On May 26th, in sunny weather, Germany’s 22GW of PV solar-generation capacity supplied 50% of the country’s electricity, and around the world PV looks like it may become a major energy option in the years ahead, accelerating past 50GW of grid-linked capacity, with price parity with conventional sources not far away. Consultancy firm McKinsley says that PV prices will reach grid parity with coal and nuclear as soon as 2020. Its report, entitled ‘Solar Power: Darkest before the Dawn’, forecasts that solar PV costs will fall by an average of 10% per year through to 2020.
This, they say, is despite a dramatic fall in global subsidy levels, severe manufacturing overcapacity and a number of major industry bankruptcies. The recent Feed In Tariff (FiT) cuts in Spain, Germany, Italy, France and the UK, in part reflected the dramatically reducing costs of PV, and although the FiT cuts will have slowed deployment to some extent, McKinsey analysts conclude that the yearly economic potential of solar PV deployment could reach 600-1,000 GW by 2020.
While there has clearly been a shakeout of some of the large companies in the US and EU that had expanded during the initial FiT led boom, that’s just the growing pains of a new, still-developing market. So McKinleys say: ‘Those who believe the solar industry has run its course may be surprised. Solar companies that reduce their costs, develop value propositions to target the needs of particular segments, and strategically navigate the evolving regulatory landscape can position themselves to reap significant rewards in the coming years.’
They add ‘underlying PV costs are likely to continue to drop as manufacturing capacity doubles over the next three to five years. Indeed, the cost of a typical commercial system could fall 40 percent by 2015 and an additional 30 percent by 2020, www.mckinsey.com/ClientService/Sustainability/Latestthinking/Solarpowersnext_shining
An even more upbeat prognosis was presented by Ruggero Schleicher-Tappeser in a paper in Energy Policy journal. He says that PV solar, onshore wind turbines, internet technologies, and storage technologies have the potential to fundamentally change electricity markets in the years ahead. He sees pv solar as the most ‘disruptive’ energy technology, in that it allows consumers of all sizes to produce power by themselves - ‘new actors in the power market can begin operating with a new bottom-up control logic’. He calls them ‘prosumers’.
He suggest that unsubsidised PV markets may start to take off in 2013, fuelling substantial growth where PV power is getting cheaper than grid or diesel backup electricity for commercial consumers. He adds ‘Managing loads and achieving a good match between power consumption and weather-dependent power production will likely become a key issue. This consumption—production balance may trigger massive innovation and investment in energy management technologies involving different kinds of storage and controls’. Overall the ‘increasing autonomy and flexibility of consumers challenges the top-down control logic of traditional power supply and pushes for a more decentralised and multi-layered system.’ He says how rapidly and smoothly this transformation occurs ‘depends to a large extent on the adaptation speed of the regulatory framework and on the ability of market players to develop appropriate business models.’ See http://bit.ly/L27haO
Very little of the recent expansion has been due to new cell technology. It’s mostly been due to improved system engineering, better module-assembly techniques, improved power handing technology and of course the stimulus of the FiT systems across the EU. A recent study of PV solar costs in the US by the University of California, Berkeley, found that the capacity-weighted average cost of PV solar there had fallen by 17% from 2009 (a $1.3/W year-over-year decline) and was 43% below 1998 levels. However it noted that ‘Among small residential systems installed in 2010, average installed costs in the U.S ($6.9/W) were substantially greater than in Germany ($4.2/W), which may be partly attributable to differences in deployment scale’. Although there are a lot a caveats, it might be concluded that the German Feed-In Tariffs are more effective at building capacity fast, and so cutting costs, than the US market-based RPS system. See ‘Tracking the Sun IV: An Historical Summary of the Installed Cost of Photovoltaics in the United States from 1998 to 2010.’ http://eetd.lbl.gov/ea/emp/re-pubs.html
Further cost reductions are likely, with cell-technology improvements becoming more of a driving factor as PV moves down its learning curve. With the market blooming, there are certainly some novel high-performance cells being developed. For example, thin-film PV cells, based on flexible poly crystalline Cu(In,Ga)Se2 (CIGS) absorber layers, have yielded high conversion efficiency -18% plus.
However it may be that innovation is ancillary areas may be just as important as improving cell efficiency. Japanese company Kyocera is selling a system that pairs solar PV panels with lithium-ion batteries for the residential market. The battery storage is rated at 7.1kWh and weighs about 200 kgms. It’s emerged, it seems, because of demand for residential backup power supply following the Fukushima nuclear disaster and to take advantage of the new PV feed-in tariff. But Li-ion batteries are still expensive, so without extra government incentives, residential energy storage isn’t likely to take off quickly. And some would say having storage at the domestic level, it is not the best approach - it would be better to feed excess power out on the grid to balance power taken in when there is a shortfall. That, after all, is what FiTs are all about. If you need storage it should be done on a larger utility scale - via pumped hydro, compressed air, cryogenic air storage, vanadium flow batteries or whatever.
That said, there are seductive small-scale options emerging, like the Fronius Energy Cell system in which any excess electricity from a PV cell used to decompose water into oxygen and hydrogen by electrolysis. The hydrogen is then stored ready to be converted back into electricity in a fuel cell when it is needed. www.fronius.com/cps/rde/xchg/SID-2038DABF-BEA034DD/froniusinternational/hs.xsl/8318098ENGHTML.htm
Then again it might make more sense to set up a full hydrogen economy with excess power from PV and other renewables, large and small, feeding into large efficient high-temperature electrolysers, and hydrogen then being stored centrally and distributed via the gas grid. Or use the hydrogen to generate electricity in a large fuel cell, with full heat recovery - i,e for high-efficiency heat and power generation.
Clearly, there is a range of possibilities and, as Ruggero Schleicher-Tappeser pointed out, PV and the energy options that emerge along with it are likely to be disruptive, not just of markets but also of the existing technological status quo.
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