came home and saw that none of their lights work anymore and that the fridge is no longer fridging, then noticed that the safety switch trips the very moment you turn it on, and then wondered whether or not it’s worth getting an electrician to take a look.  If you’re renting then you make some fairly fast and frantic calls to the landlord to tell em you’re gonna book an urgent repair, otherwise it’s straight onto the tradies to get someone in right now.  So lead generation usually means classified ads in the local rag, flyer drops, or distributing fridge magnets that display the business name and phone number into letterboxes, which the recipient will often put on the fridge thinking “hey, I might need this guy sometime”.  Most people in most businesses would consider these sort of antics as retard level marketing, but results are the only real measure of marketing methods and for tradies doing this sort of thing works fine.  The day eventually comes when you gotta call that number on your fridge.  Now I’m well aware that not everything a tradie does is a massively urgent repair to a home.  But the other jobs they do tend to be similarly non-optional and non-deferrable.  Nobody ever really builds a new structure and asks themselves “hey, do we want a roof on this thing?  who should we get for that.. maybe a roof guy?  do we want a roof now or is this something we can put off indefinitely?”, and nobody ever moves into a new office suite and then decides that the ethernet cabling can wait until next year.  So all they have to do to get the business is the same thing thing crack dealers to get theirs:  they tell potential customers something along the lines of “hey, I exist” and then hopefully follow up on that by quoting realistic prices and ideally will get themselves a lot of repeat businnes by being somewhat reliable or dependable in fulfilling the task.  In many ways, supplying this sort of skilled labour is even easier than dealing crack: crackheads can and often do eventually tire of their chosen life of malnutrition, robbery, paranoia and heavily discounted commercial fellatio, leading them to clean up their act and put the pipe down.   The enjoyment of things like lighting, electrical appliances and staying dry while it’s raining tend to be lifelong habits.  These guys aren’t very used to having to sell their product.  The product sells itself.  The only thing easier to sell is overpriced, lukewarm chips at the football.

Solar photovoltaics, as rad as they are, don’t sell themselves.  This is not because people don’t want them, but because they can always get around to doing it later.  Unlike getting the power back on, which needs to happen ASAP otherwise you can’t keep your milk fresh, getting a system installed can be put off indefinitely.  There’s no end of people who really want a solar installation who have really wanted one for a while now and are quite happy to keep on really wanting one for the duration of the forseeable future.  Dealing with this is 95% of my work in marketing this product really.  It isn’t hard to sell people on the idea of not paying for electricity anymore – particularly if they can buy the product on finance and then pay it off for the same amount of money that they were spending on bills.  I mean, what’s the downside to that?  There isn’t one.  So yeah, it’s not too challenging to convince people to want solar.  The hard bit is getting people to do something about it.

One way to get people to buy is to add some element of time pressure.  The government withdrawing a subsidy, feed-in tariff or rebate on a particular date is actually perfect for this.  This reached it’s most ridiculous point during the Solar Credits scheme, which had a planned reduction of the “Solar Credits multiplier” every 12 months – this mean that every autumn, without fail, you’d hear the call once again to “get in before the government cancels the rebates”, despite the fact that we all knew this was going to happen ages ago.  While this kind of time pressure is great for getting people to buy before the date, once that date passes you enter a world where almost everyone who was ready to buy has already bought.  Some businesses can weather this better than others – the ones most likely to go under are those that have a lot of permanent salaried staff, and big inventories of equipment they’ve imported themselves.  This creates high fixed costs.  This is one of the reasons why customers should always ask their installer who stands behind the product in the event that the business goes bust – businesses that are importing the panels and inverters themselves are just that much more likely to go out of business and leave you high and dry.  By contrast, Excellence Solar seems to always keep myself and Drew extremely busy, but in the event things went unexpectedly quiet for a while then all that would really come of it is that I’d read more novels, practice more guitar and play a lot more video games.  The business would be fine and we’d still be around to provide after sales support.

Fast forward to 2013, and some installation businesses have been able to make the transition from selling a product on the basis that the government will shell out for most of it, over to the rather more grown-up pitch that you should buy it based on what it can actually do for you.  Others couldn’t.  The biggest irony of all of this, is that going solar is actually a much better deal than it was 5 years ago.  The system that you would have been looking at buying back then was made a lot more attractive by the government incentives, but it was also so tiny that it did next to nothing to actually provide the electricity you need.  More than a few people installed an undersized system and actually saw their next bill go up, because the amount of electricity they got from it wasn’t enough to compensate for electricity price rises.  The huge crashes in the price of solar means you don’t have to faff around with wussy little 1kW novelty setups.  You can opt for a system that will actually deliver the bulk of your power – and most of the time it won’t cost you anything more than what you’re spending already.  Much of the time, you can quite literally buy the system on finance and not be paying any more in loan repayments than you would be in bills over the same period.  The difference of course is that loan repayments stay at the same level until they’re totally gone, while the price of power from the grid just keeps racing up at about 13% a year.  It’s like being able to pay off a mortgage for the same money that you’d be throwing away on renting the same place – in a neighbourhood where rents are skyrocketing.  Of course, if you can’t adequately explain this to potential customers, they probably won’t buy and you probably won’t have a business.

Shiny Solar Object Syndrome

Earlier this week a friend sent me yet another link about some spectacular innovation in photovoltaics and I immediately wanted to vomit.  Friends and associates assume that El Solar Duderino spends his day wetting his pants over the next wondrous solar breakthrough right around the corner.  Not true.  Individually, a lot of these stories are an interesting distraction from my real work, but collectively they just shit me to tears.

This probably sounds mean spirited.   All these scienticians and researchoids work their butts off to make the world a better place.  Before you decide I’m just being a dick (again), hear me out.

My problem is not with the dudes in white coats busting their collective backside in the lab, and it’s not with the doo-hickeys they’re working on either.  I dig doo-hickeys.  I’m a doo-hickey friendly kinda guy.  I own a doo-hickey purveying business.  All things considered, I’m actually rather proud to take a doo-hickey positive approach to life.  I really take no issue with brilliant minds and the undertakings they’re applied to – I love that shit.  It’s the rest of you that need to pull your bloody heads in.

Way too many of you are spending way too much of your spare time popping science boners over things aren’t really things yet.  It’s a total drag for a dude like me who has a pretty good idea how well you can get all the things you could want from a solar install just by using gear that, umm, actually exists.

Why are so many of you so hopelessly obsessed with what could possible in a few years time, that you totally ignore the extraordinary opportunities available right now?  This is so painful to watch.  It’s like seeing you daydream about how nice it would be to have a shot with Miss December, paying no regard to the fact that Miss August has been repeatedly texting you all night to tell you she’s feeling really vulnerable right now, oh and by the way she accidently just purchased way too much gourmet pizza and belgian ales, more than enough even for two hungry people really, and now that she’s all alone with it she’s really worried about what kind of career implications these diet choices could have for a nude centrefold, so she’d be really really grateful if you could come over right now to help save her from having all of it to herself and then you could both, you know, maybe hug a bit and “watch a movie” together.  Come on guys.  Take the hint.  How good does the story have to get before you’ll contemplate making your move?

There’s an idea that floats around that being involved in solar installs means being involved in the bleeding edge of scientific and technical advances.  That’s just not true – it’s not true of Excellence Solar, and it’s not true of our competitors either.  I mean, I’ll grant you that this is some truly space age shit we’re putting on your roof, but the space age happened in the 1960s.  That’s where this tech first got its legs: the very first application for photovoltaics was on American spaceships.  Remember the Pioneer missions?  Yeah, me neither.  That all happened well before I was born.

A few months ago I did an interview with Rob Beckers on the Excellence Solar blog – Rob’s a Dutch-Canadian engineer, businesschap, and all-round rad dude who has a wind and solar installation enterprise in Ottawa called Solacity, and also hosts the Green Power Talk forums.  During the interview I asked him a question about all the advances happening in solar power and he pulled me up and corrected me.  “Actually technology has changed very little in the last several decades” he replied, and he’s exactly right.  When I asked about advances is solar power, I kinda just meant that manufacturers are cramming more watts on to the same sized panel now and you can also connect some inverters up to your wireless network and then check how well the system’s doing on your mobile phone, but Rob’s words are better:  they’re clearer and they impart more truth.

If a solar dude from the ’80s was woken tomorrow from a 25 year coma, or reheated after spending the same length of time in some Fry-from-Futurama frozen stasis, there’d be two things about the world today that would seem completely familiar to him: Tattooed 19 year old chicks who’ve ruined their hair by dyeing it too often still want to blow Nikki Sixx and rooftop solar installs still consist of crystalline panels, a solar inverter, sometimes some batteries, and after that it’s just a bit of stuff to hold the gizmos in place and connect them together.

The bit that’s gonna make hypothetical reheated 80s solar dude’s eyes pop about today’s installs is not the gear used, it’s the dollar figures attached to them.  Hypothetical reheated 80s solar dude is not used to a world where installing solar is more affordable than not installing solar.  El Solar Duderino contemplates his postulated unfrozen historical counterpart and doesn’t envy the job he would have had in selling a system back in those ancient, pre-stasis days.  It’s not impossible to sell something vastly more costly than the conventional approach: brands like Maserati and Ritz-Carlton totally rely on it.  Not everyone is counting their pennies.  To sell people on a super expensive alternative, you have to find the people happy to part with the money for it, and then appeal largely to fairly amorphous benefits like ego, novelty, experience, benefaction, prestige, noblesse oblige, and so on.  But mostly people didn’t sell systems in the 80s, and you can see that in the installed capacity figures.  It’s pretty hard to sell people on the experience advantages of something that works by being totally unnoticeable as you go about your day.  A quarter-century later, my job is so much more straightforward.  Once the customer has their head around how expensive it is to not go solar, the decision to go solar becomes pretty easy, and the rest is just a matter of working with them on the how and the when.

The story of solar’s march into the global mainstream over the past decade is not a story of scientific breakthroughs but of commercial ones.  It’s a story of factories going up, improved production line processes, cut-throat competition, lower wage countries demanding their place at the table, vast new economies of scale and no small number of proddings and spurrings from governments.  It’s about money.  To some extent, the world’s gotten better at making the 1950s crystalline panel technology we’re all installing, but mostly it’s just gotten better at making it at the right price.

This is not to say that exciting breakthroughs heralded by news stories won’t ever find their way onto roofs and into houses, offices, warehouses and factories.  They will take their time though.  The bleeding edge of technological innovation doesn’t just wander out of the lab, wave goodbye to the guys in the white coats and immediately start inhabiting products on the shelf that you can buy that very instant.  Commercialisation of research is a long, expensive and inherently speculative process.  First somebody needs to develop this research into something that could go onto a product, and somebody needs to come up with processes to create the stuff that make sense in a large scale profit-driven industrial environment.  There’s a whole ‘D’ side to R&D.  From there a manufacturer builds prototypes, and they get tested.  None of this is instant, and then there’s no guarantee that the prototypes will work as expected, and even if they do, there’s no guarantee that the dudes in charge will decide that it makes commercial sense.  Once the new tech is finally available in an off-the-shelf product, it will take a little while to not cost ludicrous bucks, so if you’re not happy to pay the early adopter tax then wait another few years.

How long does this all take before the lab result finally becomes something everyone’s installing?  It’s kind of hard to say, because over the past 55 years of photovoltaics it’s mostly never happened.  As far as it goes regarding major changes in the panels that actually see widespread use, polycrystalline panels became a strong option, without ever completely replacing monocrystalline panels, and that’s all that there’s really been.  Thin-film spent a long time poised to be the rad new shit that would outcompete monocrystalline and polycrystalline panels purely on price, but crystalline panel makers flipped the script on this story and became even cheaper yet.  Thin-film makes good sense in certain circumstances, like on calculators, but as something that you’d actually want to put on the roof it has yet to prove itself as a stronger option than crystalline panels in most parts of the world.

What we do have a good idea of is how long it will take for a system you buy today to pay for itself.  There’s a little thing we refer to in the solar game called the “payback period”.  This phrase is not unique to this industry but we use it a lot.  The payback period is just the length of time it takes to get more savings from your system than it cost you to install it.  This varies depending on your per-unit electricity costs, how fast those costs are going up, the layout of your roof, what feed-in tariffs are available to you, your daytime/nighttime electricity usage mix, how well your currency is doing, how long you’re left waiting for the install to be completed, and how good a deal you get from your installer.  Excellence Solar customers get great deals and our installs happen lightning fast, so these systems don’t take too long to pay for themselves.  With Melbourne’s electricity prices rising so fast, the 5kW system you see in that link there will pay for itself in under 4 years.  We also sometimes talk about a system’s embodied energy payback period, which is a similar kind of thing, except instead of talking about money, it refers to how long it takes for the system to provide more energy than was expended to build and install it.  If your reasons for going solar involve some element of being kinder to the planet, this metric should be important to you.  The figures on how much energy goes into a system are rather less transparent than some people like to pretend, but speaking very broadly, this length of time is usually similar to but slightly shorter than the financial payback period.

Why is all this talk about payback periods relevant to a discussion about scientific breakthroughs?  Because a system we install within the next couple of weeks will have easily paid itself off before the news story you’re linking me to has become something you can buy.  A rich uncle could swoop in and buy you a system built from this amazing new tech the minute that it’s available, and you’d still be behind financially on where you’d be if you’d bought a system today with your own money.

The thing you have to ask yourself is “What do I want from going solar?“.  It might seem like an overly obvious question, but when people salivate over scientific breakthroughs they’re totally avoiding it.  There’s no end of oddball ways you could approach this question.  Maybe you think that having panels will make it harder for the illuminati to use their spy satellites to read your thoughts, or perhaps you just get a kick out of adding things to your roof, or likelier yet you just secretly think El Solar Duderino is really witty and handsome and so you just want to do things that will make him like you more.  The real answer for 99% of you, however, is “I want to start making my own electricity“.  This leads to benefits like “my power bills are almost/totally gone“, and “my ongoing electricity use creates few/no carbon emissions now“.

These features and benefits are available from an install right now.  You don’t need to wait for something else to happen.  Installing is already less expensive than not installing.  You don’t need to pin your hopes on vaporware.

You might retort that if you hold off to get an install, then you’ll be able to get something way better down the track.  The question you’ve gotta ask yourself here is this: “How much am I going to spend on power bills over the next decade while I’m waiting for lab results to become products?”  Electricity costs vary massively around the world, so the answer to this won’t be the same for everyone.  If you’re from Australia, the answer is gonna be “a lot more money than what it’d cost me to get a system installed within the next few weeks that would cover most or all of my electricity needs“.  Sure, you might be able to buy something a bit more whizzbang than what’s available right now, but you’ll also be out of pocket for the full cost of a system without actually getting to own one.  Why are you so keen to pay more than the cost of a system, just to be left holding nothing at the end, with bills coming in that are bigger than ever?

What’s so great about paying bills that you’re not ready yet to say goodbye?  Is someone from your utility company making a discrete visit every six weeks to orally pleasure you, on the understanding that they will always provide 100% of your electricity?  If that’s what’s going on then I need to rethink my whole approach to business.

By all means, be interested in the exciting possibilities the future might contain.  But stop treating rooftop solar as a technology of the future.  It’s here already and it we don’t need anything new for it to make perfectly good sense.

Interest in other categories of tech product is rarely characterised by such an extreme overfocus on stuff you can’t have.  Nobody keeps in touch with friends using two tin cans and a taut length of string because they’re holding out for the iPhone 9.  Console gamers are definitely keen to hear about products in development, but only after they’ve killed a few bad guys on their PS3 or spent time on the Xbox Live Network being regaled with fascinating tales by American teenagers claiming intimate knowledge of everyone’s mother.  I personally still hold on to my PS2, because I have this weird idea that GTA: Vice City represents the pinnacle of 21st century video games, although secretly I just miss my Mega Drive.  I should have never sold that thing.