Block’s Indicator of Sustainable Growth

by Ray Block

In 2008, the standout investment was in solar energy, where it reached the milestone of generating revenue of $13 billion for the first time, with a venture capital injection in the September quarter of nearly US$1.6 billion. The year was marked with strong growth in both solar PV (photovoltaics) and solar thermal (also known as concentrating solar).

The forecast revenue for solar energy in 2012 is a cool $40 billion, so fast is the speed where renewable energy is now seen as a major growth industry. The key to growth in the PV sector is determined by those markets, which have mandated renewable energy targets, along with feed-in tariffs, which require electricity retailers to buy power from renewable energy sources at above market prices. Feed-in tariffs originated in the US in 1978, but were refined in Germany in 2000 and added to in Spain, which account for the rapid growth in renewable energy in those markets.

The eight year extension of US tax credits for renewable energy agreed to by Congress late in 2008 will be a big incentive for record growth in America, in spite of the gloom from the world wide recession.

While Japan and Germany continue to lead the PV sector with solar panels, the US is making a spirited run in innovation to leap ahead. Polysilicon is the preferred and traditional key raw material for most of the solar panels on world markets, given its exceptional efficiency in generating electricity. This where Japan, Germany and China dominate as the major world suppliers.

However, a number of exceptionally keen US solar firms believe that their development of thin film cells, which use little or no silicon in solar power is the way of the future in the ability to reach “grid parity.” That is when the cost of a kilowatt-hour of solar energy is about the same as one generated by any other fuel source. There has been a race among suppliers of thin film cells getting the cost of panels down to as low as $1 a watt.

Dwayne Lawrence in the Fast Company blog (December 12 2008) says that “if you have an acre of rooftop (or a 100 acre field), then thin film cells, which use nano size layers of silicon or futuristic metal alloys-either cadmium telluride (CdTe) or copper-indium-gallium-diselenide (CIGS) as the key ingredient to convert sunlight into electricity promise to do the job for a fraction of the cost.” The thin film cell market is full of startups, but second generation companies, led by Arizona based First Solar, is making the most rapid progress.

“First Solar has developed a CdTe panel for a production cost of $1.14 per watt, less than half the cost of its nearest rival at its debut.” The claim is that producers of second film technologies will grow its market share from 14 per cent to 28 per cent by the end of 2009. A new solar PV maker Nanosolar using CIGS cells  boasts that it will be able to sell solar panels for as little as 99 cents a watt.

Solar PV is already a 10 gigawatt industry world wide, and Fast Company suggests that another 10 gigawatts more will be brought online in 2010 alone. By comparison, solar thermal is as yet smaller in comparative terms, but it is about to grow much larger in a hurry. Solar thermal is largely a US invention for power station use in the generation and storage of electricity.

Solar thermal power is increasingly being used in California for peak power, where it is competitive with natural gas. America, Spain and Australia currently make up the solar thermal sector. The Solar Energy Industries Association (SEIA) reported that in the beginning of 2008, 419 MW came on stream in June 2007 with  Nevada Solar, the first utility scale thermal plant since the last Mohave Desert plant was completed in 1991.  

By April 2008, new solar thermal projects announced totalled 4 gigawatts, including the world’s largest, the 280 MW plant in Arizona. Renewable Energy World reported on September 2 2008, that in areas where cloud cover is minimal such as in desert and near desert areas, the technology is most suitable, if the price and site is right. These conditions exist in the South West US, Mexico, Brazil, Chile, parts of Southern Africa, the UAE, Israel, parts of China and northern Australia.

“A flat site is needed, near power transmission, amd ideally close to a load centre to avoid long  distance transmission, and where water is available for steam generation and cooling.” One estimate of future demand suggests that over 7000 MW of new power projects have been announced to the end of 2012, with Spain capturing 41 per cent of supply contracts, and the US 44 per cent. In 2004, Spain introduced a dedicated long term feed-in tariff of 27 eurocents/kWh for power from solar thermal power plants up to 50 MW. This is payable for 25 years, increasing yearly at inflation minus 1 per cent.

California has charged ahead with Governor Schwarzenegger’s green initiatives. The Governor’s latest move was to secure legislation for a high renewable energy target of 20 per cent by 2012, and 33 per cent by 2020. He is is now examining the practicality of mandating a solar requirement of 3 GW (3000 MW) of new solar power by 2015.

A recent US start up, the Australian Ausra group led by Dr David Mills, with 30 years of research in solar PV behind him, and now based in the US promises to lower investment costs, with the use of compact linear Fresnel flat mirrors to concentrate the solar radiation, instead of the more expensive conventional parabolic mirrors. Ausra also promises higher yield than the existing plants, and its plants occupy far less land, which means that its plants can be built closer to population centres, thus saving on grid costs of transmission. The company also says that it can generate electricity for 10 cents per kWh, close to the cost of using natural gas, and it expects the price to fall even further.

After completing a 5 MW solar thermal demonstration plant in central California in record time in October 2008, the company has now over $100 million in venture capital funding. Ausra has now firm contracts for at least 1000 MW of solar power in the next five years, with contracts with the utilities PG&E in California and for FPL in Florida. The company says there is a further 6000 MW in development.

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