1. What are some key factors ( economic and non-economic) driving the solar power industry? (20 points)
2. What are the price elasticities of demand for a change in price from $15,000 to $13,500 and from $13,500 to $12,000 for a typical solar panel installation? (10 points)
3. What is the impact on total revenues based on the new prices and elasticities? (5 points)
4. How does the demand elasticity change as price is reduced? (5 points)
5. What price change would you recommend to maximize revenue? Justify your recommendations with calculations. (10 points)
6. Recommend a profit maximizing pricing strategy for the firm based on the current global pandemic environment. You may use one discussed in the module or another from your firm. (15 points)
7. What are some future trends in the solar power industry? (Discuss 3-5). (15 points)

REGULUS SOLAR POWER INC.: PRICE DEMAND ELASTICITIES Owen Halland David Smith wrote this case soiey to provide materia for class discussion. The authors do not intend to Mustrate ether effective or netective handing of a managers station. The authors may have disguised certain names and other identifying information to protect confidentiality This publication may not be transmitted photocopied agrized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproducson of his material is not covered unde autorzation by any reproduction rights organization. To order cobles or request permission to reproduce materias contact Ney Publishing Hey Business School Western university, London, Ontario Canada, NeG ONA: 512.001.3208 casesey.ca www.ejcases.com Our goal is to publish materials of the highest quality, submit any errata to publicasesvey.ca Copyright 2010. wey Busness School Foundation Version: 2010-05-23 At the Regulus Solar Power Inc. (RSP) November 2018 board meeting, the primary focus was on RSP's revenue challenges. Headquartered in Phoenix, Arizona, RSP was a regional player in the solar panel installation market serving clients throughout the Southwest United States. RSP's chief executive officer, Barbara Johnson, began the meeting by providing an overview on market and technological trends in solar power. Johnson stated, "We have witnessed strong growth in solar panel installations over the past five years. However, sales flattened out in 2018 due primarily to increased competition and lower solar panel prices." Robert Smith, the board's vice chairman, weighed in and asked for a more descriptive overview. At that point, Johnson tumed to RSP's chief financial officer (CFO), Johnny Urbane, and asked him to provide more details Urbane reported that revenues for 2018 were projected at US$18 million, which represented only a 2 per cent increase from 2017. Urbane went on to say that the largest U.S. solar installer had recently increased its presence in the Southwest United States and noted that the company had perfected the process for one- day installations, which put them at a competitive advantage. Urbane concluded by saying that RSP had not done enough to embrace the growing environmental movement, which was a major driver of the solar power market. Johnson thanked Urbane for his report and indicated to the board that, among other things, RSP would need to lower its prices to remain competitive in this dynamic market. She also indicated that RSP planned to adopt the one-day installation process, which would reduce costs. As the board meeting concluded, Johnson directed Urbane to develop an action plan and report back at the board's next meeting THE SOLAR POWER INDUSTRY The solar power market was divided into two segments: photovoltaic units (solar panels) and concentrated solar thermal. At that time, the solar panel component was significantly larger than the thermal segment. Solar panels directly transformed sunlight into electrical power. The sun produced enough energy daily to supply 10,000 times current worldwide electrical needs. The global sola-energy industry was expected to reach revenues of $422 billion by 2022 from a baseline of $86 billion in 2015. The growth of this market was driven by increased environmental pollution concerns, govemment incentives, and utility *All currency amounts are in U.S. dollars unless otherwise specified * Yashwant Singh Sahu. "Solar Energy Market by Technology: Alled Market Research, 2017, accessed April 1, 2019, www.alledmarktresearch.com solar energy-market This document is 2.0td torse any by Maria in 2021. Page 2 9B190017 power buyback schemes. The solar panel side of this market also consisted of two segments: solar panel manufacturers and solar panel installers. Some of the major players in solar panel manufacturing were located in China and Canada The solar installation segment of the market was highly fragmented. From 2010 to 2018, the total cost for a typical installation had decreased by nearly 70 per cent. This trend made solar power more affordable for both residential and commercial applications. Because schools were in session during daylight hours, both public and private schools offered additional solar installation opportunities. There were approximately 100.000 kindergarten to grade 12 schools throughout the United States but by 2017, only 5,000 schools had been equipped with solar power systems. A typical solar panel for a residential or school application measured 65 by 39 inches (165 by 99 centimetres) and generated, on average, approximately 250 watts. COMPANY BACKGROUND RSP, which was founded in 2012 and headquartered in Phoenix, Arizona offered solar power design and installation services for residential and commercial applications throughout the greater Southwester United States. While interest in solar power had continued to grow by 2018 RSP's revenues had flattened out because the largest solar panel installer in North America had entered RSP's market area. That company offered a more attractive price point and had developed more efficient installation procedures. RSP averaged one-and- a-half days for a typical installation while the competitors installations were generally completed in a single day. The basic parameters associated with a typical solar panel installation for a residential application in 2018 included an average cost of $3.000 and an arease installation size of 5 kilowatts of power (see Exhibit 1). According to a basic price demand curve in 2018 a typical installation of 300 units would cost approximately $15,000 per complete installation whereas 340 units would cost $12.000 per complete installation (see Exhibit 2). Urbane believed that a 10 per cent drop in price would be more than offset by an increase in demand volume. Urbane also knew that, to remain competitive in this fast-growing market, ESP needed to improve its image with respect to environmental movement groups. Page 3 9B190017 EXHIBIT 1: ESTIMATED COSTS AND SAVINGS COMPONENTS FOR A TYPICAL SOLAR PANEL INSTALLATION (US$) Factor Typical power cost from utility Average installed cost Typical residential demand Annual maintenance Government tax credit Utility power buyback fee Average annual peak solar day (Southwest Solar panel size Solar panel yield Average residential size installation Estimate S0.15 per kWh $3.000 per kW 1,000 KWh per month $200 3096 $15 per month 6.5 hours 65 inches x 30 inches 0.25 KW 5 KW Note: kWh-kilowatt-hour, KW-klowatt 1 inch - 2.5 centimetres Source: Based on the author's calculations from information in the case Average Peak Sun Hours by State. Regony, 2013, 2009ssed April 1, 2019, www.renogy.com templates Average Peak-Sun-hours-by-Statepat. EXHIBIT 2: REGULUS SOLAR PANEL INSTALLATION DEMAND CURVE (USS) 16,000 200 units, S15.000 420 units, $13.500 540 units, $12,000 14,000 12,000 10,000 Price per Installation (US$) 2.000 6.000 4000 2,000 0 0 100 SOO 600 200 200 400 Quantity (Solar Units) Source: based on the authors calculations from Information in the case REGULUS SOLAR POWER INC.: PRICE DEMAND ELASTICITIES Owen Halland David Smith wrote this case soiey to provide materia for class discussion. The authors do not intend to Mustrate ether effective or netective handing of a managers station. The authors may have disguised certain names and other identifying information to protect confidentiality This publication may not be transmitted photocopied agrized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproducson of his material is not covered unde autorzation by any reproduction rights organization. To order cobles or request permission to reproduce materias contact Ney Publishing Hey Business School Western university, London, Ontario Canada, NeG ONA: 512.001.3208 casesey.ca www.ejcases.com Our goal is to publish materials of the highest quality, submit any errata to publicasesvey.ca Copyright 2010. wey Busness School Foundation Version: 2010-05-23 At the Regulus Solar Power Inc. (RSP) November 2018 board meeting, the primary focus was on RSP's revenue challenges. Headquartered in Phoenix, Arizona, RSP was a regional player in the solar panel installation market serving clients throughout the Southwest United States. RSP's chief executive officer, Barbara Johnson, began the meeting by providing an overview on market and technological trends in solar power. Johnson stated, "We have witnessed strong growth in solar panel installations over the past five years. However, sales flattened out in 2018 due primarily to increased competition and lower solar panel prices." Robert Smith, the board's vice chairman, weighed in and asked for a more descriptive overview. At that point, Johnson tumed to RSP's chief financial officer (CFO), Johnny Urbane, and asked him to provide more details Urbane reported that revenues for 2018 were projected at US$18 million, which represented only a 2 per cent increase from 2017. Urbane went on to say that the largest U.S. solar installer had recently increased its presence in the Southwest United States and noted that the company had perfected the process for one- day installations, which put them at a competitive advantage. Urbane concluded by saying that RSP had not done enough to embrace the growing environmental movement, which was a major driver of the solar power market. Johnson thanked Urbane for his report and indicated to the board that, among other things, RSP would need to lower its prices to remain competitive in this dynamic market. She also indicated that RSP planned to adopt the one-day installation process, which would reduce costs. As the board meeting concluded, Johnson directed Urbane to develop an action plan and report back at the board's next meeting THE SOLAR POWER INDUSTRY The solar power market was divided into two segments: photovoltaic units (solar panels) and concentrated solar thermal. At that time, the solar panel component was significantly larger than the thermal segment. Solar panels directly transformed sunlight into electrical power. The sun produced enough energy daily to supply 10,000 times current worldwide electrical needs. The global sola-energy industry was expected to reach revenues of $422 billion by 2022 from a baseline of $86 billion in 2015. The growth of this market was driven by increased environmental pollution concerns, govemment incentives, and utility *All currency amounts are in U.S. dollars unless otherwise specified * Yashwant Singh Sahu. "Solar Energy Market by Technology: Alled Market Research, 2017, accessed April 1, 2019, www.alledmarktresearch.com solar energy-market This document is 2.0td torse any by Maria in 2021. Page 2 9B190017 power buyback schemes. The solar panel side of this market also consisted of two segments: solar panel manufacturers and solar panel installers. Some of the major players in solar panel manufacturing were located in China and Canada The solar installation segment of the market was highly fragmented. From 2010 to 2018, the total cost for a typical installation had decreased by nearly 70 per cent. This trend made solar power more affordable for both residential and commercial applications. Because schools were in session during daylight hours, both public and private schools offered additional solar installation opportunities. There were approximately 100.000 kindergarten to grade 12 schools throughout the United States but by 2017, only 5,000 schools had been equipped with solar power systems. A typical solar panel for a residential or school application measured 65 by 39 inches (165 by 99 centimetres) and generated, on average, approximately 250 watts. COMPANY BACKGROUND RSP, which was founded in 2012 and headquartered in Phoenix, Arizona offered solar power design and installation services for residential and commercial applications throughout the greater Southwester United States. While interest in solar power had continued to grow by 2018 RSP's revenues had flattened out because the largest solar panel installer in North America had entered RSP's market area. That company offered a more attractive price point and had developed more efficient installation procedures. RSP averaged one-and- a-half days for a typical installation while the competitors installations were generally completed in a single day. The basic parameters associated with a typical solar panel installation for a residential application in 2018 included an average cost of $3.000 and an arease installation size of 5 kilowatts of power (see Exhibit 1). According to a basic price demand curve in 2018 a typical installation of 300 units would cost approximately $15,000 per complete installation whereas 340 units would cost $12.000 per complete installation (see Exhibit 2). Urbane believed that a 10 per cent drop in price would be more than offset by an increase in demand volume. Urbane also knew that, to remain competitive in this fast-growing market, ESP needed to improve its image with respect to environmental movement groups. Page 3 9B190017 EXHIBIT 1: ESTIMATED COSTS AND SAVINGS COMPONENTS FOR A TYPICAL SOLAR PANEL INSTALLATION (US$) Factor Typical power cost from utility Average installed cost Typical residential demand Annual maintenance Government tax credit Utility power buyback fee Average annual peak solar day (Southwest Solar panel size Solar panel yield Average residential size installation Estimate S0.15 per kWh $3.000 per kW 1,000 KWh per month $200 3096 $15 per month 6.5 hours 65 inches x 30 inches 0.25 KW 5 KW Note: kWh-kilowatt-hour, KW-klowatt 1 inch - 2.5 centimetres Source: Based on the author's calculations from information in the case Average Peak Sun Hours by State. Regony, 2013, 2009ssed April 1, 2019, www.renogy.com templates Average Peak-Sun-hours-by-Statepat. EXHIBIT 2: REGULUS SOLAR PANEL INSTALLATION DEMAND CURVE (USS) 16,000 200 units, S15.000 420 units, $13.500 540 units, $12,000 14,000 12,000 10,000 Price per Installation (US$) 2.000 6.000 4000 2,000 0 0 100 SOO 600 200 200 400 Quantity (Solar Units) Source: based on the authors calculations from Information in the case