Energy Industry Entrepreneurs

Business Opportunities - Solar Energy

Written by Gautam Patil for Gaebler Ventures

Millions of dollars are being invested by photovoltaic (PV) panel manufacturers to ramp up production capacity in expectation of high sustained growth in PV demand. Bold ideas like Solar Tower and Solar farms are being tested by utility companies to augment their capacities and hedge against fossil fuel prices. In the midst of all these, many interesting and profitable solar energy based business ventures have been set up by small to medium entrepreneurs.

In the present scenario, long payback periods (the period over which solar installations will pay for themselves) strongly discourage prospective users from tapping solar energy to produce electricity.

However, some foresight will reveal many implicit assumptions which may not hold in future. For instance, electricity tariffs do not fully reflect the increasing fossil fuel prices. This could lead to an increase in electricity tariffs which can bring down payback periods significantly and make PV panels more attractive.

Solar energy businesses can be a lucrative area of focus for aspiring entrepreneurs who wish to capitalize on the inevitable mainstreaming of solar power.

Making Money from Solar Power

Currently, most business ideas revolve around serving off-grid customers (customers not served by the electricity grid or mobile establishments in remote locations), providing back-up power and so-called peak shaving.

Electricity tariffs are usually structured to encourage conservation by increasing tariff rates at higher levels of consumption i.e. through increasing marginal rates. Using solar power thus helps reduce the amount of electricity consumed within this tariff range and thus provides significantly higher savings. This is called peak shaving.

Solar panels are used to charge deep discharge batteries which are used as back up for emergency or back up lighting. As can be seen, this is kind of a customer base is very restrictive and in countries where utility power is very cheap or subsidized, solar power may become unprofitable. Thus, new business models and innovative products are required to widen customer base and improve penetration.

There is a lot of scope for such services in developing countries like India and Brazil which are blessed with high solar radiation as well. Electricity grids are poorly developed in these countries and never reach far flung areas.

People in such areas have very minimal energy requirements thus making grid extension an unprofitable exercise. Solar power fits the bill perfectly in these cases.

There are instances where only a few panels have been able to successfully electrify a village through use of low power devices like CFC for lighting. A few extra hours of lighting in the night is highly welcome as it increases working hours - thereby affecting household income - and makes the environment conducive for education of their children. Thus, entrepreneurs with higher outlays could 'adopt' and electrify such colonies and enjoy decent returns on their investment. In areas plagued by frequent power outages or poor quality supply, local entrepreneurs charge batteries through solar panels and then rent them out during emergencies or power cuts.

In countries like Germany, the Renewable Energy Act enables producers of renewable energy to sell power at significantly high prices (solar power is bought at 43 cents per KWhr). With increasing climate change awareness, carbon foot print has become a buzz word among new-house owners in developed countries. Building Integrated Photovoltaics - PV panels integrated with the structure of a building - is catching on and is throwing open many new opportunities for engineers and architects alike.

There is also a lot of scope for engineering innovation in process heat applications. For instance, transpired collectors have been successfully deployed for many heating and cooling applications. Some of these require fairly low manufacturing technology and can be taken up by small to medium manufacturers.

Gautam Patil is a recent MBA graduate from the Indian Institute of Management, Bangalore. In addition to serving as a contributing writer for Gaebler.com, he will join the consulting firm Oliver Wyman at their London office.

Share this article

Additional Resources for Entrepreneurs

Lists of Venture Capital and Private Equity Firms

Franchise Opportunities

Contributors

Business Glossary