The Myth Of Infinite Demand

By Paula Mints
By Navigant Consulting
June 24, 2009

If you build it they will come. All industries, particularly during periods of strong growth, are vulnerable to believing in their own invulnerability. This is not really hubris; generally, along with the technical skills required, developing a technology or product requires believing that demand for it exists, and that it is cutting-edge enough in form factor, design, function, cost, etc. to nullify the competition. Examples: Sony Betamax vs. Video Home System (VHS), and practically all Internet-based products during the dot-com boom (with obvious and vivid exceptions). Infinite demand does not exist for any good, not even toothpaste.

During the solar industry's most recent boom (2004-2008) the goal of infinite demand seemed attainable. Not only attainable, it seemed to many new entrants almost a foregone conclusion. That boom period is notable for the significant volumes of product sold into incentivized markets, in particular Germany and Spain. The term "grid parity" was knocked around often during these high-growth years, along with the promise that grid parity would bring with it the ability to sell everything you manufactured. New entrants envisioned a world with no barriers and just one small hurdle: getting to grid parity in a timely manner.

The photovoltaic industry does not exist in a vacuum -- that is, it competes with conventional energy technologies (coal and natural gas), nuclear, and other renewables such as wind, not to mention energy efficiency technologies (primarily building materials such as windows). Energy efficiency and conservation are economical ways to control energy costs. Given the competitive landscape which includes less-expensive competitors all vying for a larger piece of the energy market, the answer to unlimited demand for solar is not as simple as achieving grid parity.

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