Solar should be viewed as a a complimentary fuel source
Sun comes into its own as power generation sector looks for viable alternatives to fossil fuels, but it's often underestimated
Given technological advances, rapidly changing economics, as well as potential new applications, solar looks increasingly competitive in the future energy landscape.
Solar’s potential is underestimated and not well understood, says Bernard Clement, who heads French major Total’s new energy division. He told Petroleum Economist that the competitiveness of solar is such that it can be deployed worldwide. But rather than a competitor to oil and gas, it should be viewed as a complimentary fuel source. It is an intriguing possibility, given the earth receives solar radiation 10,000 times the world’s annual energy needs.
Grid parity – when electricity generation is competitive with grid-electricity rates without subsidies – is edging closer. Thanks to falling module costs, fuelled largely by the ramp up of manufacturing capacity in China, the average US solar photovoltaic (PV) market will likely hit proper grid parity around 2020. This point will be reached sooner in a number of states, including California. Some analysts believe that, within a few years, arguments about feed-in tariffs will become irrelevant in many nations, because the solar industry simply won’t need subsidies.
In its report Solar power: Darkest before dawn, McKinsey, a consultancy, suggests the global potential of fully economic solar could reach 1,000 gigawatts (GW) by 2020 – equivalent to about one-fifth of today’s globally installed power generation capacity. The consultancy concluded that the trend of falling solar costs could transform the face of the utility industry. In developing countries, meanwhile, distributed generation when combined with inexpensive storage solutions could bring electricity to millions. But given the barriers to implementation, such as access to finance, 600GW of installed capacity is more likely by 2020, says McKinsey.
Since 2007, the installed cost for a solar panel has dropped from $7.50 per watt (W) to about $1/W. At an installed cost of $1/W, solar – in moderately sunny environments – costs roughly $0.10 per kilowatt hour (kWh). At this price, solar is economic compared to the marginal source of power generation in almost all the markets across the US, South America, Africa, Middle East, Asia and Australia.
Based on an analysis from Wall Street research firm Bernstein, solar is competitive with gas-fired combined-cycle-turbine plants. Sunshine is more viable than more costly imports of liquefied natural gas (LNG) in many countries, when gas prices are over $11.88 per million British thermal units (Btu). No wonder many countries, such as China, which is tipped to become a major LNG importer, are rapidly expanding their solar footprints.
Total, the only big oil company that is seriously pursuing clean energy, says it is heavily investing in solar. It has spent some $2 billion, mostly over the past two years, in the sector after buying a 60% stake in panel-maker Sunpower. The French firm recognises that as innovation drives costs down, modern renewables, especially solar, will be the fastest expanding energy segment for decades. Still, that sum is dwarfed by its oil and gas investments.
Opportunities exist in every continent with major markets in the US, Japan, Middle East, South America, Africa and Australia, says Clement.
And PV is not the only form of solar energy. Improvements in other approaches, including concentrated solar power (CSP) plants – which use mirrors to concentrate a large amount of sunlight onto a small area, powering a turbine – are possible.
In fact, at the end of 2013, the sector hit a new milestone when Chile saw the first ever spot sales of unsubsidised solar-generated electricity from its maiden merchant solar-power plant.
It’s not impossible to imagine thousands of large-scale solar farms generating low-carbon electricity all over the world in future. The pilot for Europe’s biggest solar venture is the Desertec project, launched in 2009, which would use high-voltage direct current transmission lines to bring electricity directly from plants in the North African deserts to an emerging super-grid in Europe. The idea makes a lot of sense considering that the world’s deserts receive more energy from the sun in six hours than humans consume in a year.
Thanks to heat storage tanks, concentrating solar-thermal power plants in deserts can supply electricity on demand day and night. This makes them an ideal complement to fluctuating energy sources such as wind and PV power and allows a higher percentage of these variable energy sources to be used in the future electricity mix, says Desertec.
In the Middle East, PV-generated electricity looks set to be competitive with gas-fired power within a couple of years, Paddy Padmanathan, chief executive of Saudi Arabia’s ACWA Power, told an energy summit in Abu Dhabi recently.
At the height of the midday sun, electricity from PV can now be delivered at $0.12/kWh, not far off the $0.10/kWh produced by the most efficient gas-fired plant – based on a gas price of $9/m Btu – added Padmanathan.
He thinks the uptake of renewables in the Middle East will go far more quickly than most people expect. It makes sense for countries in the region to propel renewable technologies, especially if oil can be saved for more lucrative exports.
Solar is well-suited to industrial and processing applications too. In Saudi Arabia, for example, the Al-Khafji solar-powered desalination plant is set to produce 30,000 cubic metres of salt-free water per day, a development that will prove a boon in the water-short Middle East.
Energy storage, long seen as the holy grail of smart technologies, is also seeing both technical and commercial progress. Storage, which can meet the roles of conventional generation, transmission and distributed assets, as well as providing value in behind-the-meter applications, is important. Sunlight, or wind for that matter, does not synchronise with electricity demand, triggering a number of serious knock-on issues.
The high cost of energy storage compared to typical grid alternatives has long been a barrier to widespread uptake. But that’s starting to change as advances in battery technologies, coupled with cost cuts, are being driven by mass production of batteries for consumer electronics and electric vehicles.
Significantly, the next six years will mark the beginning of a viable long-term growth opportunity for commercial energy storage, according to the latest report from Grid Edge Market (GDM) Research.
Nudged along in part by the expansion of PV, over 720 megawatts (MW) of distributed energy storage will be deployed in the US alone between 2014 and 2020, up from just over 100 MW today, marking a cumulative yearly growth rate of 35%.
Over the next couple of decades, low-cost solar-plus-battery systems will enable more and more customers to cut the cord with their power utility and go from being “grid connected” to “grid defected”, market analysis and industry discussions show – including the Edison Electric Institute’s January 2013 Disruptive Challenges report.
Thomas Edison, inventor of the first light bulb, saw the potential of solar over 80 years ago, when shortly before he died in 1931 he told his friends: “I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait too long until oil and coal run out before we tackle that.”
Fossil fuels aren’t running out anytime soon, but rising costs of extracting them is helping make a case for greater take-up of solar power this century.