Evolution of the solar energy industry: Strategic groups and industry structure

Abstract

This paper discusses the structure of the worldwide solar energy industry. It focuses on sets of firms that follow similar competitive strategies (i.e., strategic groups). The dimensions of their competitive strategies include choice of market (residential, commercial, government, utilities), and type of application (on-grid /off-grid, centralized/decentralized location, retrofit/new construction); other dimensions are also relevant (e.g., cost, differentiation, technology choice, technology leadership). The evolution of this industry depends on projected demand, e.g., government mandates, feed-in tariffs, tax incentives, rebates, price of conventional energy and supply (e.g., production capacity, availability of raw materials, process innovation, rate of learning, economies of scale). Some of these factors affect all firms in this industry equally, while others affect strategic groups differently, and thus their current and future market share and profitability. The performance of firms in the solar energy industry also depends on strategic choices (e.g., preemptive moves, vertical integration, rate of capacity expansion). This paper provides an overview of current and projected structure in the solar energy industry, and speculates on the direction in which this emerging industry might develop.