The market isn't mature yet, but it's rapidly picking up speed thanks to rising environmental consciousness and innovative initiatives
Kermit the Frog once exclaimed, "it's not easy being green," but today being green is the fast track to raising both profits and environmental consciousness. Take the rapidly expanding solar-energy market, which has picked up momentum in the past few years and which was the topic of a RBC Financial Group report, "Investing in Solar Now," released on May 9.
The report from the New York City-based group provides a useful snapshot of the current state of the solar-energy industry and its potential for investors. According to the report, the demand for photovoltaic solar power will grow about 40% by 2011, making it an attractive market for venture capital and private investment.
"[Solar energy] isn't mature yet, so a lot of money is going into research and development. About $1.7 billion was invested as private equity and venture capital in the solar industry in 2006—mostly private equity for factories in China and investment in technology companies in the U.S. and Germany," explains Jenny Chase, a senior solar analyst for London-based investor research and information firm New Energy Finance. "In addition, $4.5 billion was invested in publicly quoted solar companies in 2006, most of which is being spent on expanding global manufacturing capacity," she adds.
Solar energy's recent boom is due in part to growing public and governmental awareness of the developing technology, which was introduced as an energy option during the oil crisis of the 1970s. In 1999, German legislation—known as the "100,000 Roofs" law, due to its aim to cover 100,000 roofs with panels—followed by the Renewable Energy Law in 2000, provided low-interest loans for home and business owners to install solar-power panels. It also gave installers the opportunity to earn half a euro for every kilowatt of electricity they generated in the power grid.
Silicon Panels Still Rule
In the U.S., the Energy Policy Act of 2005 currently provides a 30% tax credit on all solar systems installed by private homeowners and businesses. This policy is set to expire at the end of this year, though newly proposed legislation would extend these same credits until 2016.
Of the total solar-energy market, 95% is dominated by photovoltaic solar power, which directly converts the sun's rays into electricity. These panels use silicon, a material that raises its own environmental red flag, though industry professionals claim it has had no proven negative effects on the environment. In 2004, high demand for solar panels led to a bottleneck in the supply chain of silicon, driving up prices—and providing opportunities. "There's currently a lot of money being invested in new silicon production capacity to respond to the demand," says Chase.
But despite growth in the sector, solar power still plays a minimal role in energy production, with only .03% of worldwide electricity generated from photovoltaic power. As Chase points out, the technology is still underdeveloped, though that hasn't stopped innovative engineers and designers using what's available to produce viable, commercially focused products.
One such group is London-based SolarLab, which was founded in 2006 by Swiss-born Christophe Behling. Behling, a designer who has previously worked with companies such as Tag Heuer and Nokia (NOK), has created items from luxury products to solar vehicles. He designed the world's largest solar-powered vessel in Hamburg, Germany. The Hamburg Solarshuttle seats 120 passengers and was launched in 2000. To date, Behling has designed over 40 solar-powered water vessels, from large, commercial boats to smaller, private boats for personal use.
Slow Boat to Hyde Park
"The costs can be recovered on a boat like this in as little as three years," says Behling. "If you were to build a solar powered boat to the same size as a boat with a diesel engine, you would save 15% to 20% from the cost of fuel alone."
Most recent is SolarLab's design of the largest solar-powered boat in Britain, the Serpentine Solar Shuttle. Permanently moored on London's Serpentine Lake, the stunning craft made its maiden voyage last July, its two, silent engines completely powered by the sun. The shuttle moves slowly (at about 5 mph) and can hold up to 42 passengers. The battery can store up to 80 miles of energy when there's no direct sun (as on overcast days) and can travel for 20 miles in complete darkness.
Both the Serpentine and Hamburg Solar Shuttles usually generate more power than necessary and can feed excess energy back into their respective national grids in Britain and Germany. In Hamburg, the shuttle spends the three months of the year it's not sailing docked on the lake, feeding energy into the grid of the Hamburg Electric Company. According to Behling, it provides enough energy to fuel the city lights. In Germany, power companies must buy back photovoltaic power at about 50 cents per kilowatt hour, more than twice what normal utilities charge.
Next Project: Solar Golf Cart
SolarLab's latest ventures include building an even larger vessel, which will be a hybrid boat using solar power and bio-diesel fuel. Does that mean solo solar isn't viable? No, argues Behling. For now it's a question of practicality: As long as solar technology remains underdeveloped, the combined energy vessel can travel at greater speeds and navigate waters with stronger currents.
This boat is intended for London's Thames, and Behling's goal is to have it on the water in time for the 2012 Summer Olympics in London. The Thames boat will be able to reach speeds of 18 knots and will hold up to 200 passengers. SolarLab is also working on a solar-powered golf cart, which the company hopes to mass-produce. Currently, all of SolarLab's vehicles are custom made, making them pretty expensive—the Serpentine SolarShuttle cost around $470,000. Thinking small but mass market could revolutionize SolarLab's business.
For Behling, however, the most difficult part of the solar story is to change consumers' awareness of its current, and potential, capabilities. "Our most challenging aspect is the perception of the client. Many believe solar power isn't a reliable energy or that it's not sustainable. One of our goals is to shift the consumer mindset," he says. By creating vehicles that use reliable solar technology, and are accessible and aesthetically pleasing, SolarLab aims to create change through inspiration.