Whenever a pundit remarks that solar power is the energy source of the future, another pundit chimes in with ‘Yeah, and it always will be.’ I will try here to explain why both statements are incorrect.
As a background to this post, my contribution last year might be relevant. I have worked in the solar industry and covered it as an analyst for most of a decade. I hope what follows makes sense to you–it does to me.
Solar power will undoubtedly make a significant contribution to our energy portfolio in the future. So if you change the statement ‘the energy source of the future’ to ‘an energy source of the future’ I have no problem with it. Just change the article and I’m a happy camper.
Remember that the goal set for renewables (by which I mean new renewables without counting hydroelectric power, which was put beyond the Pale by most environmentalists, shivering alone and unloved outside with only nuclear power to keep it company) is a very reasonable 30% of electricity generation. That would amount to about 15% of total energy in most countries. Combined with wind energy and biofuels (by which I mean ethanol, as next gen biofuels will take a very long time to be even worth considering), solar power has a very real chance to be the success story long predicted for it.
To do that, take-up of solar power has to roughly triple before 2030. When it gets to about 150 GW per year of new solar, the total capacity will reach about a terawatt fairly quickly. Right now solar power supplies about 1% of the world’s electricity and new capacity amounted to about 55GW in 2015. Total solar has to reach about a terawatt before it hits critical mass, despite what fans of the technology will tell you. That’s when real manufacturing efficiencies will kick in and drive the next generation of price drops. Perhaps more importantly, that’s when the industry will have reached the critical mass required for them to deal more effectively with utilities and governments.
I divide solar power into two categories: Utility scale arrays that are financed by power companies with tax subsidies and contracts for lucrative delivery of power and residential solar panels, rooftop arrays that lower a household’s electricity costs.
Utilities, being bureaucratic monopolies bent on maintaining control of the supply of electricity, lobby hard for government support of utility scale arrays and have been fairly successful. Utility scale solar has grown dramatically, both in the U.S. and worldwide. Utilities also fight hard to capture the savings from residential PV systems, adding connection costs and lobbying to eliminate subsidies to homeowners in favor of their own businesses. Residential installations have been increasing rapidly, but still amount to a vanity purchase for upper middle class homeowners due to cost and the requirements for a good roof placed strategically.
Both are growing robustly, at about 20% last year, but the political climate is leaning strongly in favor of utility based solar going forward.
The sweet spot for solar geographically amounts to ‘anywhere with high solar insolation.’ Insolation values range from 800 to 950 kWh/(kWp·y) in Norway to up to 2,900 in Australia. (Places like Germany and the UK would do the planet more good by financing solar installations in the developing world, most of which has much higher insolation. Tell ’em, will you?) Solar works well pretty much in any area not colored blue or green in this map:
There’s room for a lot of solar, obviously. The key is falling prices and continued government support.
Regarding prices, after 6 years of dramatic decreases in solar costs, can it continue? As I mentioned above, there’s a chicken and egg element to the answer. If solar keeps selling well, manufacturers will be able to continue introducing efficiencies and accept lower margins. And newer and less affluent customers will be able to afford solar power at lower prices. You can buy modules today at about $0.50/watt. Last year it was $0.60. The question is will next year be $0.40? The answer is probably not–but $0.45 is achievable.
Solar capacity used to grow at about 37% a year–for 4 decades that was its CAGR. That has dropped to between 20% and 25%. If it can continue at that rate for another decade it will reach the terawatt level that will spark a new wave of innovation and cost reductions.
In the U.S., the government recently approved a 5-year extension of their 30% tax credits, a boon for solar hopefuls. In other countries, support for solar has waned along with the economies of former champions of solar. Solar growth has traditionally followed the subsidy–expect China and the U.S. to be the favored location for the next few years of solar.
The technology is improving. There are now being developed clear pane solar panes that can be used as windows or skylights. There are modules that work pretty well on cloudy days. The efficiency of the best panels has climbed about 10% over the past couple of years.
I predict that solar will be producing adequate amounts of electricity to be taken seriously by 2030 and will be producing about 10% of the world’s electricity by 2040. That’s based on past performance, knowledge of the improvements manufacturers can make as volume scales up and the likelihood of continued government support.
I have probably shown this chart five or six times on this weblog–it shows performance versus adoption of solar and it still seems valid. Solar is now as cheap as the fuels it seeks to replace in many (smallish) areas around the globe. The bubbles are increasing in number and getting larger and that’s due to both technological and financial improvements of the solar offer. Long may it continue thus.