Pestel Analysis For New Type Of Solar Panel Engineering Essay

Pestel Analysis For New Type Of Solar Panel Engineering Essay The purpose of this report is to investigate the external business environment for a new type of solar panel that can be fitted into UK homes to generate energy. The report consists of three parts. The first part of the report gives an introduction into solar energy, the present market size and serious market competitors. The second part presents the four key trends obtained using PESTEL analysis, identifying the factors affecting the start-up of a business. The third section reflects upon the future and the obstacles faced by the solar panel/technology industry in the UK. Information used in this report was gathered using internet services such as Google Scholar. All the websites used are referenced at the end of the report. 1.1 Solar Power and Solar Technology Solar energy was first used in the 1860s [1] by Auguste Mouchout, to produce ice by converting solar energy into mechanical energy. He later connected a refrigeration machine to this system to produce ice. In 1883, Charles Fritz converted solar energy into electrical energy. This was the biggest moment in the history of solar technology as scientists had finally found a ray of hope. Solar energy continued to develop in the 20th century. Solar panels were finally developed in 1954 at Bell Laboratories using silicon. By 1990, it was clear that non-renewal fuel would run out and it was essential alternative sources of energy were improved. In the 21st century, solar technology has improved many folds. The conversion rate of solar energy into electrical energy in 1954 was 6% [2]. The facilities present at the Sandia National Laboratories have a conversion rate of 31.25% [3]. Amorphous Solar Cells Crystalline solar PV holds close to 85% of the total market share, leaving the remainder to thin-films [4]. Which are used in a domestic environment. These can be either mounted on roof tops in UK or facing 90 degrees of south. Average solar electricity system cost  £12000 and per kW of electricity cost from  £5000  £8000 but this reduces with time as the system produces more electricity. 1.2 Advantages Producing electricity using solar power provides three main types of benefits: it benefits the environment, the user and the community. Solar power is considered a Green/Clean fuel and renewal. This helps slow down the effects of global warming and keep the environment clean. The benefits for a domestic user are: Cutting the energy bills of the household since electrical energy is being produced from a free source of energy (Sun). Once the initially cost of installation of solar system is covered, the household will have relatively low energy bills. An average UK household can save upto  £140 on energy bills/year [5]. It can provides 24 hour electric supply to a households situated in remote parts of UK If energy has been produced in excess by a domestic user via the solar energy system (SES), then it can be fed back into the national grid. This benefits the community, reduces the use amount of electricity which has to be produced using non-renewal fuels and provides finance for the producer. 1.3 Key UK based Market Competitors Various companies install Solar Electric System (SES) for domestic use. Various non-profit organisation such as Narec [6], Energy Saving Trust UK [7] and The Solar Energy trust UK, promote and support the projects undertaken by companies involved in the solar industry. Microgeneration Certification Scheme [8] ensures that all equipments and services used in the installation of a SES in a domestic surrounding is of the highest standard and is thoroughly examined. http://www.uk-ises.org/ Solar Essence Ltd is one of the leading companies which specialise in solar power/heating [9]. Solar Essence is a MCS approved installer of photovoltaic systems. They were heavily involved in the campaign which led to the Climate Change Act 2008. PV Systems established in 1982[10] is the leading provider for Photovoltaic (PV) Systems in the UK. PV Systems designed and installed UKs first fully integrated PV roof in Oxford, UK in 1995. Since then they have installed over 1000 PV Systems. They also work closely with companies such as Sony, Sharp, Mitsubishi and BP Solar; developing and installing smart PV Systems. PV Systems is too a MCS approved company; maintaining the highest standard of services. Energy Development Co-operative Ltd is a company based in Suffolk, UK since 1997. They specialise in providing off-grid solar systems by setting up SES in remote locations. They provide solar systems for various county councils in UK, Universities (Manchester), the BBC, Intel and many more such companies who are trying to reduce their energy bill. We can expect a boom in the Solar Industry in the next decade as more domestic and industrial users switch to green-fuel. Areas of UK, where sun light is available in abundance can expect new companies providing efficient alternative source of energy via the sun; to start operating in their areas as everyone is a winner in such a venture. 1.4 Market Size for Solar Power in the UK Solar energy can be potentially be a large scale/cheap energy provider for UK, especially in the summer months hence making more energy independent from the East. Across the world, the installing of PV increased from 6000 MW in 2008 to 7.3 GW in 2009. UK is expected to have a market size of 60MW in 2010. In order to get a better idea about potential market size for solar power in the UK for the next decade, a study was conducted by Energy Efficiency Partnership for Homes (EEPH). Here are the details: A method calculating the usage of Microgeneration technology was created for an earlier study on energy sources; this method was used by EEPH in order to predict the possible number of new installations of solar energy systems on yearly bases from 2010 2020. This method considered the peoples choice for microgeneration technologies. Below are the findings of the study: PV system is expected to have a market of 200,000units/year in 2020; consumers feel they would benefit greatly via Feed-in-tariff (FIT) and the capital cost to set up PV system could be covered via FIT. This is a very realistic with the improvement in the SES technology and funding from the government. In the present time, solar hot water systems are the most preferred choice(from all the microgeneration technologies presently) by domestic users of solar energy, but are expected to decline as other methods such are hot air technology improvise. The competition to sell SES is heating up in the UK. At present, there are three types of companies fighting for the top spot. Firstly the manufacturers, they are becoming more and more like wholesalers, hence affecting the business model of the wholesalers for solar systems. Manufacturers and wholesalers also have to fight large companies which specialise in installing solar systems. A price war is expected to drag the capital cost down for manufacturing, installing and maintaining. This is however an excellent news for the domestic/industrial consumers of solar power. 2 External Business Environment Analysis Using PESTEL The PESTEL model is made of 6 parts. Its designed to provide assistance to an individual or a group of people, making a business decisions. There are various elements (such as new laws and trade deals) which can affect an organisation; PESTEL is used to divide the elements affecting a business into 6 different categories. The six categories are: Political factors. Economic factors. Social factors. Technological factors. Environmental factors. Legal factors. This part of the report will help identify 4 key trends which are most likely to affect a new business in the field of solar industry. 2.1 Political: Government effect and projects This part of the report focuses on plans set by the government and trade associations; resulting in increased usage of renewal fuel, and predict the effect of these plans. The government has two main goals towards reducing the emission of carbon dioxide. They are: By 2020, aim to generate 20% of all British electric supply via renewal sources of energy and by 2050 cut the carbon dioxide emission by 60% for the UK. The present government towards these targets is shown in Figure 5. Earlier to the government announcement, in 2005 various trade associations consisting of over 550 companies addressed the issue of reducing carbon dioxide emission and increase the use of renewal fuels. By 2025 they expect 25% of UK total energy consumption to be produced using renewal sources of energy. [11] Figure 5[17] Shows the government progress towards its 2050 target A new government scheme, which is going to be introduced in April 2011[12] is set to announce that one in 10 UK homes will have a roof based SES. This will result in saying of upto  £900 a year for then household. The Scottish Government has a scheme promoting and proving grants for anyone using the microgenerator method for producing energy. The government are providing upto[13]  £4000, roughly 30% of the installing cost. As time goes on, more and more households will take up the idea of having PV on their roofs as time would also start running out for the targets set by the government. As UK recovers from recession presently, the young generation would see microgeneration technology as a attractive prospect(also the grant to cover the capital cost) as we might go through another recession in the next ~40 years and being about to reduce your bills in the recession, majorly helps out a household. 2.2 Economic: Prices of non-renewal fuel and average income This section of this report contains analysis of the effect of an increase in the cost of non renewal fuel and a increase in energy bills. It also reflects on the factors influencing financial the decision to invest into a microgeneration technology. A domestic household in the UK uses up about 1.5 to 3kW [13], and solar panels can roughly 50% of the domestic energy requirement. Presently most of the electricity using in the UK is produced by the burning of oil, natural gas and coal. This means an increase in a selling price of oil, natural gas or coal would directly increase the energy bills of a UK household. Figure 1.0 shows the increase and decrease of oil prices in the UK. The X-axis should a time line and the Y-axis shows price/gallon. In the year 2008, energy bills were considered to be at their highest point, especially August 2008. In the next 18 to 20 months, the wholesale price for oil, natural gas and coal fell by 15% 20%. This resulted in Figure 1 Graph displaying the average oil price/month from 2005 ~2010 [14]. In the year 2008, energy bills were considered to be at their highest point, especially August 2008. In the next 18 to 20 months, the wholesale price for oil, natural gas and coal fell by 15% 20%[15]. This resulted in the decrease of electricity prices by a similar margin for retailers. As we continue for relay on limited non-renewal fuels to provide energy, eventually the price of non-renewal fuels will increase, also increasing the average energy household bill. This drive in prices will result in an increase of the usage of renewal fuels, and over time the capital cost to setup will reduce due to improvements in technology, increase in efficiency and competition. New customers in the solar industry will mean a much needed funding will start becoming available in order to research further, the field of solar technology and also lead to a clean fuel based UK. 2.3 Social: Awareness about clean fuel This part of the report reflects on the present efforts being made in order to raise awareness about renewal/clean fuel in the British society. The report also reflects upon the effects of non-renewal sources of energy and their effect on the climate, e.g. Global warming. It is believed that if all of the sunlight reaching planet earth each day was converted into electricity, then the amount of electricity produced would be same as supporting the energy consumption on planet earth, many times over the usual consumption. More and more energy consumers across UK are now keen on using renewal sources of energy. This is due to the various publicity campaigns on saving energy and recycle waste making the public a lot more conscious about their behaviour towards the environment. Things such as the melting of polar ice caps due to global warming and extinction of species of various animals due to unsustainable environment has raised some important questions about human behaviour towards the environment. Figure 2 shows that change in average temperature of Central England compared to the average Global temperature. Figure 2 shows a steady increase in temperature in Central England. It is further expected that the average temperature will rise by 1.4 to 5.8 ° C [16] by the end of the 21st century. In order to keep living in a sustainable environment, we need to change our habits: Recycle close to 100% of the waste Raise awareness about sustainable environment in schools and offices. Use energy saving methods while carrying out day to day tasks. Increase in media coverage about the latest developments in the environment. Better grants and facilities available for a domestic user to switch to solar energy from a non-renewal source of energy. More and more people are now trying their best to reduce their carbon footprint to its minimum. There are various tools available which help you calculate your carbon footprint. Using energy saving light bulbs. Figure 5 provides some evidence that the British people are becoming educated about sustainable living and changing their habits as the carbon dioxide emission is on a decrease. Government is now also educating school children on green fuels and the effects of global warming on our environment by making it part of their education system. This is exceptionally good since those children will already be aware of the issues affecting our environment and will prefer renewal sources of energy as they are aware of the impact on non-renewal sources of energy on the environment. The market prospect looks positive for renewal sources of energy in the next decade, as various projects raise awareness about the effects of carbon dioxide emission on our environment. Both the domestic and the industrial sector are now changing their behaviours towards the environment and government across the world are seriously promoting renewal sources of energy as our environment could be in jeopardy if nothing was done to sustain it. 2.4 Technology: Efficiency rate One of the reasons people do not readily take to renewal sources of energy such as solar power is because they do not consider them to be 100% reliable and have a low efficiency rate (converting solar into electricity). Since 1860, scientists have been trying to address the problem of efficiency rate for solar energy. The solar technology has advanced many folds since 1860, which have made SES, affordable, reliable and low maintenance. Solar technology has been integrated with the thermal-chemical technology [18] in order to increase its efficiency. This hybrid allows users to store heat energy from the sun and convert it to electricity whenever required. This prevents from the loss of heat which was a major problem with traditional SES as they use to lose heat if it was stored for later use. Another advancement in the solar industry has been of the development of the Power Sticker. A power sticker boosts the energy output of a SES by up to 10% [19]. A power sticker sticks on top on a solar cell and prevents solar light from reflecting off from the top of a cell hence trapping the maximum about of sun light. MAKE MY OWN GRAPH ON THE NUMBER OF SES EXPECTED TO BE SOLD BASED ON OIL PRICE [1] http://facts-about-solar-energy.com/solar-energy-history.html [2]http://en.wikipedia.org/wiki/Solar_thermal_energy#Conversion_rates_from_solar_energ y_to_electrical_energy [3] http://www.sandia.gov/ [4] http://www.solar-power-answers.co.uk/solar_cell_types.php [5] http://www.electronicsweekly.com/Articles/2010/08/04/49207/uk-is-fastest-growing-solar-energy-market.htm [6] http://www.narec.co.uk/ [7] http://www.energysavingtrust.org.uk/About-us [8] The Microgeneration Certification Scheme. (2009). Welcome to the Microgeneration Certification Scheme website [online]. Available from: [cited 23/02/09] [9] http://www.ethical-junction.org/profile/solar_essence [10] Department for Business Enterprise Regulatory Reform. (2009). Renewable Energy [online]. Available from: [cited 22/02/09] [11] British Wind Energy Association. (2005) BWEA press release [online]. Available from: [cited 22/02/09] [12] http://www.financialadvice.co.uk/news/household-bills/87515-uk-government-offers-incentives-for-renewable-energy-supply.html http://www.direct.gov.uk/en/Environmentandgreenerliving/Energyandwatersaving/Renewableandlowcarbonenergy/DG_072593 [14] http://www.thisismoney.co.uk/oil-price [15] http://www.theenergyshop.com/getTariffUpdates.do;jsessionid=DB5D90222582827E01DABE3170A06719 [16] http://www.decc.gov.uk/en/content/cms/statistics/climate_change/impacts_cc/impacts_cc.aspx [17] http://www.decc.gov.uk/en/content/cms/statistics/climate_change/gg_emissions/targets/targets.aspx [18] http://www.alternative-energy-news.info/mit-thermo-chemical-solar-power/ [19] http://www.alternative-energy-news.info/power-sticker-boost-solar-power-generation/