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Diffusion of Circular Photovoltaic Product-Service Systems among Large Solar Applications

A Supply and Demand Analysis

Published onJun 20, 2023
Diffusion of Circular Photovoltaic Product-Service Systems among Large Solar Applications
Nyffenegger, R.1,2, *; Grösser, S.2; Bocken, N.1
1Maastricht Sustainability Institute, Maastricht University; 2School of Engineering and Computer Science, Bern University of Applied Science
*[email protected]

Extended abstract


The world is in the middle of a massive transition from predominantly carbon-based energy systems dependent on fossil fuels towards a low-carbon energy system dominated by renewable energy (IRENA, 2022). As a key renewable energy source, the European solar photovoltaic (PV) industry is therefore undergoing a profound transformation and experiencing tremendous growth (SolarPower Europe, 2022). As a result of the upheavals in the PV industry, considerable research has been put into the analysis of the role of solar (and circular) PV business models acting as catalysts for such a transformation (Bidmon & Knab, 2018; Ford et al., 2017; Moratis et al., 2018). However, little emphasis has been put on the effective creation and caption of value of companies engaging in the PV industry (Bankel & Mignon, 2022).

This research attempts to contribute by analyzing the value proposition, creation, and capture of circular solar PV business models in Switzerland. It focusses in particular on PSS-related PV business models, as these are particularly interesting due to economies of scale for PSS companies, declining financing costs, more efficient installation and sales processes, and the ongoing price decline of PV modules and other hardware (Overholm, 2015; Schmidt-Costa et al., 2019). And since often a pure demand side perspective is taken to analyze circular solar PV business models (Palm, 2017; Schmidt et al., 2016; Van Opstal & Smeets, 2022b), this research takes the demand and supply side into perspective.

Theoretical background

Contrary to other scholars such as Haley & Schuler (2011) or Zhang & Gallagher (2016), this research splits the PV value chain applying a holistic view of the circular economy over the entire product life cycle and not just from manufacturing to installation. Therefore, the PV value chain is divided, as shown in figure 1, into the upstream, midstream, and downstream value chain (Frantzis et al., 2008; Garlet et al., 2020; Haley & Schuler, 2011). The midstream value chain consists of PV system distribution and integration, PV system installation, PV system operation and maintenance, as well as PV system deactivation and dismantling (see figure 1).

Figure 1. Solar PV value chain

According to Bankel & Mignon (2022), three areas of circular solar PV business models can be identified within the solar PV midstream value chain. First, researchers have described solar PV business models based on the application related to where a PV system is installed, e.g., residential or commercial, small or large, rooftop or ground-mounted (Burger & Luke, 2017; Lindahl et al., 2022). Second, researchers have described solar PV business models with regard to their position in the PV value chain and the activities related to those positions, e.g., one-shot activities such as installation or ongoing activities such as monitoring or maintenance (Frantzis et al., 2008; Schoettl & Lehmann-Ortega, 2011). Third and mostly, solar PV literature describes solar PV business models based on the interaction between the ownership of the PV system, the ownership of the property where the PV system is installed, and the consumption or sale of the electricity generated (Drury et al., 2012; Horváth & Szabó, 2018; Overholm, 2015; Ribi & Perch-Nielsen, 2021). In this last area, circular business models, such as product-service system (PSS) -related solar PV business models, like third-party ownership (including power purchase agreements or leasing) are located (Lundqvist, 2020; Strupeit & Palm, 2016; Van Opstal & Smeets, 2022b).


The research has been conducted as part of the European Union’s Horizon 2020 research and innovation project on circular business models for the solar power industry (CIRCUOSL, It aims to complement the prevailing knowledge on the adoption of PSS-related solar PV business models by business-to-customer (B2C) customers within CIRCUSOL by capturing the little documented and tacit knowledge of B2B and B2G customers. Therefore, an exploratory sequential research approach was used to gain insights into PPS-PV adoption by B2B and B2G customers. This sequential triangulation, which examines qualitative data in a first phase with demand-side focus groups and then investigates their results quantitatively in a second phase with a supply-side survey, is particularly useful for exploring immature concepts that need to be explored and described (Creswell, 2014; Morse, 1991).

First results

Figure 2. Solar PV business models situation in the PV value chain and the PSS categories

The research shall contribute in three ways: (1) it theoretically derives PSS features in current midstream value chain solar PV business models, (2) it discusses benefits and drawbacks of the identified PSS business models in demand-side focus groups (B2B and B2G), and (3) it validates the focus group results in a survey of supplier-side solar PSS companies. While (1) and (2) has already been done, the supply-side survey is yet to be conducted. The theoretical contribution released that the solar PV business models in the realm of PSS in B2B and B2G environments are Consulting, PPA, and so-called Engineering, Procurement and Construction (EPC) business models. While the Consulting business model is purely a result-oriented PSS, the PPA and EPC business models are rather use-oriented PSS. The EPC business model, however, has certain elements of a product-oriented PSS. Additionally, only the PPA business model is covering all value chain steps of the midstream value chain, while the Consulting business model only applies in the planning phase of the PV system distribution and integration. The EPC business model covers the first two value steps and is occasionally extended for all value chain steps. Figure 2 shows the solar PV business models embedded in the PSS categories and the PV midstream value chain.

The focus group results revealed that B2B and B2G stakeholders are predominantly critical of circular PSS business model offerings for solar PV. A strong argument against PSS are the expected financial dependencies with fixed electricity prices that do not reflect changes in the market price. Another dependency is of a legal nature, as under a PSS contract the development of the property is made more difficult. Generally, the complex contractual design including aspect such as cancellation clauses or contract duration are regarded as challenging.

This raises the question of how PSS providers could better address the fears and anxieties associated with their PSS offering so that they can better meet the needs of the demand side. This is currently elaborated in the supply-side surveys.

Preliminary conclusions

This paper discusses the causes and possible solutions for the low uptake of circular PSS business models in B2B and B2G applications in Switzerland. It contributes first by identifying the reasons for the non-adoption of such business models by the demand side. Here, the focus groups conducted revealed the perceptions of potential PSS clients towards the current offerings on the market. Seconds, it contributes by presenting possible solutions on which the supply side can focus. Those are brought forward in a currently conducted supply side survey. Generally, the PSS offer is still facing noticeable headwinds in the market. The final analysis will show whether the providers are missing the needs of the potential customers or are facing actual low demand. Regardless of the outcome, business practitioners will gain insight into possible new business opportunities and their drawbacks and possibilities. The research community will gain insights into the circular PSS business model adoption in the PV industry and, on this basis, can contribute in future research to facilitate more circularity within the PV industry.


solar industry, photovoltaics, circular economy, circular business model, product-service-systems 


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