The Economics and Policy of Solar Photovoltaic Generation

360 Pages·2016·5.748 MB·English

by  Pere Mir-Artigues, Pablo del Río (auth.)

Green Energy and Technology
Pere Mir-Artigues
Pablo del Río
The Economics
and Policy
of Solar
Photovoltaic
Generation
Green Energy and Technology
More information about this series at http://www.springer.com/series/8059
í
Pere Mir-Artigues Pablo del R o
(cid:129)
The Economics and Policy
of Solar Photovoltaic
Generation
123
PereMir-Artigues Pablodel Río
Energy Sustainability Research Group National Research Council of Spain(CSIC)
University of Barcelona Madrid
Barcelona Spain
Spain
ISSN 1865-3529 ISSN 1865-3537 (electronic)
Green Energy andTechnology
ISBN978-3-319-29651-7 ISBN978-3-319-29653-1 (eBook)
DOI 10.1007/978-3-319-29653-1
LibraryofCongressControlNumber:2016935694
©SpringerInternationalPublishingSwitzerland2016
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Foreword
Theworkpresentedhere represents anambitiousanalysisofsolarPVenergy from
several perspectives. The authors deal with aspects connected with its history, its
technological characteristics, the innovation process and improvements in energy
and cost efficiency, changes in the industrial organization of the energy sector and
itsfirmsandthenewenergymodel,aswellaspolicyissuestofosterinvestmentsin
research, development and demonstration (RD&D), energy regulation and policy,
and the mitigation of climate change objective. The book brings together the state
of the art of solar PV energy updated with the introduction of the research carried
out by the authors themselves, which definitively establishes them as relevant
contributors to the subject.
The reader will find a thorough, honest work capable of showcasing all the
positive aspects of solar PV energy and the literature that has covered the subject
and, in turn, explain those questions that can be more debateable and which have
not been explained correctly or resolved to date by the literature or technical
developments. The extensive information offered and the rigour with which the
wholerangeofsubjectsconnectedwithsolarPVenergyisanalysed(whichimplies
ananalysisofpracticallyalltheregulationandobjectivesoftheelectricitysystem)
make this a special book and essential reading for all those interested in the
advances and challenges of the energy sector. It is an excellent textbook for those
who are studying the economics of energy and especially those following a post-
graduate course in renewable energy.
ThisbooksuggestshowsolarPVenergywillplayadecisiveroleinreachingthe
objectives of European climate and energy policy. The subject is especially timely
after theagreements oftheCOP21andtheRoadmap2030and2050that member
countries of the EU have promised to follow. European Union member countries
should implement measures necessary to reduce greenhouse gas emissions to at
least40 %by2030inrelationto1990,improvementinenergyefficiencybyatleast
27 %, and a target share of renewable energy in final consumption also by at least
27 %.TheRoadmap2050broadensthechallengestobemet.Theseobjectiveswill
lead to a profound change in the current energy technology mix; generation from
v
vi Foreword
renewable energy sources, and in particular solar PV energy, will irreversibly
displace conventional generation, especially those plants that emit the most.
SolarPVenergyhasaveryimportantrolereservedforitinthenewtechnological
generationmix.Theimportanttechnologicaladvancesandcostreductionsachieved
inthelast15yearshaveledtoalargegrowthofsolarPVenergy,indeedthehighest
among renewable energies. In this period installed capacity has increased 100-fold
and prices will reach additional reductions of 75 % in the next 10 years. Constant
improvementsintechnicalefficiencyandcostreductionsareboostingaformidable
expansion process. Numerous countries have a high installed capacity. More than
7 %oftheelectricitydemandinGermany,ItalyandGreeceiscoveredbysolarPV
energy.Itisexpectedtogrowby80 %inEuropeby2019.IntheUnitedKingdom
solar PV energy began to have a significant presence in 2011. Despite these
advances in some countries, Europe is not the best example for the expanding
performanceofsolarPVenergy.In2014,deploymentinEuropesloweddowntothe
same level as in 2009. In a context of transitioning from feed-in tariff support
policiestowardsamoremarket-baseddevelopmentframework,theEuropeansolar
PV sector is the first to experience this dynamic. There is a general move to pro-
gressively integrate solar PV into electricity markets. The European Electricity
marketintegrationandself-consumptionchallengesarethetwomaindriversofPV
redevelopment in Europe. Other geographical areas, such as APAC (Asian Pacific
Countries) are leading the growth in industrial production and installed capacity,
particularly in China.
SolarPVenergyisacasestudythatshowshowdisruptivetechnologicalchanges
canonlybeconsolidatedinthelongterm.Ascientificdiscoverycanrequirealong
period of time, first to be recognized, and after to be seen as viable and to be
commercialized in a competitive environment. This process is slower and more
difficult when the technological innovation involves a transformation of the struc-
ture of the market and allows new entrants to replace incumbents. As the authors
explaininthebook,thefirststepsinsolarPVenergyaretobefoundasfarbackas
the first half of the nineteenth century and it was not established as a competitive
alternativeuntilthetwenty-firstcentury.ThisistherealityofthehistoryofsolarPV
energy.
The depth of the analysis made by the authors and the wide range of subjects
dealtwithhavealreadybeennotedhereandIthinkitisofinteresttoremarkonthe
contributionsontheroleofRD&D,onchangesintheindustrialorganizationofthe
sector, on the new electricity model and on the role of energy policy and its
regulatory developments. In all these areas the study of solar PV energy leads to
explanatory conclusions of a general nature.
The fostering of RD&D is the backbone of the trajectory followed by solar PV
energy, in its successes and errors. The authors carry out a broad review of the
theory of innovation. It is an excellent overview of the state of the question in the
academic literature. From reading the work it can be seen that research, right from
itsinitialstage,requiresexternalsupportinassumingriskinordertoprosper.When
thestage of itstechnological viabilityisreached, it again requires a support policy
for its development in the precompetitive phases before competitive maturity.
Foreword vii
The book shows how RD&D investments have a key influence on the success of
newtechnologicalprojectsandonthescopeoftheobjectivesofprivateinitiatives.
The grounds for fostering RD&D are part of the basis of energy policy.
The book shows how the history of solar PV energy is also the history of
industrial organization, of changes in the structure of markets, of firms and com-
petition.Theconflictbetweenentrantsandincumbentsisreflectedinthebarriersin
the photovoltaic industry. In a sector heavily affected by regulation there are
institutional and technological barriers (derived from institutional ones as projects
aresubjecttochanges inpolicy objectives),andfinancialandscale barriers. These
barriers to entry alter the conditions of competition for entrants in mature econo-
mies and favour, on the other hand, new highly competitive developments in
newcomercountries.InparallelweseehowsolarPVenergyhasexpandedthesize
of nationalelectrical energy markets. New agents with solar PVenergy generation
have entered the markets, changing the composition of supply and increasing the
numberofoperators.Thegridparityalreadyachievedinsomecountriesstrengthens
this trend.
The treatment given in the work on the development of the model of solar PV
firmsisaninterestingcontributionthatopensupnewlinesofresearch.Itisknown
that the optimal size for efficiency is smaller in this sector than in conventional
sectors,especiallyinthegenerationphase.Nuclearenergyandgascombinedcycles
require greater economies of scale. Nevertheless the authors show how the pro-
gressive diffusion of solar PV energy and improvements in efficiency have been
accompanied by a growing process of business consolidation and vertical inte-
gration; a process especially important in Chinese firms. Differently from con-
ventionalgeneration,theintegrationoftheindustrialprocessandgenerationinsolar
PV energy leads to the exploitation of economies of scale.
InasplendidextensiveaccounttheauthorsplacesolarPVenergyatthecentreof
changeintheenergymodel.AsitispointedoutinthebooksolarPVenergyispart
of a set of technological innovations that turn the functioning of the electricity
systemupsidedown.Theincorporationofcomputerscienceintogrids(smartgrids)
andintothecontrolofdemand(smartmeters)willmeantheelectricitysystemwill
function on a demand response model. New generation technologies, and in par-
ticular solar photovoltaic energy, will also allow distributed generation and
self-consumption. New technological developments are introducing disruptive
organizationalchange intotheelectricitysystem.Obviouslythisdemandsadrastic
change of direction in regulation.
Energypolicyoccupiesaveryimportantpartofthebook.Itisafinalchapterthat
in a way expresses the conclusions of the work more fully and in more detail than
the summing up chapter. In accordance with the theoretical foundations that cover
all matters dealt with in the book, the authors maintain their position and enter the
debate on energy policy and its regulatory developments finding support in the
existence of market failures and the double externality problem (technological
spillovers and positive environmental externalities). In energy policy design the
authors do not exclude the need for conventional energy as a back-up with the
purpose of bypassing the intermittent nature, at least with the current state of
viii Foreword
technology,ofsolarPVenergyandalltherenewableenergies,inordertomaintain
securityofsupply.Regulatorydesignshouldbestableandatthesametimeflexible
insuchawaythattheobjectivesofsecurityofsupply,availability,affordabilityand
competitiveness are compatible with sustainability.
Finallythe account and the evaluation that the authors have made of thedesign
andfunctioningofdifferentregulatorymodelsforfosteringsolarPVenergywillbe
of great use to policy-makers in the field of energy.
To sum up, this is an excellent book which is essential for acquiring critical
knowledge of the energy sector.
Barcelona Maria Teresa Costa-Campi
February 2016 Chair in Energy and Environmental Sustainability
University of Barcelona
Former President Spanish National Energy
Regulatory Authority (CNE)
Preface and Acknowledgements
The unprecedented accumulation ofgreenhousegases (GHG)intheatmospherein
the last two centuries is undeniably changing the climate, as consistently informed
by the Intergovernmental Panel on Climate Change (IPCC) (see IPCC 2014a;
Houghton 2015). This represents quite a serious threat for the survival of many
vegetalandanimalspeciesandhasthepotentialtogenerateconsiderabledistortions
in the lifestyles of human beings. Despite the fact that most citizens and govern-
ments are clearly aware of the problem, GHG concentrations are likely to exceed
the 500 parts per million of CO equivalent (ppm CO e) level. This represents a
2 2
50-50chancethattheaveragetemperaturewouldhavebeen2 °Cabovetheaverage
temperatureinthemid-nineteenthcentury,i.e.inthepreindustrialperiod,whenthe
GHGconcentrationswereestimatedat280ppmCO e.Involumeterms,thismeans
2
that the 50 billion tonnes of CO e emitted in 2013 should go down to 35 billion
2
tonnes in 2030 and 20 billion tonnes in 2050. If emissions remain at this level in
2030, concentrations could be above 650 ppm CO e, consistent with temperature
2
increases of around 3.5 °C with a 50-50 chance (Sachs et al. 2014: 8–10; Stern
2015: 14–15, 37). It should be taken into account that the current concentration of
around 450 ppm is unprecedented in our planet, and it could have only happened
between 800 thousand and 3 million years ago. If this concentration exceeded 750
ppmbytheendofthiscentury,theaveragetemperaturewouldlikelybeabove4 °C
withrespecttothepreindustrialera.Bothecosystemsandhumanswouldsuddenly
bewithinanenvironmentwhichhasbeenthecommononeinourplanetinthelast
35 million years (Stern 2015: 9–10).1
The anthropogenic origin of climate change can no longer be doubted
sinceaveragetemperaturechangesintheHolocenehaveremainedwithinanarrow
±1.5 °Crange.Thismeansthatawait-and-seeattitudeisnotanoption,evengiven
the unavoidable uncertainty of the specific impacts of human-induced climate
change.Delayingmitigationactionshastwoseriousimplications:ontheonehand,
1Since those increases are average values, the different regions can experience different rates of
changeaccordingtotheseasonoftheyear.
ix