Advances in Solar Power

Although the solar power industry has, like its more mature peers, taken a heavy beating thanks to the economic crisis in 2008 and the resulting drop in energy prices, this hasn’t stopped many companies from making impressive headway. In this article, we take a look at the most impressive technological developments and the large-scale projects that are starting to bring the costs down to a competitive level.

China and Polysilicon – over the top?

Polysilicon is one of the major components of Photovoltaic (PV) solar modules and as a result, changes in its price and availability have major implications for the competitiveness of solar power when compared to more conventional forms of power generation. Analysts from China Merchants Securities and Changjiang Securities have warned that Chinese polysilicon producers will be hit hard by a combination of rising overcapacity and the resulting downward pressure on prices. A-list producers have all upgraded their forecasts for shipments in 2010, while their gross profit factor has dropped to 15 per cent. In addition, more capacity is in the pipeline. An executive from Jiangsu Zhongneng Polysilicon industry has told Sinocast that the top seven Chinese polysilicon makers are all pushing ahead with plans to boost their capacity, to the tune of a combined 60,000tpa. However, manufacturers are increasingly looking towards consolidation in response to the current situation. As of December 2008, the spot price for polysilicon was at US$55/kg, a far cry from the US$475/kg commanded back in April 2008. In addition, it’s worth bearing in mind that the market is oversupplied with a current Chinese polysilicon manufacturing capacity of 20,000tpa and current projects under construction could see this rise to 100,000tpa.

While this may be painful for polysilicon makers, it is clearly good news for manufacturers of PV modules and for the solar industry as a whole, particularly in light of the pressing need to reduce costs to the point where solar becomes competitive with conventional forms of power generation. Given the above in conjuction with China’s 40 per cent share of the global photovoltaic panel market and the fact that 97 per cent of the solar modules it produces are exported, the situation does suggest that it might be hard for foreign companies to compete in terms of price.

Fortunately, the Chinese government has noticed the potential oversupply situation in both the PV and polysilicon industries and therefore is ramping up its targets for domestic PV capacity by 5-10 fold. It is currently looking to install an impressive 20GW of solar power by 2020 (equivalent to more than double the world’s current solar power capacity) and while CSP projects will contribute a large portion of the projects that will undoubtably form to meet this demand, it still means a dramatically larger future market for photovoltaics. From the wider perspective of the industry, this is extremely good news as it will prevent other producers from being squeezed out of the global market. Even so, the situation is causing some alarm, with some commentators accusing the industry of “reckless investments and production expansions.”

Chinese producers might find themselves in competition from their Indian counterparts, given that India has recently passed the 1GWpa mark in terms of PV module manufacturing capacity, according to Frost & Sullivan and like China, has the advantage of low labour costs. However, the Indian PV module industry is dependent on imports of polysilicon, suggesting that it might be better off concentrating on thin-film technology to limit the comparative advantage of Chinese producers in this regard.

Over in Japan, manufacturers are also in the process of expanding capacity. Mistsubishi Electric completed a solar panel factory in February 2010 and is now expecting to produce 600MW of PV cells by the financial year March 2012, up from 200MW. Meanwhile Showa Shell’s solar subsidiary has announced that it intends to become the world’s biggest producer of thin-film PV panels, with the eventual aim of growing the business to the point where it rival’s Showa’s US$33.6bn oil-refining and downstream fuel operations in scale. In addition Sharp, is expecting to open a new plant this year, which will boost its thin-film capacity to over 1GW. Fortunately, for other producers, the decision by the Japanese government last year to reinstitute subsidies to households that install solar panels, should help to boost the domestic market.

Photovoltaic developments

California’s Nanosolar has been busy. It has recently opened an automated 640MWpa manufacturing facility for its solar panels, which use a copper, indium, gallium and selenium (CIGS) based semiconductor. The company claims to have solved some of the problems that have plagued non-silicon based cells in the past. Its solar panels has an efficiency of around 11 per cent, less than the 16.4 per cent boasted by conventional photovoltaics. However, according to Martin Roscheisen, Nanosolar’s CEO, that’s still enough to be competitive, due to modifications to boost performance, such as using large aluminium foil sheets to collect electrons from each panel and lower installation costs. Using US Department of Energy methods, he believes that power plants using Nanosolar panels could generate electricity at US¢5-6/kWh, close to that for coal-fired power plants and substantially less than the US¢18-22/kWh recorded for conventional PV solar power. Japanese solar companies are also focusing their efforts on CIGS-based cells, a natural tactic, given the competitive advantage their Chinese counterparts hold in terms of polysilicon supply.

Companies are increasingly turning to nanotechnology to drive further improvements in efficiency and cost reductions. Both nano flakes and “quantum dots” promise to trap and convert more solar energy than conventional silicon-based cells, but it is yet to be seen if they can amount to anything outside of the lab. The “nano flake” concept hinges on the discovery of a nano-scale indium arsinide crystalline structure composed of by the University of Copenhagen’s Martin Aagesen, which is capable of absorbing all incoming light. Mr Aagesen has since set up a company called “SunFlake” to commercialise his discovery. There is also the rise of novel manufacturing methods such as inkjet printing, which should help bring costs down, as should the use of dye laden plates or films of water to concentrate sunlight onto panels.

There is also the possibility that manufacturers will start to investigate materials such as iron sulphide (also known as fool’s gold), which have previously escaped scrutiny due to their low efficiency at converting solar radiation to electricity. However, the cost-savings from using such abundant materials could be substantial enough to challenge the current generation of silicon-based PV cells.

According to a recent presentation by Dr Mark Pinto, chief technology officer and general manager of Applied Materials’ Energy and Environmental Solutions Group (EES), there is still plenty of scope for innovation and improvements in conventional silicon PV manufacturing. He explained that today’s factories typically run at 1500 wafers per hour at an efficiency of 16 per cent, with as much as two per cent line breakage. In contrast, he predicts that by 2012, as a result of improvements in equipment and a move towards a fully automated process, output will more than double to 3000 wafers per hour at greater than 20 per efficiency with a 50 per cent reduction in the rate of breakages.

CSP: gaining momentum

Concentrating Solar Power (CSP) is starting to really make its presence felt. According to a report released in May 2009, compiled by Greenpeace, the European Solar Thermal Electricity Association (ESTELA) and IEA SolarPACES, total investment in the sector was expected to exceed US$2.58bn in 2009, and could rise to US$26.8bn by 2015. The report also indicated the fact that the technology has the potential to meet up to seven per cent of the world’s projected demand for electricity in 2030, increasing to an eyebrow-raising 25 per cent by 2050. The report also indicated that although CSP plants were generating just 430MW of the world’s electricity by the end of 2008, at the time it was written, there was another 1000MW of projects scheduled to come online by 2011. In addition, the report indicated that there were 7GW of CSP projects on the drawing board in the US, with another 10GW being planned for Spain, which could be commissioned by 2017.

At the moment, one of the largest projects currently under construction is Torresol Energy’s three CSP plants, which together represent 117MW of capacity and a total investment of US$1.4bn. All three are expected to be commissioned in 2011. Two are 50MW parabolic trough systems, while the third project is a smaller 17MW central tower receiver project. Torresol is a joint venture between Spanish engineering firm SENER (60 per cent) and Masdar (40 per cent), Abu Dhabi’s flagship cleantech investment firm. Masdar is also in the process of developing the SHAMS 1 100MW CSP plant in Abu Dhabi, with construction scheduled to begin in the first half of this year and completion timetabled for 2012. eSolar has also formed a partnership with power plant developer Ferrostaal AG to build CSP plants in markets such as Spain, South Africa and the UAE. Under the new arrangement, eSolar will provide its solar field and receiver technology, while Germany’s Ferrostal and Abu Dhabi’s International Petroleum Investment Co, will provide the power turbines and act as the general contractor.

eSolar’s repeating unit approach helps drive down installation costs

In terms of technical developments, much of the driving force in recent years has been from California-based eSolar, which has successfully developed a “cost-effective utility-scale CSP power plant that is based on mass-manufactured components and designed for rapid construction, uniform modularity and unlimited scalability.” Key innovations include the shift towards the manufacture of preconstructed units which can be installed easily with unskilled labour, the use of small individual mirrors to bring costs down and the use of a repeating structure that eliminates the need for precision surveying and individual alignment of mirrors. In fact, every mirror in the field can be controlled in real-time to maximise solar energy collection and direct it to the central receiver. More whimsically, such the level of control that a field can be adjusted to instantly display corporate logos that can be viewed from the air. eSolar’s system is delivered in units of 46MW, each with sixteen modules of thermal receivers and dual north-south heliostat fields.

Such is the precision of eSolar’s system, that mirror fields can display corporate images in real-time

eSolar signed an agreement in February 2009 to build a 500MW CSP plant for Californian power utility NRG Energy, which is expected to be up and running as early as 2011. More recently, the CSP developer signed a deal to license its tracking technology and know-how to China in order to both assist and profit from its goal.

There are also some technologies on the horizon that could conceivably change the entire way in which energy from the sun is converted to electricity. For example, in early 2008, details came to light that a former NASA scientist, Lonnie Johnson, had invented a small engine capable of converting heat to electricity at 60 per cent efficiency with no moving parts. Called the Johnson Thermoelectric Energy Conversion System (JTEC), it uses a temperature difference to generate a pressure that forces ions to move through a thin film, by means of the Ericcson cycle. If this technology is capable of being put into commercial use, then it will have important implications for the solar industry as well as potentially giving gas turbines a run for their money, particularly in terms of CSP. There is also the potential for it to give CHP plant operators greater flexibility over their electricity/heat output ratio.

There is also the fact that the Desertec concept, which envisages the formation of a supergrid, connecting the whole of Europe and North Africa and the creation of massive CSP plants in the Sahara desert, which would export electricity to Europe, has gained significant momentum, with the creation of the Desertec Foundation.  The foundation’s TRANS-CSP report, has calculated that the cost of such a supergrid would amount to €45bn, but as this cost would be spread across 10 years and 30 or more countries, this would cost each country involved in the scheme just €150m per year. Encouragingly, a wide range of actions towards this goal are expected to take place in the short term, such as the formation of “1 GW Kick-off-Programmes to demonstrate feasibility of CSP projects in interested MENA countries.”

A Hybrid approach

One of the more interesting developments in recent months has been a move towards combining CSP and PV technologies. The idea of concentrating sunlight onto a PV panel has always been attractive, given that mirrors are substantially cheaper on an area basis than PV panels. Now Semprius and Siemens Industry have announced that they have entered into an agreement to co-develop a “plug-and-play” demonstration system which features Semprius’ Concentrator PV module arrays, coupled with control components and automation from Siemens. Semprius utilises a proprietary micro-transfer printing technology to further bring down costs. The module design uses “inexpensive optics” to concentrate 1000 suns onto the PV receiver, which represent only 0.1 per cent of the total surface area.

In March 2009, GreenVolts, entered into a two year “development relationship” with the US National Renewable Energy Laboratory (NREL) to commercialise the latter’s Inverted Metamorphic (IMM) advanced multi-junction solar cell design, which successfully demonstrated an impressive efficiency of 40.8 per cent and has the potential to be increased further.

Another hybrid strategy is to use solar power to reduce the fuel consumption of conventional fossil-fuelled power plants. The Electric Power Research Institute is currently trialling two demonstration projects which will inject steam generated by a concentrating solar power system into a conventional power plant steam cycle to help generate electricity, thus solving the issue of intermittency. The first project will be hosted by the Tri-State Generation and Transmission Association at its 245MW coal-fired Escalante plant in Prewitt, New Mexico, while the second will be at NV Energy’s 1102MW natural gas-fired Chuck Lenzie plant near Las Vegas, Nevada.

Meanwhile, Xcel Energy has hired Spain’s Abengoa Solar to build a 4MW parabolic trough CSP plant at the utility’s coal-fired power plant, in the vicinity of Grand Junction, Colorado. Construction was scheduled to start by the end of September 2009 and is expected to be completed by the end of 2010.

Solar goes Stellar

Although there have been rumblings regarding the possibility of harvesting the power of the sun using satellites equipped with large light gathering arrays and beaming the power back down to Earth for sometime, the cost of launching the required installations into space has always seemed prohibitive. That doesn’t appear to be putting off California’s Solaren Corporation, which has signed a contract to provide Pacific Gas & Electric with 200MW by 2016, by this method. Given that the Pentagon has put a US$10bn price tag on a mere 10MW of space borne solar power by the same date, there are obvious doubts as to whether Solaren will actually be able to deliver. However, the company is convinced that it will only cost around US$2bn to put a handful of satellites carrying the necessary equipment into orbit. These would then be robotically assembled into a single large solar power station. Solaren eventually wants to be able to deliver 1GW of solar power capacity via satellites into geosynchronous orbit.

A real opportunity could be the US military which is still keenly interested in the concept, primarily in terms of being able to deliver power to warzones without the need for conventional supply lines and may well be able to provide funding for research. The concept of space borne solar power could also be a way for NASA to find a renewed sense of purpose after the current fiscal situation has forced it to give up the dream of further manned missions to the Moon or even Mars.

The wider market

The fact that the industry is already past the much vaunted US$1/W tipping point and has been since First Solar’s announcement in February 2009, suggests that the sector is now approaching the point where it can begin to move out of the shadow of the wind turbine industry and might soon start to make a significant contribution to the global energy mix. However, there is still a long way to go, as for PV to reach grid parity, the US$1/W figure needs to includes installation costs and as a result, manufacturing costs would need to drop to around US$0.65-0.7/W.

On the whole, the market is witnessing an encouraging shift from initially being focused on regions with high levels of subsidy but little in the way of actual sunlight (Germany) and towards the US east coast, the Mediterranean, North Africa and the Middle East. However, in terms of photovoltaics, Europe still represents by far the most important market, capturing about 75 per cent of all sales (some US$22bn), according to the European Photovoltaic Insitution (EIPA).

Although the global PV market has grown at a CAGR of 47 per cent over the past five years (S&P), it hasn’t been plain sailing by any means. The decision by the Spanish government to slash the subsidies provided by its feed-in-tariff scheme has triggered a collapse in the country’s demand for solar panels. In 2008, it accounted for 50 per cent of the PV market, but now it represents just five per cent and the resulting drop in demand was one of the main causes of the 32.3 per cent fall in global PV installations recorded in 2009. A similar development is brewing in Germany where feed-in-tarrifs will be cut by a further 16 per cent in June 2010, in addition to the standard annual decline. Meanwhile Italy is looking to cut its feed-in-tariffs by 20 per cent come 2011, followed by annual cuts of six per cent in 2012 and 2013, according to a draft document seen by the Reuters news agency. It has also delayed a new incentive scheme for a second time, but there is some good news for the industry as recent reports from the media suggest that the cuts in the value of feed-in-tarrifs may be less than expected.

The situation is potentially bad news for European producers, as the erosion of subsidies will make it harder for them to compete against Chinese producers, who are currently selling solar modules at around €1.20/W, while European firms are significantly more expensive at €2.00/W (data from UBS). A key reason for this is the fact that Chinese producers have the advantage of being able to source their polysilicon from low-cost producers operating in an oversupplied market. The expected reduction in demand for PV modules in Germany as a result of the decline in subsidies, is likely to significantly impact on Chinese producers, which according to Min Li of Yuanta Securities, will help drive M&A activity across the industry.

However, industry representatives, such as Katriana Landis, group vice president of BP Alternative Energy, present at the World Future Energy Summit were keen to stress that the “step-down” strategy is good for the future of solar power as a whole, given that it helps create the economies of scale needed to push costs down, while at the same time, driving innovation and preventing the industry from slipping into a complacent mind-set.

There is also the fact that just as many European countries are stepping down in terms of solar subsidies, the UK will be introducing its new feed-in-tariff scheme for renewables on April 1 2010. These will offer a 5-8 per cent return on the initial investment, as part of a series of measures aimed at increasing the share of renewables in the country’s generating mix to 30 per cent by 2020, from the current 5.5 per cent, a tall order by any stretch of the imagination.

The general outlook for the PV global market appears to be much more positive than was the case last year. According to iSuppli Corp, installations are expected to see a recovery, growing in capacity by 42.5 per cent in 2010, followed by 73.6 per cent in 2012 and 68.6 per cent in 2013. The market research firm also anticipates that PV installations in Italy will reach grid parity in 2012, with Germany following in 2018. It also expects California to reach full grid parity within four to five years, defined as the point when a rooftop installation delivers a 100 per cent return on investment within five years.

A key issue going forward will be the level of regulatory support provided by governments. In the US, this is lacking in two main areas: the absence of a federal renewable generation obligation and the fact that tax credits for renewable energy need to be frequently renewed, a situation that generates much uncertainty for investors.

Although China is potentially a huge market, there remains the issue of a mismatch between the location of its solar resources and the main areas of electricity demand. According to S&P’s Swami Venkataraman, the former are located in the west and southwest of the country while the latter are in the east and southeast of the country. This means that the cost of large-scale T&D projects needs to be factored into the economics of any significant push towards solar power in China. However, the fact that the government introduced its own system of subsidies for solar power, with installations attached to buildings involving over 50kW being eligible for a subsidy of US$2.90/W, coupled with the legal requirement for distributors to buy renewable energy from generators are welcome first steps towards what some hope will be a fully-fledged feed-in-tariff system.

Perhaps the most unique aspect of the solar sector is that the technology is advancing in leaps and bounds with many techniques competing for funding and market share, but each with its own specific strengths and applications. While the simplicity of concentrating solar power coupled with its scalability, makes it the front-runner for utility scale generation, the line between thin-film and photovoltaics may become increasingly blurred as the industry matures. In the end, it may simply come down to geography, with those areas fortunate to have an abundance of sunlight, featuring a combination of CSP and PV and thin-film playing a smaller role on large flat surfaces and windows, to a predominantly thin-film based approach in gloomier climes.