Solar Energy Markets. An Analysis of the Global Solar Industry

147 Pages·2014·6.703 MB·English

by  Philip G. Jordan (Auth.)

Solar Energy Markets
Solar Energy Markets
An Analysis of the Global Solar
Industry
Philip G. Jordan
The Economic Advancement Research Institute
Wrentham, MA, USA
and
BW Research Partnership, Inc.
Wrentham, MA, USA
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Acknowledgments
I would like to offer my very special thanks to my colleague and friend Dr. Edward
A. Cunningham. His advice has been a great help in the development of this book.
I am particularly grateful to Barry Friedman of the National Renewable Energy
Laboratory, Andrea Luecke of The Solar Foundation, and Tom Kimbis and Justin
Baca from SEIA for their deep understanding of the importance of solar labor mar-
ket issues and the assistance that they have given me in developing my career.
I also wish to acknowledge Ryan Young, our research analyst at BW Research
Partnership, who provided exemplary data collection and analysis for this text.
I would also like to express my deep gratitude to Professor Zygmunt Plater and
Professor Benjamin Sachs. Each played a pivotal role in my professional develop-
ment and instilled within me a deep drive to discover, to learn, to teach, and to act.
This book would not have been possible without the constant, patient support
that I received from my wife, Anne. Thank you for the late night read-throughs and
gentle nudges along the way.
1
Introduction: An Overview of the
Solar Industry
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 similari-
ties, 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.
Solar Energy Markets. DOI: http://dx.doi.org/10.1016/B978-0-12-397174-6.00001-5
© 22001144 Elsevier Inc. All rights reserved.
2 Solar Energy Markets
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 signif-
icantly 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 sys-
tems 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 cur-
rent (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 percent-
age 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 miscon-
ceptions, 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
1 The Solar Jobs Census 2011. The Solar Foundation, October 2011.
2 See http://science.nasa.gov/science-news/science-at-nasa/2002/solarcells/.
3 http://www.eia.gov/cneaf/solar.renewables/page/solarphotv/solarpv.html.
4 BP Statistical World Energy Review 2011 (retrieved 8.08.11). EurObserver 202: Photovoltaic Barometer.
5 http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb1008.
6 SEIA and GTM Research, March 12, 2012.
7 id.
Introduction: An Overview of the Solar Industry 3
(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 signifi-
cant price declines for global PV installations. In 2011, prices dropped by an incred-
ible 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 com-
plaint filed (and won, at least temporarily) by US manufacturers.
Equally apparent, however, is that the price declines have spurred the US installa-
tion 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 genera-
tion 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
8 See http://www.reuters.com/article/2012/04/13/solar-prices-idUSL2E8FAD0 × 20120413.
9 See Lorenz, A. 1366 Technologies, speaking at the 2012 MIT Energy Conference; Lovins, A.
Reinventing Fire: Bold Business Solutions for the New Energy Era, 2012.
10 http://www.pv-magazine.com/news/details/beitrag/china-sets-10-gw-installed-capacity-target-for-
2013_100009803/#axzz2VMqehJJD.
11 id.
4 Solar Energy Markets
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 compari-
son. 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) res-
idential, such as homeowner, rooftop solar; (2) nonresidential, such as commercial
building or campus-wide systems; and (3) utility-scale, large systems designed spe-
cifically 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 responded more slowly than expected and most of
the new solar megawatts installed in the United States come from commercial and
utility-scale projects.
Recent estimates indicate that the United States installed 1.85 GW of PV power in
2011. These new additions were led by commercial installations of about 800 MW,
followed closely by utility-scale projects (758 MW) and 297 MW of residential PV
generation.12
Some of this is likely due to concerns about the boom–bust history of the solar indus-
try, particularly during the 1970 energy crisis. The crisis and accompanying oil embar-
goes spurred America to action to develop and refine technologies to generate power.
Current solar panel designs were developed in the late 19th and early 20th cen-
turies (both thermal and PV), but they were very expensive to produce. Around the
same time that the energy crisis was in swing, new technologies brought the price
down from nearly $100 per watt to $20. The price declines and political will for a sus-
tainable source of domestic energy led to late 1970s production exceeding 500 kW of
solar power and widespread use from oil rigs to spacecraft, and all manner of off-grid
applications in between. By 1983, solar projects were generating more than 21 MW of
energy, and the solar industry was a $250 million per year business.
12 SEIA and GTM Research, March 12, 2012.
Introduction: An Overview of the Solar Industry 5
The mid-1980s brought an end to the energy crisis and oil dipped below $15
per barrel. American consumers resumed their pre-crisis consumption patterns, and
political leaders heeded the changing winds and ended or dramatically reduced sub-
sidies. The industry that looked to have such promise was, for all intents and pur-
poses, dead.
This boom–bust cycle has led many to be cynical, suggesting that the solar indus-
try will yet again fail to live up to expectations. There are significant differences
between the solar industry’s current position and its past, however, which make it
unlikely that—despite recent headlines regarding Solyndra and other high-profile
bankruptcies—history will repeat itself in this instance.
This book examines the key drivers of why the present success of the solar indus-
try differs from past experience by examining six key drivers of the solar industry
in a global context: (1) a new culture of environmentalism, (2) policy and markets,
(3) financing and venture capital, (4) economics and cost competitiveness, (5) inno-
vation, and (6) labor.
2
The Mechanics of Solar Power
A basic primer on the mechanics of solar power generation is important in order to
develop the foundational knowledge required to properly consider the economic and
workforce trends of the solar industry. This chapter provides an overview of how
each of the various technologies (PV, thermal, etc.) work. It is neither as exhaustive
as a scientific textbook on the subject nor is it as simple as a glossary entry; rather
it provides the introductory knowledge base that is a prerequisite for analyzing and
considering the industry as a whole.
Installed Capacity
Global Installed Totals (MWp)
2008 2009 2010 2011 2012
CSPa,b 484 663 969 1598 2553
PVc 16,200 23,600 40,700 71,100 102,200
aCSP Facts & Figures. Csp-world.com (retrieved 22.04.13).
bConcentrating Solar Power. irena.org, p. 11.
cEuropean Photovoltaic Industry Association, 2013. Global Market Outlook for Photovoltaics 2013–2017.
Source: CSP: https://en.wikipedia.org/wiki/Concentrated_solar_power; PV: http://en.wikipedia.org/wiki/Photovoltaics.
Photovoltaic
At its most basic level, solar PV technology converts sunlight to energy. This conver-
sion happens directly through solar cells made up of various components that produce
the photoelectric effect. This phenomenon occurs when electrons are emitted from
materials as they absorb light energy. Though early PV cells were made of silver sele-
nide or copper, silicon has been the predominant substance used for the past 60 years.1
Total PV Peak Power Capacity (MWp)a
Country or Region 2010 2011 2012
World 39,778 69,684 102,024
European Union 29,328 51,360 –
Germany 17,320 24,875 32,509
Italy 3502 12,764 16,987
China 893 3093 8043
United States 2519 4383 7665
(Continued)
1 http://www.eere.energy.gov/basics/renewable_energy/types_silicon.html.
Solar Energy Markets. DOI: http://dx.doi.org/10.1016/B978-0-12-397174-6.00002-7
© 22001144 Elsevier Inc. All rights reserved.