The Rise of Cheap Solar?

A recent report by McKinsey & Company, Solar power: Darkest before dawn, is forecasting an annualized drop in the underlying cost of solar PV cells by 10% per year from now through 2020.  This continued drop in the cost of solar manufacturing, when combined with a doubling of manufacturing capacity over the next 3 to 5 years, will result in an unprecedented expansion of solar power installation.  This mirrors the cost reductions seen over the previous 5 years, where panel prices have declined by approximately 75%, and growth in installed capacity from 4.5 GW in 2005 to 65 GW in 2012.

This dramatic drop in price has been the result of multiple, incremental improvements in each component of the installed cost of a system [1]:

This is in striking contrast to the co-incidental drop in the cost of natural gas over the previous decade, where a massive influx of supply due to the breakthrough technologies of horizontal drilling and hydraulic fracturing have produced a glut of supply, applying downward pressure on wholesale prices.  This precipitous drop in the price of natural gas in North America has led to lower market prices, and lower demand curves for all sources of electricity, including solar.

As solar continues it’s march to grid parity, McKinsey forecasts a price per watt (peak) installed of $1 by 2020.  This echos what US Secretary of Energy Stephen Chu has previously predicted:

“Before maybe the end of this decade, I see wind and solar being cost-competitive without subsidy with new fossil fuel.”

Additionally, using a conservative estimate of $2 per watt (peak) installed, McKinsey predicts 400 to 600 GW of capacity installation between 2012 and 2020.

Regardless of the pace of cost reduction, certain applications have reached parity with alternative generation technologies already.  For remote installations and isolated grids, solar is already the low-cost option.  As prices continue their decline, more and more applications will become attractive, with or without subsidy.

[1]  http://www.mckinsey.com/client_service/sustainability/latest_thinking/~/media/5E847C563A734F148B5F3A6EFBD46E39.ashx

Will PV cells take over the world?

Solar power is the poster child of the green energy movement. And why wouldn’t it be? Fuel that is entirely free, will be around for billions of years no matter what we as humans do, and doesn’t pump out nasty pollutants when used. Also, as a bonus, there is more solar power available than the world could conceivably use, roughly 89 petawatts of power [1], that’s 89,000,000,000 megawatts.

However, harnessing that power proves to be much more difficult than burning wood for a fire. The most common method used to convert solar radiation to useful energy is the photovoltaic effect, which converts photons from the sun directly to electricity and is utilized by photovoltaic, PV, cells. These cells in general do a fairly poor job of collecting the sun’s energy. Typically efficiencies are of the order 20%. In the laboratory, ie highly controlled conditions, PV cells have reached efficiencies of over 40% [2]. While the public may see these efficiencies in the future, they are not currently realistic.

What is realistic however, is a drop in price of PV cell technology. Last year, Ramaz Naam blogged for Scientific American about a possible Moore’s Law effect for solar PV cells [1]. Moore’s law originally applies to the doubling of computing power every 18 months, a trend followed by the computer industry for decades. It appears that solar power follows a similar curve, with dropping prices following a logarithmic curve from the 1980’s through 2010. Via Naam’s prediction, PV cells would reach $1/W in 2023, and could become cost effective, including installation costs, in 2020 [1].

http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

It seems though that solar power will beat Moore’s Law. Today, 2012, PV cell production costs are already approximately $1/W [3]. That’s 11 years sooner than Naam’s prediction, made only 1 year ago. In addition to dropping to $1/W, improvements in technology and production methods could lead to costs dropping to 50¢/W in the next 10 years. This would put solar power much ahead of the curve, and into the cost effective region for power generation, poised for rapid entry into the energy market.

It is very difficult to predict when a technology is on the edge of explosion due to innovation, and so a year ago it would have been exceedingly difficult to guess that solar power would go through a revolutionary shift in production techniques, enabling PV cells to be produced at greatly reduced prices. However, it seems as if PV technologies have experienced a massive innovation spike with such ideas as new ways to manufacture silicon with less waste, improved stability in silicon wafers that allow for less of the material to be used, and new designs for solar cells themselves [3]. These technologies are emergent, and will be improved upon as kinks are worked out. However, these advances represent a boom for solar power, and it will continue to ride that wave for many years to come as technologies are perfected and production grows.

Will solar power be part of the future? Most definitely. The amount of grid-connected PV installations grew 39% in just the 3rd quarter of 2011 with over 1 GW installed in the first 3 quarters of 2011 [4]. This growth will continue, especially with recent price drops for PV cells. Will solar power take over the energy sector, and the world? Maybe. There are still many hurdles for solar power to face, an intermittent source being the most serious. But the hurdle keeping away the most investors and customers has been lowered, reducing one of the barriers to clean, cheap, accessible energy for all.

Here’s to world domination solar power.

References:
[1] http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/
[2] http://www.nrel.gov/ncpv/images/efficiency_chart.jpg
[3] http://www.technologyreview.com/energy/39771/page1/
[4] http://www.seia.org/cs/news_detail?pressrelease.id=1793