Issue Date: June 21, 2004
POWER FROM THE SUN
Last year, world production of photovoltaic (PV) modules took another leap forward, up 32% from 2002 and continuing the sharp growth of recent years.
Solar advocates like to point out that although it took nearly 30 years--until 1999--for the world to produce its first gigawatt (billion watts) of PV-supplied electricity, total PV production tripled in the following four years. Last year, the industry generated $5.2 billion in sales.
The annual increase in growth was highest in Japan (45%) and Europe (43%), where government programs have helped residents buy rooftop PV units. In Japan, the cost of PV-generated electricity has declined so much that it is nearly matching that of electricity from traditional nonrenewable sources.
For on-grid applications in the developed world, government subsidies are needed for PV to compete with existing power plants and an electric grid that were built and paid off years ago, usually with taxpayer support. For off-grid rural installations, PV is economical.
With scientific breakthroughs on the horizon and production costs dropping, advocates say solar energy is on the cusp of a huge expansion. Although they have been saying this for 30 years, this time they might be close to right. Advocates have big pluses in their favor, but many obstacles remain.
On the plus side, PV is clean--no air pollution, no greenhouse gas emissions, and no coal or radioactive wastes to truck across the country and bury forever. There are fewer grid failure fears because PV electricity is usually generated where used. Its generation is silent and mostly unseen, and systems can be installed in highly populated areas. Drawing on the sun means no fuel costs, so once installed, PV electricity's price is fixed for 20-plus years, the guaranteed life of the modules. And no terrorist is likely to blow up a rooftop PV module in an attempt to bring down the grid.
But without subsidies, PV-generated electricity is usually 10 times more expensive than that generated by old U.S. coal-fired plants; four times more costly than natural gas units; twice as expensive as nuclear; and three or four times more costly than wind energy, its sister renewable source. PV-generated power is also unfamiliar to most potential users; there is usually no infrastructure to ease or encourage its use; and many people would just as soon get their electricity by flipping a switch, rather than running their own power plant.
Last year's record worldwide annual growth of 700 MW of peak PV power was equal to the output of one natural-gas-fired turbine or less than half of a large coal or nuclear plant, notes Paul D. Maycock, president of PV Energy Systems. Maycock has tracked the industry for 30 years, starting at the Department of Energy back in the 1970s.
To drive the point home, Maycock adds: "Let's say you have 30 or 40% growth a year, and compounded annually, maybe in 10 years you can get [the equivalent of] 10 gas turbines a year. So maybe in the future we've got 500 gas turbines' worth of PV energy in the world, but the U.S. is installing 100 gas turbines a year right now."
PV-generated electricity "is not a panacea," he says, "but it is clean, silent, nontoxic, non-hydrocarbon based, and reliable, and it will be economical for homes and businesses around the world by 2010."
Solar's future might hinge on the price tag for global warming and whether countries such as the U.S. decide to take climate change seriously.
Also, Worldwatch Researcher Janet L. Sawin notes that two billion people in the world don't have electricity, and if the population of developing countries such as China and India begin to generate and use electricity like the U.S. does, increases in world pollution will be huge. For these reasons, Sawin, Maycock, and others argue that PV must be a key part of the world's mix of electricity sources.
Sawin singles out Japan and Germany as models for how governments should create programs to ease in PV. The U.S. federal government, she says, is a model of how not to do it.
In 1994, Japan began its "solar roofs" program to promote PV through low-interest loans, education and advertising campaigns, and residential rebates. At the time, Japan had about 31 MW of installed PV and ranked fourth in world production, she says.
The rebates started at 50% of installed costs and declined each year. Japanese utilities were also required to buy surplus power generated by PV owners at retail rates. As a result, more than 168,000 residential PV systems, generating 622 MW, were installed under the program. In 2002, utilities purchased 124 GW of surplus PV power, she says.
By the end of 2003, Japan had 887 MW of PV installed, at a growth rate of 43% annually since the early 1990s. The country aims to have 4,820 MW of PV in place by 2010, Sawin says.
The peak government investment in the program came in 2001 at $219 million; this year, it will decline to $49 million, she says. Next year, it will be phased out.
MEANWHILE, the cost of installed PV modules in Japan has dropped from between $11 to $16 per W to $5.50 per W. And the cost of PV-generated electricity in Japan, at 11 to 15 cents per kWh, is cheaper than utility-generated electricity at around 21 cents per kWh, she says.
With about half the global market, Japanese companies now are the world's largest PV manufacturers. Sharp Electronics makes most of these units and holds about 29% of the world market. Christopher O'Brien is vice president of strategy and government relations for the firm's solar division, and he thinks that when Japan ends its subsidies, Sharp will be ready.
"There is no question we will be able to sell in an unsubsidized market," he stresses. Sharp, he notes, has about 40 years' experience in solar energy, starting with satellites, communications, and off-grid systems. He estimates that the cost of a PV-generated watt of electricity has dropped over the past 20 years by a factor of eight as a result of increased efficiency and better manufacturing productivity and methods. Sharp's annual output has grown more than six times since 1999--from 30 MW to 198 MW.
Sharp's sales are mostly to the grid-connected market, he says, noting that the proportion of global sales for off-grid electrification has decreased over the years to less than 20% of the PV market.
In other words, solar's promise of bringing electricity to those 2 billion people without electricity has not been fulfilled. "The chase costs to get the business in remote, disaggregate applications are too high," O'Brien says. "They drive up the total costs."
Sharp's focus, he says, has been on increasing its investments in production and on selling commercial and residential roof applications in Germany and Japan. For its part, Germany has also made a government commitment to PV and renewables similar to that of Japan, and today its residents are the second largest PV buyers.
The U.S., however, is a whole different story. Although once first in production and installation of PV units, it is now a distant third. In explaining the difference, Maycock and Sawin say the lack of a consistent federal government policy is a big reason for the decline.
Government, Sawin says, either must create mandates for utilities to generate renewable energy and leave it to the utilities to figure out how, or must set a favorable price for renewable electricity and devise incentives to encourage the wattage to be fed into the system. Subsidies must be part of either system and should be phased out on a set, consistently administered schedule.
Unlike the U.S., which ended federal subsidies in the 1980s, Maycock says, the Japanese government never wavered. "They provided the money and went to homeowners and builders," he says, "and made it almost a national issue that you should be green. Today in Japan, a new house has 4 kW of peak PV on its roof, and it literally has a zero energy bill. The buyer doesn't see its cost. It is rolled into the mortgage.
"The only remaining question in Japan is what will happen when the subsidy ends," he says. But like O'Brien, Maycock predicts that with PV electricity cheaper than utility-generated energy in Japan, the market will easily continue to grow 25% per year, "more or less forever."
In the U.S., however, electricity is cheap by world standards. For instance, Maycock notes that the retail cost of electricity usually runs around 8.5 cents per kWh in the U.S. versus Japan's 22 cents per kWh.
Then there are the policy issues. The administration of Ronald Reagan ended the Carter administration's PV tax breaks; there were years of discussions about bringing them back, particularly in the Clinton administration. Renewable requirements were included in the recent energy bill, Maycock notes, but the bill appears to be dying a hard death over tax breaks, mostly to nuclear and fossil fuel energy generators and provisions to help makers of gasoline additives .
Into the federal void, Maycock says, have stepped states, particularly California. Of some 67 MW of PV installed in the U.S. last year, 32 MW were grid-connected residential units, and 27 MW of those were in California. The utility-run programs vary in application, but all include plans to subsidize the purchase of PV units and to buy their surplus electricity at retail rates.
Maycock notes that in California, businesses have also increased their PV activity. Coca Cola Co. and Frito-Lay Inc., for instance, recently announced plans to install units of 5 and 2 MW, respectively, in California.
INTEREST AMONG "early adopters" in California, who want to try the program, Maycock says, is so great that the annual funding for new projects usually runs out by March.
One early PV adopter is Rick Jones, a resident of New Jersey, which Maycock says has the second-best state PV program after California.
For years, Jones wanted to put a solar system on his roof, and the idea came to a head about three years ago when he and his wife, Cindy, bought a house and got married. Rather than wedding gifts, they asked friends to contribute to the "solar fund." At that time, New Jersey utilities provided a 60% or $4.00 per W rebate, which has risen to 70%, Jones adds.
"I'd seen state programs like this come and go, so I thought, 'If we are going to do solar, this may be our best opportunity.' It was a kind of a gold rush mentality."
That instability turned out not to be the case in New Jersey, but the uncertainty that has driven potential PV pioneers from trying solar drove Jones to jump in. A skilled do-it-yourselfer, Jones installed the system himself. "We kind of felt we were going out on a limb by laying out all this money and hoping we would get a rebate," he says.
But in the end, there were no hassles with the utility inspectors. In fact, they caught a few things Jones missed. Best of all, the rebate check came quickly.
He put in a 2,860-W unit, made by Siemens Solar, now Shell Solar. Jones's system is tied to the grid and sells power when he doesn't need it and draws power when the sun doesn't shine. He did not install backup batteries because of cost and maintenance, and at that time blackouts were not a particular concern.
The system cost $17,243, and Jones got a rebate check for $13,440. He pays about $6.00 a month for electricity and sometimes only $2.18 to rent the meter.
They don't use much electricity, and Jones figures it will take 14 years to pay back the $3,800 net cost to buy the system.
"There isn't much justification in terms of cost savings," he says. "But the idea of being able to make electricity just from the light that falls on your house is fascinating. I realize the coal plant is not going to notice that I am not taking my little bit of electricity and throw less coal in the boiler, but still I guess if enough people did this, it would make an impact."
Jones's system is the familiar silicon wafer module that has been in production for years. Some 89% of the modules made today are crystalline silicon cells, despite the R&D and production of more advanced systems such as thin films. Last year, about 3% of PV production was in amorphous silicon thin film.
Of the top five PV producers, two are oil companies--U.K.-based BP Solar and Netherlands-based Shell Solar. The Japanese company Sharp is number one, and another Japanese company, Kyocera Solar, is third. The German-based RWE Schott Solar is fifth.
Many of these companies have plants in the U.S., but no domestically owned company is in the top five. In the U.S. last year, PV manufacturing fell by 20%. And for the first time, U.S. PV exports declined, from 81 MW to 54 MW, according to Maycock's figures.
Looking back only to 1998, companies in the U.S. made twice as many PV modules as firms in Japan, and 73% of U.S. modules were exported. The entire world market at that time was $1 billion (C&EN, March 30, 1998, page 24). Now the market is $5.2 billion and is largely outside the U.S., both in installations and production.
Maycock attributes the change in part to rationalization of the industry, particularly decisions to make products where they are going to be used, rather than ship them from the U.S. to the rest of the world. All this may prove to be a "hiccup," he says, because several companies with facilities in the U.S. are planning new facilities and new PV products.
In particular, he points to the entry of General Electric into the PV marketplace.
In March, GE bought a small, bankrupt, U.S.-owned company, AstroPower, for $15 million. GE, with earnings of around $15 billion a year, has the capital to strongly influence the direction of the solar market, and with the purchase, the firm continues its expansion into renewable energy. GE has become one of the world's largest manufacturers and developers of wind turbines (C&EN, Feb. 24, 2003, page 27).
Maycock puts a lot of stock in production efficiency to lower the cost of PV-generated electricity. He believes if PV manufacturers increase output of a single plant beyond the current 100 MW per year to, say, 500 MW, prices will drop by 30%. "We are just reaching a point where we get enough volume in which economies of scale come into play."
So how far can solar go?
"I've got my dream," Maycock says, "although I won't live long enough to see it. If PV is fully economical, it could provide a top limit of around 10 to 15% of the world's electricity use."
Maycock adds a caveat: "We are talking 2050 for this to happen."
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