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Government Subsidies Vital in Making Solar Power Technology Price-Competitive

[January 30, 2004]

Government Subsidies Vital in Making Solar Power Technology Price-Competitive

The commercialization of solar power, despite its technical capabilities, has yet to take off successfully largely in part due to the government's unclear stand on subsidies and regulations. Solar power producers will require substantial federal backing if they are to match prices of fossil fuel-powered, on-grid applications.

New analysis from Frost & Sullivan (www.energy.frost.com), North American Solar Power Markets, reveals that this market generated revenue of $499.0 million in 2002. Total market revenue is expected to reach $4.24 billion in 2009.

The government has been showing interest in the renewable energy sources market, especially in the wake of the extensive power outage experienced on the East Coast and the growing concern about dependence on foreign oil reserves. With subsidies, renewable portfolio standards, tax credits, net metering, and buy-down programs, the government hopes to provide enough incentives to make this a fast-growing energy market.

"Government subsidies are expected to facilitate mass production and, thereby, drive prices down sooner," states Frost & Sullivan Industry Analyst Patricia Seifert. "Subsidies will be necessary for another three to five years until solar power can compete with more common energy sources such as natural gas or oil."

The photovoltaic (PV) energy business, one of the main segments of the solar power market, is still largely dependent on government intervention for on-grid applications, since it is not considered a mainstream technology for electricity generation.

"Since PV solar cell prices are not comparable with other electricity alternatives, they are considered a viable option only for remote installations such as bringing electricity to remote villages," notes Seifert.

The solar power industry is addressing market restraints in several ways. Simplifying the installation process is helping convince potential residential end users to implement solar power for every-day electricity needs.

Being positioned as an "environment-friendly" company, as well as the multitude of state, local, and federal incentives for solar-power users are some of the benefits to commercial end users.

To capture a much wider market, PV cell providers have started collaborating with installers, homebuilders, and construction companies to offer beginning-to-end solutions. These include consulting, permitting, design, regulators, roof racks, and inverters.

PV technology has been commercially available for many years, but some challenges still exist. Inverters, for example, have lower lifetimes than most other components, and manufacturers generally only provide warranties for only five years -- considerably shorter than the 15+ year expected lifespan of other PV components and competing technologies, such as engine generators.

"With inverters accounting for 10 to 12 percent of the overall system cost, buyers will be reluctant to reinvest a significant amount of money every five years," remarks Seifert.

Nevertheless, the inverter market is beginning to look up as major telecommunication companies prepare to enter it with high quality products at reasonable prices. These companies can provide complete module-to-inverter solutions, which are likely to increase the warranty period and allay customers' apprehensions.

Combined efforts of the government, solar power producers, and solar energy's inherent quality of non-dependence on volatile fuels are teaming up to increase market adoption and boost revenue growth.

If you are interested in a virtual brochure, which provides manufacturers, end-users and other industry participants an overview of this research, send an e-mail to Nuha Kadri, Industrial Media Relations Executive, at nkadri@frost.com with the following information: your full name, company name, title, telephone number, fax number, e-mail. Upon receipt of your information, an overview will be sent to you via e-mail.

The North American Solar Power Markets, a part of the Power Generation subscription, provides a comprehensive analysis of different technologies and their potential to reduce cost. The research service also discusses prevailing market challenges and gives strategic recommendations on how best to compete in this market. The market is segmented by technology into PV and concentrating solar power, with further technology segmentation within PV. This research service also addresses new innovations in the market, such as nano-technology. Interviews and executive briefings are available to the press.

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