Solar Power Seeks a Place in the Sun

Why do we burn oil and split the atom at great risk to the planet when enough clean solar energy to power the world for 27 years falls from the sky every day? Three reasons really: 1. A daytime-only motor car with a roof the size of a swimming pool has limited market potential. 2. Static solar power costs many times more to generate than traditional grid sources. 3. The populations of areas with no access to electricity grids – solar power’s most obvious market – are poor.

(condensed from Reuters, Dec 14) Major obstacles perhaps. But power generation and transport together consume just 41 percent of total world primary energy supply, according to the International Energy Agency (IEA). Meanwhile the developing regions that offer most of the “off grid” solar opportunities may be poor, but the IEA says they will account for 68 percent of a projected 57 percent increase in energy demand between 1997 and 2020. Photovoltaic (PV) technology – the generation of electric power from the sun’s rays – is the solar industry’s driving force, having left behind direct solar heating panels as a niche market for warmer countries. PV cells are made from layers of semiconductor materials such as silicon, producing an electric current when photon light particles hit them. Cloud cover reduces their efficiency, but on a “bright overcast” day a PV panel will generate 50-70 percent of capacity. There is one big drag – the manufacturing process remains complicated and expensive. “I think the industry is still maturing in that much of it is still R&D orientated,” said Ian Simm, who manages a specialist solar energy fund for Impax Capital Corp. “There is still a credibility gap that it needs to close if it is going to go mainstream.” Grid electricity costs 6-15 cents a kilowatt hour (kWh) to produce off peak in the U.S., and 11-18 cents in the UK. For solar, a household sized four kilowatt roof installation produces 20 kilowatt hours of power through an average five hours of daylight, and costs about 25-30 cents per kWh over a 25 year life span according to BP Amoco , self-styled champion of the industry and the biggest manufacturer of PV cells. A home in South Africa might need only a 3 kW unit. In London a five kW system would be required. BP’s 4 kW unit costs $40,000 to install in the U.S., a prohibitive price for most householders, but the technology is moving on fast, and environmental legislation across the world is tipping the economic balance further. BP says it has brought the uninstalled cost of making PV cells to below $7 a watt from over $30 a decade ago. In October German electronics major Siemens announced a breakthrough with its monocrystalline roof modules that improved the power of its systems by 20-35 percent. A new generation of “thin film” PV’s are now being developed by most industry players. These are still 2-3 years away from commercial production and sacrifice some efficiency, but are much cheaper to make and can be incorporated into building materials like glass roofs – a property demonstrated in a new BP fuel station unveiled in London this week. In February, Germany gave the industry a massive leg up, passing a law that sets minimum prices for generated renewable energy and obliges network operators to use it. Solar got the highest guaranteed price at 0.99 marks per kilowatt hour. Back in the United States, 34 of 50 states have introduced net metering laws, under which any excess power generated by household roofs gets sold back to the grid – effectively making the grid a store of power in the daytime and a source at night. This reduces dependence on a battery for solar powered homes – typically about one third of system installation costs. Despite all the progress and its own $500 million investment pledge for the next three years, BP reckons PVs will not compete on cost alone in countries where the grid is widely available for another five to 10 years. BP says it is number one in PV production and boasts a global market share of 20 percent through revenues of $200 million this year – that makes the worldwide market worth just $1 billion this year. Together with new-build integration, solar roof panels account for 24 percent of the market. Forty percent is in developing country off-grid applications, while the rest is in niche areas such as telecom relay stations. Given the still long-distance nature of the opportunity, global energy and electronics corporations including BP, Royal Dutch/Shell , Kyocera Corp and Siemens still dominate. But green energy investment funds, venture capitalists and smaller companies are waking up to the opportunities and a handful of standalone solar companies have already braved equities markets for funds. Astropower , Evergreen Solar and Spire Corp in the U.S., and Solarworld AG in Germany have a combined market value approaching a billion dollars. Apart from Spire, none was a listed company three years ago. The comparison is stark with the more fashionable fuel cells sector, which already boasts its own $10 billion “giant” in Ballard Corp , but specialist investors are optimistic. “The energy sector is moving slowly away from the fossil based energy economy towards the hydrogen based energy economy, driven by the fuel cell because that works best on hydrogen,” said Impax investment manager Bruce Jenkyn-Jones. Hydrogen may be everywhere around us, but it still needs energy to separate it out and turn it into a fuel. “In the much longer term solar, wind and renewable technologies are the only sustainable way to generate hydrogen,” said Jenkyn-Jones.

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