The photovoltaic market analysis program : background, model development, applications and extensions

Abstract

The purpose of this report is to describe and motivate the market analysis program for photovoltaics that has developed over the last several years. The main objective of the program is to develop tools and procedures to help guide government spending decisions associated with stimulating photovoltaic market penetration.

The program has three main components: (1) theoretical analysis aimed at understanding qualitatively what general types of policies are likely to be most cost effective in stimuating PV market penetration; (2) operational model development (PV1), providing a user oriented tool to study quantitatively the relative effectiveness of specific government spending options and (3) field measurements, aimed at providing objective estimates of the parameters used in the diffusion model used in (2) above.

Much of this report is structured around the development and use of PV1, an interactive computer model designed to determine allocation strategies for (constrained) government spending that will best accelerate private sector adoption of PV. To motivate the model's development, existing models of solar technology diffusion are reviewed, and it is shown that they a) have not used sound diffusion principles and b) are not empirically based. The structure of the PV1 model is described and shown to address these problems.

Theoretical results on optimal strategies for spending federal market development and subsidy funds are then reviewed. The validity of these results is checked by comparing them with PV1 projections of penetration and cost forecasts for fifteen government policy strategies which were simulated on the PV1 model. Analyses of these forecasts indicate that photovoltaics will not diffuse significantly during the time horizon studied if government market development funds (money allocated to the purchase and installation of PV systems) are withheld. Market development spending has the most positive effect on photovoltaic diffusion in strategies where it is deployed early and concentrated in the residential and commercial sectors. Early subsidy spending had little influence on ultimate diffusion. The analyses suggest that any subsidies for PV should be delayed until photovoltaic costs drop substantially. Extensions of the model and approach to other technologies are discussed.