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Industry analysis of solar energy in Colorado

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Industry analysis of solar energy in Colorado
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Jaquez, Viridiana
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Denver, Colo.
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Metropolitan State University of Denver
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Auraria Library
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Industry Analysis of Solar Energy in Colorado by Viridiana Jaquez
An undergraduate thesis submitted in partial completion of the Metropolitan State University of Denver Honors Program
December 2015
Dr. Debbie Gilliard Dr. Cynthia Sutton Dr. Megan Hughes-Zarzo
Primary Advisor
Second Reader
Honors Program Director


Industry Analysis of Solar Energy in Colorado
Date: December 01,2015 Professor Gilliard
By: Viridiana Jaquez Alvarado


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INTRODUCTION
The average American household produces about 6.68 metric tons of carbon dioxide each year due to purchasing electricity from a utility company to power their home. Utility companies make this energy by burning fossil fuels, such as coal, oil, and natural gas, which is used to boil water, then produce vapor, and to ultimately move large generators that produce an electric current. This is the production of electricity, through fossil fuels, in it simplest form. Unfortunately, burning fossil fuels pollutes our environment and can inflict harm on the planet. This is commonly referred to as global warming: an environmental trend that is very controversial, not only in the United States, but in the entire globe as well. It has since then inspired a new culture of environmental awareness, and it has paved a road for new technology to enter the electricity-making business, one of which is the production of electricity through solar energy.
For us to harness the power of the sun, the installation of solar panels on homes rooftops is necessary. This is also the easiest way to use the suns energy for electricity. The increase of newcomers to electricity-making industry is allowing consumers to exercise their capitalism right by allowing them to choose between solar energy or to stick to using fossil fuel to power their homes. If there were to be a significant increase in solar energy systems, then it would be equivalent to planting 171 trees each year, per home.
In order to make a transitions to solar power from traditional utility entities, the belief that solar systems are not affordable has to come to an end, an easier process for initiating electrical service from solar energy providers needs to be implemented, and an improvement to the current technology available for harnessing solar energy has to be


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made. Given the bad auras surrounding solar energy, there are also good auras to emphasize: the incentives, environmental benefits, and the legislation in place, Specifically, in the state of Colorado, the pros of solar energy can be exploited while the drawbacks can be suppressed. Other important factors to look at include acknowledging solar energy outside of the United States, the demographics of customers, current solar technology, new technology to look forward to, trends in cost, Porters five forces, and comparisons between solar companies, in order to make an argument that sides with solar energy.
SOLAR ENERGY IN COLORADO
Incentives
The size of the market in Colorado for solar energy is composed by a little under 400 companies. Just last year, Colorado installed an additional 67 megawatts of solar electric capacity to the already existing 412 megawatts of solar energy in Colorado. This megawatt capacity is enough to power 82,000 homes in Colorado. All this has been possible because of the different ways that Colorado harnesses solar energy. Some of the products and services that the solar power trade has to offer in Colorado include, but are not limited to solar panel installation, solar design, photovoltaic systems, solar solutions for multifamily in homes and in apartments, solar lighting, solar energy saving solutions, and residential and commercial solar solutions. All of these systems are reliable and efficient ways to provide energy to countless more homes in Colorado.
One of the reasons why this might not be the case, though, is because of the speculation that solar systems are too expensive to install and/or maintain. This is, for


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the most part, true, but what the general population doesn't know is that there are ways to benefit from and afford the installation of a solar powered system, which would explain why Colorado was having an increase in popularity with solar energy in just last year. The most common way of doing this is by participating in the rebate programs in Colorado and receiving tax credit from the federal government, participating in clean energy program which are also sponsored by the federal government, by having to pay less on the utility bill, and by the increase in property value.
Although the state of Colorado does not provide tax breaks for renewable energy consumers, they still are able to receive a 30 percent tax credit at the federal level. Though, it is true that the tax credits that were given out to consumers during the beginning of the solar energy boom were more significant compared to the amount in rebates that are given to consumers today, 30 percent is still plenty to cheer about. As for the state of Colorado, rebates have been their way to motivate solar energy. The rebates, which may vary in amount, depend on the utility companies to provide the rebates in order to persuade consumers. They arent actually given by the state of Colorado, but rather the utility companies operating in the region. The problem with these rebates is that they are not as generous in amount, but easy to receive, thus being great incentives for prospective consumers.
Property Assessed Clean Energy (PACE) is another way that a homeowner can pay for a solar energy system. With PACE, a consumer is able to pay for their system through a special property tax assessment. A consumer would pay for the system by paying a higher property tax for the next twenty years, even if the consumer were to sell their property, this slightly higher tax rate would then be passed down to the new


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property owner until the twenty years have passed. Essentially, the system is paid for through these higher property taxes over the course of a twenty year period. This is a great program that Colorado residents can take advantage of, but unfortunately this program has does have limited funding. Still, this program contributes to finding a solution to the high costs of installing a system that can cost thousands of dollars without programs like PACE.
On another note, having a solar energy system can also help reduce utility bills because, having a system that creates solar energy means you use less electricity from your utility company, and that can contribute to lower heating and cooling costs. (Why You Should Use Solar) This is a great aid for homes that are using heaters or cooling system year-round in Colorado. According to the U.S Energy Information Administration, the average U.S household used 48 percent of their electrical utility service on heating and cooling, alone, in 2009. Overall, if solar energy can provide the power for heating and cooling, this would mean a 48 percent cut on the utility bill, which also means that the solar energy systems practically pay for themselves. In addition, the reduction a utility bill through solar energy can increase value of the home. Surveys conducted by the U.S. Department of Housing and Urban Development have shown that home values rise an average of $20 for every $1 reduction in annual utility bills (Why You Should Use Solar). Basically, the less you pay on your utility bill, the greater the value of the home with the solar system is. This stems from the fact that the home would rely less on utility companies for energy.
Similarly, when a family decides to install a solar energy system on their home, it is an investment even if it is difficult to see it in the beginning. Therefore, adding a solar


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energy system to one's home adds more value to the existing investment of home ownership. Typically, when a homeowner adds value to their home, there are taxes they must pay to the state for the value that is being added. In the state of Colorado, however; when a homeowner partakes in solar system installations the benefit from Property Tax Exemption, which exempts the homeowner completely from paying taxes on this added value. Homeowners also benefit from Sales Tax Exemption completely, which exonerates the consumer from paying any taxes on related sales, and any use taxes, which is another great benefit for Colorado homeowners.
Tax breaks, rebates, government programs, reductions on the energy bill, and an increase in home value all prove to be great incentives for installing solar energy systems in a home. They not only save the consumers money, but they also relieve the assumption that solar energy isnt affordable.
Environmental Benefits
Besides the incentives, solar energy is definitely going to appeal to consumers that are concerned with the environment. Solar powered energy provides a means for the consumer to satisfy home utility needs and at the same time, satisfy community responsibilities and expectations of society. It is a fact that in the near future, traditional utility companies could possibly face resource scarcity; one of the many problems we face with oil and coal as the fuel for electricity. Lastly, consumers are also attracted to solar energy because sunlight is free and it allows consumers to take full advantage of a never ending energy source, that is, the sun. With that said, Colorado is a great place to live when it comes to solar energy because of the fact that Colorado receives 300 days


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of sunshine, on average, every year. Also, solar energy does not harm the environment, unlike coal and oil, and it fulfills a homes needs for electricity.
Legislation
The state of Colorado is very fortunate to have legislation in place that benefits those who are trying to become progressive with the way they consume energy. Legislation such as the Renewable Energy Portfolio Standard pave the way to reward consumers who switch over to renewable energy. Also, legislation has made net-metering a possibility, a new frontier for those who posses and will posses solar energy system. Lastly and although controversial, Colorado courts have recently ruled that utility companies must have a certain percentage of energy come from renewable resources.
Colorado is definitely an ideal state to participate with renewable energy because of the benefits offered to its residents, such as the Renewable Energy Portfolio Standard (RPS). The Renewable Energy Industry Standard is a regulation across the whole nation that requires utility companies to obtain a certain amount of the electricity they supply consumers from renewable energy sources, such as solar or wind. In the case of the state of Colorado, RPS standards require Xcel Energy, the solitary electricity provider, to generate four percent of their renewable energy power from solar energy alone by the year 2020. The RPS standards are very significant to Colorado for that particular reason. Having incentives in place, such as tax credits and rebates, makes it easier to encourage residents to consider solar energy. In many cases, all it takes is a simple solar panel installation to qualify for different types of rewards. Also, in the case


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of the state of Colorado, the rebates help the installations of such systems more affordable for consumers. Lastly, RSP standards allow consumers to take advantage of Renewable Energy Credit (REC), which can help solar energy system owners make revenue by selling their RECs. The hope is to create more incentives for when switching over to solar energy and this is great for the solar energy market
Other reasons why Colorado is an ideal state to participate in the solar energy industry has to do net-metering. Net-metering is a concept that rewards solar system owners with credits when their systems generate additional solar power during the day. A system owner can use these credits during the night or during a cloudy day when there is a lack of sun. The state of Colorado also requires utility companies to pay renewable energy system owners when their solar panels generate extra power and the home where the system is installed does not use the extra electricity generated. So, the incentive here is to make money off of the installation of a solar energy system in a home. This is unique to solar energy since solar energy systems create energy at the home itself, rather than draining it off of a power line like a tradition utility company would like. Again, this boosts up the idea that solar energy is the way to go when it comes to affordable, reliable, and profitable energy, unlike traditional conventions of producing power for a home.
In other news, Colorados state courts have recently engaged in mandating the use of renewable resources from the states biggest utility companies. This means that, 30 percent of their power supplies must come from renewable resources (State Energy Policy). This ruling has caused much commotion in the interstate commerce because of the possible infliction it might conjure. There was so much commotion that


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the ruling was taken back to the courts again in the Energy and Environmental Legal Institute vs. Epel case, where it was argued that ruling would have an effect on the interstate commerce. The main argument by the plaintiff was that the new regulations on Colorado utility companies forced restrictions on how out-of-state goods are manufactured, and therefore, requires that out-of-state electricity be generated according to Colorados terms as any Colorado based organization would. However, the United States federal law affirms that it does not permit any state to impose constraints on the interstate commerce in regards to electricity. The judge on the Energy and Environmental Legal Institute v. Epel case, therefore, concluded that the law solely applies to energy providers who decide to engage in business with a Colorado utility provider. Inclusively, this law merely helps guide and identify if a Colorado utility company is fulfilling with its renewable energy mandate. Fortunately, for the people of Colorado this is a benefit not a drawback, although it may be disadvantage for Colorado companies in the energy business.
SOLAR ENERGY OUTSIDE OF THE UNITED STATES
The solar energy market is currently expanding worldwide. In 2010, Germany placed number one worldwide for solar power installations, installing a total of 35.5 gigawatts for solar power usage. China placed number two, with a total installation of 18.3 gigawatts, Italy third, Japan fourth and the U.S fifth with a total of 12 gigawatts installed. Germany has taken the leadership role from the United States in the energy category because of its high numbers in solar energy installations. Although Germany does not receive as much sunshine as the United States does, Germany was still


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ambitious enough to envision that for the year 2020 it will harvest thirty-five percent of its electricity from renewable resources, and bump that up to hundred percent by 2050. In 2014 Germany surpassed its 2020-year vision, by harvesting fifty percent of its electrical needs from solar energy. The scope of solar energy is definitely worldwide at this point in time.
Global Forces
In effort to slow down global warming, governments, manufacturing industries and businesses (small and large) all over the world are emphasizing their focus on green sustainability by encouraging green-friendly practices in order to be a preferred supplier. Products are preferred globally, when they have a brand of approval claiming its production and disposal processes are environmentally friendly, by consumers. Some of the solar energy service providers may choose to not partake in environmentally-friendly practices, however; they must still observe environmental laws that may have an effect to their administrative overheads costs.
DEMOGRAPHICS
Homeowners are not the only ones that can benefit from Solar Panels, so can businesses and organizations. Businesses can install solar panels to generate energy to power up their buildings, and contribute to a cleaner environment. Just like a homeowner, a business can also benefit from tax breaks and rebates when partaking in sun generated power. These businesses would not only be taking part in the movement towards a clean-energy view and standpoint, but also participate in a good public


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relations asset. Businesses and organizations possess the benefit of being role models to our society and to other businesses in the area. In fact, as of September 2012, the following companies participated in solar energy: Walmart, Costco, Kohls Department Stores, IKEA, Macys, McGraw-Hill, Johnson & Johnson, Staples, Inc., Campbells Soup, Walgreens, Bed, Bath & Beyond, Toys R Us, General Motors, FedEx, White Rose Foods, Dow Jones, Snyders of Hanover, ProLogis, Hartz Mountain Industries, and Crayola. (Solar Means Business). These 20 companies, alone, generate an estimated 47.3 million dollars worth of electricity alone each year.
CURRENT TECHNOLOGY AND NEW TECHNOLOGY
Since the start of the solar panels revolution, much has changed in this industry, and among those changes are the technological forces. Researchers are developing next-generation materials as well as new methods for producing PVs to increase conversion efficiency and lower production costs (Solar Power) at this point in time researchers are working on the next big thing for the solar energy industry technology. Some of these new technologies include organic solar cells, which are reportedly independent from rare earth minerals. Currently in the solar panel production, thin film photovoltaic are composed of rare earth minerals, including but not limited to tellurium, gallium and indium. This discovery is an upper hand in current technology because organic solar cells are independent of rare earths, whereas thin film PV modules are dependent.


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Another technological improvement in the works for solar PV is the concentration of solar power that is using lenses or mirrors to better concentrate the sunlight. This concentration of sunlight has proven to lower costs for solar power.
Other technological advances in the solar energy industry, some include the concept of light-sensitive nanoparticles. This newly discovered nanoparticle is called colloidal quantum dots; this new particle is believed to offer cheaper and more flexible material that is used for solar cells in the solar PV. Also, the new material will use new types of semiconductors, which will function outdoors. Currently the material in semiconductors cant function outdoors making them not ideal this industry, the discovery of this new material creates, yet again, another upper hand in current technology. Researchers in the University of Toronto have discovered that these new types of semiconductors will be able to bind to oxygen, the new nanoparticle does not bind to air and hence can sustain a greater stability being outdoors. These semiconductors and nanoparticles can increase sunlight absorption. Panels using this new technology were found to be up to eight percent more efficient at converting sunlight (Latest in Solar Technology) and therefore, more efficient at generating electricity to its system owners.
Researchers all over the world continue to strive to improve the current technology in the solar energy industry. Recently, in the College Imperial in London, researchers discovered a new material, called gallium arsenide, which is believed to be able to make solar PV systems more efficient. So much more efficient, researchers are hypothesizing that this material can help make PV systems up to three times more efficient than the current solar system technology. The solar cells where this new material would be located in, is called triple junction cells and the reason behind this


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increase in efficiency hypothesis is because these cells can be altered, chemically, in a way that would increase sunlight capture. These solar cells use a sensor-driven window blind that can track sunlight along with "light-pipes" that guide the light into the system. (Latest in Solar Technology) Basically, the new solar cells would increase the voltage that the electrical pipeline can provide.
Improvement in solar PV sunlight capturing is not the only thing that researchers are trying to improve. There is also a drive to improve the current technology behind storing the energy produced by the system. Current technology for energy storage is required to be used as soon as it is generated by the system, and if it is not used immediately, it is lost. In addition to this inefficiency, the sun shines through only a part of the day, and in the state of Colorados case, we go through 65 days of the year without sunlight at all. This is a problem to solar PV system consumers because of the obvious lack of efficiency of the system through the year. Currently consumers are offered with the option to integrate batteries that would essentially store energy intending to minimize the energy that is lost from the system. However; even with this system plug-in, most energy continues to go to waste because of the lack of storage size they have. To top it off, these batteries are very expensive. This issue facing the solar energy industry calls for an improvement in current technology.
Novatec Solar, a company in the solar energy industry, has been partaking in bettering the current solar energy storage system. The company has been investigating the use of molten salt storage technology, which is a process that uses inorganic salts to transfer the energy generated by the systems solar PV into solar thermal with the use of heat transfer fluids. This would generate greater efficiency for the solar PV systems


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because current systems use oils. Using heat transfer fluid instead of oils allows solar plants to operate at levels above 500 degrees Celsius; this will result in a higher energy power output. What this means for system advancements is that storage costs would lower, and therefore; utility companies would be able to use the generated power as base load plants instead of meeting peak demand during prime time frames throughout the day.
The Ohio State University researchers, who have been founded by the United States Department of Energy, have recently developed an evolved battery for storing energy. This battery is believed to be 20 percent more efficient than current batteries in the market, and on top of that they are 25 percent cheaper too. The design behind these batteries involves the integration of the battery onto the solar panel itself, rather than the battery operating on its own which is how they currently work. By partnering the battery with the system, it is believed to lower current panel product costs by 25 percent.
Also, the current way to manufacture solar panels is being revolutionized. The current process involves the use of silicon semiconductors, which is what allows the conversion of sunlight into electricity. Currently in the works is magnesium chloride, which would be used as narrow coatings from thin film of cadmium telluride on the solar panels. This new technology promises to be cheaper and much more efficient for solar panel production. There does exist an obstacle to this improved production process, and that is cadmium telluride thin film cells become unstable, and they are currently using cadmium chloride. This is where magnesium chloride comes in the picture, this new material is recovered through seawater, which makes it an abundant resource,


makes it cheaper and non-toxic too. By integrating this material into the production process, efficiency of the solar cells increases by 15 percent.
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Other than material and production improvement, technology improvements are also being considered in panel placement. This means that solar panels on top of house roofs could be a thing of the past soon. Technology is opening the possibility to place solar panels elsewhere, such as on roadways, floating devices, and even in outer space. Researchers are exploring the possibility to place solar panels on roads and highways that would be used generate and dispose electricity on to the grid. This new integration of solar panels could help overcome the fear of panels taking up too much land. This new technology is already in use in Netherlands, and serves as an example not only for Colorado, but for the world. Another way to integrate the use of solar panels without invading the rooftops of homes or buildings is by placing solar plants on water. This makes sense because 70 percent of the planet is covered in water. Many researchers all over the world are currently experimenting with this idea by piloting projects in India, California and many other locations. Last, but not least, is the idea behind going to outer space to better solar panel installations. The initial idea from traveling outside of the planet came over 40 years ago, where space-based satellites have the capability to capture sunlight and convert it to microwave energy that is in turn beamed back to earth. This development of new technology demonstrates the potential to capture more sunlight, nearly ninety percent, compared to the fifteen percent that is currently being captured by solar panels in planet earth. The reasoning behind this upper hand comes from the position of the satellites; this positioning strategy enables optimal sunlight capture the entire day, outer space does not get


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darkness from night nor cloudy days. India, China and Japan are investing heavily in these technologies right now, (Latest in Solar Technology) paving the way for the rest of the world to follow their lead.
The moral of the story here is that the solar energy industry is finding ways to make the solar energy more affordable and more reliable through new technology. Although current technology is neither quite as efficient nor affordable, the future is promising, with the new ways to capture sunlight, new storage capabilities, and cheaper, but better material for solar panels.
TRENDS IN COST
The cost of solar energy cell and module per watt nationwide has continued to drop since early 2000s, and there is no reason to believe it will anytime soon. In the early 2000s the cost per watt was a little over two dollars, and up to 2010 it fluctuated up and down but it kept a constant decrease, all the way down to less than a dollar in 2012. Currently the Colorado solar energy system owner pays about 12 cents per kilowatt-hour(kWh) of energy, which is aligned along the nationwide average. The electricity produced by the systems is very inexpensive, what is expensive is as previously mentioned the system itself, but this no longer a factor since homeowners can now lease systems instead of buying them. Over time, the cost per unit is


decreasing as more homeowners are participating in generating energy from solar panels.
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The economic conditions for the Solar Energy industry has been increasing over the past decade (since the early 2000s), and as we now know, the price per watt has been decreasing United States nationwide. Currently, nationwide, the price per watt is in between six to eight dollars, if the solar system is bigger than that reduces the price per watt a customer is faced with. Unfortunately, when it comes to solar energy, a customer is not only face with the per watt price at the end of every month, but also for the solar panels, the balance of the system, the labor, permits and inspection fees, and operational costs. The total amount a customer pays for all of these components can range from anywhere between $15,000 to $40,000 dollars. Fortunately, these costs can be put on credit, allowing the customer to pay it off in a certain amount of time, or make a certain amount of monthly payments. As mentioned before, solar panels increase the value of your home, therefore; the cost to install solar panels reflects this home value increase. Also, many solar energy companies are aware of this potential hurdle for its customers, some of which do not want to purchase solar energy, but they do, however, want to take advantage of what solar powered energy has to offer. Hence, it makes sense that many solar companies have initiated leasing programs. Leasing solar panels allows the customer to not pay the high, upfront cost of solar panels, the labor to install the system, and any additional equipment. A customer is faced with a monthly-fixed bill to cover the costs of installing a solar system.
Leasing solar photovoltaic panels opens this industry to a whole new market. When a family purchases solar panels, the family does not see the savings of the


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product and service until close to a decade later, when the panels are paid off and the family is only faced with miscellaneous fees. When a family decides to lease the product, they start to see a difference starting the first month, an immense upper hand. Although the difference is not significant for the first year, benefits do come after when the lease stays at a constant price and the price for coal and oil goes up due to inflation or scarcity.
The Lammers, a family from Erie, Colorado, was recently faced with this challenging decision, to lease or to buy Solar Energy panels. The Lammers, were looking at two outcomes, to lease the equipment or buying it. The total for leasing the equipment would cost $3,000 dollars as a down payment, and a monthly bill thereafter. If the family decided to buy the equipment, they were looking at about $9,000 dollars with incentives. If the Lammers were to lease the equipment it would cover 62 percent of their electricity needs, and the rest of their needs would have to come from the Xcel Energy provider. The Lammers were looking at a fixed monthly bill of 64 dollars from Solar City, and a 41-dollar month bill from Xcel for a total of 105 dollars a month. There was only a two-dollar difference for the Lammers for the first couple of years, but after the predicted inflation from coal and oil, the difference would be significant. Solar City estimated the family a total savings of 9,000 dollars in addition to recuperating their initial 3,000 dollars down payment.
As the Solar Energy industry has evolved, so have the demographics of the typical consumer. In the introduction stage of this industry, solar panels were something foreign to home rooftops, why? Because it was pricy and not the average family could afford to purchase these panels, nor pay for to install and maintain the equipment, it


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was not typical considering getting a mortgage for, after all it was not a home it was not being looked at as in investment. This has changed, and continues to do so. It is now more common to see solar panels on home rooftops, and therefore; generate solar energy. There has been a 60 percent increase in the number of homes installing solar panels in income ranges from $40,000 to $90,000 dollars. This trend shows that families with incomes from all sides of the spectrum, low-income to wealthy income, are partaking in solar powered electricity. Income is no longer a barrier for this industry, in fact, since Solar companies have integrated the leasing program, this industry is now appealing to a broader customer audience, broadening consumer demographics.
PORTERS FIVE FORCES
One important thing to note about the energy industry is that its really hard to persuade potential customers to choose one energy provider over the other. There is not a lot of differentiation in the industry, meaning that the product is essentially the same since all that is being produced is electricity. Of course there are factors such as price and reliability to take into account, but in the end electricity is electricity and some consumers arent worried about where their electricity is coming from, so long as they have it. Again, this can be translated to the solar energy industry because every solar energy provider is basically selling you electricity and solar panels that dont have differentiation either. In conclusion, the threat of new competition entering the market is


low because it is difficult for new companies to advertise their service as different from their competitors.
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Currently the industry cant offer much differentiation, but soon they will be able to. Given that so much investment is coming from places like Toronto, London, India, and others. Since the average consumer will spend a generous amount when purchasing solar panels, roughly ten to forty thousand dollars, it makes sense for companies from around the world to invest in finding a solution of affordability. Even when leasing, consumers will still end up spending about three thousand dollars, as the Lammers family did, on the down payment alone. In the state of Colorado consumers have many solar energy companies to choose from and compare between firms before committing to a certain provider. Still with the freedom to look around for the best firm, solar energy suppliers make it next to impossible to switch service providers once the consumer is committed because of the large amount of money and time they spent on installing a system. This puts the bargaining power of buyers at a moderate level, since they have many companies to choose from, but face high switching costs.
The solar energy industry in Colorado, as mentioned before, is composed of fewer than four hundred companies. Since the supplier group is not concentrated, this lowers the suppliers power. Homeowners are a key consumer to this industry, but they are not the only consumers it has; solar energy industry is expanding its reach to businesses and organizations. The industry has been expanding their consumer reach by investing in research and development to better the current product and services it offers and be able to offer these potential consumers services. The product and services offered by solar energy suppliers are unimportant inputs to the homeowners,


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business or organization because there exists competition in the industry, which are perceived as cheaper up front. If a consumer needs electricity, it might seem easier to call Xcel and pay a monthly bill and not have to think about it again. Solar energy takes time and thought for some time before making a choice. This decision process is not considered by some people, which is why there are consumers that dont partake in solar energy. This lack of important input to the consumers need lowers the suppliers power. Switching costs, as discussed previously, are high and differentiation in products and services are low too; this gives the suppliers a moderate power over its consumers.
The threat of substitutes comes when there is a potential to limit plausible returns of an industry by integrating price limits --ceiling, on companies that are charging at a profitable cost. In this industry, there exist utility entities, and other renewable energy companies that can substitute the need for solar energy. As mentioned before, Xcel is the primary utility provider for homes in Colorado, making it one of the biggest substitutes for solar energy. Xcel does not require its consumers to do any additional work besides calling them, giving them the home address, and paying the bill at the end of the month. Consumers are not faced with solar system distinguishing, or budgeting to power up their homes. Xcel provides a monthly bill, varying from a spectrum that is not greatly deviated from what you would be paying with a purchased or leased solar system the first few years. This causes an increase in threat of substitutes because of the lack of effort it takes to receive Xcel Energy, the initial unnoticeable monthly bill difference, and minimal decision taking between leasing and purchasing a system. Advances in technology also pose a threat to current products and services offered by the solar industry, improvements such as railroad, outer space, and float solar cell


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placement create a big threat to the original solar photovoltaic panel on home rooftops. Obviously, the threat of substitutes is high.
The amount of solar energy companies in the state of Colorado are close to four hundred, these firms are closely located to one another in the Denver Metro area; some outlier groups exist in Colorado Springs, Fort Collins and Boulder. The amount of firms in the area can be overwhelming to the consumer, which can cause a great deal a stress when it comes to differentiating between solar energy firms or other utility competitors. Competitors use different tactics to compete with one another and stay relevant to its desired audience. Tactics that are used include price competition, advertising, new product development, and an increase in customer service performance. Thus, competitor rivalry is high as a result of this.
COMPARING SERVICE PROVIDERS
Solar energy providers supply its consumers with product and services prices based off a number of things. For one, not every home is the same size, some are big, some small and some are medium, and size can increase or decrease the price of a system. A home can also have been built in different years, some old and some new, this too can influence the price of the system. Another big factor comes from the number of residents in a household; this influences the systems price because of the usage amount. When it comes the suppliers providing residents with solar energy, it is not a cookie cutter approach; it is unique to every home. Some homes may need less solar panel because they were built recently, and other may need a couple of more


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panels because they were built some time ago. In the following strategic group map, price was not a good axis because of the many things that inflict the cost of a solar system. The strategic group map below is composed of axis: product and services, and breadth of product reach. The vertical product and service axis represents the variety of products and services that are offered by the firms surveyed. In this axis, it varies between residential, commercial and residential, and commercial residential and more products and services. The horizontal breadth of product and service reach axis defines the reach these firms or clusters of firms have. The breadth is also broken down into three sections: towns in Colorado, Colorado, and Colorado and more. The firms in this industry offer different products and services, which is a good gateway to understand the strategies that are being used by these companies. Colorado is home to many solar firms, expanding is a common strategy of growth.


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Commercial, residential & more
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Breadth of Product & Service Reach
Companies in this industry take advantage of what surrounds or supports the product they offer, for example the roofs and tiles of a home. SunShare Today, Vivax, and My Solar Installer are some of the companies in this industry that share a competitive advantage. These companies, among others in the industry, offer other services to consumers that enhance their image. The My Solar Installer Company offers residential, commercial and institutional solar panel products and services across the nation and in Canada. The institutional service they offer is similar to residential and commercial; they offer four types of installations: rooftop, ground fix, ground tracking,


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and carport. This service can be looked as a subcategory to residential, it provides energy to a location of your need and solar panels are located on one of the four types of installations. The Vivax Company offers four types of services: paint, roofing, solar and windows. Vivax offers a one-stop shop for home exterior design and maintenance. This convenience of service is appealing to the industry because the roofing of a house needs extra care with the installation of solar panels. Once the solar panels are installed it might give your home a different look and having the solar supplier offer painting and window service makes it even easier to implement another home remodeling if desired. This is a great competitive advantage because it gives the firm the option to generate more revenue from its consumers.
INTERVIEWS
SolarCity is a nationwide solar energy system provider; it is one of the biggest suppliers in the state of Colorado. Their employees have a clear vision of the companys direction and where it stands in the industry. I got the opportunity to speak to one of their marketing managers, Sam, and he provided me with information that I was not aware of. For one, Sam, spoke with much confidence about the company and knew exactly where they stand amongst its competitors. Sam informed me that SolarCity recently expanded its reach to the international level by entering in business with Mexico. There is no doubt that SolarCity is taking the lead in sales, product and service reach, which is why Sam did not hesitate to assure me of their leadership, this gave me a sense of the strong corporate culture the company has. Corporate culture defines values, attitudes, standards, and beliefs that are shared between the members of a


given firm, in this case, SolarCity. What makes a strong corporate culture is the clarity and unification of mission amongst employees, respect throughout the firm, clear communication channels, and superiority in products and services.
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Sam, from SolarCity, told me his assessment of the current electricity industry is that it continues to be a battle for solar energy. To his opinion, utility companies are still the main use for electricity not only in Colorado but also nationwide, and therefore; the battle to be the industry of choice continues. Since the solar industry is giving consumers the power to produce their own energy, this gives the consumer the power to better manage its energy and be conscious to the amount they spend, something that the utility companies do not provide its consumers with. In Sams opinion the utilities companies are in confusion as to where to place themselves, which is why companies like Xcel are being integrated in conjunction with solar energy systems to homes all over Colorado. This concept of interwoven conjunction is it the way utility companies are staying relevant and a solid competitor to the solar energy firms.
Sams view on the future of this industry involves a lot more use of solar energy and as a result, a cleaner environment for society. Sam shared a game-changer concept that is piloting in the State of Nevada, it involves homes being pre-wired which subtracts the headache of choosing a solar energy provider, choosing a system, understanding the system, and understanding the use of energy for their home. Another concept that SolarCity is exploring is giving consumers free installation and startup, when a consumer buys or leases a system they must give a payment upfront. The subtraction of this pressure is revolutionizing because it makes solar that much more acquirable to consumers. This widens the demographics of consumers for this industry.


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Sam also didnt hesitate to remind me of the great partnerships SolarCity has with companies like Tesla, AT&T, Honda and BMW. Tesla is a company that produces electrical cars, they are luxurious and environmentally friendly all in one. Tesla uses very powerful batteries for their cars, and this is something in common that Tesla and SolarCity have. As previously mentioned, the solar industry is currently weakening by the lack of powerful batteries to store surplus of solar energy produced in homes. As a partnership, SolarCity has an advantage to insights in products by Tesla such as batteries, which can aid SolarCity produce something themselves. Tesla recently produced a battery, Powerwall, which charges with solar energy and provide electricity when the solar panels cant generate any; evening, night or cloudy days. Powerwall is a home battery that charges using electricity generated from solar panels, or when utility rates are low, and powers your home in the evening. It also fortifies your home against power outages by providing a backup electricity supply. Automated, compact and simple to install, Powerwall offers independence from the utility grid and the security of an emergency backup. The future for this industry is looking good, says Sam. With all of these investments and partnerships that SolarCity has, it is easy to see why Sam is so confident in the direction this industry is going.
When I asked Sam about the companys competitors, he really had to dig, he told me that SolarCity is number one nationwide and therefore a strong competitor is tough to think about. Sam then pulled up a report on Colorado Solar Panel sales, and he told me SunRun is a competitor, for the State alone not nationwide. This is surprising because SunRun only offers residential services, and SolarCity offers both residential and commercial. The reach in which SunRun competes in involves the State of


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Colorado and other State throughout the nation, this makes SunRun a growing competitor. Expanding SunRuns competition grounds is a threat to SolarCity because they compete in those grounds, and if they are becoming a threat in one State, then they can easily become a threat nationwide. As to their weakest competitors, there is not a particular company that Sam mention, all that he said was that the weakest companies are those that are independent solar installers. Family owned, local business that have not been around for that long. Sam says that these companies offer unique ways to appeal to its consumers, but simply cant keep up with big companies because they dont have the material, the staff nor the channels to drive these installations across Colorado.
Real Goods Solar (RGS) is a solar energy company in the USA nation, they offer a local focus backed up by almost half a century of knowledge and experience in this industry. RGS also prides themselves by acting as a community-minded solar service provider. RGS is another solar energy system provider in the State of Colorado. During an interview with Mike, I could immediately differentiate the intensity level of corporate culture between RGS and SolarCity. Mike was a bit more laid back and humble about where the company stands and in the direction that it is heading in, there was less pride and joy about the company image. Mike did not have a long list of partners nor investors to chat about as Sam did. In fact, there was little talk about the company at all, the information of RGS I found on my own.
Mike shared his assessment of the current industry environment and emphasized a couple of things that caught my attention. Mike brought up the fact that fossil fuel utility companies are putting up a fight and are competing with solar energy companies


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at all costs. Utility companies are competing through the use of their capital and through lobbyist groups to road block future expansion of solar energy companies. Mike also brought up the current issue of fulfilling batteries for surplus of energy produced by the solar panels. This amount of surplus deviates from home to home. This energy surplus is both a plus and a con to the solar energy companies; it is a plus because homes can use this surplus of energy later in the day, nights or during cloudy days. It is a con because there is no way to store this energy properly, effectively, and efficiently through batteries.
The future of this industry, according to Mike, will be different from state to state due to rebates, policies and regulations. These standard policies are different in every state; as for the state of Colorado there is minimal amount of rebates offered. Rebates, policies and regulations can be a great incentive to join the solar energy industry, Mike believes that these incentives will soon become a national standard. As Mike elaborated on this thought, he pitched the idea of having incentives so similar nationwide that these would become a nation standard; incenting consumers equally across the nation. In the future of this industry, in Mikes opinion, there will be a balance between solar and fossil fuel energy. Not only will there be a balance, but there will significant pushback from consumers, governmental entities, and firms themselves from utility companies. Something else that is viewed in the future of this industry is the upgrade of the grid system, as mentioned before, storage for surplus energy is a necessity for this industry and batteries or grid can better this situation. Therefore; Mike opinions that the grid will
be bettered and in turn more effective for the consumers.


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Real Goods Solar is a company that provides solar energy products and services across nine states nationwide. Since it competes in different states, RGS is prone to have different competitors across these states. As for the state of Colorado, I was not surprised when Mike informed me that their biggest competitor was SolarCity. Mike touched on the fact that SolarCity is a very large company, that was a lot of capital and partnerships with significant entities. Another thing that SolarCity has that RGS does not, is that SolarCity competes nationwide, it is a consistent competitor across the nation. I was also not surprised to be informed that RGS weakest competitor is also local shops, or as Mike called them, mom and pop shops. In his opinion, these businesses just do not have the means to compete in this growing industry.
CONCLUSION
The solar energy industry is attractive for many different reasons. For one, it is an environmental awareness trend that society as a whole is attentive to. Second, it is in the growth stage of the industry cycle making it more appealing to prospective competitors and third, there is a lot of investment in research and development to improve current solar systems. This industry involves the improvement of the environment worldwide by reducing the pollution in the air through the use of solar systems. According to the average household uses 6.68 metric tons of carbon dioxide every year and puts it onto the atmosphere when purchasing their electricity from a utility company. By partaking in solar energy, not only is the consumer reducing this amount of carbon dioxide, but they are also setting an example to follow to fellow neighbors and family members. Purchasing solar energy systems allows residents to


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demonstrates that they are fulfilling their role as a responsible citizen to society by bettering the environment we share and live in. Since this industry is in the growth stage, it makes it attractive because firms are starting to see an increase in sales because of the growth of industry awareness to its consumers. There is a key business firm, SolarCity, but there continues to be an increase in firms entering the industry everyday such as mom and pop shops. There is definitely a preference in the industry for fossil fuels, coal and oil at the moment, but the increase in brand recognition --SolarCity, demonstrates the constant growth in solar energy. An increase in research and development is also an attractive trait that solar energy has because it shows expected bettering of technology. Bettering technology can widen the breadth of consumer demographics, making this industry more attractive.
Recommendation
Recommendation to enter this industry is definitely a yes because of the attractiveness of this industry. As previously mentioned, there is a lot of research and development occurring in this industry. Such development can increase the effectiveness and efficiently of the solar energy systems, making these more attractive to potential new consumers, business owners and investors. Improving the current batteries to store surplus energy from these systems makes them more liable. As a homeowner it is great to know that your system is storing back up energy for when the sun is not out or there is a malfunction, and there is less of reliability on the utility companies. By having better batteries, system owners are saving more money because they are purchasing less energy from utility companies when the system is not


producing energy. The consumer is taking advantage of the system as a whole. There is also the need to improve solar cells, current cells are only absorbing fifteen percent of sun rays. If these solar cells are in the works to be improved, again this improves the benefits of the industry, giving consumers another reason to purchase solar systems. With the improvement of these cells, consumers will be again, saving money because the system would generate more energy which would have some surplus, and with a better battery, this energy can be used for later. Again, this allows for less dependency on utility companies, and more dependency on the system. Placing solar panels on outer space gives this industry another great attractive trait, placing solar PV in space allows for better sun rays absorption. Space does not see night or cloudy days therefore; the absorption of sunlight is much better than here on earth. Although entrance threat is moderate, entrance is recommended due to these great improvements to come that will make this industry even more attractive than it already


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small-business-size-standards>.
"North American Industry Classification System." NAICS Search. Web. 01 Nov. 2015. bin/sssd/naics/naicsrch?code=237130&search=2012%20NAICS%20Search>.
"Colorado Solar." SEIA. Web. 16 Sept. 2015. .
"Residential And Commercial Solar Energy Products and Services." Solar Energy Products and Services. Web. 10 Sept. 2015. .
Petersen, Lloyd. "Active EnergyWater Providers." Colorado Department of Regulatory Services. Web. 16 Aug. 2015. .
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"Germany Gets 50 Percent of Its Electricity from Solar for the First Time." Germany Gets 50 Percent of Its Electricity from Solar for the First Time. 20 June 2014. Web. 16 Aug. 2015. .


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"Federal Judges Rule on Colorado's Renewable Energy Mandate." Denver Business Journal. Web. 27 Aug. 2015.
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"State Energy Policy and the Commerce Clause: Spotlight on Colorado and Minnesota." Energy Law Professor. 21 May 2014. Web. 5 Nov. 2015. .
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Jaffe, Mark. "Cost of Solar Power Vexing to Colorado System Owners, Electric Co-ops."- The Denver Post. Web. 21 Sept. 2015.
system-owners-electric>.
"The History of Solar." Web. 1 Oct. 2015. .
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.


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"Solar Terminology Residential Solar 101Residential Solar 101. Web. 25 Oct. 2015. .
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Full Text

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Industry Analysis of Solar Energy in Colorado by Viridiana Jaquez An undergraduate thesis submitted in partial completion of the M etropolitan State University of D enver Honors Program December 2015 Dr. Debbie Gilliard Dr. Cynthia Sutton Dr. Megan Hughes Zarzo Primary Advisor Second Reader Honors Program Director

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PAGE 15

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PAGE 28

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