Renewable Energy Marketing Bill Bryson Described Australia Essay

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Renewable Energy Marketing

Bill Bryson described Australia as the "Sunburned Country," which would imply that there is potential for a strong solar panel industry. However, whereas decidedly cloudier countries such as Germany have used strong government incentives to create a burgeoning market for solar panels, the same cannot be said for Australia. When the Rudd government cancelled the rebate for families installing solar panels on the roof of their home in 2008, the industry took a nosedive (Beer, 2008). European manufacturers in particular cited the lack of government support for the lack of private investment in the Australian solar panel industry (Millar, 2009). This paper will examine the state of the solar panel industry in Australia and then set out an approach to market the product to Australian businesses and consumers, with emphasis on meeting the particular challenges and opportunities in the Australian market.

Industry Analysis

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The solar panel industry in Australia was dealt a harsh blow in 2008 with the cancellation of the $8,000 rebate offered by the federal government to families that installed solar panels on their homes. Rebates of this type have been a strong driver of demand for solar panels in a number of developed countries, because of the way that they skew the purchase incentive. The economics of the consumer market for solar panels are difficult in that the panels have a high up-front cost. They deliver cost savings to consumers over the long run, but the up front cost dissuades many consumers from adopting the technology. The government incentive essentially defrays much of the up front cost of installing solar panels, lending strength to the long-term incentive to purchase. This encourages buying behavior. In Germany, a policy similar to the one that the Rudd government quashed was responsible for building that nation into the world's largest market for solar panels.

TOPIC: Essay on Renewable Energy Marketing Bill Bryson Described Australia Assignment

While the German market is the largest for solar panels, the production of solar panels has shifted over the course of the past five years towards China. Five of the top ten producers of solar panels are now Chinese, two are American, two are Japanese and just one is German (GTM Research, 2010). The industry has experienced strong growth in demand worldwide as well, with production increasing 51% in 2009. The rapid increase in production and emergence of multiple Chinese firms as global players in the market has driven down the costs associated with the production and installation of a number of photovoltaic devices, solar panels included. This has been countered by the fact that this strong demand has pushed up the price of some inputs, although this is expected to reverse by late 2010 (Waldoks, 2010). Some of the increase in demand in 2009, however, came from a German market that fears upcoming subsidy cuts -- effectively creating a surge in demand that is only temporary (GTM Research, 2010).

Where subsidies or other government assistance remain, the solar panel markets appear to be significantly stronger than in areas where such assistance does not exist. In Australia, for example, support from the Queensland government has spurred the development of a 1.2 megawatt project and the University of Queensland (Queensland Business Review, 2010).

Despite the occasional support from regional governments, the business climate in Australia remains negative for solar panels manufacturers and installers. There is a lack of business incentives such as tax breaks and a lack of government support for renewable energy in the regulatory environment. This contrasts with the position the country once held as a leader in solar power, in the early 1990s. The shift in government priorities away from solar energy has hampered the development of what should be a natural industry for Australia (Millar, 2009).

Outside of Australia, the industry has remained robust even in the face of the global economic downturn, with production and sales quickly returning to pre-recession levels by the end of 2009 (Young, 2010). However, with the German, Italian and Czech subsidies now expired or set to expire, it is anticipated that demand in that country will fall and the excess capacity in the industry will seek to open new markets for its products. The impact on the Australian market, given the political climate, is likely to be negligible, as firms will pursue more favorable markets first.

A study released in early 2010 introduced a program intended to bring renewable energy to 100% of the country's usage by 2020. Currently, solar energy accounts for 1% and wind energy for 1% as well, with coal supplying 80% of Australia's electricity needs (Feldman, 2010). Under the scheme, solar energy would supply 60% of Australia's electricity. While this is technologically feasible, evidence from government action suggests that there is still insufficient political will to put economic measures in place to shift consumption patterns or to impose legal constraints on non-renewable energy usage (Feldman, 2010).

Overall, the Australian solar panel industry is relatively unfavourable. Solar panel installation remains a long-run investment, and is therefore a luxury product for most consumers. The lack of tax incentives has crippled industry growth both in terms of production and consumption. Global producers are seeking new markets in order to meet their capacity, but the oversupply in the global market is not expected to result in reduced prices for several more months. A firm operating in the Australian market must contend with the fact that solar panels remain a luxury product, which inherently limits the size of the potential market. In addition, without incentives, growth rates will be low. Should the election result in a victory for Tony Abbott, the odds of new incentives being introduced to spur demand for alternative energy development would be very low.

Segmentation Strategy

There are many ways by which a market can be segmented -- demographics, geography, psychographics and behavior (Rajeev, 2010). Behavior in the Australian market for residential solar panels is determined in this case largely by demographic (income) and psychographic considerations. There is essentially no low end for the solar panel market in Australia. The $8,000 incentive still exists for families earning below $100,000 per year, but this is insufficient incentive for families to undertake a long-range investment. Families earning more than this figure may be able to afford solar panels, but are inhibited from installing them because the payback period is so long. The commercial market (selling to businesses) is equally constrained by a lack of government offset to the short-term economic consequences of installing solar panels.

The $100,000 water mark provides a clear line of segmentation within the consumer industry. This line will impact on the consumers' willingness to purchase and the consumers' financial incentive to purchase. Because of these two factors, marketing solar panel systems to consumers will naturally be different over and below this line. The third market for solar panels is the small business market. Again, this market has unique characteristics determined by economic incentive, economic benefit and the types of installations needed. The small business market does not have the same economic incentives as the consumer market, but may be more lucrative on a per-customer basis because of the potential for the installation of larger solar panel systems and multi-site installations.

The two consumer markets are essentially defined by a demographic variable, but there are other ways to segment this market as well. As a seller of solar panels and installation, geographic segmentation is a critical factor as well. Australia is a vast country and it will be impossible to offer total coverage. The major metropolitan centers hold substantial populations, enough to sustain demand for solar panels over the long-term in the residential market. One or two key markets -- Sydney and Melbourne for example -- can be chosen as the focus of operations initially. The costs of servicing just these two markets can be high, but with one or two campaigns, 7 or 8 million consumers can be reached just in these two cities and their hinterlands alone.

There is also an important point of psychographic segmentation that should be considered. Because of the removal of the most significant economic incentive from the purchasing decision of most Australians who had been purchasing solar panels, other incentives will need to be considered in the targeting and marketing strategy. One of these is the inclination to support so-called "green" initiatives. Consumers who are supportive of green energy initiatives and environmentalism are more likely to purchase solar panels, regardless of economic incentive. This group may also receive a different sales pitch, one less geared towards microeconomic arguments and more geared to appeals to emotion regarding the "green" benefits of solar energy. There is evidence that small businesses can also be targeted according to roughly similar psychographic criteria. Many businesses have cultivated their own eco-credentials and used them as a marketing device. The installation of solar panels is one of the easiest and most recognizable steps towards building eco-credentials as it is easy to do, offers tangible benefits over the long run and is easily understood by consumers with minimal explanation, unlike some other… [END OF PREVIEW] . . . READ MORE

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