The Plight of Icarus; The Impacts of the Regulatory Framework on Various Business Model Designs in the Swedish Solar Energy Industry

Abstract

Research Question: What are the impacts of the regulatory framework on various business model designs in the Swedish solar energy industry? Background & Problem: The Swedish solar energy sector remains in its infancy as business models find their bearings. With significant capital requirements and complex transactions required to deliver solar energy solutions to a customer segment, the sector welcomes the a regulatory framework that promotes industry and market growth. Meanwhile, such a framework effectively propels the government’s ambitions to dislodge the nation from being overly dependent on fossil fuels. As would befit the above rationale, there are subsidies in place to promote the growth of the solar energy sector in Sweden. However, in mid-2016, the government implemented an indirect, per-kw tax on any producer of solar energy with an aggregate production capacity above 255kw. Economic rationale holds that this effect would erode the desired effect of the subsidy and keep firms’ deal sizes within the austere confinements of 255kw. The surprising implementation of the policy begs to ask how effective government policies are at doing what they intend and whether these policies have the intended effect on all business model designs in the solar energy industry. Methodology: This report entails a multiple-case study whereby data has been gathered from three firms in the Swedish solar energy industry. The data gathering process has employed a qualitative approach whereby the firms have been represented by individuals with elevated positions at each firm. An analysis has tied together the empirical data with a theoretical framework that builds on economic theory, business model design and supporting elements in order to make inferences that may befit an answer to the research question. Results & Conclusion: Results indicate that one regulatory framework may have different impacts to the performance, goals and ambitions of various business model designs. Those designs who target a customer segment that is also the end user are also most exposed to both the solar energy tax and the investment subsidy. However, depending on the interlinkages between the various elements of such business models, the effects of these policies may be coordinated. One company is positioned further with behind in the supply chain and takes the form of a retailer of products. The company in question is to a greater extent immunized from the solar energy tax, however, evidence suggests that the firm in question is also cut off from the benefits of the subsidy. The results also indicate that per-unit subsidies, as advocated for by the retailer, would have drastically different benefits for the companies. Conclusion remarks posit that the frequent changes to the regulatory framework, the conflict policies and the narrow scopes that their intent projects cause disturbances in the young industry. By nature, business models should be dynamic and iterative, however, when an exogenous force as provocative as the government is highly volatile, they are given few incentives to spread wings and fly towards the sun.