The Economics of Distributed Solar Power Arrays
Karl Dean, Harvard University, May 8, 2008
Essay for Accounting E-120, Richard Keith, Professor
Introduction
This essay is as much about the future as it is about the past. It is necessarily so because of rapid changes which are occurring in the solar power industry. There is an interplay of change in technology, change in business models and increased governmental incentives and penalties. The solar power industry five years from now will look quite different from what it was five years ago. As evidence of the massive changes which are now occurring, one need only look at First Solar (FSLR) a supplier of photovoltaic panels. It experienced triple digit gains in total revenue in 2006 and 2007, which would be considered extremely impressive in any industry. Its ability to make such gains was due in part to an expansion of governmental incentives worldwide which promote the use of solar panels. But it was due also to a technology and business strategy unique to the company which allows it to produce and sell panels for less.
An environment of change such as we are in can produce opportunities for other businesses as well, if those businesses can do the right thing at the right time, as First Solar did. The focus of my essay will be on the generation of power from distributed solar arrays and the opportunities available to power providers. In the interest of simplicity, I will only examine solar arrays which are connected to an existing power grid. Independent solar array systems are more complex and not germane to my discussion. One could also include an evaluation of distributed power generation from grid connected wind turbines. I’m a big fan of wind turbines, but since the end ...