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Solar Markets: A Study in Extremes

The world is using more and more solar energy; of that there is no doubt. But solar comes in many sizes and shapes. Which will prevail in the coming five or 10 years?

This is a legitimate question because today’s solar industry is a study in extremes. Massive concentrating solar plants give deserts a futuristic feel and promise thousands of megawatts to power cities. At the same time, tiny photovoltaic cells installed in clothing provide just enough energy for a person’s mobile phone. And, despite the dazzle of these technologies, old-fashioned rooftop solar continues to be the industry mainstay.

With its ability to produce useful energy on both a small and large scale, solar holds an enviable position in the renewable energy market. We can’t walk around holding windmills to charge our iPods, nor do we build biomass plants in our backyards to warm our swimming pools. Solar, on the other hand, permeates our electricity system from gadget through grid-scale.

"In the electricity business, we see some practical constraints pushing solar power into several niche sizes. We expect the market to offer ever more specialised products that focus their benefits on these size ranges," says Michael Gorton, CEO of Texas-based Principal Solar, a holding company that acquires, finances, develops and manages solar companies.

As the niches sort themselves out, one thing is clear. The world likes photovoltaics. The PV industry has experienced nothing short of a spectacular rise in recent years, even as the economy sputtered. PV installations increased 16-fold worldwide from 2005 to 2011, according to Photon Consulting, publisher of the report True Cost of Solar Power: The Pressure’s On.

In Europe, Germany, Spain and Italy have led the way. Germany alone is expected to have 25 GW installed by the end of this year, which is equal to 15%-20 percent of its electric capacity and about 30% of peak load, according to the Massachusetts-based research firm.

Les Mees solar park in France spreads across 15 ha, joining several nearby plants for a total array producing around 100 MW (Source: Boris Horvat/Getty Images)

Meanwhile, the US appears to be the next big frontier for PV. Many in the industry forecast that it will be "the largest market in the world within a few years," according to a second quarter 2011 report by the Solar Energy Industries Association (SEIA) and GTM Energy. The US installed 887 MW of PV in 2010, a 104 percent leap since 2009. Rapid growth continued in 2011 with the second quarter pace 69 percent ahead of the same period in 2010. Total US PV solar installations hit 2.7 GW.

Not everyone agrees on exactly what’s ahead for the various sizes and types of solar. Two types – distributed generation and utility-scale projects – face some of the greatest market rivalry. Distributed generation tends to be placed on the roofs of homes and businesses, while utility-scale projects are often built on the ground. And, while rooftop solar predominantly feeds power to a building, utility-scale projects tend to serve the larger electric grid. Rooftop systems, of course, produce less energy.

Why the market rivalry? Barry Cinnamon, CEO of Westinghouse Solar, points out that utilities clearly benefit from one form and not the other. Utility-scale projects boost the utility’s bottom line, add to the rate base and increase the amount of generation utilities have available for sale to customers. Smaller, distributed systems on rooftops, on the other hand, have the opposite effect. After homeowners install rooftop solar, they buy less power from the utility. The building owner, or a third-party private partner, owns the mini power plant, not the utility.

"All solar is good but there is a little bit of conflict between those two models," Cinnamon says. "It is a zero-sum game. You save [utility] electricity by installing solar on your roof; you don’t buy it from the utility."

Solar on the Roof

Despite some utility resistance to rooftop solar, it continues to grow in popularity. California, for example, reported a 47 percent rise in rooftop solar in 2010 and is on track for another record-setting year in 2011. In Germany small distributed capacity, most of it solar, increased 132 percent last year. Italy, France and the Czech Republic also saw dramatic growth. China is pushing for 3 GW of rooftop solar by 2015.

PvXchange is well positioned to monitor international solar trends. The Berlin-based brokerage and online trading platform connects 7,500 buyers and sellers of solar components. Founded in 2004, the company trades solar modules, inverters and complete systems. "In Europe, especially Italy and Germany, the vast majority of installations and total capacity is in commercial distributed generation," says Elliott Gansner, PvXchange’s general manager for North America.

Rooftop solar, especially systems of 100 kW or less, make up the preponderance of installations in Germany, Gansner says. In the early part of the last decade, Germany focused mostly on residential development. Then, once the solar market "found its feet and started growing" more ground-mounted solar systems were built, many in the form of large projects — utility-scale systems that feed the grid, rather than distributed generation. "And for a while there was quite bit of that. But quickly in Germany you saw a move away from that and back to rooftop," he says. "In fact, the German feed-in tariff does not offer any incentives for ground mount. I think Germany realises there is a lot more value in solar when you do not cover a wheat field with it."

Gansner adds that he expects the U.S. to follow a pattern similar to Germany’s. ‘I think for the next two years or so in the U.S. we will see a big boom in utility-scale applications. In a way, that is good. It will mature the industry here and get the installed value of the U.S. up, which we need to do. But I think you will see the same shift over time to distributed generation.’

What’s driving today’s push for utility scale solar in the U.S.? The federal government in 2008 began letting utilities earn a 30 percent federal tax credit, which they had previously been denied. In addition, U.S. utilities are increasingly building large power projects, or at least contracting with them, in states with aggressive renewable portfolio standards — requirements that a percentage of power come from green energy by specific dates. Utilities are typically held accountable by state regulators for meeting these goals; building large projects ensures they will do so.

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In addition, liberalised states are increasingly easing rules that prohibit utilities from building and owning generating plants, at least when it comes to renewable energy. Massachusetts, for example, passed a law in 2008 that lets utilities now own and operate up to 50 MW of solar. In June 2011 Connecticut passed a similar exception to its liberalisation rules, and now lets utilities own up to 30 MW of renewable generation.

So with this kind of motivation for utilities, why do Gansner and other believe that distributed generation will ultimately win out over utility-scale projects?

When it comes to solar energy, economies of scale tend to emerge in a somewhat counterintuitive fashion. We think that one large entity offers greater efficiency than many small ones; that is, a centralized power plant delivers energy most cost-effectively. That’s a notion we need to abandon, according to Gansner. "It is something that utilities need to realize — that we don’t need to produce electricity at giant centralised locations, and it’s actually not the best way to do it," he says.

When it comes to solar, distributed generation offers the greatest efficiency, Gansner says. Not only does it avert the need for new transmission lines, but also offers an easy way to install many small power plants, one that bypasses the hassle of regulatory approval and permitting found in large power plant construction. "Solar distributed generation is an ideal technology for modular application. It is easy to install lots of small systems. The technology is just a box that produces electricity."

Further, the costs to manufacture "the box" fell dramatically over the last couple of years, and are still falling, driving down distribution generation costs. Photon Consulting sees the price of a PV module averaging out globally to be about US$1.50/watt this year, and dropping as low as $1/watt next year.

Installation Innovation

With panel prices dropping, the industry is now setting its sights on lowering the cost of installing panels, and several new technologies and techniques are emerging. For example, Westinghouse Solar offers panels that the company says require 80 percent fewer parts than conventional solar systems. Racking and mounting and grounding components are built into the panels, rather than installed separately on the rooftop. "These innovations in installation have a bigger positive impact on the smaller systems because that is where you have proportionally more money being spent on labour rather than equipment," Cinnamon says.

 Zep Solar, with offices in Germany and the US, also offers technology designed to reduce installation costs. Zep does away with the aluminium rails used as mounting blocks for conventional solar panels and instead offers a trackless approach for both distributed generation and utility-scale projects.

Gadgets with the "wow" factor are ambassadors for solar energy (Source: Gizmodo)

"The first step for ground-mount or roof installations, almost without exception, is placement of long sets of aluminium rails. This consumes a lot of time and natural resources," says Mike Miskovsky, Zep’s chief executive officer.

Zep says that its system, which uses panels that mount by way of a built-in groove, cuts residential installation costs by 30 – 50 U.S. cents/watt and speeds installation time by a factor of five. Such rail-free systems eliminate the time spent on installation, but also cut the costs of shipping the aluminum rails, say proponents of the approach.

Other companies are foregoing the traditional solar panel and integrating solar directly into elements of the building, such as rooftop shingles, or in the case of Australia-based Dyesol, windows.

The company’s work is centred around dye sensitive solar products, which take advantage of what Dyesol describes as "artificial photosynthesis," the use of an electrolyte — in this case a layer of titania (a pigment used in white paints and tooth paste) and ruthenium dye sandwiched between glass. Light strikes the dye and excites electrons that are absorbed by the titania to become an electric current many times stronger than that found in organic photosynthesis.

Dyesol, which expects to see the integration of its technology into buildings in the 2013-15 timeframe, says it can produce electricity at a lower cost than a conventional PV panel. Moreover, the dye sensitive cells are effective indoors, outdoors, in sunlight or in shade. The product works on glass or metal that can be directly incorporated into a common part of a building. Dyesol treated windows, for example, can replace conventional glass windows. Since the product works in daylight or artificial light, the outside facing window can produce electricity by day while the inside facing window produces it at night, making it an excellent technology for stores, warehouses and large residential buildings, says Marc Thomas, president of Dyesol North America. "The building already has to have the glass or metal. So overall the cost will be lower than any type of added-on product. We believe this technology will produce power at the grid parity level," Thomas says.

What’s the technology’s limit? A building owner is unlikely to take on the expense of replacing windows just for the sake of using the dye technology, so its market is confined to new buildings or those that need window replacement. Still, Thomas sees the technology becoming strong and prevalent in the marketplace in the next five to 10 years as building owners become increasingly concerned about utility costs and energy self-sufficiency, a trend he says will spur distributed generation overall.

Very Big and Very Small

When it comes to size, gadgets and concentrating power plants represent the two extremes. Both enjoy a certain "wow" factor not shared by rooftop solar, which we are accustomed to seeing.

Mammoth concentrating solar thermal, or CSP, projects can rival nuclear or fossil fuelled plants in size. About 20,000 MW of CSP is under development worldwide, according to the GTM Research report Concentrating Solar Power 2011: Technology, Costs and Markets. Many are planned for the US southwestern states, which offer near ideal conditions for the technology. Spain is the other hot spot for CSP. Projects also are in the works elsewhere in Europe, China, Africa, Australia and the Middle East.

Lately, however, CSP faces a rival in PV, as its prices fall. Several power developers recently scrapped plans to build CSP and switched to large-scale PV. One of the biggest blows came when Solar Trust of America announced in August that it plans to build the first 500-MW phase of its California flagship plant, the 1,000 MW Blythe Solar Power Project, as PV rather than the planned CSP.

"We expect the market to offer ever-more specialised products" - Unicore

The announcement sent a "tremor" through the US CSP sector, according to a note by IHS Emerging Energy Research. It’s clear that thermal and PV technologies are increasingly squaring off in a solar-on-solar competition in the U.S. southwest, says IHS, adding, "As long as undemonstrated CSP technology solutions remain on the drafting table, the CSP sector will increasingly struggle in direct competition and will be forced to seek out hybrid thermal solutions and other markets."

But CSP does have an advantage over its intermittent PV rival — it offers grid stability. For that reason Solar Trust of America still sees a future in CSP, and intends to retain the technology in its portfolio, according to Uwe T. Schmidt, company chairman and CEO. "As the PV base in North America grows, the grid stabilising characteristics of CSP will be recognised and rewarded," he says.

Meanwhile, as large PV and solar thermal square off to serve large loads, mini-solar carves out a unique niche at the other end of the spectrum, catering to our gadget hungry world. These products range from calculators with embedded solar cell chargers to bathing suits made with PV film strips, conductive thread and USB ports.

Chasing the Pig

New York City-based Voltaic Systems serves this market with a solar charger that doubles as a backpack. The business emerged in 2005 after founder Shayne McQuade came upon a portable solar charger that he was able to fold into his backpack. He liked the idea of carrying the charger around on his back, but found it offered too little power. So he set out to create his own version.

"It was more a project than a business a first," says Jeff Crystal, chief operating officer. "Neither of us had a background in solar or consumer products, but we are both interested in sustainable design and keeping people powered up on the go."

Both Crystal and McQuade had helped launch high tech start-ups before and used their know-how to get Voltaic Systems underway. Their four- to eight-watt bags, which range in cost from $100 to $500, charge cell phones, cameras, iPods, Kindles, iPads, laptops and other popular devices. The product is gaining a worldwide following and the company now has a warehouse in Europe, according to Crystal. Solar Voltaics does not divulge its earnings publicly, but Crystal characterises business sales as modest but profitable. "We made it through 2008," he jokes.

The "wow" factor sells the product now, with people in New York City stopping backpack wearers on the street to inquire about them. For some, the product represents their first face-to-face encounter with PV. "We are ambassadors for solar energy," Crystal says.

While the product has a certain gimmicky appeal now, the company is positioning to tackle serious concerns. Solar Voltaics is eyeing parts of the developing world that lack reliable electricity or any electricity at all, and hopes to develop products for those living on $5 per day. To that end, in 2012 the company plans to introduce solar charging lights that are waterproof and portable.

The idea is to make the LED lights more economic than kerosene or diesel, which are more commonly used in the developing world. The charger would be on a permanent mount, but the light could be dislodged for quick use as a flashlight. The company sees this portability as an advantage for agricultural or rural households.

Crystal quips that the company is designing for ‘the chasing the pig scenario’. He explains: "If you have to go outside and chase the pig at night you can see your way."

While gadget solar is important to those who need to chase the pig or charge their cell phone on the beach, it’s unlikely to bring in the same kind of revenue – or have the impact on the world’s electricity grid — as utility-scale projects or distributed generation, say industry observers.

 "It is cute. It is clever. It creates a nice awareness, but I don’t think it will have a big impact on the mainstream solar market," Cinnamon says.

So far now, it appears that PV as distributed generation, the kind found on the roofs of homes and businesses, will continue to be the bedrock of the solar industry. CSP and gadget solar will carve their niches. And together these various technologies will reach into all corners of world. Where there is light — the rooftop, the desert, the city street, the rural output — there will be solar.

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