Solar energy is a grown up industry, according to William Morin, but it has not yet become mature. ‘It is a real industry not a fad or of niche interest.’ As such, it can learn lessons from other sectors, said the senior director, government affairs at US chemical supplier Applied Materials.
Indeed, the solar sector is now showing similarities to other sectors of a similar size, especially the manufacture of commercial aircraft. But with this size comes other problems including trade conflict - like the dispute over Chinese module pricing - which has been a continual aspect of these older industries. And like these more established industry sectors, the extinction and consolidation of companies is a way of life, said Morin.
‘What a difference a year makes,’ said Tom Cheyney, director, solar practice, Impress Labs. A year ago Solyndra, the PV company that went out of business despite US government backing, said it was ramping up production, and yet within three months the company had failed, he pointed out. ‘There is a word for the growing pains being experienced by the PV industry: carnage,’ he said.
In 10 years, the US solar industry has nevertheless gone from zero to a still growing market with new companies in the US and manufacturing capacity expanding overseas, Cheyney continued. The industry therefore presents ‘a mixed story’, he said.
Despite the setbacks, the US solar energy market continues to grow in 2012 following a doubling of capacity in 2011. In total, the US has around 4.4GW of solar capacity, with a further 3.2GW expected to be added during 2012 to reach a total capacity of 7.6GW by year end.
John Lefebre, president, Suntech America, believes this figure will reach over 5GW by 2014. And the US is not alone in the consolidation of PV companies; China is going through a similar process, he added. He also noted that PV energy is in direct competition with gas in terms of future technology costs; but while solar contracts are for 25 years – the expected life time of solar panels – it is impossible to price gas for that period, so solar offers significant hedging against cost and price variability.
California remains the key US solar energy market, with 620MW of new capacity being installed in 2011, totalling 1.67GW capacity by the end of last year. ‘California remains at the forefront of the US market, standing as an example of the positive impact to be had through investment in renewable energy,’ says Daniela Schreiber, executive vp of EuPD Research USA. ‘We anticipate approximately 1020MW of new installed capacity during 2012.’
A key driver for this expansion has been a reduction in equipment costs matched by favourable financial incentives from both individual states and the federal government. This analysis was echoed by Chase Weir, ceo of Distributed Sun, who noted that the cost of solar is coming close to existing prices for conventionally generated electricity.
Meanwhile, with over a million consumers in the US mid Atlantic coast states finding themselves without electricity recently, and rolling blackouts in parts of Texas, ‘distributed generation looks attractive,’ Weir added. ‘Some people see new storm clouds, while others see clear skies – and both are true.’
While the US seeks to build its solar energy capacity, Germany remains the world leader. However, the importance of the European PV market is declining, compared with the increasing importance of China and other ‘sunbelt’ countries, noted Winfried Hoffmann, president, European Photovoltaic Industry Association.
China has been blamed for pushing down PV prices and pushing out companies in the US and Europe. But China is changing, according to Frank Haugwitz, from Solar Promotion International in China, from its role as the largest producer of PV modules to a developer of its internal PV market.
Back in 2006, the Chinese government set a target of 15% of total energy coming from non-fossil fuels by 2020, but by September 2007, this target was considered out of date as interim goals had already been achieved; by the end of 2011, 8.3% had already been reached.
‘Weaker global demand means that the government can support the installation of PV in China, but there are also opportunities for foreign companies to meet the targets, encouraged by the government,’ Haugwitz said; however, these opportunities will not last for ever.
Around the world, some 1.4bn people are off-grid without access to electricity, said Ernesto Macias Galan, president of the Belgium-based Alliance for Rural Electrification (ARE), with the highest number, over 534m, in India, way ahead of Bangladesh, 112m, and Indonesia, 108m.
For India, Tobias Engelmeier, managing director of the consultancy Bridge to India, highlighted a 14.6GW PV opportunity until 2016, but he also emphasised that it is ‘a different type of PV market as it is not driven by policies but by profit’. Currently, at 1GW, India represents just 1% of the global installed PV capacity, but by 2016, he believes this will increase to 6% of the total. But he emphasised: ‘This is a market of moving parts, very unlike the German market – it is a wild new frontier’.
India has a rising power deficit, with coal and hydroelectric plants not keeping pace with demand, as well as rising power tariffs. The country experienced two massive power failures in July 2012, attributed to excess demand at the height of the summer heat. The second affected 20 states and 600m people, around half the Indian population, or around 12% of the total global population, making it the world’s largest ever power failure.
Currently the Indian PV market is focused on grid-connected plants, with over 90% being located in just two states: Gujarat and Rajasthan. Large projects, over 2MV, are also likely to make up the largest proportion of the 14GW opportunity, with 6.9GW forecast to be installed by 2016.
Although there is a huge need for rural electrification, ‘stand-alone systems are not seen as viable on a commercial scale,’ Engelmeier said.
Small projects of under 2MW are likely to account for a total of just over 5GW. Of these, Engelmeier highlighted off-grid power generation for telecoms towers as a major commercial opportunity. Estimates suggest the number of these towers will reach 550,000 by 2016, with 363,000 being on-grid but subject to intermittent power supplies.
South East Asia also provides a number of off-grid examples, including the Philippines and Indonesia, both comprised of thousands of islands.
As the president of the Philippines Solar Power Alliance, Tetchi Cruz-Capellan pointed out, where there are island grids they are all diesel-powered but solar represents a significant potential energy source for off-grid homes. Around 4m Philippino households are still without energy access.
At $0.27/kWh, the Philippines has the highest retail prices for grid electricity in Asia, Cruz-Capellan says. This country’s Renewable Energy Act provides a variety of incentives to develop ‘a self-reliance from fossil fuel’, which accounts for around 43% of power generation.
For solar, the Philippines has targets for adding on-grid installation capacities of 269MW by 2015, with further installations set to achieve a total installed capacity of 285MW by 2030. These planned additions are nevertheless dwarfed by planned wind power capacity additions totalling 2345MW.
For the archipelago state of Indonesia, with over 17,500 islands, there is considerable potential for solar power, said Horst Kruse, managing director, HK Solar Energy Consulting Services. The state currently has around 95%, dependence on fossil fuels and a low average electrification rate down to under 30% in rural and remote areas, where electricity is diesel-generated at costs up to $1/kWh. More than 65m people, 35% of the population, are without electricity.
‘Solar energy is the only renewable energy sourced electricity available in all regions, but Indonesia is lagging behind in developing solar,’ said Kruse. Until 2011 only 15MW of PV capacity had been installed, all off-grid as individual systems for households and small scale PV hybrid systems for centralised rural villages.
The government’s vision is to have renewable energy increasing its share of the electricity market to 25%, with solar accounting for just 2%. Installed PV capacity is projected to rise to 2,537MW by 2025, according to the Indonesian Renewable Energy Society.
The largest increase is expected in urban areas as roof-top systems, although Kruse noted that the government has a target of 95% rural electrification by 2025. In 2013, the 1000 Island plan to provide 800MW of solar PV capacity by 2020 is expected to be implemented, subject to the approval of investment support from Germany’s KfW investment bank and the World Bank.
Malaysia also presents ideal conditions for PV development, Kruse noted, particularly as it is also a major manufacturer of PV systems. However, with its abundance of coal and gas resources, renewable energy accounts for just 1% of power generation, with around 2.5MW of off-grid installed PV, mainly on the island of Borneo, and around 1.65MW on-grid, mainly in commercial and residential installations.
Emphasising that the country will need an additional 6GW of new generation capacity by 2020 to meet energy demand growth of 4.7%/year, Kruse highlighted the potential for PV energy in terms of both roof-mounted and ground installations that could total some 10.7GW.
The Malaysian government has formulated a renewable energy policy and action plan, which has a goal of 6% renewable energy by 2015 and 10% by 2020, with solar becoming the dominant renewable source in the long term. However, Kruse noted the associated feed-in tariff incentive is limited in scope, being applicable only in peninsula Malaysia and to domestic companies or joint ventures.
In North Africa and the Middle East, Nikolai Dobrott, managing director of the German cleantech consultancy Apricum, said Saudi Arabia presents the biggest PV opportunities. Saudi Arabia will account for the majority of installed solar capacity by 2015, he believes – 3.1GW out of a total capacity of 5.8GW. By 2020, he expects Saudi Arabia’s installed PV capacity to grow to between 11 and 16GW.
Dobrott emphasised that Saudi Arabia has realised that alternative energy sources are needed to maintain its oil export revenues, since by 2020 he believes that internal fossil fuel consumption will have increased to 42% of total production, compared with 24% in 2000 and 35% in 2010. And given the current market prices for oil, solar is now a viable alternative for fossil fuel power generation.
By Dobrott’s calculations, if Saudi Arabia installed 10GW of PV capacity by 2015, the overall net savings from replacing domestic oil use could total $39.2bn over 25 years, although an initial capital investment of $21.2bn would be needed.
In addition, by 2020, Dobrott noted that with peak energy demand growing at a compound annual growth rate of 5%, an additional 40GW of power generation will be required together with 20GW of replacement capacity, which is around half current installed capacity.
The Saudi government’s policy maker, the King Abdullah City for Atomic & Renewable Energy (KA-CARE), aims to replace up to 50% of fossil fuels in power generation with renewable and nuclear energy. By 2032, KA-CARE has a target for installing up tp 41GW of solar PV and concentrated solar power by 2032.
Elsewhere on the Persian Gulf, Dobrott said that following Abu Dhabi’s lead with its Masdar project, Dubai plans to develop solar power generation with 1GW to be installed by 3030 to achieve a goal of 5% of total energy production. The project will begin with a 100MW PV plant with the start of operations in Q3 2013.
All these capacity expansions are forecast to contribute to a total global installed capacity of 40GW by the year 2015, according to Sanjay Shrestha, managing director, Lazard Capital. ‘This market has fantastic opportunity… we need to see PV as an energy asset as it has a major role to play in the ’generation stack’.
Although the market will see consolidation of PV suppliers, major development will be driven by energy demand, he believes, especially in the developed world. ‘We must not be deterred by current problems,’ he concluded.
Neil Eisberg is the editor of Chemistry & Industry