PV – A Question of Scale

The PV industry happens to be the fastest growing industry in the world, with a promising chance to remain the fastest growing industry for the next 25 to 50 years. The PV industry worldwide grew at a compound annual rate of 35% during 2000-2009.

What is the cause of this enormous growth and why is it expected to continue? The reason is really quite simple. The market demand is enormous and PV has a number of unique characteristics that give it clear and significant advantages over any other source of electrical energy.

Unique Advantages of PV:

  1.  No moving parts, minimal maintenance
  2.  Safe and simple operation
  3.  High dependability, durable and long life (30+ years)
  4.  Scalable in output, from micro-watts to millions of watts (megawatts)
  5.  Silent operation
  6.  Maximum output coincident with peak utility power loads (summer time)
  7.  No emissions, no pollution
  8.  Portable, easy and fast to install anywhere
  9.  Available everywhere there is sunlight.
  10.  Ability to integrate attractively into existing and new buildings

What the PV Industry Needs

What could an industry with all these unique advantages, plus being the fastest growing industry in the world, possibly need?

The answer is quite simple. It needs to reduce its cost of production. Bottom line, it currently costs too much to produce PV cells. In order to dramatically reduce the cost, the industry must deploy next generation technologies that are scalable to larger volumes that will enable the needed cost reductions.

How could there be an industry with a product that is too expensive be the fastest growing industry in the world?

This contradiction is a result of the fact that the market is so vast, and that despite the current tremendous industry growth, it is only the beginning of the industry’s long-term growth curve. Incredible as it may sound the industry actually has the potential to grow at 30% per annum rates for decades.

Regardless of this dichotomy, long-term world demand will exceed long term supply (even at current “high” costs) and when future decreases in cost are accomplished the demand will literally soar far beyond the capabilities of current technology.

To address this coming demand surge, new next-generation technologies, capable of far greater production volumes, will be necessary; hence process scalability will be needed.

United States Electricity Market

The current U.S. electricity demand is roughly 4 trillion watts (4 Terawatts or TW) and is growing at approximately 2.5% per year. Current projections place demand somewhere between 11 TW and 18 TW by 2050.

To illustrate the tremendous potential of the PV industry and also the current and future demand-supply imbalance facing the industry let’s look at a few macro numbers.

For PV to supply only 1% of the U.S. demand in 2010, the worldwide PV production capacity would have to be 44 billion watts, which is over 20 times larger than current worldwide capacity. It is obvious that expanding the total industry capacity 20 fold in a few years is impossible, one thing for sure, we MUST set the bar a lot higher.

Note:

Megawatt (MW) = one million watts of electricity

Gigawatt (GW) = one thousand megawatts (one billion watts) of electricity

Terawatt (TW) = one thousand gigawatts (one trillion watts) of electricity

U.S. Electricity Demand 2010 vs. Current PV Industry Capacity

Percentage of Demand (2010) to be met with PV

GW of capacity needed

# Times larger than current worldwide industry capacity

 1%

    44  

     20 Times Larger

 5%

   220

    125 Times Larger

 10%

   440

     250 Times Larger

 

The above table shows the enormous potential of PV and how large worldwide PV capacity would have to be compared to current industry capacity, for PV to achieve 1%, 5% and 10% of the worldwide electricity market.

At least two points become very clear from the table above:

  1. The potential market for PV worldwide is absolutely enormous;
  2. New production technologies will be needed to produce far greater volumes at far lower prices if the industry is ever going to make a significant penetration of this huge market.

Currently 90%+ of the world’s solar cells are manufactured using silicon technology. This technology is over 50 years old and the good news is that it has done an amazing job at dramatically reducing the price of solar cells over the years. The bad news is that the price needs to decrease even more and it cannot do this without technologies that can be scaled up to produce GW and not the current industry MW.

Unless the industry develops a manufacturing technology or discovers a new breakthrough technology that is capable of cost effectively producing PV at the GW level, PV can never make a significant contribution to future electricity generation.

Importance of Development of the Next Generation of Manufacturing

In addition to the obvious huge business opportunity, there may be other factors that will necessitate the rapid development of the PV industry and a host of new next-generation clean technologies. This future increase in demand may not be able to be addressed by fossil fuel sources for a number of reasons that, for the most part may be beyond our control:

Limitations to addressing this growth via fossil fuels:

  • Peak Oil: Short term, Peak Oil is approaching, when worldwide demand will exceed supply permanently. This may cause a rapid and permanent rise in the price of oil and natural gas that will make them uneconomical at best and unavailable at worst.
  • Global Warming: Longer term, global warming may drastically limit our use of fossil fuels to generate electricity. This will be especially true of generation of electricity with coal, which currently supplies over 50% of the electricity generated in the U.S. and is a very significant contributor to carbon to our atmosphere.

Bottom Line

The future of the PV industry and how significant of a role it will play is a question of scale. We have to start thinking big and we have to start right now.

The answer is clear: we need to accelerate our development of next generation technologies, with far greater production capacity, so that we will have far lower cost of production.

There are a number of other macro and micro factors that will also be needed, which I will cover in a subsequent article. But the bottom line from a macro point of view is quite simply:

 The world needs PV technology capable of GW of PV production not MW.

J. Peter Lynch has worked, for 33 years as a Wall Street analyst, an independent equity analyst and private investor, and a merchant banker in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this area. He is currently a financial and technology consultant to a number of companies. He can be reached via e-mail at Solarjpl@aol.com. Please visit his site for the promotion of solar energy.

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I have worked, for 33 years as an independent analyst and investor in small emerging technology companies. I have been actively involved in following developments in the renewable energy sector since 1977 and am regarded as an expert in this field. I was the contributing editor for the past 17 years to the Photovoltaic Insider Report, the leading publication in Photovoltaics industry that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. I currently am a consultant to a number of technology and solar related companies. I can be reached via e-mail at: solarjpl@aol.com. Visit my website for the promotion of solar energy - www.sunseries.net

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