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BW Businessworld

The Sun In Your Life

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 Any look at the contemporary solar energy industry should begin with the company First Solar. This company, based in Phoenix in Arizona, has a long history. It had its origins in 1984 as the firm Glasstech Solar, but by the end of the year 2005, First Solar had revenues of only $48.1 million. But the company is expected to close this year with revenues of over $2 billion, and the next year with $2.9 billion revenues. First Solar is one of the most dramatic success stories in the energy industry in recent times. However, the best is yet to come.

 
First Solar has a huge backlog of orders for the next few years. One of the largest involves a long-term contract with the Chinese government to build a 2-gigawatt solar energy farm in Inner Mongolia. To be built in stages, the full farm would be complete in 2019 and would power three million homes. First Solar also became the first company to produce one gigawatt of capacity in one year. It is also the first firm to sell modules at a cost of less than $1 a watt, and claims to become competitive with retail electricity without subsidies by end 2010. “Look at First Solar,” says Ken Zweibel, director of the George Washington University Solar Institute in Washington DC. “Its performance shows that the industry is doing very well indeed.”
 
Better Alternative
The solar energy industry, despite a blip due to the recession, is well on its way to making a substantial impact on the world energy scene this year, as well as in subsequent years. The solar energy market is now worth $30 billion (about Rs 1,39,800 crore), and production is doubling every two years. However, global demand fell by 50 per cent last year and the industry developed excess capacity of about 50 per cent. In the past year, solar energy module prices fell by 40 per cent. This development takes solar energy within striking distance of matching the best renewable energy options for price, and matching most other sources within a decade.
 
“Solar energy is now only 25 per cent more expensive than wind in very windy areas,” says Zweibel. Therefore, it is well on its way to becoming the only serious method to reduce carbon dioxide emissions in the world. Zweibel is among the most influential apologists for solar energy in the US. A scientist at the US National Renewable Energy Laboratory for over two decades, Swiebel had co-founded several companies and the institute where he now works. Even as the majority of energy experts wait for the big breakthrough in solar, Zweibel believes that no such discovery is needed to solve the world’s renewable energy problem. 
 
According to him, solar technology has advanced enough to provide a substantial amount of the world’s energy needs — that is if the world wakes up to this fact.
 
Zwieble’s opinions, although still in a minority, is increasingly being voiced by other energy experts as well. In a well-publicised paper in Scientific American, Stanford University professor Mark Z. Jacobson and University of California professor Mark A. Delucchi calculated that solar energy has the potential to provide 580 terawatts of power by 2030 — well beyond what the world needs for a long time. What is needed, according to these scientists as well as Zweibel, is the will to change our habits.
 
Sunny Side Up
This optimism has fuelled the solar industry’s extraordinary increase of capacity in the past two years. For example, according to photovoltaic market research company Photon Consulting, 7 gigawatt of capacity had been built in 2008. This has grown to 11.7 GW in 2009, a growth of 68 per cent.
 
Next year, this capacity is supposed to grow to 24.3 GW, a growth of 108 per cent. The large capacity, with poor demand due to the recession, is forcing the prices down, and the lower prices are now increasing the demand. Says Joonki Song, consultant at Photon Consulting: “A small price drop increases the demand significantly.” Despite the steep drop in prices, the photovoltaic industry is still making profits.
 
These statistics pertain to only photovoltaics, the traditional part of solar energy industry. Photovoltaics are cells made of silicon, and produce electricity when light strikes them. Efficiencies of photovoltaic cells have been increasing and the costs coming down, thus creating a large demand in recent times.
 
Ways And Means 
Three new technologies boost hopes of sustainable solar energy production
Crystalline silicon: The traditional part of the photovoltaic industry. Uses silicon in crystalline form. Efficiencies in laboratory conditions have crossed 40 per cent, but in practice hovers around 24 per cent. The most expensive of all kinds of cells, and thus has higher pay-back times. Leading firms: Q-Cells, SunPower, Suntech.
 
Thin film: Cheaper kind of solar cell, but also less efficient (10 per cent at best). There are several kinds of technologies, such as amorphous silicon, Cadmium Telluride, organic solar cells and CIGS. Leading firms: First Solar, Solyndra, Ascent Solar Technologies, Nanosolar.
 
Solar concentrators: Uses sunlight as a heat source rather than to produce electricity directly. Supposed to be the next hot area in solar, and could overturn the economics of solar energy within a decade. An area for startups, since the technology is new and developing. Leading firms: eSolar, Ausra, Stirling Energy Systems.
 
However, this traditional part of solar energy — crystalline silicon — has been facing tough competition from two other sectors: thin film and solar thermal (see ‘Ways And Means’). Thin film solar is half as efficient as photovoltaic cells, but two-thirds cheaper. There are several competing technologies in thin film solar, and there are no clear winners yet. First Solar, which makes cells from a material called Cadmium Telluride, is a thin- film solar company.
 
The other kind of solar energy technology, solar thermal, uses the sun’s heat — rather than light — to produce steam and drive generators. Unlike other forms of solar technologies, solar thermal could also provide uninterrupted supply because it can store energy. Both thin film and solar thermal are hot areas of research today, and could produce several breakthroughs in the next few years.
 
Needed: Innovative Financing
However, several people across the globe suggest that it is economics rather than technology that is hampering mass adoption. Says Eric Wesoff, senior analyst at Greentech Media, a renewable energy market research firm in San Francisco: “Solar energy needs innovative financing and not technological breakthroughs to make a big difference.”
 
The economics seems imposing initially, but not in the long term. Setting up a solar power station requires high upfront costs of about $4-5 million (Rs 18-23 crore) per megawatt, and the full return of investment could be in a few years (less than two years for thin film). However, electricity from a solar plant becomes cheaper as we go along. After breaking even, the cost of electricity from a solar power plant is only 1-2 cents (about Rs 5-10) per kilo watt hour.
A solar cell can last for 30 years, and it does not decay quickly; a 25-year-old cell can produce electricity at 80 per cent efficiency. It is possible, theoretically, to design solar cells with 100 years of life, thereby producing an abundance of cheap electricity for a long time.
 
The next few years will see the completion of a few large solar energy projects. In the US — a laggard so far in solar energy compared to Europe — more than 5 gigawatt of projects have already been announced. The largest of them, a 500-megawatt plant in the Mojave in California, will be ready by end 2011. Spain already has 3 gigawatt of solar power installed. It plans a further 1 megawatt in 2010 for only solar thermal power. Back home, India plans 1 gigawatt of solar power projects by 2013, and 20 gigawatt by 2020. By then, solar energy would have emerged as the most important power source for the world, and a game-changer.
 
p dot hari at abp dot in
(This story was published in Businessworld Issue Dated 11-01-2010)


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