The world is currently facing myriad challenges. One of the most pressing challenges of the 21 st Century is the unprecedented environmental damage. There is a consensus that this has, in large part, been as a result of anthropogenic activities. This challenge is expected to be exacerbated by the high rate of observed and projected increase in global human population. Consequently, global warming and climate change which are closely associated with human activities are global phenomena that are affecting various sectors, resulting in overreaching adverse effects. To reduce global warming and the resultant climate change , there is a need for the global community to reduce pollution which the principal driver of global warming. Carbon dioxide (CO 2 ), a greenhouse gas (GHG) is one of the primary contributors to climate change, and is as a result of burning fossil fuels. These fuels include oil, gas and coal. Due to the noted adverse effects of the fossil fuels, the world has and is in the process of shifting its source of energy towards renewable energies . This move is aimed at ensuring that the unlimited global energy needs are met but in a sustainable manner. These alternative energy sources don’t emit CO 2 to the atmosphere and are therefore safe. Therefore, dealing with pollution and the resultant global warming and climate change requires not only responsible approaches but also profitable ones. This is in a bid to ensure their sustainability. It is this narrative and the need to bridge the existing sustainable energy gap that has led to emergence and growth of solar panel businesses in different parts of the world.
Renewable Energy
Renewable energy refers to energy that is derived from natural processes. These processes are replenished continuously and include geothermal, water, sunlight, tides, varying forms of biomass and wind. Since these forms of energy are renewed on a continuous basis, their exhaustion is highly unlikely (Khadar & Idris, 2016). Increasingly, renewable energy sources are playing a critical role in the production of sustainable energy. Likewise, they contribute a fast growing portion of the global energy needs. Besides other contributions, renewable energy sources increase energy security, safeguard the environment against pollution and reduce the emission of greenhouse gases. Further, the development of these alternative energy sources has numerous benefits. These include the creation of jobs, development of the rural areas, and nurtures technological advancement and leadership.
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Solar Energy and Solar Panels
Conventionally, the sun is a source of energy to most, if not all living organisms on earth. This feat is achieved through photosynthesis, a process through which plants absorb radiation from the sun and transform it into energy that is then stored for their growth as well as development. However, the sun is most significant renewable energy source today. This is because engineers and scientists have found a way for people to use solar radiation directly by first converting it into electricity or heat. Therefore, the energy derived from the sun is referred to as solar power. The technology involved in the process does not produce GHGs such as CO 2 or other pollutants, and therefore the use of solar energy does not affect the environment adversely.
Thermal and photovoltaic systems are currently the two most common types of solar systems (Khadar & Idris, 2016). The photovoltaic systems transform radiation from the sun into electricity using a number of methods. The most common amongst these methods is the use of silicon panel. When light falls on these panels , they produce an electric current. Conversely, solar thermal systems store the sun’s heat, which can be used for various purposes. In this case, both passive and active approaches are used. The latter include solar hot water heaters while the former include engineering options that are carefully designed to develop a building that automatically utilizes and stores energy
Solar panels refer to panels that are designed to aid in absorbing sun’s rays, which act as a source of energy that is eventually used for heating or generating electricity. The connected, packaged assembly of solar cells forms a photovoltaic (PV) module. These panels form the solar arrangement of a PV system that generates solar electricity for supplying to either residential or commercial purposes. The direct current (DC), power output under standard test settings, is used to rate a PV module and most often ranges from 100 to 365 watts (Khadar & Idris, 2016). The area of each module that is given a similarly rated output is determined by its efficiency . The amount of power produced by one module is limited. As a result, many installations are composed of multiple modules. Typically, a PV system comprises a panel or a collection of solar modules, solar inverter, solar tracker and/or battery in some instances, and interconnection wiring.
Solar Energy Business
Cumulative, the PV capacity at the end of the year 2014 increased by more than 40 gigawatts (GW) to reach 178 GW. Khadar & Idris ( 2016) argue that this figure is enough to provide approximately 1% of the global consumption of electricity, which currently stands at 18,400 terawatts (TW). Some of the leading countries in solar panel installation include China, Japan, United States (U.S), United Kingdom (U.K), Germany and France. The growth of PV worldwide varies from one country to another and is also very dynamic. Subsequently, globally, the solar energy business is currently going through tremendous changes. For instance, the consumption of energy is rising while global warming is compelling nations and individuals to adopt more sustainable sources of energy. This scenario is fuelling rapid internationalization and growth of companies. As a result, various scholars have endeavoured to study the solar panel business in a bid to channel the innovations and ideas associated with the production of solar energy into action. One core component of the emerging solar markets is the analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT). Due to its importance, the value of a SWOT analysis to an emerging solar panel business cannot be overstated.
SWOT Analysis of a Solar Panel Business
Commonly, a SWOT analysis is used in strategic planning. It provides a framework that is used in categorizing a broad range of inputs from financial, technical and additional experts in a manner that can facilitate efficient decision making. A SWOT analysis provides an ideal base upon which a business or company’s direction, position and strategy can be reviewed and assessed ( Khader & Idris, 2016; Theofilidi & Vougiouklakis, 2009). This kind of analysis allows for an assessment of data that is subjective and organized in a logical order by the SWOT format. This organization aids to understand, present, discuss and decision making in business.
Additionally, scanning the external and internal environment of a business is also a critical component of strategic planning in business. The external environmental factors can be categorized as opportunities (O) or as threats (T). On the other hand, the internal environmental factors are either strengths (S) or weaknesses (W). Figure 1 below illustrates a SWOT analysis scheme as presented by Theofilidi & Vougiouklakis (2009).
Figure 1: Illustration of a SWOT analysis scheme (Theofilidi & Vougiouklakis, 2009)
Informed by the above, the SWOT analysis for an initiative to open a solar panel business is presented in Table 1 below as follows;
Table 1: The SWOT Analysis for Solar Panel Business
| Strengths | Weaknesses |
|
Contribution to ensuring energy security Contributes to reducing GHG emission and consequently global warming and climate change Creates employment Results in enhance rural development Solar panels can be installed anywhere Uninterrupted power supply to commercial and residential space hence increased demand |
The initial cost of setting up the business is high as compared fossil fuel-based counterparts There is a geographical limitation since solar panels can only be sold in areas where there are sufficient amount solar Due to the high cost of installation, majority of possible buyers might be locked out, reducing the sales The relatively low level of awareness of solar energy in some areas may affect turnover Inadequate technical support in remote zones Climatic limitations due to weak sales in frequently cloudy , rainy locations |
| Opportunities | Threats |
|
Replacement of fossil fuels Reduced dependency on imported crude oil Reduce GHG emissions and atmospheric pollution More research in the future The continuous evolution of heat-transfer technologies Reduction of cost in the future due to innovation and entry of new players Increased awareness to result in increased adoption Government subsidies so as to encourage the use of solar panels. |
Market relatively new and market share is small Weak efforts towards facing out of fossil fuels Negative political influence on solar energy incentives Difficulties in obtaining financing Low operating profit due to massive investments in installation, maintenance and solar panel distribution Competition from the traditional energy sector. |
The Key Elements of the Business
Th global shift towards sustainable societies is enabling the increase in solar energy contribution to the electricity grid. Consequently, various players are involved in the solar panel market. These include for-profit and non-profit organizations , retail as well as commercial business entities. The PV markets are becoming major solar energy markets and due to this the design and planning of whole grid networks are affected. This has a significant effect on solar power businesses. As a result of this suitable business models will be crucial in maximizing the solar panel company ’s benefits in creating more value for its customers ( Hou, 2014; Meier, 2014) . Table 2 illustrates the fundamental elements of the solar panel business that would help it maximize the benefits.
Risk Management Plan
Despite the many advantages that may accrue from solar panels, execution of related businesses is often faced with myriad challenges. These challenges include the complexity and risks involved. Moreover, managing the risks involved can be a challenge. Nevertheless, the efficient management of these risks and other problems is requisite to the success of the proposed solar power business. Whether at the operational, handover, construction or financing stage, lack of identification, management, transfer and control of risk would be one of the most detrimental lapses in the solar panel business ( Asian Development Bank, n.d) . The likely risks, therefore, ought to be managed from the planning, construction and lastly the operational stage. Inherent in this is the formulation of a proper risk management plan. Likewise, both the positive and negative risks should be identified and dealt with accordingly. The risk management plan is illustrated in Table 3.
Table 2: The core elements of the solar panel business
|
Key Partners Solar manufacturers Financial institutions Solar energy lobby groups Micro-finance institutions International and local investors Energy consumers |
Key Activities Install and manage PPA installations Acquiring investors and PPAs |
Value Proposition Power purchasing agreements (PPA) Low risk returns on investments Reduced use of fossil fuels |
Customer Relationships Close knit customer relations Direct contact between customers and the sales personnel |
Customer Segments Mid-sized to large organizations Private and institutional investors |
|
|
Key Resources PPAs for resale Loans from banks Equity |
Channels Salesforce Door-to-door advertising |
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|
Cost Structure Installing and managing PPA installations Acquiring investors and PPAs |
Revenue Streams Servicing and monitoring fee Development fee Carbon credits |
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Table 3: Risk management plan for the solar panel business
| Risk | Description | Mitigation |
| Policy | A negative risk that is caused by policy instabilities. These could be due to changes in numerous directives as a result of changing governments | An agreement should be established between the business investors and the government to ensure protection against changes in policy |
| Laws | A negative risk caused by legal complications. These could be due to varying laws falling in different ministries that govern the energy sector | Regular consultation during the drafting of regulations and Acts. |
| Regulation | A negative risk due to absence of a regulatory body that is independent | Investors to insist on the establishment of an independent regulatory body |
| Planning | A positive risk caused by incoherence in planning and delayed implementation | Stakeholder participation at all stages of the business implementation and streamlining of implementation |
| Financial management | A positive risk that could arise as a result of poor financial state of the business and significant gaps in revenue |
Proper management of all financial matters Use of adequately trained personnel |
| Procurement | A positive risk arising from lack of transparency in signing PPAs, inadequate capacity to procure, delayed procurement and failure to manage contracts | Capacity building and transparency in negotiating principles |
| Human resource | A positive risk due to conflict of interest, understaffing and political interference | Emphasis on autonomy of management in the business |
Conclusion
Solar panels transform radiation from the sun into electricity and are currently amongst the most common types of solar energy systems. Due to their contribution to reducing GHG emissions, global warming and climate change, their popularity has grown tremendously. Consequently, numerous solar panel businesses have emerged. However, for these enterprises to be viable economically, SWOT analyses, articulation of key elements and formulation of appropriate risk management plans are requisite. This is because it is only then that they can contribute towards fostering a sustainable society.
References
Asian Development Bank (n.d). Risk assessment and risk management plan: Energy sector. Asian Development Bank.
Hou, X. (2014). Comparative analysis of solar PV business models. Master’s Thesis . Faculty of Technology, Lappeenranta University of Technology.
Khader, K. & Idris, M. (2016). SWOT analysis of solar energy in India. IRACST – International Journal of Commerce, Business and Management (IJCBM), 5(2), p. 323-326
Meier, T. (2014). Innovative business models and financing mechanisms for PV deployment in emerging regions. International Energy Agency, Photovoltaic Power Systems Programme
Theofilidi, M. & Vougiouklakis, Y. (2009). D2.6: SWOT Analysis. SolarCombi+
