Several trends appear to be converging to make 2011 a watershed year for solar power, though not quite along the lines that solar advocates have been telling us to expect. The long-awaited arrival of "grid parity", when the unsubsidized cost of power from solar panels finally becomes competitive with that of power from the grid, is still either imminent or elusively out of reach, depending on who you ask. In the meantime, solar power remains critically dependent on government incentives. Changes in subsidy levels in key countries and the rapid growth of solar manufacturing in Asia are setting the stage for a shift in the geographical focus of the industry, with important implications for national energy policies.
Last year most of the new solar photovoltaic (PV) capacity in the world was installed in Europe, accounting for roughly
4 out of every 5 Watts of global PV additions. That shouldn't have surprised anyone, because it fits a long-standing pattern. However, the European policies that made it possible for PV to compete, even in such un-sunny northern locations as Germany, have come under considerable pressure as governments have been forced to confront high debt levels and other priorities.
Feed-in tariffs (FIT) that guaranteed above-market power prices for the life of a PV installation have been slashed across Europe, including in
Germany,
Italy and
France, in a trend that has lately spread
beyond Europe. This is beginning to translate into lower demand. The reason it hadn't already resulted in a big reduction in European PV installations is that the cost of PV was dropping rapidly, further justifying legislated cuts to generous FITs.
Here's where the narrative diverges from the storyline that advocates outside the solar industry have been touting for years. Although a substantial portion of those cost reductions is attributable to economies of scale and experience curve effects--manufacturers finding new ways to cut costs as output climbs--a large slice of the reduction in global PV prices has been due to increased competition from lower-cost producers entering the game. The largest PV manufacturers in the world are now mainly based in China, rather than Europe, and PV producers outside Asia have had to shift much of their manufacturing to lower-cost locations in response. So for the last couple of years we've seen a global PV market focused mainly on sales in Europe but increasingly dominated by export-driven manufacturing in Asia. That picture is now changing as domestic demand in Asia picks up, along with growing installations in the US.
China is rapidly becoming the key country for solar, from both a supply and demand perspective. In addition to hosting leading PV producers such as JA Solar, Suntech Power, Trina Solar and
Yngli Green Energy, China's latest five-year plan increases the country's solar power target to
10,000 MW by 2015 and 50,000 MW by 2020. That compares to
global solar capacity of around 37,000 MW at the end of 2010, nearly half of which is in Germany. Ramping up installations to meet its new goals, as ambitious as they are, is unlikely to turn China from a net solar exporter to a net importer, as happened earlier for oil. That's because China's PV manufacturers are still adding capacity at a rate that should allow them to satisfy domestic demand in China--where they face only modest competition from foreign firms--while remaining highly competitive elsewhere.
With these developments, policy makers in Europe and the US who have been as focused on the creation of national solar manufacturing industries as on the deployment of solar as an element of their broader renewable energy strategies must answer a crucial question: As the PV industry develops and matures, will it follow the path of wind turbine manufacturing, in which established US and EU firms have been able to remain globally competitive, similar to the aerospace industry, or is it likelier to emulate consumer electronics, for which manufacturing is now dominated by Asian producers? If it's the latter, then the whole system of solar incentives must be rethought.
In the meantime, the shift of the solar power center of gravity away from northern Europe should advance the prospects for grid parity, because low-cost solar power depends as much on high-quality solar resources as on cheap PV panels. Geography isn't always destiny, but in the case of solar power its full potential will only be achieved when its deployment aligns large power demand with high average annual
solar irradiance. In the long run, that points to a global PV market focused squarely on the US and China.
Photo by dan.
This is the sort of good news that must be shouted from the mountaintops of Appalachia (while there are still mountaintops there)…and run head to head against other energy sector news stories that have come out in recent weeks such as these three stories:
Piedmont Energy’s announcement of investing $3 Billion for a new gas/coal plant, touted as being more efficient and cleaner than older powerplants, but also ignoring the gas fracking issues for gas, mountaintop removal, and the same old risks of mining that have always been part of the industry.
The recent tragedy of loss of life at a Massey Coal Mine, which is actually the second accident in a Massey Mine since April 2010 (in less than one year) resulting in a total loss of life of about 50 souls. This horrible news coming from a company that posted a 2007 report on Wikepedia praising themselves for their safety record by comparing their “non-fatal safety record” as nearly even to the workplace safety record of the “retail industry” in our country.
Also, in less than a year of prior bad news, BP was just granted within the last few days, “permitting to drill for oil offshore in the Arctic.”
The record of the fossil fuel sector in the last few weeks and months is status quo for these fuel sources for more than 100 years. Chevron is accused of massive pollution of the Amazon, Exxon had a really bad day at the office in Prince William Sound Alaska.
In the 1970′s coal miners went on strike for safer working conditions after a few dozen miners where killed in an explosion, and the mine owner, Duke Energy refused to negotiate for more than a year, and only came to the table after one of their thugs shot and killed a miner on the picket line.
Pete Seeger wrote a song about a similiar situation that occurred in the 1900′s when dozens of miners striking for safer working conditions were murdered and thrown into a hole.
It is the very definition of “irony” that the employers in the fossil fuel sector tell their employees that the EPA, the Dems, the liberals, and the commies don’t care about them. Nothing could be further from the truth. The reality check is that the EPA, Dems, liberals, and commies care about everybody.
In fact, if you step back to see the whole picture, the Republicans, right wingers, and Libertarians (although some doubt the latter)also care about everybody. So why the impasse? Why make the employees and the families in the fossil fuel sector the scapegoats for the status quo? It’s not the economy, or climate change, however both are on our shoulders poised and ready to slash our throats…. it is our food supply, which at this moment depends on fossil fuels in order to be harvested, transported, and refridgerated.
The ugly truth is that our leaders are paralyzed with fear, of disrupting our food supply, their hands could be frozen on the steering wheel until we all crash and climate change does us all in. It is horribly unfair to tell coal miners, all other fossil fuel employees, and their families that their own brothers, sisters, and government don’t care about them. They deserve the best jobs in the green energy sector nationwide.
The news of the success of the LADWP of going from 5% to 20% renewable in 5 years must be shared. It will give people hope that this is not the end, rather that this is a whole new beginning for mankind. LADWP’s recent success is more than applaudable. If we all work together we can even do much better than that, and on a global scale. Other people in other countries want the same future and same survivability that we all do.