The Innovation Value-added Chain for Renewable Energy Deployment Open Deployment Model in the US
In the US, the PV market is a conglomeration of regional markets and special applications for which PV offers the most cost-effective solution. Until recently, the PV market has been dominated by off-grid applications such as remote residential power, industrial applications, telecommunications infrastructure, highway and pipeline lighting or buoys and other applications in which grid extension is prohibitively expensive.
As mentioned above, PV deployment in the US is increasingly focused on the grid-connected distributed category (both residential and commercial). Growth of the on-grid sector may be due to the growing popularity of state tax credits and rebates as well as federal tax credits or other market pull policies. However, for residential PV systems this growth still lacks the uniformity of the Japanese PV appliance system and consists of mostly one-off customisation projects.
The US PV industry also consists mainly of small intermediary system integrators and component suppliers. The increased demand for grid-connected systems has prompted some component distributors to become full-service system installers. This has caused intensive competition and rendered the industry fragmented compared with that of Japan.
The combination of diverse applications and fragmented industry structure consisting of many independent systems integrators can be summarised as an open model of PV deployment.
Differences Between the Models
One way to characterise the differences between the open and closed models is through the examination of dynamic learning behaviour in the integration costs of PV systems in the grid-connected distributed category. As described above, systems integration in the closed model of deployment is performed within vertically-integrated housing manufacturing firms with minimal participation of third- party systems integrators. These vertically integrated firms can be seen as the entity implementing the PV innovation. On the other hand, systems integration in the open model is performed in the context of a much more distributed learning system made up of independent installers and integrators. There is no apparent innovating entity to co-ordinate and internalise learning among the diversity of customised installation projects. How learning effectiveness differs in the context of such learning system differences will now be determined. Drawing upon the system price data for small residential grid-connected PV systems (3–5KW form factor) published in national reports by the International Energy Agency it is assumed that these system prices can serve as a proxy of system costs. Note that the system price and module cost figures that appear in the Japanese national report refer specifically to grid-connected residential applications. Those from the US national report only refer to general system price and module cost. If the module costs are further subtracted from the system costs, the system integration costs depicted in Figure 4 are obtained (denominated in US dollars).
The dynamic learning behaviours of system integration costs are also determined in the context of these two conspicuously different deployment models. The earlier analysis of the dynamic (time varying)
MODERN ENERGY REVIEW – VOLUME 2 ISSUE 2 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0
Figure 1: Cumulative Photovoltaic Installed Base in Categories of Application in Japan
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Off-grid non-domestic Grid-connected, centralised
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Figure 2: Cumulative Photovoltaic Installed Base in Categories of Application in the US
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Off-grid non-domestic Grid-connected, centralised
Off-grid domestic Grid-connected, distributed
learning coefficients is reproduced in Figure 5. It is evident that the closed model seems to perform better in terms of lower system integration costs and more effective dynamic learning coefficients. These are, among others, the main differences between the two deployment models.
Application of Innovation Value-added Chain To help organise and explain the empirical findings, an IVC concept is proposed.3
The analytical objective of an IVC is to evaluate 7
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