TODAY’S STUDY: SUN FOR THE WORLD

So much sun, so little time...All the world has to do is perfect its ability to capture and transform a tiny portion of the sun's daily heat and light to beat the climate change threat rapidly becoming unavoidable. But will it?

Here's the good news: The report highlighted below points out all the ways the world already has advanced its ability use the sun. It also describes how successfully the world is building solar energy infrastructure and bringing the cost of sun down.

Ready for the bad news? It's a race against time and the Old Energies aren't going to toss over the keys to the grid and say "Ok, you guys drive from here."

Inevitably, sun will get cheaper and it will get built. The question remaining is "Will it get done before this good earth is changed utterly?"

The answer rests with 2 groups of people, (1) those who choose political leaders and policy-makers and (2) the scientists, engineers and entrepreneurs who make and build sun.

Solar Generation 6; Solar Photovoltaic Electricity Empowering the World 2011
February 2011 (European Photovoltaic Industry Association and Greenpeace)

Executive Summary

Status of solar power today

At the end of 2009 the world was running 23 GW of photovoltaic (PV) electricity, the equivalent of 15 coal-fired power plants. At the end of 2010, this number should reach more than 35 GW. We have known for decades that just a portion of the energy hitting the Earth’s surface from the Sun every day could power all our cities several times over.

Solar can and must be a part of the solution to combat climate change, helping us shift towards a green economy. It is also a potentially prosperous industry sector in its own right. Some industry indicators show just how far photovoltaic energy has already come.

click to enlarge

• The cost to produce solar power has dropped by around 22% each time world-wide production capacity has doubled reaching an average generation cost of 15c/KWh in EU.

• Average efficiencies of solar modules have improved a couple percentage points per year. The most efficient crystalline silicon modules, go to 19.5% in 2010 with a target of 23% efficiency by 2020, which will lower prices further. That increase in efficiencies is seen in all PV technologies.

• Solar power booms in countries where the boundary conditions are right.

• Over 1,000 companies are involved in the manufacturing of the established crystalline
silicon technology and already more than 30 produce Thin Film technologies.

• The energy pay time back the electricity it took to create them in one to three years. The most cutting-edge technologies have reduced this to six months depending on the geographies and solar irradiation, while the average life of modules is more than 25 years.

click to enlarge

Imagining a future with a fair share of Sun

The European Photovoltaic Industry Association (EPIA) and Greenpeace commissioned updated modelling into how much solar power the world could reasonably see in the world by 2030. The model shows that with a Paradigm Shift scenario towards solar power, where real technical and commercial capacity is backed-up by strong political will, photovoltaics could provide:

• 688 GW by 2020 and 1,845 GW by 2030.

• Up to 12% of electricity demand in European countries by 2020 and in many Sunbelt countries (including China and India) by 2030. Around 9% of the world’s electricity needs in 2030.

Under an Accelerated scenario, which follows the expansion pattern of the industry to date and includes moderate political support, photovoltaics could provide:

• 345 GW by 2020 and 1,081 GW by 2030

• Around 4%of the world’s electricity needs in 2020.

click to enlarge

What are the benefits?

The benefits of a Paradigm Shift towards solar electricity as described in this model include:

• Provide clean and sustainable electricity to the world.

• Regional development, by creation of local jobs. New employment levels in the sector – as many as 1.62 million jobs as early as 2015, rising to 3.62 million in 2020 and 4.64 million in 2030.

• Clean electricity that contributes to international targets to cut emissions and mitigate climate change.

• Avoiding up to 4,047 million tonnes of CO2 equivalent every year by 2050. The cumulative total of avoided CO2 emissions from 2020 to 2050 would be 65 billion tonnes.

click to enlarge

How can we get there?

A Paradigm Shift for solar is possible. While the PV sector is committed to improve efficiency of products and reduce costs, these aspects are not the major issues either. In fact, solar power is due to reach grid parity in a number of countries, some as early as 2015. Lessons from real examples show there are some key approaches to getting it right in solar power support schemes. These include:

- Using Feed-in Tariffs (FiT) that guarantee investment for 15 to 20 years.

FiT schemes have been proven to be the most efficient support mechanisms with a long, proven ability to develop the market world-wide.

- Assessing PV investment profitability on a regular basis and adapting FiT levels accordingly.

A fair level of FiT can help the market take-off and avoid over heated markets.

- Assessing profitability through IRR calculations.

All aspects of a support scheme including FiT, tax rebates and investment subsidies must be considered when calculating the internal rate of return (IRR) of a PV investment.

- Controlling the market with the upgraded “corridor” concept.

click to enlarge

The corridor is a market control mechanism that allows to adjust FiT levels to accelerate or slow the PV market in a country. The FiT level can be increased or decreased regularly in relation to how much PV is in the market against predefined thresholds at regular intervals (for example, annually).

- Refining FiT policies for additional benefits.

The way a scheme is designed can encourage specific aspects of PV power. For example, systems that are integrated into buildings and substitute building components.

- Drawing a national roadmap to grid parity.

Financial incentives can be progressively phased-out as installed PV system costs are decreased and conventional electricity prices are increasing.

click to enlarge

Learning from the pioneers

Some nations have taken a lead with support schemes that encourage market creation and industry growth.

Germany: The first country to introduce a FiT, has shown the rest of the world how countries can achieve environmental and industrial development at the same time.

Japan: More than 2.6 GW of solar power were installed in 2009, almost 99% of which were grid-connected thanks to incentives administered by the Ministry of Economy, Trade and Industry.

Italy: Uses a FiT with higher rates for building integrated systems (guaranteed for 20 years) accompanied with net metering to encourage solar power.

USA: Allows a tax credit of 30% for commercial and residential PV systems that can be used by utilities. Several States offer very attractive schemes and incentives.

China: The world’s largest PV manufacturer with unlocked its PV market potential. The country is discussing FiT to meet a goal of 20 GW of solar power installed by 2020, 5 GW of this by 2015 which is of course negligible considering its huge potential.

Reference for the future

This publication is the sixth edition of the reference global solar scenarios that have been established by the European Photovoltaic Industry Association and Greenpeace jointly for almost ten years. They provide well documented scenarios establishing the PV deployment potential World-wide by 2050. The first edition of Solar Generation was published in 2001. Since then, each year, the actual global PV market has grown faster that the industry and Greenpeace had predicted…

click to enlarge

Solar cost and competitiveness: Towards grid parity

The cost of PV systems has been constantly decreasing over time. Grid parity (traditionally defined as the point in time where the generation cost of solar PV electricity equals the cost of conventional electricity sources) is already achieved for some specific applications in some parts of the world. Competitiveness is just around the corner.

This section outlines the factors that will affect the PV industry’s ability to achieve competitiveness with conventional electricity producers and retail electricity prices.

3.1. Price competitiveness of PV

a. PV module price

Over the past 30 years the PV industry has achieved impressive price decreases. The price of PV modules has reduced by 22% each time the cumulative installed capacity (in MW) has doubled (see Figure 13).

The decrease in manufacturing costs and retail prices of PV modules and systems (including electronics and safety devices, cabling, mounting structures, and installation) have come as the industry has gained from economies of scale and experience. This has been brought about by extensive innovation, research, development and ongoing political support for the development of the PV market.

click to enlarge

b. PV system price

As explained above, the price of PV modules has decreased substantially over the past 30 years.

The price of inverters has followed a similar price learning curve to that of PV modules. Prices for some balance of systems (BOS) elements have not decreased with the same pace. The price of the raw materials used in these elements (typically copper, steel and stainless steel) has been more volatile. Installation costs have decreased at different rates depending on the maturity of the market and type of application. For example, some mounting structures designed for specific types of installations (such as BIPV) can be installed in half the time it takes to install a more complex version.

This of course lowers the total installation costs. Reductions in prices for materials (such as mounting structures), cables, land use and installation account for much of the decrease in BOS costs. Another contributor to the decrease of BOS and installation-related costs is the increase in efficiency at module level. More efficient modules imply lower costs for balance of system equipment, installation-related costs and land use.

click to enlarge

Figure 14 shows as an example the price structure of PV systems for small rooftop (3 kWp) installations in mature markets. In only 5 years time, the share of the PV modules in the total system price has fallen from about 60-75% to as low as 40-60%, depending on the technology. The inverter accounts for roughly 10% of the total system price. The cost of engineering and procurement makes up about 7% of the total system price. The remaining costs represent the other balance of system components and the cost of installation.

The forecasts for prices of large PV systems are summarised in Figure 15. In 2010, the range represents prices for large systems in Germany. The rate at which PV system prices will decrease depends on the installed PV capacity. By 2030 prices could drop to between €0.70/Wp to €0.93/Wp. By 2050, the price could be even as low as €0.56/Wp.

click to enlarge

c. PV electricity generation cost

The indicator used to compare the cost of PV electricity with other sources of electricity generation is the cost per kilowatt hour (kWh). The Levelised Cost of Electricity (LCOE) is a measurement tool that is used to compare different power generation plants. It covers all investment and operational costs over the system lifetime, including the fuels consumed and replacement of equipment.

Using LCOE makes it possible to compare a PV installation with a power plant utilising a gas or nuclear fuel source. Each system has very different lifetimes and investment costs which are taken into account for the LCOE calculation. The LCOE takes this into account. Moreover, for PV systems, the LCOE considers the location of the system and the annual irradiation. For example, Scandinavia typically receives 1,000 kWh/m² of sunlight. In southern Europe the irradiation can go over 1,900 kWh/m², while in the Middle East and in sub-Saharan Africa sunlight irradiation can reach up to 2,200 kWh/m².

Figure 16 shows current PV electricity generation costs for large ground-mounted systems. The data is based on the most competitive turnkey system price and a typical system performance ratio (the amount of kWh that can be produced per kWp installed) of 85%.

click to enlarge

For large ground-mounted systems, the generation costs in 2010 range from around €0.29/kWh in the north of Europe to €0.15/kWh in the south and as low as €0.12/kWh in the Middle East.

According to EPIA estimations those rates will fall significantly over the next decade. Expected generation costs for large, ground-mounted PV systems in 2020 are in the range of €0.07 to €0.17/kWh across Europe. In the sunniest Sunbelt countries the rate could be as low as €0.04/kWh by 2030.

EPIA forecasts that prices for residential PV systems and the associated LCOE will also decrease strongly over the next 20 years. However, they will remain more expensive than large ground-mounted systems.

click to enlarge

d. Electricity price evolution

Costs for the electricity generated in existing gas and coal-fired power plants are constantly rising. This is a real driver for the full competitiveness of PV. Energy prices are increasing in many regions of the world due to the nature of the current energy mix. The use of finite resources for power generation (such as oil, gas, coal and uranium), in addition togrowing economic and environmental costs will lead to increased price for energy generated from fossil and nuclear fuels.

An unfair advantage

Conventional electricity prices do not reflect actual production costs. Many governments still subsidise the coal industry and promote the use of locally-produced coal through specific incentives. The European Union invests more in nuclear energy research (€540 million yearly in average over five years through the EURATOM treaty) than in research for all renewable energy sources, smart grids and energy efficiency measures combined (€335 million yearly in average over seven years through the Seventh framework program). Actually today in Europe, fossil fuels and nuclear power are still receiving four times the level of subsidies that all types of renewable energies do9.*

Given the strong financial and political backing for conventional sources of electricity over several decades, it is reasonable to expect continuing financial support for renewable energy sources, such as wind and solar, until they are fully competitive.

click to enlarge

External costs of conventional electricity generation

The external costs to society incurred from burning fossil fuels or nuclear power generation are not currently included in most electricity prices. These costs are both local and, in the case of climate change, global. As there is uncertainty about the magnitude of these costs, they are difficult to quantify and include in the electricity prices.

The market price of CO2 certificates remains quite low (around €14/tonne CO2 end of 2010)10 but is expected to rise in the coming decades. On the other side, the real cost of CO2 was calculated at €70/tonne CO2 from 2010 to 2050.

Other studies consider even higher CO2 costs, up to US$160/tonne CO2.

Taking a conservative approach, the cost of carbon dioxide emissions from fossil fuels could be in the range of US$10 to US$20/tonne CO2. PV reduces emissions of CO2 by an average of 0.6 kg/kWh. The resulting average cost avoided for every kWh produced by solar energy will therefore be in the range of US$0.006 to US$0.012/kWh.

The Stern Review on the Economics of Climate Change, published by the UK government in 2006, concluded that any investment made now to reduce CO2 emissions will be paid back in the future as the external costs of fossil fuel consumption will be avoided.

click to enlarge

PV generation cost is decreasing, electricity prices are increasing

In many countries with high electricity prices and high Sun irradiation, the competitiveness of PV for residential systems could already be achieved with low PV system costs and the simplification of administrative procedures.

Figure 17 shows the historical development and future trends of retail electricity prices compared to the cost of PV electricity. The upper and lower parts of the PV curve represent northern Europe and southern of Europe respectively. The utility prices for electricity are split into peak power prices (usually during the day) and bulk power. In southern Europe, solar electricity is already or will become cost-competitive with peak power within the next few years. Areas with less irradiation, such as central Europe, will reach this point before 2020.

The trend is similar for most regions world-wide. For example, in developing countries electricity prices are rising due to higher demand whereas PV electricity generation cost is already low and PV often more cost-competitive…