Solar: Close to Going Mainstream

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A slew of new solar powered electricity projects have come online in the past two years, and the sheer volume has solar power nearing price-parity with carbon-based generation in some markets.


In 2011 US solar developers built roughly 1 gigawatt of new solar capacity according to the Solar Energy Industries Association. In Europe, despite ongoing financial uncertainties, solar megawatts continue to come online, albeit at a smaller pace than in previous years. German capacity stands at 7.4 gigawatts. Italy generates about 2.3 gigawatts of solar electricity, and in Spain the sun helps produce roughly 3.7 gigawatts of electricity.


Global solar capacity is now roughly 40 gigawatts, double 2008 levels according to BP’s latest Statistical Review of World Energy. Capacity is expected to continue grow as more farms come online in Asia, especially in China, where Beijing’s latest five-year plan commits to installing 5 gigawatts of new solar power by 2015.


A combination of government subsidies and growing production of solar photovoltaic (PV) panels has lowered prices, even as Europe’s economic woes serve as a brake on demand. Since 2008, the price of PV panels has fallen by 75 percent. PV modules now sell for about $2.30 per watt, down from $3.51 per watt only a year ago. These low prices are driving solar energy into the mainstream. A recent European Photovoltaic Industry Association report, states that solar is fast “becoming a fully competitive part of the [global] electricity system.”


While PV panels currently generate much of the world’s solar capacity, in the next several years, the U.S expects to add thousands of megawatts of new capacity through Concentrated Solar Power (CSP) plants. Unlike traditional PV facilities, CSP plants generate power by deploying mirrors. The mirrors capture and convert solar energy into heat that creates steam, which powers large generators.


Since 2009 the U.S. the Department of Energy (DOE) has committed billions of dollars to CSP developers in a bid to double the country’s solar-thermal capacity. Earlier this summer, Credit Suisse actually helped arrange an $852 million DOE-backed financing to support the Genesis Solar project, a 250-megawatt facility under construction in California’s Riverside County. By 2013, Genesis is expected to generate enough electricity annually to power nearly 88,000 homes.


Other DOE-backed CSP projects currently under construction include BrightSource Energy’s 392-megawatt Ivanpah project and Abengoa Solar’s 250-megawatt Mojave facility.


While low-cost solar power is a net-positive for developers and consumers, it has been a tough ride for PV panel makers. Manufacturers have seen their revenues dwindle, forcing many, like the California-based manufacturer Solyndra, into bankruptcy. With inexpensive PV panels from Asia flooding the market, many manufacturers are drowning in excess inventory.


Also, in North America the lack of consistent, supportive public policy may also hurt the solar industry. The U.S. Congress has not extended key subsidies that funded up to 30 percent of the costs associated with new renewable energy plants. And in Europe, the debt crisis has forced some project finance banks to tighten lending to solar project developers.


Despite these challenges solar appears poised for a breakthrough. When will the industry actually reach a tipping point and become a mainstream energy source? In a recent note Credit Suisse Analyst Pierre-Yves Bolinger wrote that he expected the solar industry to continue to rely on subsidies “for a few years to come.” However, the day non-subsidized renewable energy, including solar generation, successfully competes with other forms of energy is rapidly approaching. Until then, though, Bolinger expects solar and the green power sector as a whole to continue experiencing a high level of volatility as the industry, especially in the U.S., wrestles with ongoing regulatory and financial uncertainties.


Photo:  Andrew Orlemann