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The Viability Of Small Solar Energy Systems Installation

820 words - 4 pages

My neighbor recently asked my opinion of her possible entry into the solar energy installation market in the Midwest Region as an installer of small solar photovoltaic energy systems (PV systems) for homes and small businesses. She believes renewable energy results in cost savings, and government subsidies make the idea more attractive to potential clients. However, she expressed concern about the financial risk and potential profitability of her proposed venture. I researched the applicable economic variables of her proposal to provide her with a recommendation based upon my findings. I focused my research on demand and supply factors within the target market. In addition to evaluating ...view middle of the document...

The third demand determinant evaluated is consumer taste. Scant information is available to gauge the preference of consumers for PV systems. A 2009 survey of 641 individuals and businesses in San Diego, California indicates 20 percent or fewer respondents would have PV systems installed without an available tax rebate, and most could not afford systems sufficiently large enough to meet all of their electrical needs (U.S. Department of Energy, 2009).
The next determinant evaluated is population and demographics. Again little information is available to evaluate this determinant. In a subcontract report for the National Renewable Energy Laboratory, The Natural Marketing Institute indicates consumers in the Midwest are price sensitive, and less aware of their available energy options than other national regions (Rogers, 2011). Additionally, the report states most consumers across all regions are concerned about renewable or sustainable energy yet few act upon their concerns.

The final demand determinant evaluated is consumer expectation of future price. PV system prices are expected to decrease as photovoltaic technology evolves, and production increases.
From 2012-2016 all PV markets are expected to grow by 25-30 percent, and the national weighted average of all system prices dropped 33 percent (Solar Energy Industries Association, 2012).
Price elasticity of demand for solar systems is relatively inelastic due to the price of photovoltaic panels until such time as the cost of the necessary photovoltaic is reduced. Current price reductions are incremental, and fail to produce significant increase in the level of demand for such systems....

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