Wednesday, October 06, 2010

What's the Best Way to Expand the Use of Solar WITHOUT Government Subsidies? Put Solar on the White House?

Whenever government support for solar declines, we are reminded of how important it is for renewable energy markets -- especially solar power -- to operate independently of government support.  Consider for example the boom-and-bust cycle experienced in Spain.  It's clear that feed-in-tariffs do not create sustainable markets.

The solar industry absolutely needs regulatory certainty, but it also needs to become sustainable on its own…a process that is referred to as market transformation.

The term market transformation has been used in the energy efficiency industry for a long time now.  It is essentially the process of expanding a market in ways that create lasting change.  Here's the definition of market transformation used by the Northwest Energy Efficiency Alliance (NEEA):

Market Transformation is the strategic process of intervening in a market to create lasting change in market behavior by removing identified barriers or exploiting opportunities to accelerate the adoption of all cost-effective energy efficiency as a matter of standard practice.

The key words in NEEA's definition are "lasting change." Because government subsidies do not create lasting change, we need to identify ways to intervene in the solar market in a way that accelerates the adoption of solar, but also leads to a sustainable market.

Governments worldwide have implemented a variety of solar incentives and support, with mixed results.  Here in the U.S. the latest example of "government support" is the installation of PV on the White House.  But if you look at the history of solar on the White House, it's no different than any other form of temporary support.  We're now seeing the third time solar will be installed on the White House.   President Carter installed solar on the White House…Reagan removed it….Clinton considered it….then George W. Bush installed solar again….and now Obama is [presumably] adding more.

It seems that solar on the White House is just like any other type of government support…it's on, it's off, it's on again.  In the end it's just another form of regulatory uncertainty...leaving the solar industry to guess about how long the current administration will support solar.

So here's my question.  What's the best way to expand solar markets WITHOUT government subsidies?  And how do we create lasting change without relying on transitory support?

As you may know, I have a clear opinion about how to achieve market transformation in the solar industry.  And most of the strategies I recommend include reducing the perceived risk of adoption which will help people learn to "trust" solar.

But as the saying goes, there's more than one way to skin a cat. So I'd like to hear what others think about this subject.  What can the solar industry do to truly achieve market transformation?

Now we all know that there's been massive government support for fossil fuels ever since christ was a small child.  But that's not the point of this dialogue.  Assume energy generation and delivery can be achieved without subsidies, and let me know your ideas for making solar a self-sustaining industry.

Thursday, July 01, 2010

The Relative Advantage of Solar

Most business schools still refer to Everett Rogers and his theory of how and why new ideas and technologies are adopted by a population.  In his book called Diffusion of Innovations, Rogers introduces five main dimensions that influence the adoption of an innovation: complexity, compatibility, observability, trial-ability, and relative advantage.

An examination of the factor called "relative advantage" reveals why there are so many challenges associated with making solar more widespread.

Relative advantage is the extent to which solar is viewed as better than the method in current practice.  Fundamentally, a new product or service will be successful if it does a better job than existing products at satisfying the needs of a targeted customer group.  But according to diffusion theory, "doing a better job" actually has four components. If a new product or service can surpass existing offerings across all four of these components at once, then we can guarantee that the targeted customer group will purchase it.

The four components expressed in terms of solar electric power are:

- solar must be less expensive than power from a utility (lower price).

- solar must provide better features or functionality than power from a utility (greater benefits).

- solar must not have any switching or adoption costs (easy to use).

- solar must be readily available (easy to buy).

Customers for whom all four conditions apply will purchase solar because there are only benefits and no barriers. And the closer a solar product comes to succeeding in all four dimensions, the greater the chance that the product will be a success.  And, of course, the new solar product will be a financial success if these conditions can be met at a profit.

The convenience and reliability of electric power from a utility makes it very difficult for solar to meet all four criteria.  And notice we haven't even talked about "trial-ability" yet.


Warren Schirtzinger advises solar companies on how to: differentiate their products, grow during an industry shakeout or consolidation, and thrive without government subsidies. He has authored articles as a "Renewable Energy Insider" on RenewableEnergyWorld.com and writes about marketing strategies on the solar strategies blog.  Contact him via e-mail (warren["at"]solar-strategies.com) or follow him on Twitter @SolarStrategies.

Wednesday, June 09, 2010

How 1BOG Helps Make Solar More Appealing to Mainstream Customers

We hear this topic discussed almost everyday in the solar industry. How do we reduce or eliminate barriers to adoption, and what programs or activities are needed to make solar/PV a mainstream technology?  Within this endless debate, it's interesting to see the different strategies being applied toward reaching the common goal of increased market adoption.

Two examples of recent initiatives -- specifically aimed at taking solar into the mainstream -- include groSolar's national advertising campaign and Akeena Solar's partnership with Westinghouse. In terms of strategy, groSolar is relying on building awareness whereas Akeena is focusing on brand recognition and using "home improvement" channels of distribution.  Yet in my mind the most interesting strategy is the one employed by an organization called 1BOG.

Buying solar involves a complex, information intensive and high risk purchase decision. (Note I said the purchase decision is complex and high risk, not the technology)  This is exactly the reason why the solar industry has not yet reached a tipping point.  Solar/PV is a high cost product, supplied by unknown vendors, in an industry without uniform standards or government regulation.

When faced with a purchase decision that involves high cost and/or high risk, pragmatic customers (starting with the early majority) will not buy until they see proven/leading suppliers, references from people they trust, and reliability of service.  1BOG helps mainstream customers meet these buying requirements by offering a unique combination of group purchasing/installation and objective advice.

1BOG's service organizes homeowners in a given area and allows them to purchase and install solar as a group.  In addition to negotiating a volume discount of about 15%, 1BOG acts as an independent provider of quality assurance and objective information.  To qualify as a 1BOG vendor, local solar companies must go through a rigorous evaluation of their products, installation practices, and longterm stability as a company. Customers are also provided with assistance and support in the areas of rebates/incentives, financing and permits.

While most people would point to the 15% reduction in cost or the assistance provided with bureaucracy and paperwork as the primary benefits of 1BOG's program, I believe the true power of their approach is in helping reduce the perceived risk of solar.

In the world of high risk the customer will not rely on the word of a vendor. The customer’s decision process is based on finding objective information from reliable sources, something the vendor cannot provide.  1BOG reduces the perception of risk by acting as that provider of objective information.  1BOG facilitates references from trusted sources (by organizing buyers into self-referencing groups), and then provides evidence of expertise and product quality (by vetting local solar providers).

The 1BOG strategy is by no means complete but it does a good job of addressing some of the needs of mainstream customers. Only time will tell if this, or other methods, will deliver the anticipated prize -- solar's mainstream market.

Warren Schirtzinger advises solar companies on how to: differentiate their products, grow during an industry shakeout or consolidation, and thrive without government subsidies. He has authored articles as a "Renewable Energy Insider" on RenewableEnergyWorld.com and writes about marketing strategies on the solar strategies blog.  Contact him via e-mail (warren["at"]solar-strategies.com) or follow him on Twitter @SolarStrategies.

Saturday, May 29, 2010

Akeena Solar's Market Research Raises Some Interesting Questions

I was surprised by the remarks made by Akeena's VP of marketing (Gary Mull) in a recent interview with Seth Masia from Solar Today Magazine (see: Why the Westinghouse Brand Matters for Solar)  The subject of that interview was Akeena's new partnership with Westinghouse.

About 1 minute and 15 seconds into the interview, Mr. Mull states that Akeena discovered through market research that there are currently no recognizable brands in the solar industry.



Here's the exact quote:
our research showed that consumers really couldn't recognize a major brand within the solar market today
The first question I would ask is…what about Sharp?  Isn't Sharp a recognizable brand name in mainstream America?

Please keep in mind that I'm not picking on Sharp Solar.  I know there was a lot of disagreement when I recently suggested that Sharp's brand failed to help them maintain the #1 ranking as a fabricator of solar cells. Many people were unhappy with my opinion about branding.  (see: Branding Only Works on Cattle. Just Ask Sharp Solar) I even got the publisher of Renewable Energy World (Oliver Strube) to moo like a cow in protest, which is not an everyday occurrence.  My goal here is to stimulate a worthwhile discussion about interesting topics in the solar industry.

The other question I would ask after listening to the Akeena interview is: if there are no recognizable brands in solar (per Akeena's research) and Sharp is a brand that is not recognized…what makes them think the Westinghouse brand will be of any value?

There are many similarities between Sharp and Westinghouse.  Both companies have a long history of financial success and are known for innovative household products that are marketed worldwide.  Both companies have a reputation based on reliability and trust. Wouldn't either brand be equally recognizable?

Obviously there are many details regarding Akeena's research project we don't have.  Did they forget to list Sharp on their survey form? Did Akeena's research focus exclusively on pragmatic/conservative mainstream customers or did it include all types of buyers? How does Akeena define the difference between early adopters and the early majority?

I feel these and other questions are worth asking, because the issue of "recognizable brand" forms the basis of Akeena's strategic decision to partner with Westinghouse.  At least that's what I'm hearing in this interview.

I would enjoy hearing everyone's thoughts and comments.

Warren Schirtzinger advises solar companies on how to: differentiate their products, grow during an industry shakeout or consolidation, and thrive without government subsidies. He has authored articles as a "Renewable Energy Insider" on RenewableEnergyWorld.com and writes about marketing strategies on the solar strategies blog.  Contact him via e-mail (warren["at"]solar-strategies.com) or follow him on Twitter @SolarStrategies.

Wednesday, May 05, 2010

Meet the Gatekeeper of Solar's Mainstream Market

The solar industry has been selling to an early market of innovators and early adopters for many years now. And there are still plenty of customers in the early market to sell to.

But most solar companies have their eye on a bigger prize -- solar's mainstream market -- a category that contains a whopping 84% of all customers. Because there are so many people in the mainstream market, winning their business is key to sustained profits and growth.

Customers exhibit purchase behavior over time that is different at each stage of a market's development. Innovators (about 2.5 percent of a market) are often fascinated with new technology. Early adopters (about 13.5 percent of the market) are less fascinated with technology but are often quick to see the potential benefits of something new. But the great majority of the potential market -- the remaining 84 percent -- is not fascinated with technology at all. In fact, the most substantial portion of a market are those who fundamentally dislike technology.

What are the characteristics of the customers who make up 84% of the solar market? Meet the gatekeeper of solar's mainstream market -- the early majority.

All mainstream markets begin with the early majority.  They are the gatekeepers of the business rewards that lie ahead.  These people do not want to be pioneers and will never be the first on their block to try a new technology like solar.  They like to keep a low profile and their goal in life is to make incremental, predictable progress. (quantum leaps are for Evel Knievel)

The early majority shares some of the early adopter's ability to relate to technology, but ultimately they are driven by a strong sense of practicality.  The word "risk" is a negative word in their vocabulary because it implies the chance to waste time and money.

When they buy they care about the company they are buying from, the quality of the product they are buying, and the reliability of the service they are going to get.  They like to see competition and prefer to buy from the proven market leader.  Members of the early majority tend to be vertically oriented, meaning they communicate more with others like themselves. References and relationships are very important to these people which presents a "catch-22" for solar vendors: the early majority won't buy from you until you are established, yet you can't get established until they buy from you.

In order to break into the mainstream market, solar vendors will need to re-orient their business practices to match the pragmatic and conservative characteristics of mainstream buyers. This means: facilitating referrals and references from someone the customer trusts, establishing then adhering to industry standards, emphasizing financial stability and product "intangibles" rather than technical specs, selling through channels that mainstream buyers are comfortable buying from, and offering turnkey systems that are designed for vertical markets.

Meeting the needs of the early majority is a strategic way of intervening in the solar market to create lasting change. There are many ways to affect markets on a short term basis -- advertising campaigns, government policy, subsidies, etc. -- but these techniques have no long-term positive impact on the market. Understanding mainstream buyer behavior and adapting your business practices accordingly will permanently change solar markets in ways that are sustained by natural market dynamics.


Related Articles:
Product Adoption Fundamentals
Solar in the Mainstream




Friday, April 30, 2010

Smart Grid Standards Must Come First

Technology adoption is all about standards. To succeed with consumers, one firm's gadget often has to work with other gadgets from other firms.

Technology moves so quickly that standards set by committees usually come too late. Instead, the industry organizes itself around de-facto standards championed by single firms with the clout to make them stick. For example, as Intel has done with microprocessors.

Early adopters who are using Smart Grid Investment Grants (SGIG) are currently choosing hardware, software and communications technology well before most of the relevant standards have been settled. This creates enormous *risk* in the minds of the public.  The possibility of selecting the wrong vendors or technologies is keeping a lot of people from participating, thereby delaying mainstream adoption of smart grid products and applications.

Smart grid standards would help remove this barrier to adoption and open the door to mainstream markets.  The only question is, who has the clout to establish a de-facto standard that the rest of the industry can follow and benefit from?

I was disappointed to read a recent article written by General Electric -- clearly one of the candidates capable of establishing a smart grid standard -- that said the key to smart grid adoption is education and awareness.  This claim was based on a report commissioned by GE Energy that surveyed consumers in the U.S. and Australia.  It found that 10% of the people surveyed know "something" about smart grid technology, and those people are overwhelmingly in favor of pursuing and adopting it as soon as possible.

GE's logic goes like this: we found that people who know about the smart grid concept support it…so if everyone knew about it, everyone would support it.

Innovators and early adopters (who make up about 16% of the smart grid market) are willing to accept high risk.  And the GE survey did a nice job of confirming the fact that innovators and early adopters are technology advocates and enthusiasts.  But the bulk of the smart grid market (known as the early and late majority) is risk averse and not willing to participate until standards and other risk-lowering factors have emerged.

I wouldn't recommend spending a lot of money promoting the smart grid concept until a minimal amount of standardization is in place.  You can't advertise or "educate" your way into a mainstream market.  Without the right mix of vendors, channels, products, services and standards, pragmatic and conservative customers simply won't buy in.

With emerging technologies and markets, sometimes raising awareness is the last thing you want to do.


Related Articles:
The Gatekeeper of Mainstream Markets

Monday, April 19, 2010

Reducing the Risk of Solar

Solar energy is considered a long decision-cycle purchase. Due to the complexity of the sale and its financial components, consumers educate themselves thoroughly before buying. As such, vendors cannot move a customer through decision stages to close the sale.

With products that are more costly, complicated or high-risk, the customer has more at stake.  If a solar installation goes bad, the customer is looking at losing thousands of dollars, the potential of roof damage/repair, time without basic necessities (electric heating, cooling, refrigeration, etc.), and a significant disruption to his or her life.

Adding to this perception of high risk is the nearly risk-free alternative of buying electric power from the local utility, a proven supplier with an unmatched record of safety and reliability.  Relative to a utility, solar appears extremely risky.

In the world of high risk the customer will not rely on the word of the provider. The customer’s decision process is based on finding objective information from reliable sources, something the vendor cannot provide.

Think about the last time you had to select a surgeon, a family doctor, a lawyer, or an investment broker/advisor -- all high-risk purchase decisions.  Would you entrust your life savings to a financial advisor or broker because of an ad or brochure?  Would you select a surgeon based on his "messaging?"

The only way to increase adoption of a high risk offering is with methods that reduce risk in the mind of the customer -- references from someone the customer trusts, professional credentials/affiliations, a supporting infrastructure, industry standards, evidence of expertise, product quality, and ongoing service.

The solar industry needs to wake up and realize that the McDonald's-happy-meal approach to promotion is useless when the product is high cost and/or the purchase decision is high risk.


Related Articles:
Marketing High Risk Products

Sunday, April 11, 2010

Solar Forces a Change in Behavior

I think it was Nathan Lewis of the California Institute of Technology who first said that solar energy-generated electricity does nothing "new." People already have electricity.  And that is true.  Solar doesn't offer an improvement in capability.  But that's not the real barrier to the public's adoption of solar power.

Most emerging technologies are introduced when their performance is not as well developed as established products.  And in order to become competitive over time, technologies like solar must be refined and improved by a sequence of users (starting with innovators and early adopters).

The key issue here is not that solar is an under-developed technology or that solar provides something people already have.  The key issue is that solar, like many technologies, forces a change in behavior.  With solar you must have panels (or PV material) installed, rather than use a built-in connection to the grid.

A recent survey by the Solar Energy Industries Association (SEIA) as reported on Renewable Energy World indicates people are in favor of solar power but would prefer that it is supplied by their utility.  Why would 75% of people surveyed want their utility to install solar?  Because that way they can realize the environmental and renewable benefits of solar, without changing their behavior.

As long as everyone agrees that centralized solar electric power delivered through a grid is the best path to a sustainable future, then our objectives are clear.  We need to focus on utility-scale solar and improve our centralized system of delivery.

However, if distributed generation and residential solar are a better way to go, we need to find a way to get people to change their behavior.  And getting people to change their behavior requires more than just cost reduction and government subsidies.  Encouraging people to change their behavior requires the influence or involvement of preceding groups of people in the marketplace


Related Article(s)
Product Adoption Fundamentals

Thursday, April 08, 2010

The Easy Solar Segments Are Gone

Today's solar markets have exhausted the "easy" segments. Typically, customers exhibit purchase behavior over time that is different at each stage of a market's development. Innovators (typically about 2.5 percent of a market) are often fascinated with new technology. Early adopters (about 13.5 percent of a market) are less fascinated with technology but are often quick to see the potential benefits of something new.

But the great majority of a potential market -- the remaining 85 percent -- is usually not fascinated with solar technology at all. In fact, the most substantial portion of any market may be those who fundamentally dislike technology.

Solar organizations that understand the shift in potential customer focus will recalibrate their marketing. They will concentrate more on the complete (intangible) product and less on the technical specs or "tangible" features.

Developing a complete product means helping the customer focus on how the product will improve his/her future. It requires detailed knowledge of the customer's life and direction, not merely an understanding of the efficiency of a solar cell.

Companies that do not understand this fundamental change will experience an abyss in their growth curves. Once the easy segments of their markets are exhausted, additional sales will come only at the expenditure of substantial resources, and the returns on sales and marketing will decline rapidly.


Related Article(s)
Product Adoption Fundamentals

Monday, April 05, 2010

The Relative Advantage of Solar

Most business schools still refer to Everett Rogers and his theory of how and why new ideas and technologies are adopted by a population.  In his book called Diffusion of Innovations, Rogers introduces five main dimensions that influence the adoption of an innovation: complexity, compatibility, observability, trial-ability, and relative advantage.

An examination of the last factor, "relative advantage," reveals why there are so many challenges associated with making solar more widespread.

"Relative advantage" is the extent to which solar is viewed as better than the method in current practice.  Fundamentally, a new product or service will be successful if it does a better job than existing products at satisfying the needs of a targeted customer group.  But "doing a better job" actually has four components. If a new product or service can exceed existing offerings across all four of these components at once, then we can guarantee that the targeted customer group will purchase it.

The four components expressed in terms of solar electric power are:
  • solar must be less expensive than power from a utility (lower price).
  • solar must provide better features or functionality than power from a utility (greater benefits).
  • solar must not have any switching or adoption costs (easy to use).
  • solar must be readily available (easy to buy).
Customers for whom all four conditions apply will purchase solar because there are only benefits and no barriers. And the closer a solar product comes to succeeding in all four dimensions, the greater the chance that the product will be a success.  And, of course, the new solar product will be a financial success if these conditions can be met at a profit.

The convenience and reliability of utility-delivered electric power makes it very difficult for solar to meet all four criteria. Grid parity alone is clearly not enough.


Related Article(s)
Does Grid Parity Matter?