Solar power got a brighter future than the NY Times lets on

Interesting but unfortunately pessimistic article in the Times this morning by Andrew Revkin and Matt Wald buying into the conventional wisdom that solar photovoltaics can't be an important source of power without some major technological breakthrough. Revkin and Wald are right to point out that the coal and nuclear lobbies massively out gun the solar lobby and that federal funding for solar has been inconsistent and insufficient. But the real breaking news is that most experts that I talk to about the industry say that the solar market is about the change significantly not because of major technological changes but because of changes in the business structures and financing arrangements available now for solar. These changes have already started to fundamentally change the industry but have been masked by a shortage of silicon, which has kept PV prices high.

Photon Consulting has a study out which does a good job of addressing the cost drivers and potential near-term reductions. While the full report is expensive (by NGO standards), a summary is available here. The summary forecasts PV costs dropping from about $0.25/kWh now to between $0.15 and $0.10/kWh by 2010. Here in NYC, that sounds pretty good, and the summary says that at current grid rates, that even at $0.15/kWh, this cost would be competitive for about half of residential customers and 10% of commercial customers. Quoting from the summary:

Incremental improvements in solar power manufacturing, installation and financing will reduce the cost of solar power over the next four years. The most important drivers of cost reduction will likely be cell efficiency gains, increased scale, and other factors such as better financing terms for systems. Conservative estimates of cost are $0.15/kWh by 2010 for typical locations. Taking into account potential for faster cell efficiency gains and larger savings from vertical integration, $0.10/kWh is a realistic estimate of cost in 2010.

 The summary goes on to state:

Solar companies are aggressively pursuing vertical integration to ensure that they can deliver electricity below grid price. .... These companies are increasingly able to offer electricity instead of components.

There may be significant first-mover advantage for companies that sign customers who currently pay high grid-based electricity prices into long-term solar power purchase agreements (PPAs), and signs of a “land-grab“ for those customers are increasingly apparent. A rising number of customers in key market segments are entering into solar PPAs, including utilities, governments, big box commercial customers and residential customers. 

See this article about a solar installation made possible by a new approach to financing as a bit of evidence. 

There is an important technological barrier for solar's long-term growth and that's addressing the intermittency of solar. This starts to become an issue when solar is providing between maybe 5% and 10% of power. Wald does have an article on storage technologies in today paper too. But as far as solar is concerned, he over emphasizes the importance of storage. Solar combined with just a small amounts of storage and remote controls that grid operators can trigger could dramatically increase solar's value at peak times.

The solar has been growing at a combined annual growth rate of 40% over the last 5 years or so. This implies a doubling every 2 years. So, even if dower forecasts reported by Revkin and Wald of solar providing just a percent or two of our energy by 2030 prove to be right, at growth rates even close to current rates, that very much put solar on course to a big player by mid-century. As the industry immerges from the current silicon supply shortages, I predict that the news about solar will sound very different in just a few years.