Years

Figure 8.1 Enormous recent growth in global PV production

Source: Inglin22

solar industry, manufacturing and exporting solar modules to Europe and America.23

But more relevant to our study, this surge in demand in the industrialized world led to an increase in the price of a solar module. In 2002 the wholesale price of a solar module in Japan was US$2.5 per watt, but by 2005, the price had risen to close to $3.5 per watt.24 By 2006, you were lucky if you could buy a solar module for $4 per watt on a wholesale basis in emerging markets.25

Of course, these price increases were not ideal for solar diffusion in the emerging markets. It meant that firms selling solar needed to increase their retail price to consumers. For example, in Sri Lanka, various market leaders increased the retail system price by 50 per cent between 2003 and 2005, partly due to a reduction in the World Bank grant, but primarily due to the rising price of solar modules. Yet, as we have seen in earlier chapters, despite these increases, diffusion surged ahead.26

The point is this: where a strong market infrastructure exists in tandem with consumer finance, increases in the price of a solar system do not have a big effect on diffusion. The reason for this is that the full effect of any price increase is moderated by consumer finance. Provided loans are available, then solar customers are only paying 10-15 per cent of the system price on day one,

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