Solar Energy: The Quest for Cheap
As the price per watt falls, the tipping point for solar energy to become truly competitive is only a few years away
By Joel Stonington
The big number is 50. When companies can produce solar photovoltaic modules for less than 50¢ per watt, solar energy will be able to compete directly with coal. Right now, the cheapest solar cells are being produced for as little as 70¢ per watt. They are selling for about $1.26 per watt, with prices expected to drop to $1.17 next year. Most anticipate they they will hit 50¢ per watt within four or five years.
To get a sense of just how much prices have declined, one of the biggest manufacturers, Tempe (Ariz.)-based First Solar (FSLR), was selling solar power panels for $3 a watt in 2005.
As prices fall, demand is growing. Total solar installations in the second quarter grew by 69 percent over the same period in 2010. The number of Americans working in the solar industry more than doubled, to 100,000, from 2009 to 2011, according to the Solar Energy Industries Assn. That’s considerably more than the 80,600 coal miners working in the U.S., according to the Bureau of Labor Statistics.
“At the point where you say, ‘It’s cheaper to use solar than natural gas or coal,’ that’s when you’ll really see a rush,” says Jeff Siegel, managing editor of Green Chip Stocks, a research firm that focuses on alternative energy.
CARNAGE AMID LOWER COSTS
Behind the price drops are cheaper manufacturing costs, lower costs for such crucial raw materials as silicon, and rapidly improving technology. Cheaper photovoltaic cells manufactured in China and misplaced bets on more-expensive technologies and materials have battered stocks and created corporate wrecks like now-bankrupt Solyndra and the less-well-known but no-less-bankrupt Evergreen Solar (ESLRQ) and SpectraWatt. Others are anticipated to follow.
“Solar is still a very young industry, it’s in enormous turmoil,” says Frank van Mierlo, chief executive officer of 1366 Technologies, a Lexington (Mass.)-based manufacturer of silicon photovoltaics. “The largest solar company has been different every year for the last six years. This is a young market where things are getting flushed out. Fundamentally—for us as a country—this is really good news. You want solar to be cheap.”
Dozens of startups in the U.S. have potentially transformative ideas. The question is which can come out on top. The wide variety of companies developing competing technologies to capture and distribute solar power underscores the market’s immaturity. Currently, researchers are experimenting with materials ranging from silicon to gallium arsenide to cadmium telluride, basing cost projections on disparate technologies that create solar cells.
The goal is to build one that competes without government subsidies. SunShot, an initiative from the U.S. Energy Dept., has since 2007 spent $59 million to help attract an additional $1.2 billion in private solar investment, with the stated goal of a 50¢ module.
CAN THE U.S.FEND OFF CHINA?
Notwithstanding competition from China, costs are most likely to fall because of technological advances. “This is an industry where we can win,” says 1366 Technologies’s van Mierlo. “We can win and we can compete. We have to do it based on technology. The good news is we have a technology lead.”
A promising startup is Alta Devices in Santa Clara, Calif. With 80 percent of the market dominated by silicon solar cells, Alta Devices is attempting to break in from the outside, using gallium arsenide, a material usually considered too expensive for anything other than use by the likes of NASA.
The advantage of gallium arsenide is that it is highly efficient and works better than standard silicon in low light and at high temperatures. The foundations of Alta’s manufacturing process were patented back in 1979 but shelved until it became cost-effective due to advances in chemical availability. Because the material is so thin, Alta’s solar panels can be embedded into roof shingles or rolled out like carpets.