Inderscience Publishers

Solar photovoltaics: oligopsony, non-market decision-making and the paradoxical persistence of unprofitability

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Record volumes of solar PV power plant installations have been achieved on the back of feed-in-tariffs and fiscal incentives. On the supply side, however, equipment manufacturers have been filing for bankruptcy protection in quick succession. This paper is an attempt to unravel the mystery underlying this inequilibrium, and to suggest a way forward for the solar PV sector to thrive. The price-cost margins are driven to unsustainable levels by an oligopsonistic, small buyer group facing up to a fragmented vendor base. Hence, given the pressure on manufacturers to supply large quantities within the short subsidy time-windows and the consequent emphasis on scale economies, process improvements have dominated product improvements and investments in product development and research have been marginal, if at all. The solar PV industry needs to invest in building goodwill through superior service provision and to rediscover its roots in decentralised generation, which is clearly more cost-effective, efficient, environment-friendly and genuinely sustainable.

Keywords: oligopsony, price-cost margin, price-quantity inequilibrium, goodwill capital, import substitution, industry maturity

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