Solar Markets: A Study in Extremes

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.