Industry Report: Solarcity (Research Paper Sample)

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Title: INDUSTRY REPORT: SOLARCITY
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Contents TOC \o "1-3" \h \z \u Part 1: Industry Report PAGEREF _Toc415001521 \h 4Introduction PAGEREF _Toc415001522 \h 4Analysis of the structure of the solar energy generation industry of US PAGEREF _Toc415001523 \h 5Current market structure of the industry PAGEREF _Toc415001524 \h 5Reasons for the current structure PAGEREF _Toc415001525 \h 6Possible future structure PAGEREF _Toc415001526 \h 10Effect of the structure on strategy decisions PAGEREF _Toc415001527 \h 12Contribution of the energy generation industry to national economic development PAGEREF _Toc415001528 \h 13Contribution to employment PAGEREF _Toc415001529 \h 13Contribution to GDP growth PAGEREF _Toc415001530 \h 15Contribution to FDI PAGEREF _Toc415001531 \h 16Sustainability targets for SolarCity and its impact on company business plan PAGEREF _Toc415001532 \h 17Company level sustainability targets PAGEREF _Toc415001533 \h 18National level sustainability targets PAGEREF _Toc415001534 \h 20Conclusion PAGEREF _Toc415001535 \h 21Part 2: Reflection PAGEREF _Toc415001536 \h 23Overview PAGEREF _Toc415001537 \h 23Analysis of concepts needed to the impact of the environment of business PAGEREF _Toc415001538 \h 23Appraisal of an organisation’s business plan PAGEREF _Toc415001539 \h 24Application of techniques of strategic analysis to specific business problems PAGEREF _Toc415001540 \h 25Production of a well-researched and analysed report to a given brief PAGEREF _Toc415001541 \h 25Acquired transferable business skills PAGEREF _Toc415001542 \h 26References PAGEREF _Toc415001543 \h 27
List of Figures
TOC \h \z \c "Figure" Figure 1: Major solar energy firms in the US PAGEREF _Toc415001312 \h 5
Figure 2: Short run equilibrium in perfect competition PAGEREF _Toc415001313 \h 8
Figure 3: Long run equilibrium in perfect competition PAGEREF _Toc415001314 \h 9
Figure 4: U.S. Annual PV Installations, 2000 – 2014 PAGEREF _Toc415001315 \h 10
Figure 5: Jobs- Years created for new-build electricity generation in the US PAGEREF _Toc415001316 \h 13
Figure 6: Levelled cost of electricity in the US PAGEREF _Toc415001317 \h 15
Figure 7: Pillars of sustainability PAGEREF _Toc415001318 \h 18
Figure 8: CSR rating for SolarCity PAGEREF _Toc415001319 \h 19
List of Table
TOC \h \z \c "Table" Table 1: Economic indicator for the construction of new US power generation facility PAGEREF _Toc415001320 \h 14
Part 1: Industry Report
Introduction
The energy industry is considered a pivotal industry around which most other industries of a country revolve. The reason for this assertion is that most other industries that operate in a country for the economic fulfilment of the country depend on effective energy generation to become operational (Ramana, 2011). In the United States (US), the energy industry is often referred to as the backbone of the industrial revolution and the cornerstone on which industrialisation has strived for decades (Daintith & Hancher, 2014). The aim of the report is to have a thorough industry analysis that makes it possible to find the current market factors that affect organisations and companies operating in the energy generation industry, with particularly emphasis on solar energy generation. This aim is necessitated against the backdrop of growing national demand for energy in the US to serve various domestic and commercial purposes (Kieltyka, 2009). With a critical analysis of the industry therefore, it will be possible to ascertain the current strengths and opportunities of the industry that helps it fulfil this demand, as well as weaknesses and threats that must be overcome in making the industry a result oriented one. In order to achieve the aim of this report, the energy generation industry for US will be analysed by focusing on the structure of the industry, its current and future market structure, effect of the structure on strategy decisions, contribution of the industry to national economic development, as well as the sustainability targets of SolarCity as a major player in the solar energy generation sector.
Analysis of the structure of the solar energy generation industry of US
Current market structure of the industry
Van Cayseele (1998) defines the market structure of an industry as the number of firms who produce identical products which are considered homogeneous. In this, there are several firms in the US that are recognised by the Energy Information Administration as service providers of solar energy in the country. Some of the major listed solar energy companies in the US include Applied Solar, BP Solar, EIQ Energy, Inc., Global Solar Energy, Sharp Solar, and SolarCity (Ramana, 2011). Within the larger solar energy industry, there are three major categorisations of firms or service providers that can be found, which are utility solar contractors, commercial solar contractors and residential solar contractors (Goodman & Rowe, 2009). In the chart below, the top 16 solar energy providers, the total megawatts installed, employees, city of headquarters, among other information is provided.
Figure SEQ Figure \* ARABIC 1: Major solar energy firms in the US
Source: Solar Power World (2015)
Marin & Siotis (2007) noted that the market structure of any typical industry may be composed of one of several types, of which the US solar energy industry is found to be a perfect competition. Perfect competition has been described as the type of market structure which presents no barriers to entry, making it possible for new entrants to come into the market. The perfect competition market structure has been noted to have the characteristic of featuring unlimited number of producers and consumers, a reason for which Solar Power World (2015) lists as many as 250 solar energy contractors in the US as leading firms.
Reasons for the current structure
Giving background on the energy industry in the US, Kieltyka (2009) observed that the birth of industrialisation increased the overall demand for energy in the country, particularly electricity. The demand was in all areas of production including residential, commercial and utility. Before this, the major source of energy supply in the US was through hydroelectric power, which was found not to be sufficient for the increasing level of demand. In a report produced by the United States Department of Energy in 1993 therefore, the feasibility of solar energy in becoming a major alternative source of power in providing as many 586,687 Quadrillion BTUs (Quads) of energy was identified (Goodman & Rowe, 2009). The outcome of this report became motivation for a perfect competition market structure so as to ensure that as many service providers as possible could come on board to make the projected values feasible. In effect, the core reason behind the current market structure is in the need to distributing the responsibility of projected demand for power generation among as many competitors as possible (Bosselmann, 2008). The perfect competition market structure was given a better boost when the National Renewable Energy Laboratory produced a report in 2012, outlining the technical availability of solar energy resources for each US state (Daintith & Hancher, 2014).
Based on the report by the National Renewable Energy Laboratory, service providers had a better idea of available market opportunities in every state of US where they could effectively engage in their business. As it is known of the perfect competition market structure, there is virtually no barrier to market entry, meaning that new entrants can easily enter the market and compete with existing competitors. It is not surprising that in figure 1, it can be seen that most of the top ranked companies acting as solar contractors in the US were established at different times since 1911 and have remained highly competitive since. Based on Porter’s Five Forces theory, the threat of new entrants is identified as one important factor that affects business operation of companies in many ways. As the perfect competition market structure does not present any barriers to new entrants, it is possible to discuss the force of threat of new entrants from the perspective of Porter’s theory. According to the theory, the major advantage with this force is that where new entrants can easily enter a given market, it intensifies competition and affects such factors of business operation as economies of scale, absolute cost, access to distribution, brand equity, and product differentiation (Dick, 2007). In effect, the perfect competition market structure being operated in the US solar energy industry ensures that all competitors, both existing and new are forced to offer value for money that creates competitive advantage in competing for limited demand on the market (Marin & Siotis, 2007).
From an economic perspective, there a number of ways in which a perfect competition market structure can be said to affect the way firms behave within an industry. According to Irmen and Thisse (1998), in a perfect competition market structure, firms act as price takers, meaning that each firm takes its price from the larger industry. The reason it is said that the firms take prices from the industry is that firms do not have the luxury of quoting prices that are favourable to them rather than what is determined by the industry. This is because once this is done consumers will have several other providers offering lower prices from who they may do business with (Johnson & Myatt, 2006). The consequence of the firm as price taker is that the market price is where market demand is equal to market supply (Van Cayseele, 1998).
Figure SEQ Figure \* ARABIC 2: Short run equilibrium in perfect competition
Source: Economics Online (2014)
As it has been illustrated in figure...