It chucked out chintz, now for carbon. Here come Ikea's flatpack solar panels

The Swedish giant wants to bring clean power to the masses, but can it get over the cost barrier? Stephen Pritchard reports

Sunday 23 November 2008 01:00

Cross the bridge from Copenhagen to Skane in southern Sweden and you can see why people in this part of Europe might be attracted to wind energy.

The bridge is 7.8km long and traverses the Oresund, the stretch of sea between Denmark and Sweden. Even on a calm November day, the white peaks on the waves contrast with the leaden grey skies, and there is plenty of wind around to power turbines.

There is even enough sun to power solar energy. Solar advocates estimate that households can generate about half of their hot-water needs from the sun's power, even on a gloomy day. Indeed, using solar panels for electricity – photovoltaics – can reduce a typical household's CO2 emissions by 1.2 tons, according to the Energy Saving Trust.

That's what Anna Josefsson of Ikea is betting on, as the Swedish company gears up to break into the green market. Josefsson, deputy managing director for Ikea GreenTech, the nascent environmental products arm of the home furnishings giant, has a bud-get of Skr500m (£41m) and is serious about the market. So is Ikea.

But the venture is a departure for the company. Renewable energy systems such as solar panels, which are Ikea's immediate focus, are "big-ticket" investments for householders. With installation, a simple solar array for water heating starts at around £3,500 in the UK. Larger systems can easily cost 10 times as much.

Yet Ikea – which has built its reputation on good design but also on low costs – sells only a small proportion of products costing more than a few hundred pounds. Few, aside from the company's kitchen range, cost the kind of amounts customers might have to pay for a domestic photovoltaic system. Many cost much, much less.

Ikea executives have suggested that the company's skills in designing low-cost products, along with its economies of scale, could halve the cost of solar electricity from its current rate of around €2 (£1.70) per kilowatt hour of generating power to about €1/kWh. Josefsson, however, declines to give exact figures, not least because Ikea GreenTech has only been fully operational for about six months.

"We want to be there with the cheapest and best solar panels," she says. "That will mean co-operation with good solar panel developers who we can work with. We will contribute with our product development skills and design. That is our capital. That is where we come in."

Anyone who has struggled home with an Ikea flatpack on a Bank Holiday weekend might dispute this is an advantage. But it is a criticism Josefsson takes in her stride.

On the wall of the meeting room at Ikea GreenTech's offices, in Lund, southern Sweden, Josefsson has an illustration from an Ikea instruction set. This shows line-drawn figures assembling an Ikea solar panel using the company's often-infuriating Allen key.

But the illustration is not of an actual – or even a planned – Ikea product. Instead, it was drawn by an artist for Ny Teknik (New Technology), a weekly Swedish newspaper covering science and technology. Josefsson liked the drawing so much that she asked the paper for a copy.

Ikea plans to tackle the issue of how the panels will be installed in two ways. Initially, it is likely to offer a professional service, either using its own technicians or local subcontractors.

The company already has teams of kitchen fitters in markets such as the UK, so much of the infrastructure is already there. This is also the business model of competitors such as B&Q, which has sold solar-heating systems and small wind turbines in its stores and via its website for two years now.

Josefsson, though, has every intention of developing a flatpack photovoltaic kit, and it could be in Ikea stores within four years. "It will be the same as when you buy a kitchen. You either do it yourself, or take a service sold by the local store." She concedes that most shoppers will need to hire an electrician, at the very least, to connect a solar panel to their electricity supply.

It is the need for professional installation, as well as restrictive planning laws, that has largely hampered the market for green energy technology in the UK. Only 100,000 homes in Britain have micro-generation equipment. This compares less than favourably with Germany, where more than one million homes have their own green generation equipment. Just 270 photovoltaic systems were sold in the UK last year as against 130,000 in Germany, according to a report from the Department for Business, Enterprise and Regulatory Reform.

The Government hopes that one in three homes will install some form of renewable energy equipment in the next 12 years. If the target is met, micro-generation could produce the equivalent of five nuclear power stations.

But for that to happen, much needs to change. The Conservative Party leader David Cameron, for example, famously fell foul of planning laws when he tried to install a wind turbine last year. The Government, however, is easing restrictions so homeowners will be able to install solar panels and small turbines without planning permission.

Higher prices for selling surplus electricity to the grid will also help. In Germany, energy companies buy electricity from micro-generators at a much higher rate. This makes it far easier for householders to justify the investment. In the UK, B&Q is supporting an Energy Saving Trust study that the company believes will make it easier for homeowners to calculate the payback period for equipment such as solar panels or small wind generators.

But the fundamental barrier remains cost, especially in an environment where energy prices are falling and where households are wary of spending on home improvements. That does not seem to deter Ikea, however, not least because Josefsson is confident that her company's investment in green technologies will drive down costs dramatically. So, too, will the huge distribution potential of Ikea's network of more than 250 stores.

But the greatest savings will come from separating the cost of the solar panels from that of installation and delivery, just as Ikea has already done with kitchens and home furnishings.

"Today you buy your LCD panel through an installation company, so you don't actually see the cost of the solar panel on its own," says Josefsson. "In some markets, the installers' margins are quite high. So we see an opportunity to reduce that dramatically."

And, she hints, you might not even need an Allen key.

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