by the National Renewable EnergyLaboratory predicts that the cost of concentrating solar power without subsidies can be reduced to 5.4 cents per kilowatt-hour by 2012 for troughsystems, to 4.0 cents per kilowatt-hours by 2012 for tower power systems,and to 6 cents per kilowatt-hours by 2025 for dish systems. These costs arecompetitive with those of nuclear and fossil-fuel-fired power plants.21Future of CSP. Concentrating solar power is gaining momentum dueto the comparatively low power-generation costs and the large scale ofelectricity that can be generated in remote, desert-type locations. Proponents of CSP are confident that CSP electricity generation costs can besufficiently reduced to compete head-to-head with fossil fuel without government mandates or incentives, particularly if emissions and other external environmental costs are added to the cost of fossil fuel power plants.Aside from the CSP projects mentioned above, the World Bank’s Solar Initiative is pushing CSP for developing nations with financing by the GlobalEnvironment Facility.22
SOLAR PHOTOVOLTAIC POWERThere is a perception among some that solar photovoltaic power (solar PV)is “not ready for prime time” because it is not powerful enough or because
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it will always be too expensive. The U.S. Department of Energy notes, however, that a single 100 square-mile solar park in the Nevada desert could satisfy the entire United States with its power needs using even low-efficiency(10 percent) solar modules.23Regarding the cost of solar PV power, there is no denying that solarpower is still relatively expensive. However, a huge amount of researchand development capital is being spent on finding ways to slash the costof solar PV. The cost of solar PV has historically fallen by about 5 percentper year and one leading solar research firm has found that solar PV isalready competitive with retail electricity pricing in 10 percent of the developed world and will be competitive in 50 percent of the developed worldby 2020 (more on this later). The world’s largest vertically integrated solarPV company, Renewable Energy Corp of Norway (Oslo: REC NO), has aclearly defined technology roadmap for cutting the cost of solar power by50 percent by 2010 and has identified further solar cost savings beyond the2010 roadmap. The global solar PV industry is already in the mass production stage with global sales of $15.6 billion in 2006, according to CleanEdgeLLC.24
Advantages and Disadvantages of SolarPV PowerAdvantagesr No greenhouse gas emissions, which means solar PV is carbon neutral. Solar PV electricity satisfies government-imposed renewable energy mandates placed on power utilities around the world. Solar PVbenefits from numerous government subsidies around the world.r Produces no waste byproducts.r Equipment typically lasts 25 to 30 years with virtually no maintenance.r Uses free fuel (sun) and provides energy independence from foreignsources of fuel.r User-installed solar systems provide distributed electricity to theowner and protect the owner from grid problems such as blackouts,brownouts, and electricity price hikes.r Generates electricity even on cloudy days and works even in northernclimates.r Generates electricity during the day when electricity is the most expensive, thus avoiding highest electricity generation costs and shavingthe peak for utilities.r Falling solar power costs (5 percent per year on average) have alreadymade solar power competitive with retail electricity prices in some areas of the world (e.g., Japan).
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r Uses the same silicon wafers that are used by the semiconductor industry, which means the two industries share R&D knowledge baseand investment.r Already in the mass production stage and the industry is spending largeamounts of capital on R&D efforts.Disadvantagesr Provides electricity only during the day. For power at night, the systemmust have an ancillary power storage system, or the system owner candraw power from the grid.r Remains expensive at present and is competitive with existing gridelectricity in most areas only after the inclusion of government incentives and rebates.r Presents a large up-front cash cost, although financing of solar equipment is becoming more available.
How Does Solar PV Work?Solar cells create electricity by using sunlight to create the flow of electrons between negatively and positively charged layers of semiconductormaterials. Electrical contacts are applied to the solar cell, usually throughscreen printing, in order to collect and transport the electricity from thecell to an output contact (see Figure 5.6 for a photo of a silicon solar cell).
FIGURE 5.6 Silicon solar cellSource: U.S. Department of Energy.
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SunlightAntireflection coatingTransparent adhesiveCover glass
Front contact
Current
Substraten-Type semiconductorp-Type semiconductor
Back contact
FIGURE 5.7 Solar Module SchematicSource: U.S. Department of Energy, Oﬃce of Energy Eﬃciency and Renewable Energy,“Solar Cell Materials,” http://www.eere.energy.gov/solar/solar cell materials.html.
The solar cells are then assembled into a solar panel or module. Asseen in Figure 5.7, the elements of a solar module typically involve a backing plate (substrate), the semiconductor layers, an antireflection coating toimprove sunlight absorption, and an aluminum frame box and a glass coverto protect the entire module. Solar modules can be manufactured withoutsolar cells by directly coating a substrate with a thin film of semiconductormaterial, which is then referred to as “thin film solar” (more on thin filmsolar later).The solar modules are then typically combined in an overall systemthat is placed on a roof or supporting structure, as seen in Figure 5.8. The
FIGURE 5.8 Solar Module System: Supplying Power to PentagonSource: U.S. Department of Energy.
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FIGURE 5.9 PV Value Chain SchematicSource: Renewable Energy Corp. “Analyst Field Trip – presentation material,” 28March 2007. http://hugin.info/136555/R/1115224/203491.pdf]
support structure can have a tracking system that slowly turns the solarmodules to directly face the sun in order to obtain the strongest possiblesunlight. Also, the system can be constructed so that the sun’s energy isconcentrated by various methods onto the PV cell/module, which is thenreferred to as “concentrating photovoltaic” power. A power inverter is typically used to convert the direct current from the solar system into thealternating current that is typically used by the grid and by most electronicdevices. A power storage system (e.g. batteries) can be added to the overallsystem that can be charged during the day and then provide a continuousflow of electricity from the system at night when there is no sunlight.
Solar PV Production Process and Value ChainThe crystalline solar cell industry involves a value chain that begins at aquartz mine and ends with the final product—a solar power system installed at a customer site. It is important to recognize the different stages ofthe value chain and the stage in which a particular solar company operates.The main stages of the value chain at which solar companies operate are(1) polysilicon (2) wafers, (3) solar cells, (4) solar modules and (5) systemintegration and installation. There are also companies that sell the production line equipment that solar PV manufacturers use to produce wafers,cells, and modules.
r Metallurgical silicon. The silicon PV value chain starts at a quartz minewhere a mining company digs quartz out of the ground. Quartz is silicon dioxide (SiO2 ), which means there are two molecules of oxygenattached to each molecule of silicon. Silicon is the second most plentiful element contained in the earth’s crust (after oxygen) and makesup more than 25 percent of the earth’s crust by mass, according to theU.S. Geological Service.25The mining company then places the mined quartz through a refining process that removes impurities and produces metallurgicalgrade silicon (MGS) flakes with 98 percent silicon purity. Metallurgical
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silicon (MGS) in 2006 cost about 77 cents per pound ($1.70/kg), according to the U.S. Geological Service.26 The main users of metallurgical silicon are the producers of aluminum/aluminum alloys and thechemical industry. The polysilicon producers that supply the solar andsemiconductor industries account for only a few percent of overallmetallurgical silicon demand. The supply of mining output of metallurgical silicon is plentiful and is not in short supply despite the sharpincrease in demand from the solar polysilicon industry.r Polysilicon. A polysilicon company takes the metallurgical silicon(MGS) and then processes it into pure silicon, typically through theSiemens process. That process involves transforming the metallurgical silicon into either trichlorosilane (TCS or HSiCl3 ) or monosilanegas (SiH4 ) and then using the gas to grow pure silicon crystallinerods in a pressure reactor. Polysilicon is virtually 100 percent purewith any impurities measured in parts per billion. The polysilicon output is usually in the form of long rods, but newer production techniques (e.g., fluidized bed reactors) can produce polysilicon in granularform.r Silicon wafers. The polysilicon is then melted down in a crucible andis allowed to solidify into an ingot block. The two main techniques forcreating the ingot are Czochralski (CZ) and float-zone (FZ). In the process of melting down the polysilicon, solar-grade silicon is typicallymixed (or “doped” in industry parlance) with small amounts of boronto improve the material’s electrical properties. The solid ingots arethen cut into very thin wafers with a thickness of only 200 to 280 microns (about one-fifth of a millimeter) using high-precision wire saws.Depending on the solidification technique, the resulting silicon ingotcan be either monocrystalline or multicrystalline silicon. There is a different method for creating wafers called the “string ribbon” techniquewhich involves drawing strings through the molten polysilicon to create a solar wafer immediately, thus skipping the process of creating aningot and sawing it into wafer slices.r Solar cells. In the solar cell manufacturing process, the solar cells aretypically created by etching the wafer surface, applying a dopiant ontothe front side of the wafer to set up the electrical transmission process,applying a thin layer of antireflective material on the front of the waferto increase sunlight absorption, and then applying electrical contactsthrough screen-printing.r Solar modules. The solar cells are then placed in a frame under tempered glass and are electrically connected to each other through junction boxes. The typical solar module has a life cycle of more than 25years and requires virtually no maintenance since rain is usually sufficient to keep the module surface clean.
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r Solar systems. At a site location, the modules are connected togetherinto an array and are installed on top of a building or on a support structure. As mentioned earlier, the power generated from a solar PV systemis direct current (DC), so an inverter may be necessary to convert theDC power into alternating current (AC), depending on the power requirements. The solar system may also use a battery system to storethe power for continuous output during night time.
Solar PV Target MarketsThe primary target market for solar PV power is for installation at homesand commercial buildings. Typically, the system power range is 2 to 10kilowatt-hour systems for homes, and 10 to 100 kilowatt-hour systems foroffice buildings and schools. Solar power equipment has a large up-frontcapital cost but the equipment typically lasts 25 to 30 years with little orno maintenance. The benefit for homeowners and businesses is that afterthe up-front capital cost for the equipment, there is no additional cost forthe electricity produced by the solar power equipment over the life of theequipment. In addition, the solar PV system owner gains protection fromelectricity price hikes from the local utility company. Solar power is a distributed means of power generation that allows a homeowner or businessto become independent, to some extent at least, from the local grid-basedutility.Solar power is particularly attractive in developing countries forvillage-scale electricity generation plants in remote areas. China, for example, has an active electrical rural electrification program. Solar powerprovides an ideal power generation source for remote areas since it requires no fuel and little maintenance. Fossil fuel power plants in remoteareas, by contrast, can be expensive because of the need to transport largeamounts of coal, diesel fuel, or natural gas to the plant.Solar power is also attractive for instrumentation devices in remoteoff-grid locations where it is too expensive or even impossible to run powerlines. Such remote locations include (1) microwave repeater stations; (2)TV/radio towers; (3) remote sensors such as pipelines, well heads, andbridges; (4) remote water pumps; and (5) transportation signaling devicessuch as marine buoys, lighthouses, aircraft warning lights, and road transportation warning lights. The ultimate “remote location” is space, wheresolar power has been used for many years.Another important target market is the solar PV park, which involvesinstalling many solar modules on multiple acres of land to provide an overall system that is large enough to provide electricity to the grid. Solar parksare popping up all around the world, largely because of renewable energymandates and feed-in tariffs. Government feed-in tariffs set the long-term
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price for the electricity that the solar park can sell to the local utility, thusguaranteeing the investor group or company an adequate return on theproject.Solar parks typically produce electricity on the scale of 10-50megawatts, which is the size of a very small traditional power plant andis enough to power 3,000–14,000 homes. The Bavaria Solarpark in Germany, for example, is a 10-megawatt complex that covers 63 acres anduses 56,600 PV panels. In another example, First Solar (Nasdaq: FSLR) isproviding its solar modules for the Waldpolenze Solar Park in Germany,which is a 40-megawatt solar park that will use 550,000 thin-film solar modules. The Waldpolenze Solar Park solar park will cost 130 million eurosto build and is scheduled for completion by the end of 2009. Contributorsto Wikipedia are keeping a current list of the world’s largest solar parks,which is a good way to keep tabs on the most recent solar park projects(see en.wikipedia.org/wiki/photovoltaic power stations).Research is currently being done on the feasibility of constructing huge100-megawatt to 4-gigawatt solar parks in desert areas with high sun energy, which are called very large scale photovoltaic power generation(VLS-PV) systems. These facilities would use the same solar PV technologies that are in use by today’s solar parks, but the difference is that theseVLS-PV systems would be much larger and would be located in remotedesert-type locations where there is intense sunlight and no land constraints or NIMBY (“not in my backyard”) objections. One problem withplacing these large solar parks in desert locations would be that long powertransmission lines would have to be built to transport the electricity fromthe plant to the cities and towns where the electricity is needed. The maintreatise on VLS-PV systems is Energy from the Desert: Practical Proposalsfor Very Large Scale Photovoltaic Systems.27 The study looks at the possibility of placing huge solar parks in remote desert areas of the world suchas the Gobi Desert in Mongolia, Dunhuang in China, the Mediterranean, theMiddle East, and Australia.
Solar PV Demand: $4 Trillion in New ElectricityGeneration Assets Needed by 2030The world will need a huge amount of investment in new electricity generation in the coming decades. The International Energy Agency (IEA) estimates that from 2001 through 2030 new power generation capacity of 4,700gigawatts will be built worldwide, which is equivalent to 9,400 mediumsized 500-megawatt power plants.28 This investment will total about $4 trillion in the period through 2030. The IEA says that about one-third of thenew capacity will be built in developing Asia.In addition to new capacity, the IEA forecasts that over one-third ofcurrent total electricity generating capacity in the OECD nations will need
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to be replaced because of aging facilities. The IEA forecasts that OECDcountries will also require more than 2,000 gigawatts of new generatingcapacity, which is equivalent to 4,000 medium-sized 500-megawatt powerplants.The IEA in its power generation forecast (which was made back in2003, with no recent update) said that the bulk of the new investment inpower plants would be in coal and natural gas fired plants. However, withthe increasing global restrictions on greenhouse gas emissions and withthe cost of solar and wind power dropping, solar and wind power are likelyto take a larger role in meeting more electricity demand than the IEA originally forecasted.The implication of this huge demand for new electricity generating capacity is that there is a big opportunity for solar power to supply a significant portion of this new capacity. Solar power currently accounts for lessthan 0.1 percent of world electricity production according to the International Energy Agency.29 In the United States, solar PV power capacity in2005 was a negligible 0.44 gigawatts, which was only 0.04 percent of U.S.peak electrical power generation of about 1,000 gigawatts according to theSolar America Initiative.30Total installed U.S. solar power generation capacity could increase by30 percent per year but solar power would still account for only 1 percentof total U.S. power generation by 2017, 2.4 percent by 2020, and 9 percentby 2025, as mentioned earlier in Chapter 4. Similar figures apply on a globalscale. This illustrates the large amount of room on the upside for growthin the global solar industry, particularly given the attractive attributes ofsolar power relative to the traditional power generation methods of coal,natural gas and nuclear.
SOLAR POWER INDUSTRY GROWTH RATESThe world solar PV cell market grew at an annual rate of 45.5 percentfrom 2001 through 2006 according to a key solar industry publication, PVNews.31 The same publication reports that the solar PV cell productionshowed year-on-year growth of 41 percent in 2006.32 Demand for solarmodules currently far outstrips supply, meaning that solar module producers (and producers along the entire PV value chain) can easily sell as muchproduct as they can produce.Figure 5.10 illustrates the growth in global annual solar PV cell production since 2000. In the five years from 2001 through 2006, Europe showedannual solar PV cell production growth of +40 percent, Japan +15 percent,United States +46 percent, and rest of world, which is mainly China, +56percent. The “rest of world” production soared by +121 percent year-onyear in the single year of 2006, leading the regional year-on-year growth
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3World
Gigawatts
2
1JapanEuropeROWUS02000
2001
2002
World Production
2003US
Japan
2004
2005
2006
Europe
Rest of World
FIGURE 5.10 World Annual Solar PV Cell ProductionSource: “23rd Annual Data Collection—Final,” PV News, April 2007, p. 8, PrometheusInstitute, Cambridge MA, http://www.prometheus.org/.
rates in 2006 of +42 percent in Europe, +31 percent in the United States,and +11 percent in Japan.Looking ahead, global solar module production appears set to showextremely strong growth near 50 percent per year from 2006 through 2010.That suggests the solar PV industry will more than quintuple in size from2006 to 2010. PV News is forecasting compounded annual module growthof +53 percent in the 2006–2010 period, from 2.1 gigawatts of module production in 2006 to 11.3 gigawatts in 2010, as seen in Figure 5.11.Photon Consulting, in its Solar Annual 2006 report released in September 2006, forecasted 2010 solar PV module production at 10.4 gigawatts,122010 PV News Forecast: 11.3 GW9Gigawatts
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2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
FIGURE 5.11 Global Solar PV Module Production ForecastSource: “Supply and Demand Reconciliation,” PV News, Prometheus Institute, August2007, p. 7-8, Prometheus Institute, Cambridge MA, http://www.prometheus.org/.
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which is just moderately below PV News’ forecast of 11.3 gigawatts33 Photon Consulting forecasts that revenues from the solar sector will more thantriple from $19 billion in 2006 to $72 billion by 2010.34 Photon Consultingexpects pre-tax margins for the industry to remain strong in the 33 to 38percent area in 2007 to 2010, with the pre-tax profit pool more than quadrupling from $5.7 billion in 2006 to $27.2 billion by 2010.35
DEMAND GENERATED BY GOVERNMENTINCENTIVES AND REGULATIONGrowth in the solar industry in the past 10 years has been driven mainlyby demand in Germany and Japan. Germany and Japan currently have thelargest global demand share for new solar installations at 55 percent forGermany and 17 percent for Japan.36 The United States had a global PVdemand share of only 8 percent in 2006. Figure 5.12 shows that PV News isprojecting a pickup in United States/Canada demand share to 26 percent in2010, with Europe still the biggest market by far at 51 percent, Asia at 20percent, and Rest of World at 3 percent.37Solar PV growth in both Germany and Japan has been driven by aggressive government support programs. Germany began a 1,000 Rooftop program in 1990, which gave a start to solar PV demand. German solar powergrowth then skyrocketed when the German government implemented the100,000 Rooftop program in 1999 and the Feed-In Tariff law in 2000.Germany’s feed-in tariff offered a guaranteed €0.50 per kilowatt-hour for
Rest of World3%U.S./Canada26%
Europe51%
Asia20%
FIGURE 5.12 Regional Solar PV Demand Share in 2010Source: “PV Market Demand through 2010,” PV News, July 2007, pp. 5-7, Promethesus Institute, Cambridge, MA, www.prometheus.org.
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20 years for electricity fed into the utility grid. The feed-in tariff’s guaranteed price falls by 5 percent per year for new projects brought on line toensure that the solar power providers are receiving benefits only if solarequipment costs fall 5 percent per year, as targeted by the industry.Japan’s 70,000 Roofs program provided a 50 percent cash subsidy for 3to 4-kilowatt grid-connected residential systems. The program succeededin growing the Japanese market from 500 to 100,000 solar PV systems over10 years. Japan’s program gradually phased out subsidies and solar PV inJapan is currently competitive with utility electric prices in many areasbecause of the high retail electricity prices in Japan.Solar PV growth is now picking up quickly in countries other thanGermany and Japan. Solar PV growth is now strong in Spain (+200 percent in 2006), other European countries (Italy, Greece, Portugal, France,and Belgium), and the United States (+33 percent in 2006). California andNew Jersey have been the main areas of growth in the United States. California on January 1, 2007, started its $3 billion California Solar Initiativeprogram (www.gosolarcalifornia.ca.gov). The California program aims tohave at least 3 gigawatts of solar power installed by 2017. Other states inthe United States are also ramping up incentive packages for solar powersuch as Arizona, New Mexico, Florida and Hawaii. A full list of U.S. state renewable energy incentives is available at the Database of State Incentivesfor Renewable Energy (www.dsireusa.org).At the federal level, there is a commercial and residential investmenttax credit (ITC) of 30 percent (no cap for commercial but residentialcapped at $2,000) for fuel cells and solar power systems that are installedbefore December 31, 2008. The solar power industry is currently lobbying for passage of the Securing America’s Energy Independence Act (H.R.550/S. 590), which would extend the solar investment tax credit for eightyears.China’s State Electricity Regulatory Commission is expected to releasea detailed feed-in tariff and incentive program for solar and wind energy bythe end of 2007, which should lead to even faster solar growth in China incoming years. The feed-in tariff represents the implementation of China’slarger goal of obtaining 10 percent of its power from renewable powersources by 2010 and 20 percent by 2020. China’s Sustainable Energy Programme has mentioned a goal of 450 megawatts of solar power by 2010 andup to 8 gigawatts by 2020, which would create a huge source of demand forthe global solar industry.Table 5.1 provides a list of financial incentives for solar PV in theUnited States, the length of which illustrates the strong and increasing support that is being given to solar PV in the United States. Table 5.2 providesa list of solar PV incentive programs in Europe, which illustrates the extent of government support in Europe for solar PV. The list of worldwide
ResidentialCommercialResidential/CommercialResidential/CommercialResidential/CommercialResidential/Commercial
Residential/CommercialResidentialCommercialResidential/CommercialResidentialCommercialResidential/Commercial
U.S. Federal
ConnecticutFlorida
Nevada
$5.00/watt$4.00/watt$4.00/watt35% personal tax credit$2.00/watt$2.00/watt$3.00/watt
30% Tax Credit30% Tax Credit$2.00–2.50/watt$2.50/watt$0.39/kWh for 5 years$4.50/watt
Financial Incentives
Up to $20,000Up to $100,000
(Continues )
Xcel Energy; $2/watt + RECpayment of $2.50/watt<10MW
Limited to certain utilities
$2,000 max
Details
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AllAllAll<100kW>100kWAll
System Size
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Colorado
ArizonaCalifornia
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TABLE 5.1 U.S. Federal and State Solar PV Incentives
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94Residential/CommercialResidential/CommercialResidential
TexasWashingtonWyoming
AllAllAll
$4.50/watt$0.15/kWhLesser of $3,000 or 50%
$4.00/watt
Source: “Smart Regulation Speeds Growth,” PV News, November 2006, p. 3–5, Prometheus Institute, Cambridge, MA, www.prometheus.org.
Residential
Pennsylvania
$1.00–1.25/watt
Only for PG&E or Paciﬁc PowercustomersOnly for PG&E or Paciﬁc PowercustomersUp to $20,000; $1 kWh up to$5,000 after ﬁrst $20,000Austin Energy only
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All
Commercial
$3.80/watt$2.75/watt$2.50/watt$2.25/watt$2.00/watt$4.00–4.50/watt$2.00–2.25/watt
Financial Incentives
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New YorkOregon
0–10kW10–40kW40–100kW100–500kW500–700kW<50kWAll
Residential/CommercialResidential/CommercialResidential/CommercialResidential/CommercialResidential