Solar Energy Has a Tail Wind
January 4, 2012 § 2 Comments
The price of solar panels dropped 70% in 24 months. Good news for the consumer, not so good for manufacturers of panels. Three of them went out of business last year including the infamous Solyndra. You recollect this as the outfit that got $535 million in loan guarantees from the DOE. They were excoriated for this by the Republicans in Congress. Incidentally, a loan guarantee is not the same as a loan, as noted recently by the Brookings folks in an analysis of the merits of these measures.
The tail wind comes about from the realization that we may already be close to the generally accepted target of $1 per watt installed capital. This is the number at which most observers felt grid parity could be met.
Grid parity is defined as rough equivalence to the delivered price of base load power, usually from coal. But this measure is not completely relevant in cases where the solar power is used for peak shaving because the cost to the utility of delivering peak period power is a good deal higher than the average cost. It is also not at all relevant when there is no grid, as in remote areas and villages in developing nations.
Initially the costs of panels came down largely due to the actions of Chinese manufacturers of silicon based panels. Some believe that government subsidies allowed for this and that this was a play similar to that in rare earth metals. In that case, China assured itself a virtual monopoly by causing mines all over the world to shut down due to inability to be profitable at the low prices set by the Chinese companies. However, the excitement currently centers on alternative materials. First Solar in Arizona is well on its way to the $1 target using Cadmium Telluride (CdTe) thin films as the material. Eminent scientists are arguing that this approach is flawed because world supplies of these materials, primarily Tellurium (Te), are inadequate for large scale replacement of base load power. This argument fails to take into account the fact that Te is a bi-product of copper extraction and has no other volume use. Ores rich in Te almost certainly exist and could be targeted for exploration. Until these avenues are explored, the warning bells are premature. Cd being a heavy metal has also undergone scrutiny from an environmental risk perspective. CdTe being a very stable compound is not subject to leaching and so this too ought not to be a concern except for the impassioned few.
The Te argument also underscores a general malady with alternative energy positions taken by people: the silver bullet problem. There is absolutely nothing wrong with a market basket of alternatives pecking away at coal and gas. Furthermore, the lesson in the CdTe story is that thin films are a viable avenue to low cost panels rivaling silicon on cost. Other compounds will find a place and will either replace CdTe or simply co-exist with it. There already are laboratory scale reports of success with Iron Pyrites and most recently with organic semiconductors. In the case of the latter, efficiencies double that from CdTe is being claimed.
India is the latest country to make a big push in the solar arena, and this coincided with the dramatic price drops. Subsidies are consequently much less costly than in other countries such as Germany. At an auction at a state owned utility in Gujerat the winning bid was 8.77 rupees (16.2 cents) per kWh. This is about double the coal based price and yet is 27% lower than the low bid a year ago. As a reference, Germany, the biggest solar user in the world paid US 23 cents per kWh. India has the opportunity to make a virtue of being late. Besides, India averages 3000 hours of sunlight per annum; the sunniest city in Germany weighs in at 1600 hours.
Off-grid applications: Parity with conventional alternatives is much easier to achieve in off-grid markets. The principal application would be rural communities in developing countries. Here the competing source is most likely kerosene or diesel based. Kerosene is considered essential for lighting and cooking in many Indian rural communities. As a consequence it is heavily subsidized. But the subsidy is provided at the distributor level not directly to the consumer. A recent estimate puts 38% of the kerosene as stolen (the government study making the estimate uses the euphemism “diverted”). So the effective cost of the delivered fuel is very high and much more easily matched by solar. Remote power is usually diesel based. Not only is the fuel expensive, but the trucking costs are high.
Even in western nations, a rule of thumb breaking even with solar is running 1 km power line to the grid. That is at today’s solar prices; those will continue to drop but not so the cost of running a line.
Storage Solutions: Since the sun chooses to shine only during the day, storage is something of a necessity. The greatest demand on the grid is in the late afternoon and early evening. In the latter period, the photon intensity is low or absent. The objective of peak shaving is best accomplished if some of the electricity produced earlier in the day is stored for evening use. As discussed earlier, peak electricity is very costly because the natural gas generators operating in this period are idle for much of the time and so the fully loaded cost is high. This is despite the fact that compared to coal and nuclear, natural gas cost is lightly loaded on the capital side, thus limiting the idle time cost.
One of the storage solutions being developed uses molten salt as the heat storage medium. The so-called Solar Thermal method uses systems of mirrors to direct the rays to heat up a fluid rather than produce electrons. This is analogous to childhood experiments using a lens to concentrate solar energy to set a piece of paper alight. For direct conversion to electricity, this fluid is water and steam generated drives a turbine. When storage is required, the heat is used to melt a mixture of salts, currently comprising nitrates of sodium and pottasium. Lower melting salt mixtures are being researched in order to minimize the risk of unintended freezing. The heat in the salt is transferred to produce steam for a generator.
One purveyor of Solar Thermal systems claims that the storage and release will shave 4 cents per kWh off the cost. If accurate, that is significant. Much of the cost savings come from eliminating the peaking gas generator.
If the trend towards ever lower cost of solar panels in real terms continues, and if solar thermal systems become commercial, solar power could overtake wind as a near term renewable source to replace fossil fuels – at least in some places in the world. Every little bit matters.
Excellently written article and correct. If you take the installed price of a commercial solar system today at 3.00/Wdc, carry the investment and pay interest,.. say at 5% per year, that an annual cost of $.15/W/yr.. then if that watt produces 1.5 Watt-hours/yr..; you have an effective cost of $.10/kWh…plus you own the investment and its value will track grid power costs. This is with no tax benefits, no rebates…etc. Though a simplistic view, it is not dissimilar to buying a home versus renting. It is less expensive to take a loan for your own solar system and may payments, then to buy electricity from the grid.. in many markets today. The fact that you can own your own, onsite clean power system, remains one of the top investment plays in the market today.
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