The solar energy segment whose growth will eclipse all others in the 21st century

Summary: Building integrated photovoltaics (BIPV) — aka solar tiles, an integral component of the intelligent home movement — is a solar energy market segment that is projected to grow four times in the next five years to $23 billion. Easier to install than solar panels and with new designs that add to the beauty of a house, they will make panels obsolete.

Carlos St JamesAbout the AuthorCarlos St. James is an advisor to energy investors and developers in emerging markets. He co-founded the Argentine Renewable Energies Chamber in 2005; has been a board member of the Latin American & Caribbean Council on Renewable Energy since 2010; founded the Middle East-Americas Energy Council in 2014; and publishes the Latin American Energy Review in his free time.

PrintHe was recently named Summit Chairman of the upcoming LAC-CORE Finance Summit in Miami, Florida in October 2016.

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Giant wind farms, solar parks and biomass facilities capture the imagination. Why wouldn’t they? It’s an industry with an annual compound annual growth rate (CAGR) of 20% over the last decade which attracted over $300 billion in investment last year. We gravitate towards these deals like moths to a flame.

But investors are no longer making the same returns they once used to from buying, building and selling renewable energy projects. It is still good business and will continue to be so for a long time. But I suspect that the next great new robber barons in our industry will come from the consumerization of retail energy solutions. But where and how?

It’s in a still unseen niche of residential solar.

The current residential solar panel business model is flawed

But not just any residential solar. Forget the less-than-beautiful solar panels awkwardly attached to the roofs of homes, their installers in constant fear of government subsidy cancellations without which they cannot survive, spending enormous amounts of time in search of financing solutions on behalf of their customers — and having to work to get approval from homeowner’s associations to install panels because they are perceived as an eye sore. That sector continues to struggle to gain profitability despite the growth. The business model is flawed.

solar panels and solar tiles
Solar panels (left) versus solar tiles (right)

It should not be surprising that Elon Musk, chairman of SolarCity, a finance company disguised as a solar panel installer, has stated that he wants solar panels to be more “cool-looking, aesthetically pleasing”, in the same way that he’s already done with Powerwall residential energy storage systems.

Solar tiles will overtake solar panels and make them obsolete. The path to market lies in making them an integral part of the rapidly growing intelligent house segment of the giant construction industry.

The rise of solar tiles

“Building integrated photovoltaics” (BIPV) refer to solar tiles (as opposed to panels), which come in different colors, are far more appealing, and in some instances can be downright beautiful. Architects love them. Solar tiles have only really been in the market for some ten years: the market leader launched their product just five years ago.

The future of solar energy does not lie in more utility-scale solar parks — although that will indeed remain a growing business for a long time. It is in solar tiles as a value-add product of the residential construction industry, an integral piece of the intelligent house. New homes can now be built with the client choosing between regular shingles or energy-producing solar tiles on their roof. And make no mistake, soon enough they will be the default option. As the price of technology continues to drop, government incentives to install solar will become irrelevant.

Millennials will decide that the only way to ensure they are consuming clean energy is to produce it themselves.

The mega-trend here is that mankind’s relationship to institutions such as utilities is changing forever. Debates on “national energy security” will evaporate as energy self sufficiency will be chosen at the residential level by consumers in every country. Home-buying Millennials will want independence from large and lethargic utilities and will increasingly decide that the only way to ensure they are consuming clean energy is to produce it themselves.

The residential construction industry is enormous, with a global market size of over $8 trillion a year. In the next twenty years it will have a CAGR of 3.5% (according to studies by economic analysis firm IHS). Growth in mature markets like the United States and western Europe will be negligible, while the two hottest markets will be Latin America, where annual growth will actually accelerate over time and hit 4%, and Asia Pacific, where a whopping 50% of all global residential construction will take place by 2022. That’s a lot of rooftops and intelligent homes, and the reason why studies predict that BIVP will grow from a $3 billion market two years ago to $6 billion next year and then $23 billion in 2021 – a quadrupling in five years.

Studies predict that the BIVP [solar tile] market will grow from $6 billion next year to $23 billion in 2021

So who’s big in BIPV? An increasing number of companies are manufacturing solar tiles, now reaching cost parity with panels and already easier, faster and cheaper to install.

  • The U.S. market leader is Dow Chemical’s Powerhouse brand, with solid warranty offerings – and which only came to market in 2011. They have chosen the thin film route.
  • The second largest market share is held by Saint-Gobain’s Apollo brand; they have chosen the monocrystalline path and just came out in 2013.
  • And new startups are popping up everywhere. One example I know of, the UK-based Solarmass with its Ergosun brand, has chosen to go global from the start because of the above data and has come up with a creative thin film-monocrystalline hybrid that doesn’t use glass but a new product that is thinner, stronger, and allows for greater solar radiation yield.

It’s anyone’s guess which company will be the next Apple Computer or facebook of residential energy self-sufficiency. But I am certain that there will be one, with an ambitious Millennial driving it to new heights.

Full Disclosure: I am not a stock-picker or -advisor, nor an investor in any of the companies mentioned above. This is just an opinion piece. I analyze larger trends looking for inconsistencies, contradictions and seeming opportunities and simply write about topics that interest me. It keeps me sane.

© Latin American Energy Review 2016

About the Author:

Carlos St. James is the co-founder of the Argentine Renewable Energies Chamber (CADER, by its initials in Spanish) and was its first President until 2011; is a board member and was elected the first President of the Latin American & Caribbean Council on Renewable Energy (LAC-CORE); is the founder and chairman of the Middle East-Americas Energy Council (MEAMEC); and founder and publisher of The Latin American Energy Review. His private sector background is focused primarily on finance and bringing together stakeholders so that deals get done. He advises governments on renewable energy policy, counsels private equity firms seeking to enter the region; and brings together stakeholders, including investors, for new energy projects.

He obtained his undergraduate degree in international economics from DePaul University and his masters in international relations from the Fletcher School at Tufts University.

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