There is a massive industry in Western European countries like France and Germany that is growing ever so larger, some call it the solar industry, others call it the Photo-voltaic Power Generation.
Massive is an understatement!
This blog post aims to portray an overview of the solar PV industry in two Western European countries, namely France and Germany. First, we introduce the contextual environment and analysis of the stakeholders, rules of the game, and non-financial associated risks. A scenario analysis was conducted after setting a context, which includes both internal and external perspectives on the business. As a result, we were able to describe the possible changes based on PESTEL factors and set a value chain analysis to track the activities from the selling point to the maintenance and connection to the national grid. To complete the picture, we included local communities’ analysis and investigated their renewable energy market role. Consequently, the blog’s findings and the list of paramount recommendations to the success, improvement, or transition within the Photovoltaic energy generation industry were combined in the advice.
From the landscape perspective, Western Europe should decrease imports from China to lower the supplier power and import dependency. More solar companies’ development support should lead to a transition from an export region rather than an import region. However, to achieve this, an innovative mindset should be adopted first. The latest updates from the world energy industry provide more solutions for storage technologies to make sustainable energy more feasible. The government’s role is fundamental and plays a crucial role in encouraging household owners and renters. Therefore, state incentives and infrastructure should be put in the first place, together with new energy policies and regulations.
Local communities’ role should also be considered as a moving force in the energy transition since they appear to be more effective in overcoming social resistance and communication with the locals. Delegation of authority allows to speed up the efficiency of the whole energy transition initiative and effectively distribute the resources.
The recommendation formulated that were paramount to the success, improvement or transition within the Photovoltaic energy generation industry are:
➢ Western Europe should decrease imports from China.
➢ Start developing more solar companies and start being an export region, rather than import.
➢ Western Europe should invest more in energy storage technologies and infrastructure.
➢ More government incentives and infrastructure (in general) should be put in place (faster).
➢ Fewer regulations and restrictions (for example home codes) from governments.
➢ Governments and towns should encourage homeowners and renters to be involved.
➢ Adopt more of the latest innovations that are founded by companies like Tesla or Solaredge.
Great France and Germany
*Disclaimer: If information of Germany is only represented in the blog, not both France and Germany, this means that it could have been caused due to lack of online resources parts of France makes available to international audiences.
This blog analyses Western Europe’s Photo-voltaic (PV) Power Generation. We interpret our findings to recognize the region’s position/state in terms of using this energy-generating technology. PV Power Generation utilizes one of the five essential renewable energy resources,
By understanding the Photo-voltaic Power Generation technology position, we were able to achieve the purpose of this blog, which is to create a transition process design and summarize the findings in final recommendations.
This blog’s context is in Western Europe, which usually includes Belgium, the Netherlands, Luxemburg, France, Germany, and the United Kingdom. However, this list can also count twenty-two countries, expanding the research horizon, which can be found in appendix G (Western Europe, 2020). In this blog, we decided to focus on just two countries, namely Germany and France. The decision is based on our desire to have a broad context, and at the same time, massive interest in two different energy paths these countries pursued.
After the Fukushima atomic catastrophe in 2011 and following shortly after anti-nuclear protests (BBC News, 2011), Germany’s chancellor Angela Merkel announced that Germany would shut down all its atomic power plants within the next decade (Käckenhoff, 2019). By the state of 2020, eleven out of seventeen reactors have been shut down to prevent the possibility of a new nuclear catastrophe and satisfy citizens’ will.
While Germany’s government choose to shut down all its nuclear power plants, France had a different approach. Instead of refusing to exploit atomic energy, the head of the French government at that time – Nicolas Sarkozy – decided to increase the lifespan of existing power plants beyond 40 years and invest in its security (Reuters, 2012). Reuters also suggests that extending reactors’ lives will be a cheaper option for the French government than building new modernized power plants.
Consequently, to better understand how PV projects are related to the energy transition’s primary goal, we looked at local PV projects initiated by communities in Germany and France. A comparative analysis of the two countries was conducted to summarize various approaches towards the energy transition in Western European regions. Nonetheless, both internal and external perspectives on the business were applied to snap a broad industry overview. In this way, we were able to draw a conclusion that was formulated to the best of our abilities.
*Disclaimer: The research conducted and the blog written was done to the best of our abilities online regardless of the current COVID-19 situation.
Information that inspired or broaden our knowledge about this topic helped indirectly with generating ideas to write.
This chapter looks closely at the methods, models, and theories chosen for this blog. Additionally, an essential aspect of it is how the data is being collected and processed. The choice of the research tools fulfils the goal of drawing a complete overview of the PV industry in Western Europe and understanding how to apply transition management theory in practice.
The dominating source of information is secondary data, which is being processed and compiled in several models and strategic tools, which were selected based on their relevance and potential benefit from the analysis. These economical models have a common goal to categorize and compare available data in a way that we can retrieve the results. The conclusion must be suitable for the companies that operate in a given context and complement their strategic plans.
To accurately analyse the state of PV in Western Europe, we faced a choice of which tools should be used based on their relevance and reliability. Firstly, a Shareholder/stakeholder analysis was conducted to understand this technology’s relationship with stakeholders and potential impacts it might have. As a base, we categorized different stakeholders into groups. First, internal and external, and second, supporters and opponents. Internal stakeholders are directly involved in the operation of a company and can influence decision making. On the other hand, external stakeholders are not involved in the operation but significantly influence the business environment.
For its part, supporters and opponents can be business partners, organizations that influence society as a whole, and people’s opinions, investors, and renewable energy competitors. The stakeholder analysis’s goal was to identify the level of interest and influence on the industry and its joint impact on a business.
Secondly, a nonfinancial risk (NFR) assessment was done to highlight additional factors that play a role in business processes. These factors are beyond the company’s control and are part of the macroeconomic environment where the business operates. Additionally, we developed the rules of the game or which norms of behaviour must be considered and respected to promote the success of energy projects such as solar PV manufacturing.
Thirdly, scenario and back-casting analysis were used to portray the reality in which business will operate. Therefore, four variations of the future or “worlds” were described. The scenario analysis began with the distinguishment of internal and external analysis. We applied Porter’s five forces for internal analysis to identify weaknesses and strengths and reviewed the business structure through the business canvas.
The external analysis had to take into account the multi-level perspective of the environment. Therefore, the PESTEL model fits our needs to overview the most important external forces that influence the operation. Previous sections prepared a background for both analyses. Consequently, a description of “worlds” was based on two PESTEL factors that cause a variation of four based on all possible combinations of these two factors related to the potential impact of the factor and its stability. A value chain analysis was then completed to determine what aspects of the operation are most valuable for a solar PV business. This analysis provides a framework for process standardization and further evaluation of the business activities.
Last but not least is the assessment of local energy communities’ involvement. Local communities are a moving force in the energy transition since a delegation of authority allows to speed up the efficiency of the whole energy transition initiative and effectively distribute the resources. For the assessment, we examined existing solar PV projects in two countries, their performance, and their future ambitions. Furthermore, success and fail factors were developed to critically review which aspects are crucial for energy communities’ operation.
To make strategic decisions for the successful integration of PV panels, as part of the energy transition in Europe, it is important to analyse the environment in which the business operates. The different interest groups can have a significant influence on the success of the business. The business environment includes stakeholders within the organization(internal stakeholders), and stakeholders who do not have a direct connection with the organization but have interest or influence on it (external stakeholders). Once the supporters and opponents of the business are identified it is crucial to understand their characteristics and level of power they hold to decide on how to properly manage each stakeholder relationship (see overview in appendix F).
Internal Stakeholders are directly and financially involved with the operational processes of the company. When looking at the PV solar market in Europe, the owners of the business have high interest of the business success as their interest lays in the wealth maximization which is impacted by the business’s success in the market, shareholders usually invest in several businesses, therefore their interest can also be considered rather medium to high (Barba-Sánchez, V., Atienza Sahuquillo, C., 2017). Depending on which kind of shares they own they might possess voting and decision- making rights which would mean they have a higher influence on the business. The most effective strategy here is to fully engage with these stakeholders and keep them satisfied because they are a fundamental source of capital for the business. Employees and managers are both stakeholders directly impacted by the organizational strategy and success which results in their high interest. The manager has a high influence on the project as he or she can make a strategic decision. Employees have a lower influence on the project than the manager, yet they are important as they a represent an essential role for carrying out the strategies and operations of the organization(Lumen, n.d.). Communicating regularly to adequately inform them will be most successful and engages them to ensure they are supporters of the business.
External Stakeholders are people or organizations indirectly impacted by the project but can have a significant influence on the success of the business depending on their level of power. The European Commission’s interest in the success of the PV panel integration in the European Union is high. The Commission has very high ambitious long-term goals of becoming more carbon neutral.
The European Commission goals have been to reduce emissions by 80-95% in 2050 since 2009 (European Commission, 2018). This political commitment sets the path to a more sustainable future in Europe (European Commission, 2020a). Since the European Commission has legislative power their influence can be considered as high. The relationship to this stakeholder should be managed closely by communicating frequently to realize the integration of PV’s in Europe. (Fact Sheets on the European Union, 2020)
In Europe, the supply side of PV panels is compromised of suppliers which predominantly procure PV panels from manufacturers in China which offer mass-produced low-cost PV panels. Yet, some suppliers also procure PV panels from small American and Asian businesses that offer high quality and more efficient solar panels (European Commission, 2020b). To become less dependent and reduce the risks of high foreign supplier dependency Europe has already planned on producing their PV panels on mass (European Commission, 2020b). Risks are usually associated with delivery performance such as delayed delivery chains (Sadgrove, 2016). However, as dependency still exists, it is important to build up a good supplier relationship and keep them satisfied to maintain an effective supply chain. Vendors are providing the service of installing PV panel and have a high interest in the success of PV panels in the EU Market and rather medium power as they are an important part of the marketing channel but are also constrained by consumer wants. Since they are supporters and important part of the supply chain, good relationships should be established with this stakeholder to build trust and ensure success.
One of the biggest opponents of the PV Market is the fossil fuel industry. The industry has a high interest because the PV solar panels as renewable energy put their industry existence at the risk. Fossil fuel energies do not align with the climate goals of the government, yet they are still the dominate part of the current energy system, which gives them power. As opponents they will try to use their power, they obtain to keep their business running and continue to capture profit. Their influence is rather low because it does not align with the climate goals of the government, however, they might use their power for lobbying to influence the government which could affect the speed of the energy transition. Some fossil fuel companies started to orientate themselves towards renewable energies, so they may become competitors or possible cooperatives (IEA,2020). Thus, the most efficient way to deal with this stakeholder is to keep them informed. Trying to win their
support could be successful or not.
Through this strategy, not too much valuable time is invested but the possibility remains to win this stakeholder over towards a shift to renewable energies for future collaborations. The media can have a significant influence on the successful integration PV solar panels in western Europe, in particular regarding the acceptance of it within the society. In western Europe, the media largely supports the fight against climate change and the energy transition
and the use of renewable energies such as PV solar panels. The media has a medium to high influence and interest. The media has high influence because it can influence the social acceptance of the PV technology which is one of the most important requirements for successful integration of any technology (Heras-Saizarbitoria, Cilleruelo & Zamanillo, 2011). Therefore, this relationship is most efficiently managed by monitoring and frequent information exchange.
Another important stakeholder is the environmental groups in western Europe e.g. Greenpeace, Fridays for future etc. They have a high interest in the successful PV solar panel integration as they aim to stop global warming. Furthermore, they obtain low to medium influence on the whole project. As main supporters, the relationship to this stakeholder is most efficient managed by frequent communication to inform and consult.
Lastly, consumers have shown an increased interest in the solar power industry which is due to the reduced cost and the broad support of renewable energies by society, a tool to fight climate change (SolarPowerEurope, 2020). Even though consumers only have minimal influence on the business itself they do have the potential to gain a higher influence. Consumers can gain more power depending on how informed and educated they are of the market (Fitzgerald, Bone & Pappalardo,
2020). Therefore, it is most efficient to simply monitor the consumers and look out for any changes in the level of influence they possess. With low influence, this stakeholder relationship is the least important and therefore minimum effort should be invested. The priority should be focused on the stakeholders with the highest power and interest.
As we have analysed the internal and external stakeholders, we were able to display an overview of where the influence and interest of these stakeholders lie. By making a matrix as seen here above, we can determine the different positions that these stakeholders have within the photovoltai energy generation industry.
Looking at the internal and external stakeholders in the stakeholder matrix it can be seen that there is a high number of stakeholders that are placed on the right side of the matrix and therefore either have high interest or influence or both, Thus, this means that there a lot of stakeholders that need a high level of attention when making strategic decisions
RULES OF THE GAME
There are certain rules, incentive systems and/or norms of behaviour in the political economy of Western Europe we have to consider, respect and try to understand to have a successful projec take place, including Photovoltaic energy generating projects. Here below we mention certain rule of the game an individual, community or organization has to acknowledge
➢ Democratic; as mentioned above that the Western European countries have socialis tendencies, but they are mostly ‘’officially’’ known to have democratic-socialist views to kee the majority of the country residence happy. This also paves a way to open discussions abou what is best for the public, including renewable energy generation systems
➢ Equality; this is very important in Western European countries as they are more on the socialis side of capitalism where they focus on getting everyone the basic human requirements an opportunities. This way of thinking also greatly helps with social stability, which can be argue that most Western European countries have.
➢ EU 2050 agreement; the agreement to reduce emissions gives a sort of a guideline to ho industries should operate and companies, industries and organisations that do not follo through with the agreement will be looked down upon. This shows a great governmen willingness to support sustainable energy development. This also helps businesses gain subsidies and allowances for their sustainable activitie
➢ Technological development; you have to innovate to stay ahead of the game to retain marke share or gain market share if innovation is removed from the equation, failure is almost certainl inevitable. The rate of innovation helps with education in general and in turn, will keep th general public relatively more informed about sustainable energy in general
➢ Bureaucracy; some Western European countries are more bureaucratic than others, meanin that in some countries it is harder for the general public to have their wishes, desires an necessities heard by the people in power This can affect small communities that want to develop PV projects for example. Wester European countries are involved in the EU and have different legal processes put in place whic can cause a new law, legislation or regulation regarding PV to take a relatively long time.
➢ Lobbying; this is almost unavoidable in almost any region of the world, this can have a grea effect on the general direction of the sustainable energy generation industry as individuals o groups of people can influence the government in either direction they want, this can be either ‘’good’’ or ‘’bad’’.
By looking at the rules of the game we can determine that the rules of the game in Western Europe is caused by the democratic nature of Western Europe as a whole
POTENTIAL COMBINED IMPACT OF STAKEHOLDER
As mentioned above, stakeholders can have a significant influence on the success of the projec depending on the power and interest they obtain. However, what has not yet been addressed is the potential combined impacted stakeholders can have if they work together, For instance, the government, in this case, the European Commission, has high power and influence but it can increase this by working together with environmental groups to promote the project. This could also increase the interest and influence of the consumers if they start using their voice. In this case, the media can play an important role as well because they can influence consumers by supporting and spreading opinions and attitudes towards climate change of the European Commission and Environmental Groups.
Furthermore, fossil fuel companies could positively contribute to the combined stakeholders impact because some companies are already starting to orientate towards renewable energies Thus, a collaboration between renewable energy companies and fossil fuel companies could lead to a much higher positive impact of stakeholders on the success of the project.
NONFINANCIAL RISK ASSESSMEN
The non-financial risk analysis aims to identify the non-monetary factors that can affect a compan and its performance. However, these factors will influence the monetary outcome of the company in the future. To begin with, one needs to identify the company’s value drivers, the factors that will create stockholders’ value. After identifying the main factors that will contribute to the long-term success of the company, it is necessary to translate the objectives of the company into measures that lead the managers in their actions and help them in their decision-making process .Another aspect of the non-financial risk assessment that needs to be clear is that non-financial risk or in short NFR is concerned with operational and strategic risks that a company may face during its performance. Last but not least, it is necessary to define risk in a solid framework to prevent confusion. Risk is made of three main parts, impact or consequences, causes, and events. Further in this chapter these parts will be discussed and will be used to provide clarification regarding existing risks and the proper approach to deal with them.
To provide practical use of this assessment, the following structure is designed to carry out the objectives of the tasks. To begin with, five main NFR derivers are identified based on the main stakeholders and their relation to value creation. Then explain each one of them and break down into three main parts of risk. With such an approach, there will be enough clarification regarding them, and a company can use them to design more integrated strategies.
MAIN NON-FINANCIAL RISK
Impact: The attitude of the people that their lives are touched by renewable energy has a grea impact on the outcome. The amount of social contribution of society can determine the success of failure of the project.
Cause: The primary cause for developing resistance or acceptance towards renewable energy and in this case the PV sector is the change. The attitude of the society toward the change and their willingness to accept the challenge can determine they will resist or accept the company.
Events: Consider if the society accepts the new lifestyle they will contribute to the project and willing to carry part of it. For instance, permitting the company to implement a new infrastructure in their homes. In the other hand, if they resist it, they will have the power to stop the projects. In extreme cases, they can protest against it, as it happened before in the Netherlands againsimplementing wind turbines in 2018.
Impact: PV sector and in the general renewable energy sector is in the early stages of development and it’s not surprising if a new technology were to be introduced and shift the current paradigms. Innovation has the potential to increase the efficiency of the system and change the possible outcome dramatically.
Cause: As mentioned before, the PV sector is developing every day and the need for more efficient systems requires constant improvement on existing technologies. Also, the diversified application of renewable energies opens different doors to its deployment in different situations.
Events: In case that the project owners face new technologies or in general new approaches to the market, they need to decide to either alter their initial plan or continue with it. A critical and flexible decision making regarding the matter can determine the success of failure of the project.
Impact: Choosing the right location to implement the PV panels is crucial and can single-handedl change the outcome of the project regardless of the rest of the remaining conditions
Cause: The cause of this big impact is the fact that renewable energy plants have complicate designs and they need to meet their requirements to be operational. For instance, a PV pane cannot generate electricity unless it absorbs a certain amount of sunlight
Events: Such importance requires the project owners to conduct proper technical research to mak sure that the chosen location meets the requirement. Also, the project managers should be able t adjust their plans to the people who are occupied the chosen location.
Local regulations and policies
Impact: To be able to acquire needed permits and eventually start to perform, the business or the company needs to comply with local policies and regulations.
Cause: Local authorities are responsible to provide and maintain a proper environment for the society. Therefore, they have given the right to supervise the activities in society. Any sort of business needs to be approved by these organizations be aligned with the policies.
Events: In this situation, the business needs to apply for the required permits, licenses, and in some cases a simple approval. Since the energy sector is a highly sensitive market most of the governments have strict rules regarding it.
Impact: A competitor with the higher potential to create value will demolish the business of the company and will prevent the company to perform. Such a competitor will be the first option for the customers, and it will prevent the company to make a profit
Cause: The reason for such a correlation is the fact that costumers chose a product or a company that is creating more value for the same price. This can be even more extreme in the energy sector since it is part of literally everything in daily life and has a relatively high price. Therefore, customers tend to look for a company with the potential to create more value.
Events: It is not surprising that costumers choose the company with a higher competitive advantage, regardless of the reputation of the company. By declining demand, the weaker company will be out of the game in no time. Since people always are under heavy advertisement, they tend to evaluate the possible options at all times. In the energy sector, customers have a very low degree of loyalty toward the companies since the product is the same thing and the extra value is created around the main product with services. Looking at the findings of the stakeholder analysis, it was found that there is a high number of stakeholders that exists in the market need to be managed and take into consideration when making a decision. Most of the stakeholders are supportive of the PV industry which also has to do with Western Europe being democratic. Governments strive to increase the use of renewables to decrease CO2 emissions. In Western Europe there exists a high level of bureaucracy and implementing projects might take a long time due to long approval processes. The society and the media are largely supportive which is highly favourable for the PV industry because social restraint is one of the most impactful non-financial risks. The biggest threat might arise from fossil fuel companies that might use their power for lobbying and influencing the government.
SCENARIO & BUSINESS CASE ANALYSIS
Scenario analysis is an accurate and coherent description of a possible future state. This analysis attempts to describe how the future can look under specific circumstances or change of variables. It is worth mentioning that scenario planning is not specifically a future forecast, but a depiction of alternative futures (National park service, 2013).
The analysis starts with an internal assessment of the system and how the system sustains itself. For the company, it means the evaluation of their strengths and objective weaknesses. An internal review provides a context in which an organization operates. The external analysis leads to the exploration of the other variables, independent from companies’ influence, but with an impact on the operation.
The evaluation can be performed through several models, e.g., SWOT analysis, Porter’s five forces, or Ansoff matrix. In this chapter, we chose Porter’s methodology and business model canvas to draw an image of the environment and the company’s position in it.
External assessment completes the strategic planning with scenarios drawn based on available information discovered during internal evaluations. The scenarios are based on the business ecosystem’s external factors and the existing correlation between their level of impact and the factor’s stability. PESTEL model, which examines these factors from six different perspectives, was used as the external assessment method.
By looking at the micro-environment in this section, and utilizing Porters five forces as it worked the best for displaying the internal strengths and weak points, especially its innovation issues of the industry while focusing on how it penetrate different markets by looking at the threats. With the business model canvas displaying how the PV industry functions and what are the essential distinctions to make it run. We were also able to create inductive builds (found in appendix B, C, D and E), showing different possible scenarios that might happen with different governments goals and materials availability changes and how they affect each other in a positive feedback loop ultimately.
Porters five forces
The threat of new entrants
The threat of new entrants is one of the porters five forces and refers to the threat that new competitors pose to existing ones in the given market. In general, new competitors look for gaining profit by initiating for market penetration strategies. However, if the increase in production capacity does not follow by an increase in demand the potential profit in the market will decrease dramatically.
Several factors determine the level of the threat of the new entrants, so-called entry barriers. Entry barriers are the conditions in a competitive environment that make it hard to start operating for new businesses. Discussing all the factors involved is not possible in this part therefore three main ones will be discussed and explained.
➢ Capital investment for PV companies is relatively high. Therefore, it makes it hard for new companies to enter the market.
➢ Since the location is a factor that is very important for PV sites and, it’s not easy for any company to enter the market unless they have a proper setup.
➢ In general, the threat of new entry is low when profitability requires economies of scale. PV sector is a market with this characteristic therefore the threat of new entrants is low regarding this factor.
Bargain Power of Buyers
The bargain Power of buyers in Western Europe is relatively is high in Western Europe as the technology is more accessible to the Western World and many different companies that either lease or sell PV’s. There is also an abundance of online and offline information/resources where anyone can learn how to make their solar panels at home. This abundance of information and stagnation of innovation makes the buyer powerful with knowledge and easily accessible materials. However, it can also be argued that the bargaining power of buyers is relatively low when these buyers are not sufficiently educated or motivated to seek more information, compare suppliers to find the best deal. Countries like Germany and France, where online information is relatively difficult to locate due to the websites not being at a level of countries like the Netherlands where buyers can easily compare different companies with each other. Governments can also influence the number of power consumers/buyers have as even when educated, government rules and regulations can restrict consumers from specifically using their knowledge in a manner of original intent.
Bargain Power of Suppliers
Tesla, based on their solar cells, and solar panels in combination with their energy storage capabilities/technology are considered superior in this aspect as they have the most advanced technologies in these regards and have the best engineers in the world as they are one of the most attractive employers in the world (Company Ranking | Universum, 2020). Unless a supplier is an innovative, technologically advanced and fairly priced company like Tesla with its solar roof (Tesla, 2020a) or Tesla’s solar panels (Tesla, 2020b), or a leading company with inverters like Solaredge (Solaredge About Us, 2020) the bargaining power in Western Europe is relatively low as the bargaining power of buyers can be high. The government also has a certain amount of control on the distribution and application of PV technologies on individual & commercial residences. Western Europe imports a lot from China as well, making them not very competitively priced and dependent on imports. The bargaining power of China in relation to Western Europe is however relatively high as Europe depends heavily on the imports of China (OEC, 2020)
The Threat of Substitute Products
The threat of substitute products for PV solar panels in Western Europe is low. Although there are many alternative renewable energy technologies, solar power has significant advantages over other renewable energies and there for the threat of substitute is lower.
Compared to wind energy, solar power less cost-effective but has an advantage that it can be deployed near residential areas or on rooftops, different from wind energy which requires large open spaces has wind patterns vary. Both technology efficiencies are dependent on the season. Whilst wind power is much stronger in winter than in summer, the opposite is true for solar power. Furthermore, the most efficient way for Europe to become carbon neutral can be achieved when counterbalancing energy technologies such as wind and solar and in general generate energy for the grid from various sources of renewable energies. Therefore, the threat of substitute is low as solar power will be required for a successful energy transition.
Rivalry among existing Competitors
In Porter’s model, the intensity of rivalry depends on several factors interconnected with other forcers. The presence of these factors will increase or, as the opposite, decrease market competition. To analyse existing rivalry, we should consider two main topics to draw an overview of the industry.
That is consumers and the industry itself. However, there is a difference between German and
French markets based on size, government policies, and the energy sector’s current composition. From the customers’ perspective, the question of how difficult it is to switch from one manufacturing company to another should be placed first.
There is a smaller variety of existing local manufacturers for the French market due to dominating and cheap atomic energy. For German consumers, the situation is different.
There is a higher composition of solar energy in the whole sector compared to France. However, at the same time, coal and offshore wind energy dominate over other sources of energy. Individually, all customers can choose from where they want to purchase solar panels, whether it’s a local manufacturer or one of the top-10 manufacturers in the world. Additionally, installation services cannot be performed without assessing the area where the panel would be placed and the necessary experience with installation.
As it was mentioned in the section “threat of new entrants,” fixed costs pose a difficulty for new market players. In this way, it slows down the industry growth and decreases the rivalry as a limited number of players coexist on the market. The product “solar PV panel” is differentiated to a certain extent based on the technology, costs, and efficiency level.
Based on the factors mentioned earlier, we can conclude that France has a lower rivalry intensity than Germany. Nonetheless, in both countries, there is a medium level of rivalry among existing companies.
Business Model (business case analysis)
Here below we can see the elements that are considered ‘’essential’’ to the Photovoltaic energy generation industry, by looking at this canvas we can determine which are the most essential ingredients to run a successful business or organization in this industry.
Looking at the business case analysis model, you can see one cannot function properly with the other, everything is interconnected, however, the key partners, key resources, key activities and customer relationships require the most ‘’ingredients’’ out of all the other sections. Thus, just by looking at the graph here above we can stay that these 4 elements are one of the more essential elements to the photovoltaic energy generation industry in regards to this business case model.
Key partners: In western Europe, Key partners are essential to the success of running a successful Photovoltaic energy generating industry/business, as is any other business involved in such manufacturing volume and scale. The Key partners mentioned above in Western Europe are predominantly made possible by China as China owns most of the companies that this industry does business with. Investors and landowners range from private to governmental they both play a major role in the development and success of its endeavours.
Key resources: Capital resources and engineers are one of the most important key resources that we mention in our business model canvas as you need the money and other forms of assets and the minds that can make the plans of private companies and governments a reality with regards to photovoltaic energy generation.
Key Activities: The activities of manufacturing enough solar panels and making sure that the service and maintenance are optimal to ensure a positive rememberable and exiting customer experience is important to have a popular widespread success in Western Europe.
Value Proposition: PV solar panels offer consumers energy with low operational cost once they are installed because they do not require any specialized personnel as they are easy to operate. Solar panels are made out of tempered glass which can endure hail and other rough weather conditions. The solar panels require only low to no maintenance and have a lifetime of 25 years or more (Energysage, n.d.)
Furthermore, PV solar panels can be deployed off-grid which increases the consumers’ freedom and independence through self-reliant power grids. This is especially beneficial for consumers who live in rural and isolated areas. However, also the average household can benefit from installing its PV solar panels through cost savings on their utility bill as it can offset their energy costs.
Distribution Channels: To bring the product to the end consumer, distribution channels play a vital role. Distribution channels start with the manufacturers which produce the PV solar panels. After that, these either go to a wholesaler or retailer or directly to installation companies which are selling the product to the end consumer. Furthermore, Marketing and sales agencies are important channels as well, to advertise the product and attract consumers.
Customer Relationships: Customer relationships are the relationships that the company needs to establish with the customers to provide customers with good experience with the company and its services. These relationships are varying from personal assistance to automated services. The goals of the company will identify what relationship to establish. For instance, increasing sales acquire customers or retain customers. Some of the most important ones are: transactional, long-term, self-service, automated services and personal assistant
Customer Segments: To group the customers in the energy sector, we need to define criteria. In this case, in the energy sector, the type of electricity usage can be the best option to group the users and based on the amount of usage and business capabilities target the right segment of the customers.
Therefore, in this blog, four different segments are identified and are as follows.
- Industry: the users that are engaged in manufacturing, and the energy that is used in infrastructures are in this group.
- Households: the users that use the energy in their homes.
- Trade and Services: businesses that are using energy in their routine business activities, such as stores and offices.
- Transport: the users that use electricity by the means of transportation such as trains.
Cost Structure: Costs arise in any business and consist of two types: variable and fixed. Variable costs stand for expenses which change based on the increase or decrease of the output. Fixed costs, on the other hand, remain constant on the annual basis and hardly change.
Variable costs for the solar PV manufacturer and producers stand for all related raw materials, freight costs, direct labour and variable overhead costs. For instance, nickel and silicon cells are essential raw materials and prices for them will play a crucial role in the operation.
Fixed costs are normally the expenditures which can’t be changed easily. They can occur for a long period and include depreciation on capital assets, rent of the premises, (or property tax), interest expenses, permits and licenses. Examples of fixed costs in the PV industry are assembly lines for solar panels manufacturing, warehouses costs, administration fees and permits before the business begins its operation. As previously mentioned in Porter’s five forces analysis, since required capital investments are relatively high, economies of scale play a significant role in the long-term operation and allow to reduce costs per product.
Revenue Streams: Revenue streams are dependent on income generated by the company’s customer segments, the company’s key activities and its value proposition. Generation of the revenue can be indirect, for example through advertisement.
For the revenue, it is important to determine what are the distinct characteristics of the company, what is the value customers are ready to pay for and how to manifest the quality so the customers will come back. For the solar PV industry revenue stream can have both recurring and transactional origin. Recurring revenue stream means that after initial purchase the relationship between the company and the client remains active since the company provides maintenance services and postpurchase care. Transactional revenue stream includes only initial payments the customer makes during the purchase.
To accurately portray the business ecosystem of photovoltaic energy generation technology, we have made four different inductive builds found in appendix B, C, D and E based on the four different worlds we have created.
The archetypical graphics we developed are made in such a way that you can see how different worlds are skewed to different places by looking at different potential world distinctions and connecting it to the confidence level in percentages, representing the likelihood of each distinctions happening. To create an accurate inductive build that can best represent each world individually we chose 10 distinctions being; low crime rate, good quality of life, carbon-neutral eco-system. High innovation rate, patents war, reaching a no-return point, high level of education, good infrastructure, accessible health care, and lower energy costs.
For the first world, where government goals & materials are available, most of the distinctions are skewed to the right, indicating a utopian type world. The two distinctions that act as outliers are reaching no point of return and patents war. A utopian world is less at risk of reaching a point of no return and patents have a huge chance of being abolished due to innovation encouragements by the government, however, if it is not abolished it may cause different lawsuits between innovative companies.
For the second world, it is more skewed to the left, indicating a relatively more negative world than the first world. With the government not putting enough priority to making goals to use the available materials, the chance of getting to a point of no return rises. Lower energy costs also have a higher chance of coming to fruition as fossil fuel energy is still a cheaper solution at the moment.
For the third world, You can see that the Graph is more skewed to the middle, indicating that with government goals, there is a higher chance for innovation however the lower energy costs become minimum as a lot of materials will have to be imported.
For the fourth world, It is clear that most of the arrows are skewed to left, indicating a dystopia with the chance of no return being at the highest confidence percentage as the actions in this world will most likely pollute the world to an extent that it will not be reversible in at least a single human lifetime.
Analysing the macroenvironment is essential, as external forces can have a significant impact on the performance of businesses, institutions or organisations. By identifying the forces that lay within the macroenvironment and understanding their level of influence and stability, an organisation can identify what business obstacles will play a role in the operation. For the external analysis, the PESTEL framework has been applied which takes into consideration political, environmental, social, technological, economical as well as legal forces. Based on the PESTEL factors, a stability and impact matrix was able to become constructed to determine how important these factors are regarding impact and stability and also see if there are any correlation with the PESTEL factors.
The Impact / Stability matrix provides an assessment of PESTEL factors and their influence on companies in the solar PV industry within North-West Europe. Each factor was graded from 1 to 10, 1 being the most unstable and having the least impact and 10 for the crucial and the most stable elements in the existing macroenvironment.
Each factor’s grading is an essential step since this assessment allows us to plot all the factors on the graph and have a complete overview of their impact and stability. Next to the scoring, we placed letters which assisted with the creating of the next subchapter.
The scoring was accomplished by extensive discussions within the group with the help of general knowledge, opinions and inspiration from resources utilized that can be found in the reference list.
The following scoring is a result of elaborate group discussions, 23 factors were chosen as these were found to be sufficient to represent what was to be portrayed in the driver mapping in the following subchapter.
These scoring are subject to change on a long term basis however accurate enough to the extent that the conclusions from our discussions were accurate with the rationale used within the group.
After defining the level of impact and stability of PESTEL forces we were able to plot every factor on a graph to see what drivers have the highest impact and stability. Every letter represents the PESTEL factor, mentioned previously in Impact / Stability Matrix.
After categorizing the data, we created a graphical representation of PESTEL model outcomes.
The letters were derived from the scoring system we constructed containing 23 PESTEL factors,
As we explained, grading the factors allowed us to see which factors have the highest impact and stability scores (upper corner on the right) together with ones which have a huge influence but hardly are stable. This approach provides us with a background for the potential future scenarios or in other words ‘worlds’ descriptions.
Looking at the driver mapping and PESTEL factors we accumulated different factors to create a diverse depiction of the world in different scenarios. From the aforementioned PESTEL drivers, we took the government’s energy goals and materials availability as a base for worlds descriptions. By taking these two factors to the extremes, we examined each world.
In appendices, we included a matrix in which every world was assessed based on PESTEL inspired criteria, such as low crime rate, good quality of life, carbon-neutral ecosystem, high innovation rate, patents war, reaching a no-return point, high level of education, good infrastructure, accessible health care, lower energy costs. These criteria allow to make the worlds more grounded and realistic and see how a change in just two PESTEL factors can affect the future world scenario.
This Utopia where the Government in Western/Northern Europe has goals that will support and accelerate the transition to sustainable energy with focus on Photovoltaics energy generation system, also known as solar panels. Not only does the government have goals, the materials and technology needed for this are also heavily available in the countries of these governments.
These combinations mean that the Government will focus less on exporting their Materials, however, focus more on utilizing as many materials and technology as they can to develop their nations to what we think is a modern, futuristic and minimalistic society assuming their goals reflect a clean and safe Utopia.
We imagine these nations to have a lot of state of the art Photovoltaic technologies and are one of the world leaders in this and placed all over the land due to the abundance of materials. Even technology that might be able to clear the skies on a cloudy day so that shun shines better through may have been developed.
These countries might also become very wealthy as they might have an abundance of energy, especially if their energy storage technology is up to par. This means not only can they export their abundant materials, but they can also export stored portable energy due to the surplus of energy they receive from their endeavours.
In a world that a government has access to the resources needed for the PV power plants but no ambition to utilize its assets systematically to make them beneficial for the nation, it is more likely to overlook the potential of the resources. Also, such governments tend to sell the resources to the parties that are willing to have access to such assets.
Currently, African nations experiencing such a situation. Countries like China that have the technology and plans for futuristic PV power plants are making deals with those governments and buy the resources mostly in a low price and make tones of profit by simply transforming these raw materials in PV equipment.
Even though these countries receiving money for their resources, in a bigger picture they are losing a great amount of value because of lack of proper planning.
Such governments can acquire knowledge of producing solar panels and use them to enhance the life quality of their countries and maybe solve the energy problem of their nations.
In this world, the government has high ambitious in installing PV panels and integrating sustainable energy sources but it simply does not have the necessary resources. Thus, it is forced to source materials for the PV panels from other countries which are going to increase the cost of PV panels and the country will become more depending on its supplier.
As the costs of resources are related to the end price the consumer has to pay, integrating the PV panels in a large scale and making it accessible for the majority of the population as a sustainable energy source in a profitable way will not be viable.
Therefore, the PV panels would still be used as a sustainable energy source by consumers that have the financial resources to afford it, e.g. single households or companies. If the government in this world has enough income it can provide subsidies. However, in this world, the government would still need to rely on other energy sources including fossil fuel as the PV panels are too expensive to integrate on a large scale.
The government doesn’t set energy goals and there are no resources for solar panels production/there are difficulties with obtaining them.
In this world, the main issue is not only a lack of government’s awareness about a climate crisis but inaccessibility of resources for harvesting solar energy. As a result, a wave of riots went through Western European countries where the youth was speaking out of their concerns about the future. Highly negative reactions don’t seem to change the course of government actions. Solar energy remains unavailable for the public use due to difficulties with obtaining raw materials for its production, namely nickel. The prices for this metal increased significantly in the past few years.
Batteries technology for storing harvested energy are a subject of competition. Big tech companies keep their patents out of reach for public domain and there’s no exchange of technologies. Due to this, the development of solar PV is in stagnation regardless of potential benefits from solar energy.
Government’s blindness about rapidly approaching no-return point doesn’t stimulate the growth of renewable energy systems. That leads to an increasing level of pollution since the leading position in the energy transition is occupied by coal, oil and gas.
With these two factors, we were able to portray a utopia, dystopia in addition to possible scenarios in between. Each scenario raises different problems which can arise depending on variables change. However, the goal of the scenario analysis is to identify major uncertainties and shift from internal to external perspective. As a conclusion for all the four worlds, the main danger is to make poor choices with resources allocation and use of technologies, no matter whether the materials are available or not.
The basic key topics in the value chain in the photovoltaic energy generation are relatively the same throughout Western Europe. It comes down to being able to obtain materials, permission to start operations and making it easy for customers to use and maintain. All of this should also be cost-effective and be relatively cheaper or more convenient for the user.
By looking at the value chain analysis, we can also see that the specific input providers and consumers are key elements in the value chain of photovoltaic energy generating industry.
Without these elements, this industry will most likely fail.
The involvement of local communities has gained global importance to stop climate change by generating more renewable energy. In the following chapter examples of local community initiatives in Germany and France are described and analysed in terms of their structure and network of stakeholders.
In Germany, the energy transition also called “die Energiewende”, is to a large part actively supported by several projects by communities and associations across the country. In 2000, a new law was introduced “Energiewende von unten” (Energy transition from the ground) which fostered the dynamic development among German citizens to support the energy transition (Energieagentur Rheinland-Pfalz GmbH, 2016). Citizens strive to work together to speed up the energy transition with a trend towards prosumer models (Energieagentur Rheinland-Pfalz GmbH, 2016).
An example for a local community project for PV panels is the project in Klüsserath near the City Trier. The project was initiated by the energy cooperative ”Treneg” in 2016. The cooperative is a limited company (GmbH/ Ltd.) and owned by three persons with investment capital of 25,000 € (“PAK PV-Anlage Klüsserath GmbH”, n.d.) The PV park can produce a total of 5.119 kWp and the produced energy is transferred to the local energy provider “SWT”.
The network of the most important and relevant stakeholders of the project in Klüssenrath are depicted in Figure 12 below. The most important stakeholder is the Energy Association Treneg as they are owner and investors of the project and own 15%(Treneg-trier, n.d.). They have high interest and influence on the project. Therefore, frequently communicating, consulting and involving this stakeholder in activities will be most beneficial for the success of the project. The local energy provider “SWT” is an important stakeholder and a good relationship should be built up to ensure good cooperation in which party is satisfied with the result. Furthermore, the citizens and community are important stakeholders to consider. They may only have low to medium interest and influence but have the potential to change that by using their voice.
Through investing themselves into the project or by promoting the project they can positively contribute to the project. The “Lokale 21 Agenda” is an association that advocates for a sustainable and fair society around the area of Klüssenrath and therefore have a high interest in the project. They are an important stakeholder as they can support and promote the PV project and therefore have an influence on the project.
In the graph above the most important stakeholders of the PV project in Klüssenrath, Germany are depicted. Identifying the network of stakeholders helps with better understanding the projects environment and the influence and interests of each player. Thus, better strategic decisions can be made that align with the interest of important stakeholders.
In 2018 in Les Suroltés d’Aubais in France, a local community has started a PV project to fight climate change in particular fossil fuels and shale gas in their region (Energie Partegee, n.d.). The project is supported by the energy association “Énergie Partagée” which supports local projects for the generation of renewable energies across France. Next to the 300,000 € budget collected from community investments, “Énergie Partagée” supported the project with 50,100 € (Energie Partegee, n.d.). The PV panel park can produce up to 360 kWp annually for 150 households and was installed on a former landfill which was not useable anymore for any building or agricultural purposes (Energie Partegee, n.d.). The entire amount of energy produced is being sold to the green electricity provider “Enercoop”.
The network of the important and relevant stakeholders of the project in Aubais are depicted in Figure # below. The Energy Association “Energie Partegee” has high interest and influence on the success of the project as it supports and promotes the project and gain new investors.
The local green energy provider “Enercoop” profits from renewable energy by buying off energy from PV Park in Aubais. It has medium to high power because the owners of the PV Park in Aubais could decide to sell their generated power to another energy provider, but it might not be as local as “Enercoop”. It is important to build up a good relationship with this stakeholder to make fair deals which are satisfying for both parties. The citizens and the community are a stakeholder that is highly interested in the project and have a medium to high influence. They can support the project by either investing in it or promoting it to gain more investors. The community should be frequently informed and consulted to keep them satisfied. Government institutions are important stakeholders because they have an interest in the use of renewable energies and can be another source of receiving financial support. They might not have the highest interest, depending on their priorities but they can have a high influence because they also have legislative power next to financial power.
In the graph above the most important stakeholders of the PV project in Aubais, France are depicted. Identifying the network of stakeholders helps with better understanding the projects environment and the influence and interests of each player. Thus, better strategic decisions can be made that align with the interest of important stakeholders.
To identify success and fail factors for the local energy communities first we should have a look at what role they perform and what advantages do they bring for the members and society. Based on the listed benefits possible pitfalls can be identified and discussed.
Local energy communities allow to validate the power of micro-societies on the level of villages and cities, bring people together and increase awareness for the future. Communication with locals is the key element in their operation since the primary goals are overcoming the social resistance. The success factor in this way is accessible education and external motivation, for example through profit. Participation in the energy community provides an opportunity to combine funds and invest in larger renewable energy farms. In this way, the community performs a coordinating and educational role. Combined knowledge allows to effectively use available government’s support and multiply the profits from the projects. However, profit is not the only motivation that can be used. Additional services, for example, “heat maps” which identify areas in the household where heat escapes positively influence the trust between locals and energy community. Trustworthy relationships in this regard are one of the key elements in operation.
Another factor which influences the performance of the energy community is transparency. Lack of transparency and manipulation with energy certificates will result in a decrease in trust and increase of social resistance. The structure of the energy community and the way it operates plays a significant role in it.
As shown in the matrix above, the degree of success or failure is closely related to the people that are involved in as local communities. Level of education among people and the level of trust that is maintained between the parties.
A comparison of the French and German PV project is worked out on all relevant aspects described in the assignment. For this part and to be able to compare two countries comprehensively, two different aspects will be discussed the current projects and the future vision of each country for the PV sector and their goals.
Future: the German government aims to deploy solar panels and other renewable energy sources to produce 18.8 GW energy in 2028. This is divided into two different areas. Of this total amount, 5.3 GW will be tendered in the rooftop segment and 13.5 GW will be assigned to the large-scale PV projects. Based on the timeline, the minimum amount of 1.9 and a maximum of 2.8 will be allocated annually. (Enkhardt, 2020)
Current: in 2019 Germany increased its solar capacity by nearly 1 GW and reached the total amount of 3.94 GW. This number was 2.96 GW in 2018. Germany’s cumulative solar capacity reached 49.78 GW at the end of 2019. Such advancement is the result of government policies and support by giving subsidies and reducing the tariffs. (Enkhardt, 2020) France
Future: In France’s new solar strategy according to the government, in the best-case scenario, France would have 44.5 GW of solar capacity by 2028, with renewables forecast to come in at up to 113 GW. The six-year solar tender program envisages allocation of 2.7 GW this year and 2.9 GW per year for the next five years. This year, two tenders for ground-mounted solar will be held in the second and fourth quarters, with an expected assigned capacity of 800 MW and 1 GW, respectively. Rooftop solar will see three tenders in the first three quarters, with an assigned capacity of 300 MW each. (Bellini, 2019)
Current: The first six months of the year saw a marked shift in the location of new French solar generation capacity, with 18 MW of new projects in Normandy marking a 12% expansion in the northern region. The sunnier south is the powerhouse of French solar, but a slowing market saw only 394 MW of new capacity added across France and Corsica in the six months, plus a further 3 MW of new projects in the nation’s overseas territories. Counting new generation assets France has a cumulative 8.9 GW capacity in the mainland. (Rollet, 2019)
As a result of the comparative analysis, we can see that Germany is currently more involved in working with the local communities with including households and utilizing the rooftop spaces. Also, Germany has a higher capacity of producing electricity currently but France has higher goals for the future.
In conclusion, we analysed the photovoltaic energy generation industry of Western Europe, using mainly France and Germany as focus points and in comparison aspects. By looking at the stakeholder analysis we found that the European Commission and owners of PV parks and technologies have the highest influence while consumers currently have the lowest interest and influence. The low interest and influence of the consumers are due to lack of education and realization their influence can be relatively high.
Social resistance/acceptance is the most impactful non-financial risk for the PV industry as acceptance and lack of consumer interest can hinder innovation as low interest can mean low funds to innovate. The technology is relatively still new and no ground-breaking innovations aside from Tesla developments have been made.
Geographical locations and the local regulations and policies that are found in these locations can be daunting. These two risks can collide with each other as a perfect location can be found but regulations don’t allow (optimal) operation conditions or vice versa. Market competitiveness can be deadly to PV companies as there is little room for differentiation due to there being so little innovation in this industry. If one company or organisation can positively innovate and only use it for their interests, it can create a monopoly as they have a superior product/service.
By analysing Porter’s five forces, we have concluded that it is rather difficult to penetrate the Photovoltaic industry market, as it requires relatively high initial investment costs. It was also buyers who have an upper hand on suppliers if educated enough and if suppliers are not innovating fast enough.
Looking at the business model canvas, we see that key partners that provide raw materials and customer segments are most essential to the photovoltaic energy generation industry, without these, there is no point to attempt.
Furthermore, looking at the external analysis within the scenario analysis, we found that most factors of the PESTEL cluster around the same region of stability and impact indicating that all factors are interconnected and relevant to a certain extent with one another. By creating different world scenarios we could see that out of the 4 worlds, there were two extremes of utopia and dystopia, showing that when materials and government goals match, utopia is possible, and when there are not any specific goals or motivation put in place with a lack of resources, a dystopia can be caused. The value chain analysis has clarified that without government permits and initial investors, projects cannot be initiated.
Looking at Germany and France for local community projects, it is found that Germany is more involved with cooperatives than France in regards to solar-powered projects.
Finally, it was found that communication, transparency education and governmental permission are the key success & fail factors for local community projects. It can also be derived from this that cooperatives and local communities can have a domino effect on the larger aspect of things. By starting in communities, it sets a precedent of knowledge, interest and respect for renewable energy generation which if enough communities participate, can have a macro effect. This means that development on a micro level like local communities is just as important as actions being taken on a national/global/macro level.
Western Europe should decrease imports from China and start producing more renewable energy technologies like Photovoltaic panels within Europe itself. This will make Europe less dependent on China and creates more jobs within Europe itself. By having more manufacturing facilities in Western Europe, more people will be educated for these jobs and in turn making their families aware of these developments. By families being involved indirectly it can direct the general awareness, knowledge and respect for the technologies, helping it grow faster. Western Europe should be at least 90% independent by 2050 with the EU goal. To have reliable sustainability, each region should develop a strong sustainable energy system within their regions.
Western Europe should invest more in energy storage technologies and companies that can grow this industry within the region. Especially for countries with seasonal weather, energy storage can be essential and helps with energy security.
More government incentives and infrastructure should be put in place (faster). Countries should start replacing (or adding) electric vehicle charging stations in the place of gas stations. They should also push car trade-in, meaning you can trade your gas car for an electric vehicle (or with a discount) and the government will recycle the parts of the traded-in gas vehicles.
Governments and towns should encourage homeowners and renters to start cooperatives and take matters into their hand with information pamphlets and resources to find more information on their own. This will help individuals form useful communities. If everyone is informed about the financial and social benefits, it would be adopted faster.
If done safely, governments should have fewer regulations which can allow homeowners to be less grid reliant. With strict building codes, materials are also limited to what can be used. This should change as fast as possible.
Western Europe should adopt more Tesla photovoltaic generation panels if the company allows this. Tesla has the best engineers working for them and are the frontrunners of innovation. This will speed up a solar panel or solar cells adoption and make the individual and governmental investments cheaper.
Western Europe should try to incorporate more of American technologies like Solaredge technologies which have a state of the art inverter, which is cheaper, safer and optimizes power generation. It is currently the better option between the traditional string inverter and microinverters.
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