300 GW a year: Power in numbers09 / 2012, Markets & Trends | By: Jonathan Gifford, Shamsiah Ali-Oettinger
The 300GW/a initiative: While the production side of the current PV industry sags under the weight of surplus supply, talk of long-term optimism and big goals for future capacity may seem to be nothing but hot air. However in an energy market where things are changing rapidly, pv magazine is tackling the idea of whether 300 GW per year (GW/a) of installed PV generation can be added globally in the year 2025 and beyond.
Big challenges require big thinking. Indeed, some of the data that have been mounting of late have begun to make the challenge posed by climate change seem extremely big. In the July edition of Rolling Stone Magazine for example, long time environmental and climate change author Bill McKibben summed up some of the numbers that are beginning to bring home the big reality of climate change: “June broke or tied 3,215 high-temperature records across the U.S. That followed the warmest May on record for the Northern Hemisphere – the 327th consecutive month in which the temperature of the entire globe exceeded the 20th-century average, the odds of which occurring by simple chance were 3.7 x 10-99 ,” an infinitesimally slim chance.
While turning to the Rolling Stone magazine for comment on climate change may appear a little unorthodox, McKibben’s article was a major online success and the need for clever thinking to challenge a big problem is apparent. Could 300 GW/a by 2025 be a representation of such thinking, or is it pie in the sky? The current PV market is generally accepted to be around 30 GW/a. 300 GW/a would be an increase by the power of ten over 13 years or an annual growth rate of 20 percent. In the previous decade, PV’s growth far exceeded this, but that was from a very low base and was in a time when Europe supplied significant demand through generous incentives. For 20 percent growth to be sustained over the next decade and beyond, it would have to be done without anywhere near the same level of public support and may be in the face of political opposition or attacks from other vested interests.
The case for 300 GW/a
“I think by 2020 we are looking at 100 GW or 120 GW/a installed capacity, so therefore for 2025, 300 GW/a is definitely in the cards,” says Eicke Weber, the Director of the Fraunhofer Institute for Solar Energy Systems. He bases his argument for such a level of installation primarily on the growing economic imperative, with PV becoming competitive with various non-renewable generation fuel sources, first oil and diesel, then other fossil fuels and nuclear.
“The LCOE for PV in some countries is now below US$0.10/kWh and it will go to US$0.08/kWh very soon,” says Weber. This makes PV competitive on a generation level with new nuclear power plants and fossil fuels, if conventional electricity producers are made to be accountable for externalities, like CO2 emissions or nuclear waste disposal. The President of the European Photovoltaic Industry Association (EPIA), Winfried Hoffmann supports Weber’s view and adds that a large proportion of nuclear-dominated France’s reactors are already written off and hence producing electricity at around US$0.03/kWh. For new nuclear, says Hoffmannn, “the real costs of a kWh is much higher than the number discussed today in public.” How to purchase insurance for a new nuclear power plant without government subsidies, is also not included in the low costs quoted for the technology.
German Green Party Member of Parliament Hans-Josef Fell also argues along economic lines for the rapid deployment of PV. He postulates that fluctuations in oil prices and other fossil fuels is a major contributor to the downturns that have gripped the global economy in recent years.
Fell authored the draft of Germany’s influential Renewable Energy Act, known as the EEG, and he links the Euro-crisis to a spike in the oil price. “Conventional energies have already caused the world economy to crash,” says Fell, “the Euro-crisis is more deeply linked to the energy crisis, and this relationship is more pronounced than what is already discussed.” He argues that as politicians come to this realization the case for renewable energies, including PV, will become overwhelming.
The case for the realization of a 300 GW/a goal can also be made for a number of other reasons. Stanford University’s Mark Jacobson states that with between 50,000 and 100,000 deaths per year in the U.S. and 300,000 per year in Europe as a result of fossil fuel emissions, goals such as 300 GW/a of PV by 2025 are absolutely necessary. “From a societal point of view of individual countries, their overall costs go down right away [with an increase in renewables and a reduction of fossil fuel reliance],” explains Jacobson. “Right now it’s much cheaper for society to use renewable technologies, because the health costs alone are so large.” Jacobson explored this theme using New York State as an example. Given the U.S. government assumption that the value of a life is US$7.7 million, and given the 4,000 deaths a year because of fossil fuel caused pollution, “that’s US$32 billion per year or three percent of the GDP of the state,” says Jacobson. He has calculated that for the entire state to transform its electricity generation to renewables, it would cost US$570 billion. The result being that purely through health costs, the renewable energy transformation could be funded in 17 years.
While much political and public debate regarding anthropomorphic climate change becomes increasingly heated and support for PV is dragged into the debate (see pp. 48-54), evidence of climate change is apparent in parts of the U.S. In the country where debate over this issue is highly political and emerging as a major theme in the looming presidential election, parts of the U.S. are currently in the grip of the worst drought in more than half a century. The American Meteorological Society and the Department of Agriculture forecast dire returns from the year’s corn crop in July: “The worst Midwest drought in a quarter century is doing more damage to U.S. crops than previously expected.” The Kansas Livestock Association has reported drought in 80 percent of the states that form the country’s “Beef Belt,” prompting the U.S. Department of Agriculture to release extraordinary funding to get water to livestock.
Measures to require fossil fuel electricity generators to account for CO2 emissions based on climate change’s effects are developing or being put in place in some countries, such as Australia, which enacted a Carbon Tax that came into effect on July 1. EPIA’s Hoffmann believes such measures and the additional cost of carbon sequestration and storage brings about PV’s competitiveness on a LCOE basis. “If you look at the last one or two years, the real generation cost for fossil fuel-based kWh is approaching US$0.08 or US$0.09/kWh,” he says. In Germany, with PV’s LCOE at US$0.14 or US$0.16/kWh, depending on installation size, the point of parity is not far away, and in places with higher irradiance closer still.
300 GW where?
Despite the compelling evidence for the necessity of 20 percent annual growth of PV to 2025, just where 300 GW/a of capacity will be added geographically is not an easy question to answer. Christian Breyer from the Reiner Lemoine Institut is working with colleagues there to construct a multifaceted dynamic model by which a 100 percent renewable energy future can be conceptualized. Breyer says that countries in which there is a growing demand for electricity are bound to play a large role, but that the updating of existing generating capacity with PV as a fuel replacement will also provide significant demand pull.
Breyer continues that he believes North America will remain important, but Asia, and in particular China, will have the most significant PV markets heading to 300 GW/a. However, he adds that growing economies elsewhere should not be underestimated. “A lot of fast growing developing countries like Brazil, India and Indonesia will be important markets and of course current consumption in Russia and the former Soviet Union countries is not too low.” For a full interview with Christian Breyer, see pages 36 to 39.
In early August, Pike Research’s latest Renewable Distributed Energy Generation report arrived at similar conclusions to Breyer, finding that while Europe and China will remain important PV markets, Africa and the Middle East are becoming “indispensable” to the global PV marketplace. The report predicted a global installation rate of 63.5 GW/a in 2017.
Support for PV from the Chinese government appears to be remaining robust and it more than doubled its goal for PV capacity by 2020 from 20 to 50 GW early last month, with an interim goal of 21 GW by 2015. Elsewhere in Asia, Japan has seen revamped and generous FITs for PV installed and Noriaki Yamashita from the county’s Institute for Sustainable Energy Policies (ISEP) forecasts three GW of newly installed PV capacity added in 2012, with that increasing to five GW in 2015. While his reaction to a 300 GW/a goal was that it is a “very challenging target,” post-Fukushima Japan represents an example of how energy policy can change rapidly in a developed economy. Yamashita reports that in recent annual general meetings, 40 major Japanese firms announced intentions to move into the development of utility-scale PV.
India’s support for the major growth of PV through national and regional incentives is well understood, however much publicized grid failures on July 30 and 31, which left 800 million people without power, have illustrated the urgent need for reliable electricity supply in the region. EPIA’s Winfried Hoffmann says that there are gigawatts of diesel currently in place, which can be supplemented with PV. “You can add PV to existing diesel systems and use PV as a fuel saver,” says Hoffmann. “You can still use the diesel for times when there is no sun available, and the kilowatt-hours including PV are cheaper than with the diesel permanently running.” PV can also substitute for oil-fired electricity generation in countries such as Saudi Arabia. In May a government agency recommended that 41 GW of solar capacity should be added, of which 16 GW would be PV. The world’s largest oil company, Saudi Aramco, is currently required to sell oil for US$4.90/barrel for electricity generation in the country. On the global market, that same barrel of oil could sell for upwards of US$100/barrel. Fraunhofer’s Eicke Weber says that by replacing some of that oil as a fuel source for electricity, “the Saudis could make billions of dollars.” He adds that interest in PV in the region is picking up sharply and that when he consults with decision makers in the country, “they ask all the right questions.” Other MENA states, such as the United Arab Emirates, are also emerging markets, despite highly subsidized electricity costs for consumers, due to rising electricity demand in the region. Figures unveiled at a Middle East Electricity summit in 2011 predicted US$2.2 trillion would have to be invested in new capacity to meet estimated demand in 2019. Australia too can play an important role in the 300 GW/a goal, says the University of New South Wales’ (UNSW) Richard Corkish. Representing the “low hanging fruit,” Corkish believes that Australia could become an example of a 100 percent renewable economy. “We’re an advanced, developed economy that is a high-energy economy. But we’re lucky enough to be a big continent with relatively low population density with renewable sources easily exceeding our needs.” Ample sunshine over much of the country and rapidly increasing retail electricity prices is also feeding into the “perfect storm” for PV. In this electricity climate, says Corkish, forecasts for installed PV capacity can afford to be ambitious: “Big numbers are very, very realistic I think.” Although it should be noted that the UNSW Photovoltaics head was more cautious than others supporting outright the 300GW/a goal: “To actually put numbers on a market that far ahead you’ve actually got to be very brave,” he stated.
PV activity in South Africa and off-grid solutions in other parts of the continent (see pp. 148-149) can also provide further demand, and PV industry activity in the area is picking up. The South American PV market in Chile is developing rapidly (see pp. 44-47) and the move by Argentinian and Chilean investors to take over the insolvent PV manufacturer Inventux Technologies last month indicates that an upstream business may be developing to serve the region also.
Growth of PV in the U.S. and Canada has been steady, seemingly despite the increasingly fierce debate over renewable energy. In the U.S. utility-scale projects are being built out in 2012 and the commercial rooftop market segment in places like New Jersey has exceeded predictions by the Solar Energy Industries Association (SEIA). Around 3.2 GW of installed capacity have been predicted by the SEIA for 2012.
One of the keys to seeing continued growth in the PV sector in the U.S. will be the availability of finance, and it is an area where there has been a great deal of innovation in recent years. An oft-quoted fact is that in many markets the cost of finance is the largest component of the LCOE produced by a solar array. Tony Seba, a lecturer in entrepreneurship and clean energy at Stanford University notes that providing finance for PV in the U.S., while challenging, is also a space for new business models to develop. “Allowing customers access to easier and cheaper capital will be a big opportunity.” He cites solar leasing models, such as those employed by SolarCity, SunRun and Sungevity as being able to form a crucial link between institutional investors and potential PV customers. Clean Tech Finance has also rolled out a business model to provide this vital link (see pp. 184-186).
Seba, who is also the author of the new book, “Solar Trillions,” cautions that the regulatory framework will continue to pose challenges to PV in the U.S. for some time. Seba describes much of the existing regulation in place as representing an Electricity 1.0 view, and says much must be done to turn it around. “We need to work to make sure that you can connect your solar residential installations or your solar commercial installation to the grid just like you connect your PC to the Internet.”
If PV does continue to grow at the 20%/a rate required to reach the 300 GW/a goal, it is entirely plausible that vested or special interests, particularly the owners and operators of existing electricity infrastructure, may flex political muscles and try and prevent PV’s rapid development. Seba cites the low PV penetration rates in sunny states such as Arizona and New Mexico as evidence of impediments to PV’s expansion and also Californian utility companies’ resistance to net metering for households and businesses with PV arrays.
However, the effects of climate change will override political resistance to renewables in the next five to 10 years, says the Director of the National Renewable Energy Laboratory’s (NREL) Photovoltaics Center, Greg Wilson. “I think the first manifestations will be in large disruptions to food supply and access to fresh water, which is going to create dramatic social instability,” says Wilson. He concludes that as such, the forces pushing towards non-polluting solutions will be too large to hold back.
The German Green party’s Fell is a man familiar with facing just such political resistance to renewables and he is convinced it can be overcome. “Politics is very important because politics can hinder this strategy or it can accelerate it, but politics cannot stop it.” Fell argues that while the pushback is being felt in politics such as in Germany and the U.S., there is hope from other parts of the world like China and some of the Southeast Asian states, which are only now beginning to introduce FITs.
Japan is also seeing PV being contested in the public space, with ISEP’s Yamashita reporting that about half of the media coverage surrounding the revamped FITs chose to focus on the cost of PV, rather than the opportunities in the new industry. He too remains confident however and says the current high level of interest in a revitalized energy debate is a positive sign. “Before Fukushima most people had no attention on energy policy and energy issues, but now they think that renewables are a good thing,” he concludes.
In Germany, the Fraunhofer Institute’s Weber says an interesting development is taking place in the state of Baden-Württemberg, where a government dominated by the Greens controls one of the big electricity companies, EnBW AG. Weber asks: “Will this company, which still operates nuclear power plants, be the first to develop new renewable business models?” EPIA President Winfried Hoffmann believes that as the price of PV continues to fall, the economic reality will overcome any political pushback. “I am convinced simply on the cost and price development for renewables, compared with the cost and price increase from the traditional nuclear and fossil generation,” he says. But for this to eventuate, PV’s cost reductions and the effects of the learning curve will have to eventuate. And this is something that is contested.
Speaking as a scientist, Weber says he is confident that the learning curve will continue to deliver major cost savings for PV. He adds that while some thought a slowing of price declines in 2006 and 2007 indicated a tapering off from the long-term learning curve, 2011 and 2012 prices came out below the learning curve, indicating that its effects are still valid. He points to automation techniques, handling of materials, and process and yield controls as areas where new fabs can far outperform old ones. He says much of the manufacturing capacity responsible for the current industry oversupply will be phased out as they are unable to compete.
“I see the learning curve continuing and I see electricity costs coming down to US$0.05/kWh and below,” says Weber. “Actually, when we’re at that level, we don’t need to further reduce the costs because then PV will be the least costly electricity, with the only exception being hydro.” The learning curve must also be applied to energy usage within PV production, if a 300 GW/a industry is to be truly sustainable, continues UNSW’s Richard Corkish. “We need to take every step to make our production processes as efficient as possible and to get the energy payback time for the PV – not only cells but modules and systems – reduced as far as we can,” he says. Bringing various production processes into step is also important, Corkish adds, however vertical integration of companies has gone some way to address this challenge. On a macro level, research from Q-Cells SE and the Reiner Lemoine Institut indicates that the energy required for PV production has been falling away compared with the net energy produced by PV very rapidly in recent years (see diagram at the top of page 30).
Integration and storage
Grid integration of PV and the challenges posed by intermittency will however continue to provide a major challenge for the industry in achieving 300 GW/a, and in meeting this challenge there are a large number of solutions. To address the challenge of PV intermittency, a holistic and multifaceted approach is advised by the researchers and industry professionals pv magazine consulted. The experts advocate an application of various storage technologies, international smart grids and power electronics, accurate forecasting techniques and super grids, all applied to varying degrees. PV’s place in an integrated renewable and conventional power supply mix of the future must also be emphasized, as the models being developed by researcher Breyer are attempting to set out.
The importance of PV integration and the need for more accurate research data and an understanding of the field are apparent in increasing moves to tackle the issue. Australia’s leading industrial research body, the CSIRO, published a paper this June where it suggested intermittency could be tackled, although research into many areas is urgently required. EPIA is currently in the final stages of preparing a major report into grid integration issues that also hopes to contribute to this aim.
Furthermore, the Association of German Engineers (VDI) released material last year to promote debate on how 100% renewable solutions can be realized. For Germany, it argued that coercive and incentive-based measures could be used to drive the development of grid-level storage solutions. These measures would apply to both renewable and conventional electricity companies. It also advocated cross-border capacity to be developed, a solution currently being developed by the wind industry and one in which Fraunhofer Institute’s Weber places considerable faith.
NREL’s Greg Wilson is of the opinion that the development of new grid technologies could present the answer: “I think a well engineered grid, with all the improvements that are possible with a fairly straightforward integration technique excluding storage, would mean 25 to 30% renewable penetration is easily possible.” Wilson notes that storage costs are currently not at the stage where they are competitive, however EPIA’s Hoffmann believes that the potential for a learning curve in the storage field could drastically reduce costs in five to 10 years. Hoffmann also espouses the potential of a power-to-gas storage solution, with a storage capacity currently in the existing gas grid in Germany alone of 110 TWh in electric units, being 20 percent of the country’s annual electricity requirements.
What is clear is that a big goal such as 300 GW/a will require big thinking to deliver the solutions to the technological, financial and public policy hurdles the industry will have to overcome. Indications are that the PV technology landscape will also be a very different one than that which we see today, despite consensus among the major research bodies that crystalline silicon will remain the predominant technology, although perhaps not in the form it currently appears.
Given the bullish predictions expressed by leaders from NREL, EPIA, the Fraunhofer Institute and others, 300 GW/a can give considerable hope to equipment suppliers and manufacturers facing an extremely tough market. NREL’s Wilson succinctly sums it up: “It doesn’t really help the executives of small PV companies today that are going out of business because of current commodity cycles. A lot of companies will fail, but new companies will form from their ashes.” And to the survivors, a 300 GW/a future could be a rich reward.