The availability of capital for developing photovoltaic markets

Abstract

Capital availability is not a problem in a well-functioning market. However, the market for photovoltaic cells is immature; in fact, the market for grid-connected photovoltaic applications (the primary concern of this study) does not yet exist. Therefore, the capital markets cannot easily evaluate the credit-worthiness, the economic attractiveness of the variety of photovoltaic production processes, research programs, or end-use applications currently being developed. Only when photovoltaic technologies converge to a roughly standardized set of mass production methods and consumer applications will private capital markets perform their job of allocating financial resources to the photovoltaic industry. Until then, investigations into the question of capital availability for this industry must focus on firm-by-firm "case" studies. This paper examines capital availability for both the production and consumption sides of this young industry. The experiences of photovoltaic producers in obtaining and allocating capital are described for three groups: oil company photovoltaic subsidiaries, electronic firm subsidiaries, and independent producers. This discussion is based on telephone and personal interviews with officials of the companies described. The capital availability problems of solar thermal consumers provide a basis for anticipating such problems for future photovoltaic grid-connected consumers. This basis is used to project the probable behavior of capital markets once mass production is economically feasible. Recent Congressional hearings on the creation of a Solar Energy Development Bank provide the primary backdrop for this discussion. It is concluded that given no change in federal programs to support photovoltaic production and/or consumption, only "large," capital-rich firms will enter the mass-production of photovoltaic cells. Small independents can survive only if they are proficient in serving the specialty, or systems, photovoltaic market. Large firms not currently active in the photovoltaic industry will enter production through acquisition or accelerated research programs once the mass-production market develops and the profit potential is recognized. Finally, consumers will have difficulty in locating financing for their photovoltaic purchases for some time after the mass market opens up. Recommendations include (a) no government subsidies until private industry defines the best photovoltaics technology, and (b) creation of a Solar Energy Development Bank after mass markets develop to dissolve the reluctance of financial intermediaries to lend.