The use of the sun’s energy to provide heat and electricity for our needs has enticed markets and governments to invest in R&D, set targets, offer incentives and assist a wide range of solar technologies. The number of applications is broad and increasing, and development of technologies continues to improve the effectiveness of solar capture, conversion and dispatch. Markets will continue to grow in all sectors, with some consolidation expected following the worldwide financial crisis. However this growth will remain reliant on subsidies, availability of resources and continued research as capital cost remains the greatest barrier to mass deployment
Background
Harnessing the power of the sun directly or indirectly remains at the core of future energy scenarios. Direct solar electricity production is predicted to provide over 400TWh in 20301, with estimated cumulative investment of over $500 billion. The variability of the resource by time and place presents its own set of unique challenges. However, the technical, political, economic, environmental and social challenges of harnessing solar energy are increasingly being overcome by investors, developers, scientists, governments and communities around the world.
Figure 1 – Worldwide direct normal solar irradiation(DLR 2008)
The range of solar technologies, applications and size of installations has increased markedly over the last decade. Broadly these can be split into three categories: photovoltaic’s that produce electricity directly from solar radiation (PV); concentrating solar power (CSP) thermal devices which use heat for electricity production in a steam turbine; and solar thermal devices for direct heat applications. Each technology has unique properties, benefits, disadvantages and costs.
Cost remains the largest challenge for solar technologies, with high capital costs driving levelised costs several times higher than conventional supply technologies. All require subsidies and supportive policy frameworks to be competitive and these are increasingly forthcoming as governments set carbon emission reduction targets amid climate change and energy security concerns.
Figure 2: Estimated cumulative investment (USD billions) in solar technologies 2008 – 2030. Based on figures presented in the IEA World Energy Outlook 2009
Photovoltaics
The PV market has grown rapidly over the last 10 years with installed capacity increasing by 1500% to some 15GW by end 2008, primarily from crystalline silicon modules. Recent developments in photovoltaic efficiency and cost, driven by increased volumes and larger scale production facilities and applications give some promise that the costs of solar power are coming down, but still have a way to go before they will be able to compete on cost.
Despite PV being a relatively expensive way to generate electricity governments around the globe, continue to provide subsidies to support its development due to some of the inherent advantages and overall promise of the technology – being that it is silent, low maintenance, can be deployed in a distributed nature in the urban environment and coupled with strong popular support for solar technologies. This investment has lead to new technology developments, increased efficiency of existing technologies and expanding manufacturing bases. An interesting development has been the use of PV in utility-scale power plants. The Topaz Solar power plant in California will have a capacity of 550MW when completed. Recently First Solar announced their intention to build a 2GW PV power plant in China. Currently the largest thin film plant is in Germany and utilises 53MW of cadmium telluride technology. In Spain a 60MW2 plant has been completed that utilises crystalline silicon modules. Flexible triple junction amorphous silicon laminate modules have been used in an 11.8MW roof mounted building integrated installation for General Motors in Zaragoza, Spain.
Figure 23 shows the range of technologies under research and continued advances made in cell efficiency. Whilst efficiency is important it only makes up part of the equation when considering investment in PV. Commonly a system is assessed on the dollars per watt peak installed capacity ($/Wp) or kilowatt hours produced per kilowatt peak installed capacity (KWh/KWp). The rise of building integrated PV helps improve the economics as they can be incorporated into the building envelope or used as an alternative to high cost cladding.
Figure 2 – Photovoltaic cell efficiency – best research results (NREL 2009)
Concentrated solar power
The oil price shock of the 1970’s resulted in R&D programmes in concentrating solar power and some power plant development in the US in the 80’s and 90’s. Eventually interest waned as low oil prices reduced competitiveness of the technology. Recently CSP has undergone a renaissance and the overall market potential is significant with estimated realizable potential of 20-42 GW by 20254. With the assistance of government incentives a variety of demonstration/utility scale plants have come on-line in the past few years, primarily in the US and Spain.
Opportunities for CSP development exist where direct solar radiation is at least 2000kWh/m2/yr5. Figure 3 below shows the areas of potential for CSP projects. The centralised nature and multi-megawatt scale of CSP fit well with utilities. Additionally the ability to store thermal energy and generate electricity outside of sunlight hours can improve capacity factors to over 60% and provides a critical advantage over PV. With support from the World Bank, plans are afoot for multiple CSP plants totalling 1GW capacity across 5 countries in North Africa. Economies of scale and increased R&D are predicted to enable CSP to become competitive with traditional technologies – the US Department of Energy has a goal for electricity from CSP to cost 5c/kWh and provide 17hours thermal storage by 2020.
Figure 3 –Regions suited to Concentrated Solar Power development (DLR2008)
Solar thermal
There are a wide range of thermal applications for direct use of solar energy. Perhaps the most well known is for domestic hot water use and total global capacity is estimated at 145GWth6 - or over 200km2 of collector area. China leads the way and installed more than two thirds of the total market in 2008, due to low manufacturing costs and government incentives. A range of other technologies or techniques exist for harnessing the heat from the sun including: solar ponds utilising salinity gradients for water desalination able to generate heat or electricity; solar panels for low to medium temperature industrial applications; concentrated solar for direct steam production in industry or food production; solar thermal cooling using absorption chilling for refrigeration or air conditioning; passive solar design in buildings to maintain internal temperatures; and simple solar cookers and driers.
Policy Issues to assess
Solar technologies have been and still are heavily reliant on subsidies and supportive policy frameworks. Governments have implemented a number of approaches including capital subsidies, feed-in-tariffs and tax credits. Generous feed-in-tariffs in Germany paved the way to rapid acceleration of solar PV by providing investors with confidence through removal of the uncertainty of future electricity prices and providing guaranteed income. There are now over 507 schemes in existence worldwide at a regional and national level covering most renewable energy technologies. Spain is utilising feed-in-tariffs to accelerate CSP developments whilst the preferred US incentive is tax credits, which have the advantage of being flexible across an organisations investment portfolio. Japan is reinstating capital grants for homes PV systems after the market dried up when it pulled the plug on capital subsidies in 2006.
As the markets grow and costs of solar technologies become closer to grid price parity degression of these subsidies presents new challenges to governments and investors alike. The Japanese example shows that grid price parity alone may not be enough to stimulate the market to take action at the level required to achieve greenhouse gas emission targets. Germany has set a degression rate for PV installations of 8% per annum. This has created a rush of applications to the scheme resulting in a shortage of balance of systems components – namely inverters.
Many subsidies do not yet have degression rates or firm end dates, but it is very likely that with time these will be introduced. Investment decisions will have another layer of complexity as the fluid nature of the component markets impacts system costs, which is set against a time limit of depleting returns. As grid penetration of renewable energy technologies increases, preferential access of one technology over another will require revision of regulations which currently benefit from preferential access to the grid. This will increase risk for investors as the returns from solar are left to compete against the market, the weather and other technologies. Perversely it could end up with government intervention to subsidise loses or more likely require greater control of the market. A staggered reduction in subsidies around the globe may drive investments between countries as investors seek safer investments.
Photovoltaic Market
PV cells rely on precise engineering of elements to achieve maximum efficiency or product competitive edge. Bottlenecks in the supply chain of key elements have increased the cost of certain technologies, most notably the supply of high grade silicon required for common crystalline silicon cells in 2008, which adversely impacted the costs and availability of crystalline silicon modules. This was resolved by the global financial crisis which resulted in a drop of module price of about 25% as capital dried up and semi-conductor grade silicon became available. However as the market picks up again and more and more countries announce feed-in-tariffs and other incentives it is possible that competition for silicon will push up prices again.
Thin film PV technologies are predicted to continue their increase of market share against crystalline silicon as new manufacturing facilities coming online, efficiencies improve and prices reduce. Estimates are that thin film PV could have up to 30% of the PV market by 2012, up from 6% in 20038. However with the increased manufacturing capacity there are some concerns over the availability of key elements that are used in modules, in particular indium (which is also used in LCD) and tellurium. Furthermore there are environmental concerns about some of the constituent parts such as silver which will require careful management and disposal processes.
Concentrating the sun onto PV cells has the potential to increase the efficiency of photon conversion and recent advances have produced cells of 43%9 under laboratory conditions. Concentrating radiation also offers the promise of replacing solar cell area with lower cost materials. However at present the cells are in the early stages of development, are relatively expensive and suited to specialised applications, such as in space. Overall concentrating PV systems are more complex than simple fixed flat panels, as they must track the sun, require cooling and have more failure points. There are numerous design approaches which seek to trade off efficiency with cost and complexity. Some are of similar design to CSP systems and others offer dual outputs of heat and electricity as PV and thermal systems as hybridised.
Organic PV cells utilise different physics to traditional PV with nanoengineered conductive and semi-conductive inks. This enables them to operate indoors and under low light levels. They are flexible and ink can be applied to plastic substrates offering the potential to be low cost. Barriers to commercialisation include manufacturing advancements and increasing cell efficiency and durability. NREL recently certified a cell with 7.9% efficiency10. Applications are widespread and include coating fabrics or glass, integrating into buildings or with portable electronics. The first products are expected on the market in 2010.
Concentrating Solar Power Market
Electricity production from CSP is projected to increase from less than 1 TWh in 2007 to almost 124 TWh by 203011. To achieve this incentives are required to acquire a critical mass of manufacturers. However as technologies develop and new designs come to the fore the potential exists for local manufacturing of CSP, which has fewer exotic materials than PV. This may influence the type of technology selected for a particular market, for example Linear Fresnel CSP has relatively simple flat mirrors, which presents a number of advantages over parabolic trough, such as simplified engineering as well as easier maintenance.
With the best resources being in sunny dry places access to sufficient water for power generation requires attention from project inception as traditional steam turbines require 3000 – 4000 litres/MWh12. Dry (air) cooling or hybrid wet/dry cooling options exist, but reduce the efficiency of the plant and increase costs. Additionally other working fluids and organic rankine cycles offer promise, but are not yet commercialised or cost competitive. Water requirements for weekly mirror washing are only 2% or around 80 litres per MWh13 and relatively small in comparison.
Options exist for recycling water, using storm water, utilising CSP with desalination plants and so on, but these will add cost to the operation and as competition for water increases power plants may take second place behind agriculture and municipal water supplies. Dry cooling options will increase levellised costs of electricity and extend use of subsidies. Solar dishes directly generate electricity without water, using heat to power a Stirling engine, but they do not have thermal storage options.
There are no clear winners as yet with CSP design and much research is still required, in particular in terms of storage solutions, as well as in terms of performance improvement and construction, operating and maintenance improvements. Thermal storage mechanisms vary and include molten potassium and sodium nitrate salt, high temperature concrete or castable ceramic, saturated water thermal storage systems, graphite blocks or use of phase change materials. Other system improvements include using lower cost high performance receiver coating and developing lightweight mirrors with coating to reduce soiling. Further improvements can be made to onsite construction and heat transfer. The potential to offset base load fossil fuel power provides real impetus to achieve this. However the large increase in electricity demand expected over the next 20 years (IEA estimates 4800GW of new capacity will be required by 2030), leaves CSP as a relatively minor player in the global scene in the medium term.
The sites with the best resource may not necessarily be the first sites to be commercialised due to financial, regulatory, environmental or political constraints. The development of all solar technologies and continued push for low carbon energy sources will see an increasing number of developments in niche markets and hybrid systems, such as pre-heating water for geothermal power generation, utilising CSP in conjunction with natural gas and/or biogas, reducing carbon footprints of coal/gas power stations by preheating water; direct steam production for industrial uses.
Solar Thermal Market
Use of solar thermal in the domestic sector offers huge potential to offset electricity generation with systems being less reliant on solar radiation and hence having wide geographic spread. Yet barriers still remain with the capital cost of systems, lack of perceived added value to properties, appropriate regulations, qualified installers and poor system controllers. New building codes, planning rules, increased adoption of standards and government subsidies will support the development of domestic applications. Commercial and industrial applications such as solar cooling and generating process heat will lead to refined technologies and represent an area for future growth. However the requirement for back up or storage to avoid loss of productivity will, at least in the medium term, require incentives for this to materialise and they are likely to be suitable for niche applications.
Conclusion
The future for solar remains bright with targets for reducing carbon emissions intensifying, however solar technologies will be reliant on subsidies for several years to come. Moving from a subsidised market regime presents risk to investors and can have unforeseen or adverse impacts on the industry. For incentives to achieve their goals they need careful design and a comprehensive policy framework. This framework will guide the technology choice and application, with feed-in-tariffs, tax incentives and renewable energy portfolio targets resulting in utility scale power plants.
Availability of resources and competition with high technology industries will limit the growth of some PV markets. The market for CSP will grow rapidly as utilities take advantage of the high capacity factors achievable and learning effects bring down cost. The solar thermal market looks set to continue its growth and direct applications in the residential sector provide a great incentive for governments to provide funding to reduce national electricity demand. Hybrid systems and new technological advances will continue to broaden applications and refine approaches to producing heat and electricity from the sun.
1 IEA –World Energy Outlook 2009 p. 623
2 http://www.pvresources.com/en/top50pv.php
3 Kurtz, S. (NREL 2009)- Opportunities and Challenges for Development of a Mature Concentrating Photovoltaic Power Industry
4 DLR 2004
5 F. Trieb et al, Concentrating Solar Power for the Mediterranean Region, German Aerospace Centre Berlin, 2005, www.dlr.de/tt/med-csp
6 REN21 – World Renewable Energy Global Status Report 2009
7 REN21 – World Renewable Energy Global Status Report 2009
8 REN21 –World Renewable Energy Global Status Report 2009
9 http://www.inhabitat.com/2009/08/25/australian-scientists-develop-worlds-most-efficient-solar-cell/
10 http://www.pv-tech.org/news/_a/solarmer_breaks_organic_solar_pv_cell_conversion_efficiency_record_hits_nre/
11 IEA –world energy outlook p.102
12 http://www.nrel.gov/csp/troughnet/power_plant_systems.html
13 http://www.nrel.gov/csp/troughnet/power_plant_systems.html
© Sinclair Knight Merz
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