April 3, 2007 2:00 PM PDT
Getting the price right for solar
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Suppliers of solar photovoltaic (PV) panels are in the midst of a multiyear investment boom, with an eye toward producing electricity as cheaply as the entrenched standard: fossil-fuel power generation.
Electricity from PV panels now costs substantially more than power from conventional fossil-fuel sources. Industry executives say, however, that ramping up the volume of panel production--regardless of any solar cell technology improvements--will bring solar closer in line with today's power rates.
"We have to cut the cost in half of where we are today, and we can do that with a lot of the technologies and solutions available to us today," said Charlie Gay, vice president and general manager of Applied Material's solar business group, while speaking at Massachusetts Institute of Technology's
Solar makers stand to benefit from a global push to increase the production of polysilicon, the primary solar cell material, which at times has zoomed from $20 a kilo to $60 amid a worldwide shortage.
Many solar manufacturers make their products out of silicon and use machines similar to those used in the chip industry, but solar panel makers won't be benefiting from Moore's Law, a phenomenon in the chip industry where power increases as cost go down. Moore's Law works because reducing the size of microprocessors simultaneously makes them less expensive (a manufacturer gets more chips out of each wafer) and more powerful. But shrinking the size of solar cells doesn't help performance because cells rely on maximum surface area to harvest energy.
Instead, the solar industry expects to see prices decline the old-fashion way: larger economies of scale mean suppliers can produce more materials at a lower cost. Improved manufacturing processes also mean that suppliers can create panels with thinner solar cells, which will lower material costs.
"These kinds of tools are what are going to help us get to much lower cost," Gay said. He predicted that when there are plants capable of making a gigawatt worth of capacity, the cost of solar power will reach "grid parity," or equal to the current cost of producing power for the power grid.
By contrast, about 125 megawatts of solar power capacity were installed in the United States last year--the equivalent of roughly 40,000 residential installations.
Going down cost curve
Even with the investment boom, the industry still remains dependent on government incentives, from a cost perspective, for the foreseeable future, said Alex Klein, a senior analyst at Emerging Energy Research.
"It's sort of a race against time to drop down costs so that when subsidies (go away), the market will sustain itself," Klein said. "Ultimately, if you talk about the viability of solar PV, it has to become close to competitive with other forms of electricity, at least at peak power."
Generating electricity from photovoltaics costs between 18 and 23 cents a kilowatt hour. It is projected to go down to 11 to 18 cents by 2010 and then to 5 to 10 cents by 2015, according to the National Renewable Energy Labs. By contrast, electricity in the U.S. costs between 5 and 18 cents per kilowatt hour, according to the Energy Information Administration.
Klein agreed that higher manufacturing volume and improvement in the solar industry's supply chain can lower costs. Still, technology to improve cell efficiency or to greatly lower the cost of making solar cells will make a large impact, he said.
Companies are developing so-called thin-film solar cells and other materials such as CIGS (copper indium gallium selenide) to replace high-priced silicon as the dominant photovoltaic material. Nanosolar, for example, raised $100 million to take on incumbent suppliers with a plan to produce 430 megawatts of solar cells a year by using thin polymer films. Shell Solar, the solar division of the petroleum giant, has also become a big advocate of CIGS.
Established silicon-based panel manufacturers are hedging their bets by investing in alternative materials as well.
German company Q-Cells, for example, has invested in several smaller firms working with a range of materials and manufacturing techniques. Sharp, the world's largest silicon panel maker, is also tinkering with alternatives, including concentrators, which increase output by increasing the amount of sunlight that strikes a solar cell.
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