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While
wind power is a nearly mature New Energy and one of the least costly
sources of power a utility can build or buy, solar energy is right at
wind’s heels.
Solar is price competitive with all other forms of grid
electricity supply in some places and is on its way to becoming price
competitive everywhere else. But as solar power grows into its
maturity, it is becoming a whole lot more than just panels on the roof.
A white paper from Florida, a state at the forefront of U.S.
New Energy and New Energy policy innovation, highlights 3 trends
expected to be important factors in the growth of the U.S. solar energy
industry. According to Emerging trends in the U.S. solar market,
from Environment Florida and GTM Research, the remarkable (1) growth in
demand for solar photovoltaic (PV) systems, (2) the even faster growth
in the supply of PV, and (3) the steady falling of the installed cost
of solar PV systems have joined to drive a host of new technologies,
market strategies and regulatory concepts – but 3 stand out.
The
3 trends – (1) The European-style feed-in tariff (FiT), (2)
utility-scale PV installations and (3) solar PV-biomass cogeneration as
a baseload power supply – share 2 key characteristics. According to the
white paper, these uses of solar PV (1) have yet to fully impact the
U.S. solar energy market and (2) have the power to transform segments
of the solar energy industry.
The
installed cost of photovoltaic (PV) systems has steadily fallen 3.6%
per year for a decade. At the same time, the price of electricity has
gone up just as steadily. With its increasingly competitive economics
as a major factor, global PV demand has gone up 51% per year and the
U.S. market has grown 71% per year since 2000.
U.S. PV demand in
2008 was the 3rd biggest in the world, behind Spain and Germany, and
appears to be just beginning to realize its potential. Much of the U.S.
is rich with insolation (direct solar radiation per unit of horizontal
surface), electricity demand is enormous and expected to grow, and
there are lots of rooftops and plenty of land on which to place
systems. Long-term growth appears a sure thing.
The
first trend described in the Environment Florida white paper is the
Feed-in Tariff (FiT). Although there are many elements in an effective
FiT, the basic idea is to reward builders of New Energy with a
guaranteed, above-retail price for all the power their systems feed
into the transmission system over an extended period, usually 15-to-25
years to approximate the life of the New Energy system.
Although
there are a number of arcane formulas by which the rate of return can
be set, the 2 most popular kinds of FiTs are (1) a fixed rate of
return, or (2) a set amount of return above the market rate for
electricity. Either way, a guaranteed profit over a predictable period
of time has almost invariably attracted investment in New Energy.
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The
amount of profit offered to attract investment is usually determined
either (1) by the value of New Energy to the utility, or (2) by the
estimated levelized cost of electricity from New Energy generation.
Determining the “value” of New Energy is theoretical and complex.
Determining the levelized cost is more statistical, straightforward and
generally more successful at attracting investment.
The FiT was
originated in California in the late 1970s but proved unwieldy in its
incipient form. As the concept grew more sophisticated, other nations
that wanted New Energy incentives adopted it. There are more than 40
FiTs now in place around the world. The stable, long-term, levelized
cost-based German and Spanish FiTs have spurred those nations to world
leadership of installed PV capacity.
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Germany
went from 44 megawatts in 2000 to 1,260 megawatts in 2007. Its FiT was
so successful it had to institute a sharp digression rate, lowering the
guaranteed rate of return on new systems entering the program over a
scheduled time period as installed capacity grew. Spain’s 2007
adjustment to its FiT was too ambitious and caused a temporary bubble
in the solar industry worldwide.
Setting the ideal FiT rate
and schedule is a challenge to economists and planners. Both Germany
and Spain will need to adjust their FiT rates of return downward going
forward, as volume grows, to avoid re-inflating the solar PV market or
unnecessarily burdening their utility ratepayers. The world is watching
how they manage the delicate balance of sustaining investment without
overheating the solar industry.
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Gainesville
Regional Utility (GRU) of Gainesville, Florida, instituted one of the
first levelized cost-based U.S. FiT’s in February 2009. It offered a 32
cents per kilowatt-hour rate of return in 2009 and 2010 that drops to
30 cents per kilowatt-hour in 2011 and continues dropping going
forward. The FiT is "capped" at (i.e., only allowed for) the first 4
megawatts of ground based PV systems that apply. It "digresses" (i.e.,
provides a lower guaranteed price) on a fixed schedule over the 20-year
life of the program. By March 2009, GRU had booked its allotment of
systems through 2014.
California has the biggest U.S. program,
capping its FiT-eligible systems at 750 megawatts. It has been so far
less urgently subscribed because its rate of return is determined in a
complex and somewhat arcane manner. The California legislature is
pushing to streamline the FiT and the effort looks like it may once
again break new ground in solar initiatives.
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The
white paper’s second designated trend is the development of
utility-scale PV. The trend is driven by the widespread adoption of
Renewable Electricity Standards (RESs) at the state level requiring
regulated utilities to obtain a portion of their power from New Energy
sources by a date certain.
Utilities quickly realized
customer-owned distributed generation was not going to get them to the
RES in the designated time. They have, therefore, been obtaining power
purchase agreements (PPAs) with wind developers and biomass plant
builders as fast as projects can be built. In states where there is a
very high insolation or inadequate readily exploitable wind and biomass
resources, many utilities have turned to solar. Also, many sun-rich
states included solar carve-outs in their RESs, requiring that a
specific portion of the New Energy requirement be solar energy.
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Utilities
initial high interest in the many concentrating solar power plant
(CSPP) technologies has been tempered by the falling cost of PV solar.
While CSPP technologies offer the enticing possibility of storage
capability and 24/7 dispatch, that is still – like the CSPP
technologies themselves – less than fully proven and in some cases
essentially experimental.
The predictable and mature PV
technology’s price, on the other hand, is expected to reach parity with
other forms of grid electricity generation as early as 2010.
Two
factors more than offset the variability of PV supply: (1) Its value as
a peak load smoothing energy supply, because the sun is most intense in
the afternoon when demand is often the greatest; and (2) the increasing
knowledge by power plant managers and grid operators of how to predict
and integrate solar PV-generated electricity into transmission systems.
The
14-megawatt system at Nellis Air Force Base in Nevada was the first
utility-scale PV solar system. The second, a 25-megawatt Florida
system, came online in November. 100-to-550 megawatt systems are
planned at several sites in California.
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Standard
silicon-based PV panels and newer thin film PV panels are presently
competing for dominance in the utility-scale PV market. Standard panels
turn more of the sun that hits them into electricity but in the past
have been more expensive than thin film. Until this year, thin film
looked to be dominant.
When the bubble caused by Spain’s FiT
burst just as enormous increases in supplies from new manufacturing
capacity in Asia caused an oversupply of silicon and silicon-based
panels, the price of standard panels dropped so low that they became
the better bargain. Now thin film suppliers are offering rebates and
streamlining manufacturing in a fight to retain market share.
The
third trend described by the white paper is the most dubious: CSPP
technologies, which the white paper calls solar thermal, combined with
biomass-to-natural gas in a cogeneration facility.
First, a
clarification of the terminology: Concentrating Solar Power Plant
(CSPP) technologies are solar thermal technologies because they use the
heat (“thermal”) part of the sun’s energy to generate electricity,
whereas PV technologies transform the sun’s light (“photo”) to
electricity (“voltaic”).
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NewEnergyNews
prefers to use the CSPP designation for technologies that concentrate
the sun’s heat, primarily with mirrors, so as to distinguish them from
the solar thermal used by hot water systems that gather but do not
really concentrate the sun’s heat.
CSPP's greatest promise is
its potential capability to include 24/7-generation by transforming the
sun’s heat into captured and stored steam that can be released after
the sun sets to drive a turbine. This concept remains largely
experimental at utility scales. In the absence of a capacity to use
solar energy when the sun is not shining, it cannot be used as baseload
power – except in conjunction with a non-variable energy source.
Experiments
are under way to use natural gas and biomass-derived gas as the
non-variable energy sources. CSPP plants would then be built with and
integrated into such a base-load system.
Of the fossil fuels,
natural gas is the lesser of the evils because it spews the least
greenhouse gas emissions (GhGs) when burned and because there are large
domestic supplies that (1) might (theoretically) be obtained with less
destruction of the local environment than coal and (2) transported with
less spewing of GhGs than coal.
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Between
natural gas and biomass, biomass is the lesser of the evils because it
puts to use waste that would otherwise release GhGs as they decay with
no derived benefit and because it is a somewhat renewable energy source.
In
CSPP-biomass hybrid cogeneration plants, turbines can be driven by the
concentrating solar technologies that convert the sun’s heat to steam
during the day and they can be driven by steam created from the burning
of the gases derived from biomass when there is no sun.
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Pilot
projects are being built in California farming regions. In 2010,
massive amounts of cattle waste and agricultural waste will be put to
work as biomass-to-gas under California’s plentiful sun. The following
year, a smaller, community-sized pilot facility in Florida will go
online and combine the South Florida sun with forest and non-crop waste
biomass supplies.
Doubts remain about the economics of hybrid
biomass-CSPP plants that will not be clarified until there are more
working systems and the costs of the experimental technologies are
established.
Environmentalists remain dubious of any energy
system that involves burning anything and they emphasize the importance
of learning to rely entirely on sun and wind and flowing waters. At the
rate human ingenuity is harnessing this good earth's gifts to produce
power that is cost-competitive with burning's spew, environmentalists
are very likely taking, as usual, the wisest point of view.
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QUOTES
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From the report’s introduction: “…while demand is beginning to
stabilize in the historical demand centers [like Germany and Spain],
the U.S. market is only beginning to ramp up. With high insolation, the
largest electricity demand in the world, and ample available land for
solar development, the U.S. presents an attractive long-term growth
opportunity for developers, installers, financiers, and other solar
service providers.”
click to enlarge
-
From the report’s introduction: “The solar market is evolving as
rapidly as it is growing. Local and state governments throughout the
U.S. are increasingly considering new policies and incentives to
support solar deployment, utilities are beginning to consider solar a
valuable component of their portfolios, and technological innovations
are increasing the effectiveness and value of solar power. The trends
that emerge today will determine the nature, and fate, of the solar
market in the U.S.”
click to enlarge
-
From the report: “…By providing a stable, known rate, feed-in tariffs
attract capital investment in solar projects with little revenue
risk…As has been proven in Germany, effective feed-in tariff policies
can provide the backbone for rapid, sustained solar market growth.
Thus, the more the U.S. implements cost-based FiTs, the stronger the
demand market for solar will become.”
- From the report:
Utility-scale PV is a relatively new phenomenon in the U.S. However, it
is widely acknowledged to have the potential to disrupt the market, as
announcements for larger and larger projects seem to arrive weekly…”
posted by Herman K. Trabish
Emerging trends in the U.S. solar market
November 2009 (Environment Florida and GTM Research via Greentech Media)
