Washington, D.C. [RenewableEnergyAccess.com] World production of solar cells soared to 742 MW in 2003, a jump of 32 percent in just one year. With solar cell production growing by 27 percent annually over the past five years, cumulative world production now stands at 3,145 MW, enough to meet the electricity needs of more than a million homes. This extraordinary growth is driven to some degree by improvements in materials and technology, but primarily by market introduction programs and government incentives.World production of solar cells soared to 742 MW in 2003, a jump of 32 percent in just one year. With solar cell production growing by 27 percent annually over the past five years, cumulative world production now stands at 3,145 MW, enough to meet the electricity needs of more than a million homes. This extraordinary growth is driven to some degree by improvements in materials and technology, but primarily by market introduction programs and government incentives. The top five manufacturers of solar photovoltaic (PV) cells — Sharp, Kyocera, Shell Solar, BP Solar, and RWE Schott Solar — account for 60 percent of the market share. In 2000, the Japanese company Sharp eclipsed Kyocera (also a Japanese producer) and BP Solar to take the top position among global manufacturers. Since then, Sharp has sustained an impressive annual growth rate of 63 percent, more than twice the global rate. As a result, the company’s share of the world market has climbed to 27 percent. Japanese PV production, which accounts for 49 percent of the world total, has benefited from a variety of government incentive programs. The 70,000 Roofs Program established in 1994 initially covered 50 percent of PV installation costs. As the cost of solar cells fell with increased production, however, the subsidy was reduced to about 10 percent. By 2002, the number of residential systems installed in Japan had reached 144,000. Other useful government incentives include a budget allocation of 20.5 billion yen ($186 million) in 2003 for research and development, demonstration programs, market incentives, and net-metering. Within nine years, from 1994 to 2003, these programs helped Japan position itself as the world leader in both production and installation of solar cells. European production has also boomed. With a growth of 41 percent in 2003, PV production in Europe reached 190 MW. Despite the lack of a unified EU approach toward renewable energy, individual member states’ policies have enhanced Europe’s position in the world market. Germany is the second largest market for photovoltaics. The country positioned itself with the 100,000 Roofs Program launched in late 1998, which provided 10-year low-interest loans for PV installation. All of the program targets were met in 2003 and the country closed out the program earlier than expected. Germany now leads the way with an Electricity Feed-in Law that started in 1999, which permits most customer applications to receive 45.7 Euro cents (US 56 cents) per kWh for solar-generated electricity sold back to the grid. By the end of 2003, German installed capacity was 400 MW, well beyond the initial goal of 300 MW. The rising number of market implementation programs, as well as various regional incentive programs, provides a bright outlook for the solar industry both in Germany and in Europe as a whole. In contrast, PV production in the United States decreased by 14 percent in 2003, dropping to 104 MW. This was due to lowered production by BP Solar, the repurchasing of solar cells by Shell Solar, and the bankruptcy of Astropower, which was the second largest producer of solar cells in the United States. Furthermore, the Million Solar Roof Initiative, a national program designed to support states and local communities as they develop solar energy technologies that was launched in 1997 by President Clinton, lacks a dedicated budget, which has stymied progress. As a result, the 89 regional partnerships in this initiative reported that by the end of 2003 there were only 229,000 residential solar roofs throughout the country. State policies and programs, including tax exemptions, loan programs and grants, and renewable content requirements, have been more effective. California’s Environmental Protection Agency recently proposed a Million Solar Homes Initiative that would require half of the new homes in the state to run on solar power within 10 years, with a goal of a total of 1 million solar homes within 13 years. China may soon become an important player in this field. According to officials, the government is ready to invest $1.2 billion in solar energy development over the next five years. It also expects to have a total installed capacity of more than 300 MW by 2005. Worldwide, the solar industry is a $7-billion-a-year business, and it is expected to continue growing as solar cell manufacturing costs decrease. A residential solar energy system typically costs about $8–10 per watt of generating capacity. But government incentive programs, together with lower prices secured through volume purchases, have brought costs down to as low as $3–4 per watt (10–12? per kWh). Analysts note that for every cumulative doubling in PV production, there is a 20 percent decline in costs. With an annual average growth rate of over 30 percent since 1995, this translates into a 5 percent cost reduction per year. Rural areas in developing countries stand to benefit the most from solar energy. For the 1.7 billion people whose homes are not connected to an electrical grid, solar cells combined with storage batteries are often the cheapest source of electricity. Through microcredit programs with 30-month financing, the monthly costs of solar cells are often comparable to the cost of kerosene lamps and candles, usually the current source of light. PV systems offer high-quality electric lighting, which can enhance educational opportunities and provide access to information. A shift to solar energy also brings health benefits by allowing vaccines and other essentials to be refrigerated and by improving air quality as kerosene lamps are replaced. While the off-grid sector was the initial major market for solar cells, the grid-connected sector has grown significantly since 1996, after the implementation of the 70,000 Roofs Program in Japan. In 2003, the grid-connected sector represented 77 percent of the total market worldwide. Solar cells now supply electricity to more than 1 million homes worldwide. Further sustained growth will be possible with increased funding for research and development and with continued economic incentives. The expansion of net metering laws, together with microcredit loans and the removal of distorting fossil fuel subsidies, would allow solar energy to compete in a more equitable marketplace. At the international level, global partnerships that provide opportunities to exchange experiences and market information, such as the Global PV Industry Platform launched in June 2004 by Japan, the United States, and Europe, are expected to reinforce local measures, bringing the world closer to a post-fossil fuel age. Article reprinted with permission from the Earth Policy Institute.