There’s never been a technology that was perfected before it was released. Technology products like solar are introduced when their performance is not as well developed as established products along some dimension that mainstream customers have historically valued.
In order to become competitive over time, technology products must be refined and improved with the help of a sequence of users (starting with innovators and early adopters). This dynamic, called the technology adoption lifecycle, is critical to the success of any new product or technology. Without the adaptation and improvement that’s demanded by early users, mainstream customers (the bulk of any market) will not adopt the product.
This is important because government subsidies often completely disrupt the technology adoption process. When mainstream buyers of solar begin to enter the market because of a subsidy rather than product attributes, then forward progress on product adaptation tends to stop.
When I surveyed residential solar owners in the Sacramento area, I found that the majority of them were late adopters. (this is an easy thing to determine by asking specific questions about their purchase decision) Why would late adopters decide to buy solar before the product is mature? Because the local utility (SMUD) made solar “look” mature by offering subsidies and intangible product attributes. At the time SMUD was offering 4 kW systems for only $7 per month, and after 10 years the customer could buy the system for $2400. SMUD’s offering caused technology laggards to enter the market prematurely.
This subsidy from SMUD completely disrupted the normal cycle of adoption that is needed for a market to be sustainable. Subsidies from any government, agency or organization do the same thing. And when the subsidy is removed, the market adoption pattern must start over from the very beginning. This is why government/public subsidies are so damaging over the long term. There’s a far greater impact than just a loss of money when the subsidy is discontinued. Subsidies take away a key component of sustainable market development: product and buyer evolution.
Warren Schirtzinger is a business- and marketing-strategy consultant for solar companies, utilities, and renewable energy firms. He has authored articles as a “Renewable Energy Insider” on REWorld.com and writes about marketing strategies on the Solar Strategies Blog. Contact him via e-mail (warren
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