Technology Strategy in The Solar and Wind Renewable Energy Industries

  • Yu-Kuang Lin

Student thesis: Master's Thesis

Abstract

The objective of this study is to investigate the different effective technology strategies for companies in the solar and wind industries given the dynamics of the renewable energy industry in general. We will investigate how these companies are creating value, capturing value, and delivering value. We looked at all the internal and external factors that drove the competitiveness of the solar and wind companies. A literature review was conducted on the technology strategies as well as solar and wind renewable energy industries around the globe. Eleven case studies including solar and wind companies from around the world were carried out in order to understand their technologies strategies. Based on this, effective technology strategies to create, capture, and deliver value in the solar and wind renewable industries were identified. For thin film PV companies, economies of scale could be an essential factor for cost reductions instead of saving raw material costs because the raw material costs are much less than crystalline silicon modules. Thin film PV companies with disruptive technologies could channel more effort into R&D to leverage the phase of accelerated improvement on the technology S-curve. Traditional crystalline silicon PV companies should pay attention to mitigate the threat of disruptive technologies and secure value creation in the long run. Overall, cost reduction is the key factor to cross the chasm in solar PV industry. Wind companies could penetrate early majority and reach late majority by going global and at the same time being localized. As the competition intensifies both in solar and wind industries due to low cost Chinese entrants, solar and wind companies need to heavily focus on cost reductions by all means, such as by shifting production to low cost countries. For crystalline solar module companies, upstream vertical integration is already not necessary to reduce material costs due to the oversupply of silicon. Downstream vertical integration as an energy solution provider is a trend in the solar PV industry because it can secure the project pipeline and minimize BOS costs. From the technology adoption life cycle in the solar PV industry, successful solar companies effectively crossed the chasm while less successful solar companies failed. We found out that economies of scale played an important role in value creation. However, solar companies with lower production capacity did not necessarily perform badly. Successful solar companies reduced price and cost to respond to threatening external forces while less successful companies such as Solyndra, reduced capacity or improved product quality. Therefore, we can infer that in the solar industry, price is more important than product quality since there is not much differentiation in solar modules. Most solar companies chose to do vertical integration to reduce cost. However, QCells and Solyndra were late to do so, resulting in bad performance. Most successful solar companies have manufacturing facilities in developing countries as key complementary assets while less successful solar companies do not. Successful solar companies relate their simple rules to cost reductions and actively probe into the future market while less successful companies relate their simple rules to quality, and are late to regenerate their business. Successful solar companies adopted time pacing strategy and managed transitions well, lowering their cost fast enough. On the contrast, less successful companies failed to manage transition and adopted event pacing strategy, passively responding to events. Successful wind companies generally have bigger rated capacity turbines and crossed the chasm effectively while less successful wind companies did not. Both successful and less successful wind companies have economies of scale. Therefore, we inferred that mainly relying on economies of scale is not enough to perform well in wind industry. Unlike solar companies, wind companies who focus on quality could effectively respond to external threats. Successful companies generally have higher product differentiation. However, Sinovel is an exception since it mainly focuses on the domestic market. Unlike solar companies, successful wind companies relate their simple rules to more diverse targets such as quality, market share and revenue. Less successful companies fail to regenerate their business and probe into the future. Like solar companies, successful wind companies adopted time pacing strategy and managed transitions well. We could infer that managing transitions and rhythms are important strategies both in solar and wind companies. Diverse market portfolios are the long term solution to capture value both in solar and wind industries. Solar and wind companies should leverage existing complementary assets to enter emerging markets to achieve global presence. Both solar and wind companies should diversify their technology and market portfolio to mitigate disruptive technologies and policy uncertainties. In terms of technology diversification, solar companies should invest in disruptive technologies such as organic cells and dye-sensitized cells. As for wind companies, offshore technology developments are necessary and attention should also be paid to disruptive technologies such as airborne technology. Wind energy in 2016 can be as competitive as conventional coal plants in the USA while solar companies also have opportunities in some states of the US such as California, because the minimum costs of solar PV are projected to be as competitive as the maximum costs of conventional combustion turbine plant in 2016. Other than existing European markets, Australia, Chile, Brazil and some other Latin American countries are potential markets for solar and wind energy due to high electricity prices. The Latin American market is expected to be the next battlefield for solar and wind companies.
Date of Award2012
Original languageAmerican English
SupervisorToufic Mezher (Supervisor)

Keywords

  • Energy Industries
  • Technology Strategy
  • Renewable Energy

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