Future of solar power

I think we are close to the "tipping point" where solar energy will become economically viable for the general masses. Experts used to say couple of years ago that the "tipping point" will arrive when the capital cost of solar power falls below $1 per watt, roughly the cost of carbon power. The best options today vary from $1.5 to $3.5 per watt - down from $100 in the late 1970s. Cell conversion efficiency and economies of scale are surging ahead so fast that the cost has been predicted to be less than a dollar by 2010, with a target of 30 or 40 cents in a decade.

EPT (energy payback time) is the measure of how many years of operation is required to generate the energy used in the manufacturing stage, and if this value is smaller than the lifespan of the system it is profitable in terms of energy. Based on current manufacturing processes solar cell systems can recoup the energy required for their manufacture in 1 to 3years after their installation, and thereafter they add value by becoming net energy producers and enabling lower consumption of fossil fuels. There are lots of innovations happening in this field which will further shrink the consumption of fossil fuels during manufacturing process of solar cells by another 30-50%. That means the EPT will be less than a year which is great when the expected lifespan for solar cell systems is about 20 years.

There are governments of different countries who stepped in and realized the need to move away from the dependency on oil as well as to curb greenhouse gas emission per the Kyoto protocol, established in 1997. Currently, Germany, Japan and the US (mainly California) are the key proponents of solar energy. New initiatives are starting to pick up in China, Southern European countries and rest of the US. There was report that was released by UC Berkeley economic study very recently which stated that the green efforts in California will boost household incomes by $48 billion and create as many as 403,000 jobs in the next 12 years. All this will lead to more talent entering the solar field which will accelerate the innovations on efficiency and cost.

But the sector is still in its infancy. Even if all of the forecast growth occurs, solar energy will represent only about 3 to 6 percent of installed electricity generation capacity or 1.5 to 3 percent of output in 2020. While solar power can certainly help to satisfy the desire for more electricity and lower carbon emissions, it is just one piece of the puzzle. Some of the challenges that proliferation of solar power is going to face is not all economical but issues like lack of public awareness, lack of governmental involvement (which probably will change in US with Obama) and just people waiting on the fence (nothing wrong about it) to see where the technology is heading in terms of efficiency, cost & aesthetics.

Obviously there are going to be early adopters and enthusiasts like the people who stood in the line when the first generation iPhone was released. There are also going to be certain group of people who will adopt it for the "image" factor where it is the right thing to do and it makes a statement, 'Look at me, I'm environmentally conscious.' While the others will wait till it really becomes cheaper, efficient and commoditized.

Roshan

Sources:

1) Asia Pacific Equity Research, JP Morgan, Jan 2008

2) The economics of solar power, Mckinsey Quarterly, June 2008

3 ) Image courtesy: www.solarforschools.ca