Grid Parity: Will We Run to the Shop?

Pat: “Did you hear the news today?”
 
Pete: “What news? You mean the neighbours' dog's pregnant?”
 
Pat: “No, darling, the news said grid parity's been reached.”
 
Pete: “Grid what? You mean they finally fixed the grid and got everybody connected? It's about time. I don't even know who lives at the end of our street. But on the other hand, having seen some of them, I don't even want to be connected.”
 
Pat: “No, darling. Maybe it's time you got connected to some of the new developments going on in the world instead of just watching football. For instance, I have my own followers now.”
 
Pete: “You mean that Scarface from across the street is chasing you again? Let's send our crazy cat to his garden!”
 
Pat: “No, honey, followers on Twitter. But that's something else. I'd better not even try to explain to you about people sending me messages... What I mean is new developments in the area of renewable energy. Particularly solar energy.”
 
Pete: “Solar energy in our country? You must be kidding! Every time I go to the football stadium I'm in my raincoat. And on top of getting soaking wet, most of the games are terrible anyway. And they invested all these sunny oil dollars in our team.”
 
Pat: “Honey, what I mean with grid parity is that the cost of solar energy is the same as we pay for our electricity right now.”
 
Pete: “Invest in solar? You must be kidding. I'd rather start with an investment for a bigger fridge, so we can cool more beers if my friends come over.”
 
Pat: “Darling, I think it's a great idea to produce green electricity from our own roof and still not pay more than the neighbours.”
 
Pete: “Yes, sure - fun! And every cloud will cut off the electricity so I miss the replay of the best goals - although lately those are the opponents' anyway, with all those well-overpaid foreign defenders from sunny countries...”
 
Pat: “Darling, really, you should follow the news some more. A grid-connected system means you won’t even notice where the electricity is coming from - the roof or the grid.”
 
Pete: “Great, so we invest and don’t even notice the difference?”
 
Pat: “Yes, but it will be green electricity. I think we should contribute to making the world a little greener.”
 
Pete: “Greener? I already agreed to eat a green salad with you every week. My lads say my hair's looking more green than grey. And you want to invest our little savings in this solar energy thing?”
 
Pat: “Yes, for only €5000 we can produce almost all our energy from the sun. And if you started by watching less football matches on TV - the ones you've already seen in the stadium anyway - we might even manage to produce our entire electricity consumption from our own roof.”
 
Pete: “And then save what?”
 
Pat: “Well, nothing at the beginning. But with electricity prices going up, we'll be saving money in a few years.” 

Pete: “Who says electricity prices will go up? Politicians? Huh, they promise too much anyway... So, to show you I'm not as negative as you think I am, let me try to understand you... You are intending to mount some ugly green energy panels on our precious nice grey roof to produce solar electricity, and in the next 15 years we might be able to save €30 per year if this solar stuff is €0,01 cheaper per kilowatt-something than what we currently pay to these utility thieves? And for this great news we only have to pay €5000...? We'd be better off growing green salad on our roof to save money! I should have known this green salad would affect your brain...”
 
Pat: “Darling, now you're exaggerating a little. We can contribute to a better world and save some money in the next 15 years. Don’t you think that's a nice thought?”
 
Pete: “Let’s keep it as a thought. I think we'd better wait till we can actually make some real money with these green hobbies of yours...”

The solar energy bubble is good for everybody

Solar module prices have dropped an astonishing 40% in 2011 alone. This is the result of an exploded solar industry where oversupply is now leading to a consolidation phase, including strong competition. This enormous growth of mainly the Chinese PV industry is a result of generous feed-in tariffs for market development in mainly European countries.
On the other side, grants and other incentives for industrial development in China, the USA and Europe contributed to this as well. Both are now leading to what seems to be a solar industry bubble. Bad news never comes alone... In addition to an oversupply, the leading markets are currently facing financial headwinds as well. This means less money available for incentives and project financing. Where and how to sell your products? It all leads to rapidly declining module and system prices.

That sounds like great news, because the sooner we reach grid parity and get rid of subsidies, the sooner we can start exploring the infinite market potential of competitive solar energy. Next year, the solar energy produced by households will be cheaper than electricity from the grid in the world’s biggest markets, Germany and Italy. With solar energy expected to get cheaper, and dirty grid electricity more expensive, the future for solar energy indeed looks bright.

Nevertheless, not everybody seems happy with the current situation. Claiming unfair competition, some industries and politicians are urging for barriers to be imposed on imports of cheap (Chinese) modules, and extra incentives for domestic products.
But, shouldn’t we be happy that Chinese manufacturers are producing such cheap modules? After all, isn’t this what we want? Wasn’t this the original plan and goal: to make solar PV competitive, so that financial (government) support for market development would no longer be needed?

Indeed, Europe has heavily sponsored market development, which has enabled foreign manufacturers to emerge and grow. And, yes, (Chinese) companies have benefited from tax holidays, free land and free infrastructure development, investment subsidies, cheap loans and cheap energy. As such, they have been able to produce at lower cost. Seems unfair? Europe and the USA have seen local industry development stimulated, too. Not surprisingly, most German manufacturing is taking place within the former Eastern German territory. Grants and capital incentives have been made available to build industries and create jobs.
If the Chinese local and central government had not financially supported solar industry development, today's solar modules would have been more expensive. Subsequently, yearly market demand would have been much smaller and grid parity further away. Thus, incentives would have been needed for a longer period.

But this is not the case, because the world is flat – as Thomas Friedman wrote in his book. You can’t stop industrial development in Asia. Because we want everything to be cheap – not only solar modules. From socks, to kitchen equipment, from chemicals, to cars. All US Walmart and European stores are fully packed with products manufactured in China. I bet even a lot of politicians shouting about local solar industry protection are using an iPhone produced in China and watching an Asian flat-screen television at home – and might even be wearing European-labelled underwear produced in China.... Why should solar modules be the exception?

Isn’t it great that the Chinese central and local governments supported the development of their solar industry? Europe and the USA subsidised the market, China subsidised the industry – and in the end we are both benefiting. China has invested a lot of money to build an enormous solar industry. Western solar equipment manufacturers benefited greatly. And Western investors supported the stock-listed Chinese solar manufacturers in New York. Lots of US and European capital is used to build the Chinese module giants, and dividends are flowing back to Western investors.

Now we are facing a solar industry bubble. And in this consolidation phase, only the strongest companies will survive: manufacturers able to cope with reduced feed-in tariffs and able to emerge in markets without any incentives; the strong ones, highly automated with Western equipment, able to produce at the lowest costs, with thin profit margins. Good news for customers and politicians longing for cheap solar energy and market development without costly incentives....

The low costs upstream, with the Chinese solar products (from silicon to modules), mean that Europe and all other markets will be able to achieve grid parity sooner – giving us a future with an abundance of downstream solar business opportunities in local markets, and room for new business models invented by local financial engineers; new local building products with cheap solar cells integrated, and lots of installation work for local electrical installers. We are almost at the point we want to be: low-cost solar energy and a sustainable infinite market. We all want and need cheap (solar) energy – and the sooner, the better. The world is flat. Solar modules are flat. But we don’t want a flat market.

The World’s Biggest Grid Parity Market Could Change Drastically Within Ten Years

Picture yourself Italy in 10 years' time. Apart from a new prime minister, other things will have changed drastically. Anyone who makes some conservative forecasts for household energy prices in Italy in 10 years' time will see some interesting outcomes. Take a modest 2.5% inflation on the current electricity price for households and you will arrive at around €0,30 per kWh by 2021. This is of course without taking into account any euro or dollar value increase, abolition of  CO2 taxes, oil and gas price decreases, (renewable) energy tax decreases and – last  but not least – sharply reduced energy consumption due to a wave of environmental consciousness flooding Italy. All of which could possibly happen.

At the same time, imagine a 'crazy' global PV industry growth of 25% per year. Compared to the 50% compound annual growth rate during the last 10 years, this at least can be called a conservative scenario. In line with this, a 5-10% average price reduction per year in PV systems looks feasible. Again based on assumptions that remain to be proved: economies of scale leading to lower production costs for solar modules, technology and cell efficiency that have not reached their limits, the number of markets for PV not coming to a standstill, and – last but not least – the assumption that the currently more than 500 module manufacturers will not collectively decide to compete and lower prices any further. All of which could possibly happen.

Such a 5-10% yearly system price decrease will lead to a cost price per kWh of around €0,12 for solar electricity in 2021 (calculated based on 15-year amortization and 6% interest rate).

To summarize, for 2021 we calculated €0,30 per kWh for grid electricity and around €0,12 for solar electricity. Is it possible for these prices to co-exist alongside each other? How likely is it that people will use the grid if they can use solar energy for less than half the cost?

What about supply security and energy storage? Well, you can assume that the price difference of €0,18 should be sufficient to cover cost for energy storage. Also, much development is taking place in this area. Think about micro energy storage solutions in mobile phones, but also about electric cars, scooters and bikes. All of these are expected to show significant growth trajectories. Will energy storage be more expensive in 2021 than solar electricity production (€0,12/kWh)? If not, the total price for solar electricity plus storage could be less than €0,24/kWh. Still lower than the expected grid electricity price....

Will there be any reason for customers to stay with an expensive, old-fashioned bureaucratic energy company? Or will they opt for new dynamic solar energy utilities supplying green solar electricity, including storage and full 24-hour service at a 15-year guaranteed lower price?

Italy will arrive at grid parity in 2012. It will become the world’s biggest grid parity market and an example for the rest of the world. Within 10 years, the Italian energy landscape could face major changes. Will today's energy moguls remain passive and then be surprised to see new solar energy service providers take over their businesses overnight, like WhatsApp did with SMS...?

We need a solar Twitter

If you had predicted 10 years ago that you would be able to send messages to hundreds of friends at the same time and free of charge, people would have called you a nice futurologist. Who would pay for the infrastructure? What kind of business model could work with that? Nevertheless, Twitter was invented in 2006 and is now a globally established tool for such short message services.

In the same category of crystal bowl forecasts, it would have seemed impossible to send text messages for free with your mobile phone. Yet, today WhatsApp is conquering the world and forcing existing telecom service providers to come up with new business models. Payment per kilobyte of data just does not cut it any longer. And what about the high-tech cell phones these companies provided for free with 2-year membership? How do they make money?
The most surprising element of these inventions is not the exciting technology but the business model. How in the world is it possible to make money providing free services? What is the business model behind these successes?

The interesting parallel is that the PV industry needs new business models such as these, too. We need to get rid of unpredictable government incentive schemes. Indeed, most people would not be opposed to reducing their dependence on and bills for their energy utility.

Will it be possible to offer solar energy for free in five years’ time? No payment per kwh, but only a flat monthly fee just for the PV system (connection)? Or sharing the solar energy from your roof with your friends and neighbors for free?
Who would pay for the PV system investment (by the way another 30% less than today)? No idea yet, but that does not mean it is not possible! The guys who invented Twitter and WhatsApp did not know upfront either, yet their companies are worth a great deal of money...
Rather than working solely on technology improvements, the solar industry would do well to work on innovations for business models.

The industry needs to get rid of dependence on the yearly-changing government feed-in tariffs, tax advantages and subsidies. Let’s put our energy into universal business models that could work in any country; that have the potential for a niche in the rapidly and continuously growing global PV market. That is what the industry needs most now: to stop the current whirlpool of cost reductions and margin compressions forced by decreasing incentives, which lead to uncertain market demand and hence oversupply and the need for more cost reductions.

The most successful internet companies where not related to better transistors or other “wiz kid” technology innovations. The major success stories such as Google, Facebook, Twitter, etc. all emanated from superb business models based around free services.

A Solar PV Market Forecast for 2014: Which Markets will be in the Top 10?

Solarplaza recently published the Top 10 of the world’s biggest PV markets for 2010 and previous years. But what will this Top 10 look like in 2014?
If we look back 3 years, we can see how unpredictable market dynamics are. After all, who would have believed that Italy would have turned out to be the world’s largest PV market in 2011? Who would have believed that Spain would have fallen out of the Top 10 in 2011, after being the world’s biggest market in 2008? And what about the global economic situation and other international developments impacting the solar industry and market developments...? It is in fact anyone’s guess when it comes to looking three years ahead... But it’s fun to try - so here is my best guess:

Market Size in 2014 [MW/Year]
1. Germany - 6500 MW
2. Italy - 5500 MW
3. USA - 4500 MW
4. Japan - 3300 MW
5. India - 3000 MW
6. China - 2000 MW
7. Australia - 1400 MW
8. France - 1100 MW
9. Spain - 800 MW
10. Greece - 750 MW

1. Germany
When Germans build cars, they make the best. Why would that be different with PV? Germany is the most developed and experienced market in PV, and the country has the world’s best PV business infrastructure, with thousands of PV companies. Germans have a great ability for technological and business innovations, have a green drive and clear renewable energy goals. All of which are the right ingredients for staying at the top, even after the FiT era. The expected dip in sales in 2011 is probably just a temporary phase, during which Germans are preparing for grid parity in 2012/2013. Being one of the world’s most stable economies, I expect solid market growth, which will be fuelled by the German attitude, “My green neighbor has PV, so I want/must have it too.” Market saturation is still far away, so there is plenty of room for further market growth. International companies believe in the future of German customers too: they are lining up to sponsor German football teams. Like in football, Germans always play in the top league. Losing the number one position to Italy this year might very well be a one-off mistake...

2. Italy
Italy is Italy and things are done differently in Italy. Five years ago a tiny market of 11 MW, the Italian market will be 500 times bigger than in 2006 and become the world’s largest market in 2011. Italians are creative, impatient and like speed. Plus, the Italian market is attractive – and you can’t teach  the Italians anything about attractiveness... Maybe the market will face a little fallback after the record year 2011, but I expect them to bounce back, reaching the goal of 20 GW cumulative installed PV power even before 2014. High irradiance figures combined with high energy prices are helping to bring Italy closer to grid parity this year – or at least next year – in the residential market. Some additional taxes or levies on the energy price to finance the feed-in tariff will do the rest. Italy will definitely remain a Top 3 market by 2014. My guess is that, even without a FiT, they will reach 20 GW. Italy is an ideal market and base for new business and financing models based on grid parity circumstances. The business infrastructure is already in place. All major PV players have established Italian branches – and not because of the nice cars! Italy is a market for the future, with electric cars powered by solar energy. Not because they hate the noise of fast cars, but because these accelerate faster than the current Ferrari.

3. USA
The USA will become the world’s biggest PV market. The only question is when... My guess: not yet – but in 2014. The US market might grow at least 50% per year and the potential is enormous with 50 States. But, as per Europe, every State has its own policy(makers) and federal policy is not as sustainable as PV systems themselves. At the present time, most States still have a small market size; easily 10 times less than that of Belgium in Europe. By 2014, several Sunny Desert States will be contributing, with some very large-scale projects (e.g. California, Arizona, Texas, Nevada, New Mexico), and several other States will have well-developed residential and commercial market segments (e.g. New Jersey). But, if the economy is up, the dollar strong, Democrats still in charge, paperwork for PV reduced and the federal tax credit still available, the USA may well become the world’s number one market even sooner. Is that feasible?

4. Japan
The shift from nuclear to renewable energy will help to make the Land of the Rising Sun an increasing PV market. After almost following in the steps of the Samurai by killing its own leading market position a few years ago, Japan is now on the way back to the top. The high energy prices and rapidly decreasing solar module prices help a lot. Also helpful are the mature domestic PV industry, the very well-developed PV business infrastructure – and let’s not forget public awareness. Japanese customers are already familiar with solar PV systems, with PV ads in all media channels. Ambitions and the potential are huge. A modest 30% growth rate per year will put Japan in the number 4 position with a size of around 3300 MW.

5. India
Probably one of the best places on earth for solar energy. The highest irradiance, high economic growth, permanent power shortage and no domestic natural energy sources – apart from abundant sunshine... All major markets have taken at least 3 years to build up their PV business infrastructures – and that is what is happening now in India. In the coming years, cheap solar energy will become unavoidable for all energy utilities in India. BOS cost (labor, engineering, etc.) will be low in India, and with module costs coming down rapidly, there is no better alternative. The Indian PV market potential is infinite. In the long term, India is ready to become the world’s biggest PV market. It will just take a little more time, because it is too hot to work too fast in this sunny country. My guess is at least a 100% growth, putting them into position 5 for 2014.

6. China
Will the Chinese domestic PV market be smaller than the Indian market?
The race might be close. But China might be more focused on industrial development and making money through export first, before developing its domestic market. Irradiance in the relevant populated areas in India is better than in China. And in a situation of no subsidies the market will follow the sun. Besides, there are more power shortages to solve in sunnier India than there are in China. On the other hand, the financial power of China is better, and if the Government would provide the same loans for PV installations that they have for manufacturers, and in the same amounts (billions of dollars) growth could be much higher. Being more manufacturing-driven, my guess is that China will focus more on export and sales and India more on domestic energy supply.

7. Australia
In an overview of countries with huge solar energy potential, Australia cannot be excluded. Although still addicted to coal, Australia might see the (sun)light soon, as they increasingly discover the potential of this clean, reliable, predictable and cheap energy source. And on the map it looks like there is also plenty of space for ground-based solar PV power plants... A natural choice for rapid market development. The Australian market is emerging and a solid 40% market growth per year will bring them into the Top 10 at place number 7 for 2014.

8. France
The time is over for nuclear power. Building new nuclear power plants is too high a (financial) risk. Financing a 20-year solar PPA contract is easier than financing a new nuclear site. Who wants to invest for another 40 years in such power plants, knowing solar and wind energy are favored by customers and voters alike? And will also be cheaper within 10 years? Solar energy will be a natural choice for France. The French love their innovative products and business concepts. And the French like their independence. New players will find their way into solar. And customers love to be independent with their own energy source. Only a 30% year-on-year growth is sufficient to put France into the 8th position.

9. Spain
Yes, why should Spain not regain its place as top-of-the-market? After the burst of the PV bubble in 2009, Spain is crawling back up, and very soon it may no longer need subsidies to make solar PV affordable. Energy prices are rising, and the companies that have survived are stronger and more experienced. Even more important, the Spanish banking sector has sufficient experience. Grid parity is close and Spain is Europe’s most logical and best-suited country for large-scale ground-based PV power plants. At a 30% market growth per year, Spain could end up 9th in the 2014 Top 10. Provided there is no economic meltdown in Europe, Spain could be the reviving surprise.

10. Greece
There needs to be at least one surprise in the Top 10. Greece is the silently but steadily growing market. Shadowed by its economic problems, the Greek market is doing great with over 200% growth per year since 2007. If it experienced just 40% growth in the coming years, it could suddenly enter the Top 10 in 2014. No domestic energy resources other than abundant sunlight and rising energy prices will help to develop Greece into an attractive grid parity market. Just replacing fossil fuels by solar power from all the islands will not only cut costs but will provide a sustainable future again for Greece.

There is always room for more surprises. Who in 2007 would have expected the Czech Republic as the number 3 market in 2010? It only takes 3 years to develop a market and business infrastructure. So if countries like Brazil, Chili, South Africa, Israel and Morocco start next year, they could easily end up in the 2014 Top 10.

The above Top 10 is just a best guess. An interesting experiment to look back on in 2014, to see whether predicting the future is still impossible – but nevertheless fun to do. I can’t wait to look back in 2014 and find out what surprising and foreseeable facts were overlooked...

This forecast is open for discussion and therefore I hope to meet you in Hamburg at our Global Demand Forum, where keynote experts will be sharing their vision on where modules are heading in the coming years!

The rapidly developing solar energy evolution

Look back just 20 years in time. The year is 1991. There is no Google, no lap-tops or indeed many other things that now look like they’ve been here forever. Cell phones are only for the happy few and the World Wide Web, or what we now call 'the internet’, has only just been launched in August of this year. Then, in the twenty years from 1990 to 2010, worldwide mobile phone subscriptions grew from 12.4 million to over 4.6 billion. And between 2005 and 2010 alone, the number of internet users doubled, and was expected to surpass two billion in 2010. Looking back it looks like a complete revolution has taken place. But if you are old enough to have fully experienced this period, you’ll remember that it just felt that developments were progressing fast but also very smoothly.

So what can this ICT revolution teach us for the application of solar energy? Everybody loves solar energy, but the cost is still an obstacle. It’s not surprising so few people in the world are using photovoltaic solar energy. Will this cost-issue be solved soon? Will there be a revolution?

Looking into the future, ten years from now, the answer is a resounding yes. Let’s assume a conservative 5% cost and price reduction year on year from now on for Pv Systems or solar electricity. This calculation is based on technology improvements, economies of scale and other optimizations such as reduced transportation cost etc. And this is a conservative estimate, since in the past 10 years the yearly cost reductions have been higher. The astonishing and convincing result is that within ten years solar energy, even in the less sunny northern European countries, will be available at around €0.15/kWh. Compare this to today’s current cost of electricity from the grid! And would any sane person predict that the cost of fossil fuel-derived grid electricity will decrease over the coming decade? In the sunnier Southern European countries the cost will be even less than €0,10/kWh within this period. So, who then will still want to buy grid-electricity when solar energy is half the cost?

In 10 years, solar energy will be competitive in all residential PV markets in at least Europe and America. And in 20 years solar energy will be so cheap it will be competitive in any application; residential, commercial and utility scale power plants. Solar cells and modules will be so cheap they will become available in any size, form and color. How will this impact our lives?

Since it will be attractive to generate solar energy from any roof, facade or even any indoor and outdoor surface absorbing (day)light, all industries and consumers will be thinking electric. Solar electricity will become available everywhere at low cost. Small and large scale convenient energy-storage solutions will make the availability of cheap (solar) electricity possible anytime and anywhere in and outside buildings.

Excess solar energy which you don't use immediately can be saved for later, or for charging your electric vehicle - with this cheap solar energy, within 20 years the EV will be much cheaper to drive than an 'old timer' running on gasoline. And the car industry, already investing millions, will have kept up with this power revolution. Mass production will bring down the price of EVs to a level lower than the antiquated fossil fuel cars.

So, we’re looking forward to cheap sustainable energy for everybody around the world, an energy revolution, but has this revolution already started? The solar industry is growing like crazy. And this is not just due to its novelty or to a green commitment. Prices for solar systems are decreasing rapidly. Because of the scale of current investment (much of it Chinese), industrial companies and banks can predict that solar panels and systems will soon be produced competitively, and without depending on subsidies or government support. The investors are not all opportunists either, or crazy. With hundreds of millions being invested today in building new manufacturing plant, the global industry already includes hundreds of manufacturers. They all want to have a share of a market which will take a substantial percentage of the world energy mix within 10-20 years.

And then suddenly, in twenty years, solar energy will be there as if it had existed forever. It will be competitive and it will seem completely normal to everyone to rely on solar systems. Today, we may not see a solar revolution. But, we are already part of a solar evolution - and it’s developing fast.

Who will help PV development more: the green or the greedy?

"We will enable, help and secure the development of a sustainable future with clean energy supply for our children". Does this sound familiar to you? The websites of the solar investors and sustainable and solar energy funds all declare this great ambition. But, in the end, what counts are the financial numbers. "We need at least 12% ROI on the project. Certainly with all the risks involved". There is this great chorus line, saying "it’s all about the money...".  

 
Better than 2% at your savings account
Have you ever seen a solar fund promoting an offer of a 6-7% guaranteed return on your deposit? It would still be a much better alternative to the 2% on your savings account at the bank, and I bet there is a great future for such an initiative. No one would become very rich, but it would enable solar project developments for private people at a decent return. It would make green and clean solar power development attractive for many people.

The green or the greedy?
Investors could be put aside as greedy people/companies. But the reality is that they accounted for maybe even around 50% of the global market volume and development in the last 10 years. Without the ‘greedy’ investors probably only a handful of large scale projects would have been built. This means the global market demand would have been much smaller. And the market volumes and industry dynamics would have been different. Module and system prices would definitely have been substantially higher. If it was just aimed at the green sustainable-inspired people and customers, the global PV market development would be focused on residential PV applications, on many small PV systems, with just a few exceptions for companies looking for a green image. So, who will help the development of the solar industry and markets more - the green or the greedy people?

Higher returns now lead to quicker competitive prices
The higher the returns offered to investors now, the faster the global market and industry will grow, and the sooner module and system prices will decline due to economies of large scale production; and the sooner green people can buy their clean energy at low prices. Besides this, the investors and financial institutions and banks will get used to solar as an easy, reliable, predictable, trusted, low maintenance technology - a reliable asset with interesting returns. This will be helpful when solar energy becomes competitive and when further market development requires the involvement of big companies, investors and banks.

Global energy hunger
The more investors are facilitated with good returns [RJW1] on their large scale projects now, the faster the industry will grow; and the sooner this will lead to lower production costs and, finally, competitive price systems. Thus, we can sooner reach grid parity where incentives are no longer needed at all. And the investors will have found out that solar PV is a superb, reliable and sustainable asset for further investments, even if the returns are less. They will stay in this growth business because the world’s energy hunger can only increase.

Money makes the PV world go around
Money does not only make the world go round. With solar energy, higher subsidized returns speed up achievement of grid-parity, where government support is no longer needed. A 'quick money shot' with good returns will fire up the PV market and keep it running forever. This 20 year period of FiT-payments will still be ‘nothing’ compared to the incentives, tax advantages and environmental tax exceptions that the fossil fuel industry received over the last 70 years. The PV industry will be like a gasoline engine. The initial ignition takes some (money) fuel. But once it runs, it’s hard to stop. And with solar PV it will never stop as the energy source is infinite and the cost competitive.

Solar module prices come down another 20% in just five months

Growing industry and government budget cuts force prices to drop

Solar modules prices have dropped by another 20% during the first five months of 2011. Top-brand modules are now available at $1,40 per watt and sometimes even less. Half-way through 2008, the sales price still stood at around $4 per watt. Why are prices plummeting and where will this end?

A decade of continuous growth
Last year, the global solar PV market grew an astonishing 100%. For any industry in the midst of a global economic crisis, this is not a bad result. And it was not the first time this spectacular growth had occurred - it first happened back in 2008. Only in 2009 did the global crisis hit the PV market, slowing growth down to around 15%.
Since 2001, the global PV market showed an average growth rate of 50% of new installations per year. No wonder the solar industrial players invested heavily in capacity expansion. After a decade of continuous growth, it does not look as if there is any turbulence ahead for the solar PV market. After all, governments will continue to seek sustainable energy solutions and fossil fuel independence. And as for the end user, the majority would definitely prefer clean solar energy if available at competitive prices.

Still more industry entrants
Even more stimulated by the glorious market demand figures we saw in 2010, the solar industry invested heavily in capacity expansion. This will bring down cost and sales prices, helping it to reach the holy grail of grid parity even sooner.
But, besides the rapid growth of the existing industry leaders, many new players have been attracted too by the growth figures and market forecasts. New small companies and very large (Asian) corporations have started to produce silicon, cells and solar modules. And why not? Market saturation is nowhere to be seen. It does not look as if the solar energy market will stop growing some day - apart from the odd temporary slow-down.

Government budget cuts
At the same time, governments of leading markets saw budget claims for Feed-in-Tariffs in 2010 go through the roof. In the light of general budget cuts and economic problems, Germany, France, the Czech Republic and Italy therefore decided to cut back the FiTs and other grants for 2011. The purpose of this move is to cool down the explosive market growth and excessive budget claims. Not only did they lower the tariffs (subsidies); the revised schemes mean that smaller and roof systems are favoured over big ground-mounted power plants.
The subsidy reductions are forcing the solar industry to reduce cost and system prices in order to remain attractive to its customers, ensuring it still provides an attractive return on investment. Besides, the shift from fewer large-scale power plants to more smaller-scale systems will be a more costly job in terms of sales efforts.

Governments cutting budgets to cool market growth
The result of a rapidly expanding industry on the one hand, coupled with budget cuts on the other have led to a rapid fall in prices. The industry is growing at full speed, and facing more competition in the major leading markets. Germany, France, the Czech Republic, Italy, etc. are being cooled down with seriously lower incentives. This parallel development produces a cocktail which will bring about a rapid price decline for solar modules, inverters and total solar PV systems....
In order to control further budget cuts, these countries will calculate their FiT levels for 2012 in accordance with market growth in 2011 or on solar module price development. It is even possible that these leading markets will (slightly) shrink in 2011 (Germany, the Czech Republic, Italy) compared to the record year of 2010. Although the dynamics are hard to forecast, the promising emerging markets (India, China, etc) are yet not big enough to make up for any slower growth in these leading markets. Nevertheless, with system prices going down rapidly, it might very well be that we can expect another year of global growth.

Spiral of declining prices
Of course, new markets are popping up. But governments closely follow the leading markets, introducing FiTs and incentives according to the latest market prices. In the UK, the incentives for large-scale power plants were drastically cut, even less then a year after their introduction.
Inevitably, this spiral of developments leads to (rapidly) falling system and component prices. And the dynamics are hard to control. The existing leading industry players will fight hard (i.e. lower their prices) to capture and increase their share of the market. New players will fight hard to enter the market. And if the market continues to grow substantially, governments will lower the FiTs even more in order to control the overall budgets.

Where and when will this spiral end? Well, not until solar system prices have reached a point where subsidies, grants or FiTs are no longer necessary to make solar energy competitive with other energy sources. And in some markets, this is already a close call for certain market segments. Germany and Italy, with high electricity prices, are serious candidates to reach grid parity for residential customers next year.

New era of strong growth on the horizon
Industry leaders and experts forecast that solar modules will be sold for under $1 per watt three years from now. An average decline of module prices of around 7-10% per year. Large solar PV systems and power plants could then become feasible at $2 per watt. This will lead to competitive prices for solar electricity, without any government support.
Inevitably, this development will change the business models. In the near future, solar PV systems will be sold as energy and cost saving devices - whereas currently they are sold as profit generators based on government subsidies. With regular electricity prices likely to increase, and as solar system prices continue to decline in the near future, an infinite market is appearing on the horizon. The solar industry can prepare itself for an era of continuous tremendous market growth. But first it needs to fight to get itself through the coming years. 

Solar Power Plants Are a Future Goldmine

Solar energy too expensive? It depends how you make the calculation. How long will a PV power plant last? The general practice is for investors to base their calculations on a 20- to 25-year period for a megawatt ground-based PV system, using a fixed structure to calculate the return on investment. Does this give a correct calculation? Why not base it on 60 years and consider the replacement of inverters every 10 years and modules every 20 years?

Is a 25-year depreciation period realistic? What is possible with a PV power plant after 25 years? You could replace the modules by super cheap new modules. The inverters will have been replaced 5 years earlier and will still be doing fine. The rest of the system - concrete, cables, steel structures - are not likely to be eaten by rabbits or ants. Permits and grid connection are most probably still valid as well, since the world is desperate for electricity. So, by replacing the modules with new efficient cheap blue gold panels, available for - who knows - maybe as little as $0.50/Wp, the megawatt power station will be as new. Ready to produce electricity for a further 25 years.

One thing is sure: If a PV power plant is completely depreciated in the first 25 years, the production cost for electricity in the next 25 years will become extremely low. Making it a serious contender to compete directly with electricity from coal and nuclear power plants... And who would believe that electricity on the market will be cheaper in 25 years? In other words, the renewed PV power plant will, once again, become an extremely profitable electricity production site...

It is like renovating your house or building. Replace the windows, but keep the walls and structure intact. Maybe a new kitchen and a lick of paint will give the house a value even higher than ever before. So why, in a world of growing energy needs, would a PV power plant be worth less after 25 years? Isn’t it more likely that the plant is worth even more?

Why would coal and nuclear power plants be depreciated in 50 years and PV power plants in just 25 years? Don't coal power plants present higher risks? Who will be able to estimate what coal prices will be in 25 years' time? Or the costs involved for CO2 emission rights? Or, indeed, other emission reduction measures which may be introduced? These figures certainly seem to be less predictable than what the cost of solar energy will be in 25 years' time. However, it will be difficult to ascertain just how much cheaper modules will be 25 years from now...

10 Myths About Solar Energy

“Solar panels are unsightly, have low efficiency, cost tons of subsidy money and have a high carbon footprint. “
Edwin Koot writes about the 10 major myths about solar energy.

1. Generating Solar Energy Is Only Possible In Countries With A Lot Of Sunshine
The fact is, the energy of the sun is the most evenly spread source of energy in the world. In any part of the world where there is light, solar panels will work. The world’s biggest market for solar energy is … Germany, a country not particularly blessed with long days full of sunshine, but a country with a smart government nonetheless. In the summer, more than 10% of the household electricity in the south of Germany is generated by solar panels.

Of course, when you’re living in the Sahara region, your ROI will be higher, but there are many other factors playing a role, such as the presence of a grid, the local consumer price for electricity, your energy usage pattern, the political stability in a your country, your need for independency from external sources of energy, and many more. As an example, in Northern Alaska it is smarter to invest in solar energy than to pull a cable from a far away power plant or grid connection point.

2. Solar Panels Are Only Attractive In Niche Markets
Solar energy is an attractive product in any place where people need electricity, which nowadays is anywhere in the civilized world - globally. That is a much larger market than just large-scale solar plants in desert areas, which are very competitive markets, because they need creation of new grids, are competing with wholesale prices for electricity and are crowded with many other power-generating enterprises.

When you concentrate on solar panels for household or entrepreneurial use that can be mounted on a rooftop, you can compete against the local consumer and corporate rates for electricity. You can compare this with the market for compact fluorescent lamps, where the consumer at the end of the day saves money by investing a small sum of money. The ROI is made at the end-consumer level: the height of the electricity bill. The investments are very simple, and no new grids or other types of costly infrastructure are needed.

3. Solar Energy Needs A Lot Of Public Financial Support And Could Never Become Competitive
“People will never buy laptops.” “Flat screens televisions are too expensive for the general consumer market.” “Mobile communication is too expensive in comparison with landlines.” These are some of the opinions that we have heard in the past, and how untrue they were! Laptops, flat-screen televisions and mobile phones are now everywhere, because people wanted them, needed them and were willing to pay for them, and finally the prices went down because of mass production methods that could be applied for the innovative products. The same is now happening with solar energy systems.

In the past three years, the prices of solar panels have gone down by half, as a result of the introduction of large-scale production methods. Marketing research shows that innovative consumers want solar energy now. In 5 years, your average consumer worldwide will want his solar panels, just like he wants his smart-phone and laptop. Your consumer will want them, because the solar energy from those panels will be cheaper and greener than the electricity from the grid.

Public funding was created in the past to accelerate this process of acceptance by the general consumer. In the largest markets, the subsidies are now in the process of being terminated. By next year, in Italy and Germany solar energy without any form subsidy will already be cheaper than electricity from the grid. The other European countries will follow this trend soon.

And other countries worldwide will follow, for the simple reason that the global market is getting bigger and bigger and solar systems are getting cheaper and cheaper. That is one thing for sure. The other side is that nobody knows what the costs for traditional energy will be in 10 years. Today, new nuclear plants won’t be even build without substantial government funding, because their future is so insecure.

4. The Efficiency Of Solar Panels Is Still Too Low
True, it could be better. Like cars getting more economical every year, solar panels are getting more efficient every year. Are the current panels not good enough? No, the technology is mature and the panels are good. What is at stake now, is not the efficiency of panels, but the price per generated kilowatt-hour. It is no longer about the type of motor in a car, but about how much fuel the motor consumes per mile.

There will still be new types of solar panels developed, with better efficiency, but the real success of solar energy in the future will lie in large-scale production matters and growth of the global market. A low purchasing price for a solar panel will be the determining factor for low-cost generation of solar energy for the consumer.
Are you waiting with buying a car because the models will be better, faster and greener in 2 years? Not if you need a car right now … In the same way, people need solar panels right now and buy them now, because they help them realize certain goals, such as independency from the grid, lowers costs for electricity and a carbon footprint shift. No new technologies are needed to create a breakthrough for solar panels. They are the breakthrough.

5. Solar Panels Have A High Carbon Footprint And Are Not Sustainable
Solar panels are usually made from silicon. Silicon is found in sand, one of the most widespread natural elements on earth. The ovens used to transform the sand into silicon use a lot of energy - that is true. But the payback time for the energy used to produce a solar panel is only 1 to 2 years. This means that in this time the panel generates the total amount of energy that has been used for its complete production - thanks to the free energy of the sun.

All power generated after the payback time is pure green profit, while solar panels can last 25 to 40 years! Other sources of energy have much longer payback times. Specifically, nuclear power plants have extremely long payback times, so long that it is questionable whether all the power that was generated during their lifetime is enough to pay for the energy used to build and disassemble them.

6. Solar Panels Are Unreliable, Because On Cloudy Days And During The Night They Do Not Work
Right now, the market for wind energy is (still) bigger than the one for solar energy, although the sun is a more reliable source of energy than the wind. But solar energy will soon surpass wind energy, firstly because solar panels can be used anywhere and secondly because they can be implemented in a modular way.  This means that is very easy to expand the solar energy system in the course of months or years.

The combination of solar and wind energy is a nice option, but the future lies in the combination of solar energy with energy storage on a local and on a central level, especially now that the market for transport of electricity will grow further.

The market for central storage of energy is also going to be a phenomenal growing market. Central storage of energy in batteries creates the possibility to store the power generated during the day and use it in the night. An example is charging your electrical car at night. Energy storage is already a hot item - you only have to think of laptops, iPods, iPads and electric scooters and bicycles - but solar energy will give this market a big boost. The combination solar power generation and energy storage for later use is a perfect one.

The markets for central storage of energy and for solar energy systems will stimulate each other mutually, because when storage gets cheaper, it becomes cheaper to generate solar energy with the purpose of storing it and using it at a later time.

7. The Big Energy Corporations Do Not Believe In Solar Energy And Thus It Can Not Be Good
Shell finished their engagement with solar energy already. Exxon does nothing with solar energy. Many large energy corporations prefer to invest in coal power plants. But, don’t expect a wholesale slaughterhouse to specialize in gourmet green meat products. Shell has oil in its blood and their business is based on it. Large multinationals are like large tankers on the ocean: they are very difficult to maneuver and cannot make quick changes in course.

Solar energy is a sport for fast and flexible entrepreneurs, with a preference for innovation and sustainability. The market is volatile and ever changing, like the wind in the sails of an elegant and fast sailing ship. An entrepreneur in solar energy has to be like the shipper of such a sailing ship, sometimes tacking in headwind, sometimes easy-going down the wind, but never windless …

And as such, electronic market giant Sharp, a worldwide market leader in solar panels, shows us that some large companies do believe in solar panels. Sharp understood that mass production of solar panels would lower their price, and that ‘mass = cash’. The mass market for solar panels is about to come into existence – and not just in Japan.

Shell has predicted that in 2040, 50% of the worldwide energy will be generated by sustainable sources. Chances are big that sooner or later Shell will buy one of the consolidated winners in the solar energy market. Some of the ‘small’ solar panel producing companies have already grown into large corporations, with thousands of employees and turnarounds of a few billion dollars per year.

Google grew in 10 years to become one of the largest companies worldwide, so why not a company in solar energy systems?

8. Solar Energy Has No Role In The Global Generation of Energy
At this moment, solar energy contributes to only 1% of the worldwide need for energy. But, this contribution could be growing surprisingly fast. Germany is the guiding country, where it is expected that in 5 years, 10% of all energy used will come from solar panels.

And what Germany can do, other countries can do too. For emerging economies, it has already become useless to build large coal or nuclear power plants when solar panels are getting so cheap so quickly. You can compare this with the introduction of the mobile phone in India and other countries that didn’t even have a mature landline grid.

Those grids were never further developed and will never be, because they were made redundant by the introduction of the mobile technology. The same thing could happen with the introduction of solar energy on the markets of the emerging countries. The building of new, large power plants will become redundant, because individual, decentralized power generation is cheaper, more efficient and much more flexible.

The photovoltaic world market has grown in 2010 with more than 100% compared to 2009, and it already started to grow in this way in 2009. If this logarithmic growth percentage of 100% continues, then solar energy will cover the entire global energy needs in less than 10 years!

9. Solar Panels Are Unsightly And Take Up A Lot Of Space
That really depends on taste. Of course, there will always be people who believe a smoking chimney of a coal power plant is the apex of industrial technology and esthetics. Other people don’t mind showing that they are generating their own electricity and therefore have solar panels on their roofs. Anyway, there will always be enough space on earth for all solar panels ever needed.

Mind you, only a relatively small desert area of 200 by 250 kilometers (125 by 155 miles) filled with the solar panel technology of today would be needed to fulfill the total need for electricity of Europe. But, luckily, we don’t have to enter into those beautiful desert landscapes, because there is enough roof area available in Europe to realize this supply. And on a lot of roofs, the panels won’t even be visible.

Also, more attractive panels will be introduced on the market as production methods and innovations proceed. Compare it with the cars of today, which are so beautiful, compared to the vintage cars of the ‘60’s and 70’s … or not?

10. Solar Energy Systems Are Unreliable And Require Maintenance
Solar energy systems do not have moving parts and therefore require no or hardly any maintenance. The most fragile part in a grid-connected solar energy system is the inverter, which converts the DC from the solar panels into AC equal to the voltage of the grid.

An inverter costs about 10% of your total energy system costs. It consists of some pieces of micro-electronics, can last about 10 years, and can easily be replaced for a then probably even low price.

Only in dry and dusty climates, it can become necessary to clean the panels regularly with a little water. If you live in an environment where it rains often, you don’t even need to do that.

A recycling program for solar panels has already been put in place in many countries, so if after 25 years of loyal service you would need to replace your solar panel, the solar energy sector has processes to recycle all panels for 100%. And no coal power plant can beat that.