Solar Energy Markets

An Analysis of the Global Solar Industry

Philip G. Jordan

• Publisher: Elsevier
• Year: 2013
• Print ISBN: 9780123971746
• eBook ISBN: 9780123977687
• Topic: Business
• Subtopic: Energy Industry
• Index: Business

This groundbreaking new book features holistic coverage of technological breakthroughs, financing trends, workforce development issues, and comparative regional case studies in solar energy. It provides a global bird's-eye view of the industry for scientists, engineers, business leaders, and policymakers — anyone seriously engaged in the rapidly evolving field of solar energy. The expert author's analysis includes primary data from the first comprehensive solar industry survey conducted in the United States, insights from key thought leaders in the energy sector, and case studies from international leaders in solar development. Solar Energy Markets examines six key drivers of the solar industry: 1) a new culture of environmentalism; 2) policy and markets; 3) financing and venture capital; 4) economics and cost-competitiveness; 5) innovation; and 6) labor. In a field too often marked by divisive over-specialization, this resource provides invaluable context, demonstrating how the solar field's innovative triumphs and inherent challenges play out in the real global marketplace. - Analyzes key drivers of the solar industry at international, national and local levels - Synthesizes the first comprehensive surveys of the U.S. solar industry - Uniquely ties together technological innovation with market implications for engineers, business leaders and policymakers alike - Examines the evolving role of China in global solar markets

1

Introduction

An Overview of the Solar Industry

This chapter reviews the up-and-down history of the solar industry with a particular focus on the boom and bust from the 1970s to today. In addition, the chapter includes a brief overview of the important categories in which solar is divided, based on technology type and size. The chapter provides an overview of current trends (at the time of printing) and specific insight into the import–export makeup of the US solar market.

This chapter also reviews the key themes that policy makers and advocates frequently discuss, such as price parity, storage mechanisms, and installation growth. It addresses the relationships among the United States, Europe, and China before outlining the remainder of the text’s chapters.

Keywords

Solar history; photovoltaic; concentrating solar power; price parity; installed capacity

The 2007 US banking crisis was the first of a series of shocks to the global economy with trillions of dollars of wealth evaporating from the globe and years of scandal and upheaval to follow. Economic markets have been slow to recover, and labor markets even slower. Few industries have grown, let alone thrived.

Despite these unprecedented downward global pressures, the solar industry has experienced a global revolution with profound implications for business, government, and the environment. This text is intended to provide a unique, global perspective of the US solar industry, exploring the differences between the solar industry today and previous growth spurts such as the 1970s brief solar boom.

This book relies on information from the nation’s first comprehensive solar industry survey, pioneering survey work from adjacent industries, and insights from key thought leaders in the energy sector in the United States, and from international leaders in solar development.

At its most basic level, solar power is a broadly defined term for harnessing the power of the sun to generate heat or electricity, which humans have been doing for at least 5000 years! There are many different technologies at use in the commercially available products that capture solar energy, from passive design features of buildings to advanced thin film photovoltaic (PV) panels. Each of these products share similarities, such as shared incentives and market drivers, as well as many differences from their technological innovations to their economic viability.

Generally speaking, the solar industry is categorized by the various technology-driven product lines that make up the array of choices for the global consumer. The three largest categories by technology are PV (electric power generation), solar thermal (electric power generation), and solar water heating. Solar space heating and cooling are also growing areas with particularly strong potential in the northeast United States, though such applications are clearly well behind the other uses in terms of market penetration.

Solar thermal products use solar energy to heat water or other liquids. These can be used for heating water for domestic/commercial use or to produce electricity through the use of a steam turbine system. Solar water heaters employ a simple design utilizing aluminum fins and insulated storage tanks to supply hot water for pools or domestic use. To generate electricity, however, much more heat is needed, and the most common mechanism for obtaining this heat is through concentrating solar power (CSP). CSP uses mirrors to focus solar rays to provide intense heat that generate significant steam, which can then be passed through a variety of steam turbine systems.

The majority of this book will focus on the largest segment photovoltaics, but will also include pertinent details in each chapter regarding solar thermal technologies. Due to recent price declines in photovoltaics and the much lower maintenance required (PV panels have no moving parts!), many projects throughout the southwest United States that were planned to use CSP have been changed to PV projects.

Across the globe, recent significant price drops in traditional PV panels have significantly changed the solar industry, shifting interest away from producing more efficient products towards producing traditional photovoltaics even more efficiently. With price declines of approximately 70% over a 2-year period, the economics of PV power systems have improved dramatically and far outcompete rival solar technologies.

PV products represent the lion’s share of the solar industry. In a recent survey of solar employers in the United States, over 90% of all solar installation companies work with PV products.¹ Photovoltaics operate by using arrays of semiconductors, typically made of monocrystalline or polycrystalline silicon, to produce direct current (DC) energy from solar radiation.² The global rise in PV panel installation has led to significant growth of solar electric power in Europe and the United States, and dramatic increases in panel manufacturing throughout the globe.³

The United States has installed approximately 4 GW of solar power through 2011, tying it with Spain for fourth place in total generation, behind Germany, Italy, and Japan.⁴ Though the total amount of energy generated by photovoltaics has increased dramatically over the last 10 years, the overall demand growth over the first part of that period has meant that PV merely kept up with other technologies, as the percentage of electricity produced by PV systems had not changed significantly over time.⁵

This inability to capture increasing share of the electrical profile shifted in 2009, when the solar capacity of the United States experienced incredible growth, with no signs of a slowdown. During this solar boom, for the first time in generations, the United States experienced energy demand declines due to the great recession and accompanying slow recovery. And the pace continued to quicken; utility-driven PV installations increased 109% alone in 2011 representing an additional 758 MW of solar power.⁶

Installations only tell part of the US solar story. Despite widespread misconceptions, perpetuated by media stories, the United States is a net exporter of solar products, meaning that US manufacturers produce more solar components than are installed domestically. Historically, only 30% of the photovoltaics installed in this county are domestically sourced, but the United States exports large quantities of solar products to other nations. In 2010, for example, the United States imported $3.7 billion of solar products, while exporting $5.6 billion, resulting in a net export of nearly $2 billion in the industry.⁷

Every mainstream discussion on photovoltaics eventually leads to China, but it is becoming increasingly apparent that it is for the wrong reasons. Though it is true that Chinese contribution to the global industry has been primarily related to production (as the largest producer of solar products), it is becoming increasingly apparent that demand-pull from China will be the single most important factor shaping the future of the solar industry in the United States, potentially remaking the economics and labor force of the US solar industry.

Currently, increased production of low-cost Chinese panels has resulted in significant price declines for global PV installations. In 2011, prices dropped by an incredible 30%, as part of a 70% decline over the last 30 months.⁸ This price drop has clearly negatively impacted manufacturers outside of China, prompting a trade complaint filed (and won, at least temporarily) by US manufacturers.

Equally apparent, however, is that the price declines have spurred the US installation market. Together with strong federal and local incentive programs, the low price of equipment has led to significant global increases in solar installations, leading many experts to believe that PV-produced energy will soon reach price parity—some believing as early as 5–10 years from now.⁹

Price parity, the elusive holy grail of the industry, will have as much (or more) to do with China than perhaps any other region. On the one hand, and as previously mentioned, module price declines from Chinese manufacturers have brought PV power dramatically closer to parity. Declining cost trajectory would obviously hasten this trend, however, China’s direction in terms of installations will likely be the key to prices in the future.

Like any commodity, supply and demand dictate pricing, and the future of Chinese demand has as much to do with forecasting prices as does the supply output. As of 2012, China has installed approximately 7 GW of solar power, but it has set a goal more than doubling that by adding 10 GW of solar power in 2013 alone.¹⁰ As reported in Reuters in January of 2013, this sets China on a strong path to achieve their previously stated goal of 21 GW of solar power by 2015.

As noted in that report, however, this alone is not sufficient to significantly drive prices up or spur greater innovation for future market response. According to Morningstar Analyst Stephen Simko (as reported by Reuters), “If you look at how much supply there is in the world relative to demand, even if China grows by 10 GW this year, it really is not enough to fix the problems that exist in the solar sector…”¹¹

A persistent and sustained increase in capacity additions in China together with continued growth in Europe and the United States would likely bring supply to a level that would increase prices in the short term. This spike is inevitably followed by greater manufacturing innovation and efficiencies, which lead to permanent price declines. As a result, one likely pathway for sustained price parity with fossil generation includes temporary price spikes due to rapid expansion of installed capacity.

Germany has the world’s most mature solar market with nearly 28 GW of installed solar capacity in 2012, adding nearly 7.5 GW in 2011 alone. Coupled with its 18 TWh of thermal energy, solar power contributes 3% of Germany’s overall output, an increase from 0.01% in 2000. Germany presents a compelling example of how to build a solar industry in a large country with a significant economic and manufacturing base.

Throughout this text, each chapter will include a topical overview for the global industry with specific emphasis on the US markets. In addition, trends in Germany and China will provide additional detail and serve as reference points for comparison. In this way, three of the major solar markets will be covered in detail.

Any analysis of the economic or workforce implications of solar energy must delineate not only by technology (and to some extent, geography) but also by scope. Distributed generation, or production of electricity at the site of consumption, includes projects that are much smaller in size and scope than utility-scale projects, where power is produced in mass quantity and delivered to customers through the grid. Much more labor intensive, distributed generation maintains its cost competitiveness because there is virtually no loss in transmission and in most cases, no payments or fees to the electric utilities. In fact, in many regions of the country, grid-tied distributed generation system owners receive credits or payments from their utilities for their surplus power production that can be transmitted to other customers.

Solar installations are therefore generally segmented into three categories: (1) residential, such as homeowner, rooftop solar; (2) nonresidential, such as commercial building or campus-wide systems; and (3) utility-scale, large systems designed specifically for feeding the grid rather than specific uses.

In addition to price declines in manufacturing and installation, low interest rates, beneficial tax policies, state renewable energy credits, and new financing models, solar power is rapidly approaching price parity with traditional, fossil-fuel electric prices in the retail market. Despite the many economic and social benefits of solar power, however, consumers have...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Acknowledgments
• 1. Introduction: An Overview of the Solar Industry
• 2. The Mechanics of Solar Power
• 3. The New Culture of Environmentalism
• 4. Finance and Venture Capital
• 5. Global Solar Policy
• 6. Federal and State Energy Policies
• 7. The Solar Labor Market—Efficiencies and Productivity
• 8. Global Markets
• 9. The Economics of Solar Power
• 10. Afterward
• Glossary