Researchers are developing next-generation materials as well as new methods for producing PVs to increase conversion efficiency and lower production costs. Many of these technologies, for example organic solar cells, are not dependent on rare earth minerals; thin film PV modules, on the other hand, are commonly made from rare earths such as tellurium, gallium, and indium. Concentrating PV, not be confused with Concentrating Solar Power (CSP)–using lenses or mirrors to concentrate sunlight onto special PV materials—may prove to be a lower-cost solar power option. Nano-scale materials, such as carbon nanotubes, could also yield breakthrough applications for PV materials. Others believe they can achieve low-cost solar electricity via the use of organic materials, bioengineering, and streamlined manufacturing processes.
Concentrating solar power (CSP) / Solar Thermal
Globally, CSP accounted for 1.76 GW of installed capacity at the end of 2011. Unlike PV, which converts sunlight directly into electricity, CSP uses the sun’s thermal energy to produce electricity. CSP is mainly a utility-scale application of solar power that uses arrays of mirrors to focus sunlight on a fluid to produce steam to spin an electricity-generating turbine. Because coal and gas-fired power plants also generate steam to spin turbines, solar thermal can potentially be integrated with these plants. CSP systems require a significant amount of area and ideal solar conditions.
CSP, similar to solar PV, has difficulty generating electricity when the sun is not shining. However, working fluids in CSP systems, such as molten salt, give up their heat slowly and can continue to produce steam and therefore electricity for several hours even without direct sunshine. In July 2011, a 19.9 MW CSP plant in Spain became the first utility-scale solar installation to generate electricity for 24 hours straight, using molten salt for energy storage.
CSP technologies include parabolic trough, linear Fresnel reflectors, power towers, and Stirling thermal systems. Parabolic trough, which uses parabolic mirrors to focus light onto a linear pipe, is the most popular CSP technology and accounts for over 90 percent of CSP. Other solar thermal applications outside of electricity generation, known as low-temperature or medium-temperature collectors, include HVAC system designs, solar water heating (e.g., hot water heaters for swimming pools) and cooking. Solar water heating accounted for 172.4 thermal GW in 2009; China accounted for 58.9 percent of this capacity. The U.S. solar water heating industry is growing at 6 percent annually in the United States and has significant potential to expand.
Solar power capacity is expressed as Watt-peak (Wp), which is the amount of power generated by a solar panel at standard testing conditions (STC). Standard testing conditions denote 25 degrees Celsius and an irradiance (or insolation at a specific moment in time) of 1000 watts per meter squared, approximating the sun at noon on a clear day in spring or autumn in the continental United States. For PV, Wp incorporates the absorption efficiency of sunlight into the individual cells as well as the conversion efficiency from solar to electricity. However, because of nighttime, weather conditions, and other issues, the capacity factor of solar PV is around 25 percent, meaning average actual electrical generation over the course of a day is only a quarter of Wp.
Environmental Benefit / Emission Reduction Potential
Electricity produced using solar energy emits no greenhouse gases (GHGs) or other pollutants. As with any electricity-generating resource, the production of the PV systems themselves requires energy that may come from sources that emit GHGs and other pollutants. Since solar PV systems have no emissions once in operation, an average traditional PV system will need to operate for an average of four years to recover the energy and emissions associated with its manufacturing. A thin-film system currently requires three years. Technological improvements are anticipated to bring these timeframes down to one or two years. Thus, a residential PV system that can meet half of average household electricity needs is estimated to avoid 100 tons of carbon dioxide (CO2) over a 30-year lifetime.
It is highly uncertain how quickly and to what extent solar will grow into the future. The IEA envisions a scenario in which nearly one-third of the world’s electricity supply could be from solar by 2060 given improved efficiency and a price on carbon, but all else equal. Carbon dioxide emissions from the world’s energy sector would fall from 30 gigatons in 2011 to 3 gigatons. The European Photovoltaic Industry Association estimates that global cumulative solar PV capacity will be between 208 GW and 343 GW by 2016, corresponding to roughly three to five percent of global electricity demand. This percentage is similar to the current solar share of electricity generation in countries with the most solar generation.
For PV, panel prices are usually denoted as cost per Wp. Costs are also sometimes expressed as cost per installed watt, which includes the price of the DC-AC inverter, connection to the grid, and more. All costs besides the module itself are known as balance-of-system costs. Thus, the addition of balance-of-system costs to the cost of the solar module equals the installed watt costs.
The cost of solar PV has fallen substantially over the last few decades, and especially over the past few years. CSP price declines have also been substantial, but not as sharp as PV price declines. The weighted average cost of PV systems across residential, commercial, and utility-scale installations declined from $10.80 dollars per installed watt in 1998 to just above $7.50 per installed watt in 2007. By Q2 2012, costs have fallen to $4.44 per installed watt. The bulk of these discounts is from diminishing module costs, although the root cause of these diminishing costs is unclear; for individual silicon wafer panels, the average selling price dropped from $1.85/watt to $0.97/watt in 2011 alone, nearly a 50 percent price decline. Diminishing module costs have been driven by a variety of factors including vertical integration, scale efficiencies, overproduction of polysilicon (the key raw material in solar), subsidies, and more., In contrast, when the technology was first developed in the 1950s, solar PV cells cost $300 per watt. Although solar PV prices are forecasted to continue to decline, the magnitude and pace of these price declines are uncertain.
CSP prices have also declined but not kept pace with PV price declines, leading to a shift from planned CSP power plants being converted to PV in 2011, including projects by Tessera Solar, Solar Millenium, and Google/Brightsource. To illustrate this shift, CSP in 2008 accounted for about ten times as much installed capacity as solar PV in the United States; in 2011, solar PV accounted for 1.6 as much capacity as CSP. While a rebound in CSP development may eventually come about, PV continues to remain more cost-effective than CSP while equally satisfying various state mandates such as renewable portfolio standards (RPS). However, compared to PV, CSP offers more developed storage potential as well as integration with conventional turbines normally fueled by fossil fuel combustion.
PV project costs may not decrease as quickly in the U.S. as they have in the past two years, and several market factors could affect the prices of PV modules. Low prices on solar panels in 2011 were in part caused by oversupply from Chinese solar manufacturers, which made up 47.8 percent of global solar cell market share in 2012, but U.S. anti-dumping tariffs of thirty percent may soon be imposed on Chinese solar manufacturers. Moreover, cash grants from the U.S. Department of Treasury, which reimbursed solar developers up to thirty percent of project costs, expired in December 2011 and will affect both PV and CSP project development after 2012. Project developers in the U.S. can now only claim tax credits (Investment Tax Credit) instead of upfront cash grants after 2011, which is a barrier to project development because many solar developers do not have a sufficiently large tax appetite, and developers may need upfront cash to finance the project. The Investment Tax Credit itself, which gives a tax credit for 30 percent of any commercial and residential system, is slated to expire at the end of 2016. Although the magnitude of the effects of these events is uncertain, balance-of-system costs, which now comprise more than half of the installed cost of PV systems (solar modules only comprise 35-40 percent of costs), may present opportunities for further price declines.
Solar generation still remains more expensive than other forms of electricity generation in many areas, but solar power may become comparable or even cheaper than conventional electricity in certain regions in the next few years. A study in late 2011 showed that the levelized cost of a thin film PV system ranges from 10 to 14 cents per kilowatt-hour (kWh) for a utility-scale solar power plant, while home and medium-scale solar installations cost between 12 and 30 cents per kWh. These costs, however, depend on a number of assumptions and are highly sensitive to the inclusion of various tax incentives for solar power, especially the Federal Investment Tax Credit.
Solar prices are forecasted to continue to decline. GTM Research forecasts that the average selling price of silicon modules will fall from about $0.97 per watt to $0.61 per watt by 2015. The U.S. Department of Energy SunShot Initiative aims to reduce PV costs to $1/installed Wp by 2020, which would translate to 6 cents per kWh. These price reductions would allow solar to comprise 14 percent of U.S. electricity consumption by 2030, and 27 percent by 2050. Such shares of generation would lead to 8 percent (181 MMT CO2) and 28 percent (760 MMT CO2) reduction in U.S. CO2 emissions in 2030 and 2050 respectively.
Table 1: Solar Technologies at a Glance (as of early 2012)
Solar PV Price
U.S. Solar PV installed capacity
Global Solar PV installed capacity
CSP (parabolic trough) price
U.S. CSP installed capacity
Global CSP installed capacity
Obstacles to Further Development and Deployment of Solar Power
Electricity generated from solar power remains more expensive than other forms of electricity in many places. Moreover, in recent years, the supply of rare earth minerals commonly used for PV manufacturing has become constrained. China supplies 97 percent of the world’s rare earth minerals and has enacted production and export quotas, driving higher the price of rare earth minerals. The uncertain future of the supply of rare earths is a risk to the U.S. PV manufacturing industry, but efforts are underway to develop a domestic supply of rare earth minerals as well as the use of solar technologies that do not use supply-constrained materials. For the time being, rare earth supply has met the growth of solar in demand, and has not been a limiting factor in the price declines of solar power.
Solar power, especially solar PV, is constrained by intermittency issues because of weather factors and the fact that daylight hours are limited. CSP storage technologies are being developed to alleviate intermittency problems, although integrated storage remains costly. Solar power is also constrained by the uneven geographic distribution of solar resources, which ultimately encumbers integration with the larger electric grid. To achieve its full potential, solar power will rely on a variety of advanced enabling technologies such as demand response and improvements in energy storage. Energy storage technologies would allow electricity generated during peak production hours (i.e., on bright, sunny days) to be stored for use during periods of lower or no generation. The National Renewable Energy Laboratory (NREL) has published a series of studies examining whether intermittent renewable including solar are capable of providing up to 80 percent of electricity demand.
Solar power, specifically utility-scale PV and CSP, is also held back by a lack of transmission infrastructure (necessary to access solar resources in remote areas, such as deserts, and transport the electricity to end users). These areas often have the highest potential for solar generation.
However, solar technologies offer a number of opportunities for “on-site” or “distributed generation” applications in which energy is produced at the point of consumption, including rooftop PV arrays and building-integrated photovoltaic (BIPV) systems. Such systems, known as local PV, can make solar power more cost competitive by avoiding costs associated with transmission and distribution. However, technical problems in regulating the local grid must be solved before local PV reaches its full potential.
Policy Options to Help Promote Solar Power
Price on carbon
A price on carbon, (e.g. under a carbon tax or GHG cap-and-trade program) would raise the cost of coal and natural gas generation, making solar more cost competitive in more parts of the country, especially as technological advancements continue to bring down the cost of solar power.
Renewable portfolio standards
A renewable portfolio standard (or an alternative energy portfolio standard) requires that a certain percentage or absolute amount of a utility’s power plant capacity or generation or sales come from renewable or alternative sources by a given date. As of July 2012, 31 U.S. states and the District of Columbia had adopted a mandatory RPS or AEPS and an additional seven states had set renewable energy goals. Renewable portfolio standards encourage investment in new renewable generation and can guarantee a market for this generation. States and jurisdictions can further encourage investment in specific resources, such as solar power, by including a carve-out or set-aside in an RPS, as is the case in the District of Columbia and 12 states (all of which mandate that a given percentage of their renewable energy requirements be met through new solar generation).
Development of new transmission infrastructure
Policies that promote the buildout of new electricity transmission lines (such as the streamlining of transmission siting procedures) allow access to these resources, thereby providing additional incentives for utilities to invest in them. Lack of transmission can also be addressed by instead incentivizing distributed electricity generation using solar PV, rather than focusing on large, utility-scale systems.
Feed-in tariffs and other financial incentives
Feed-in tariffs (FiTs)promote the deployment of solar power or other renewable electricity generation by guaranteeing electricity generators a fixed price for electricity produced from particular resources (e.g. solar), usually enough above the retail price for electricity to cover the costs of the generation and also provide the generator a profit. Typically, utilities are required to purchase this electricity at the specified price and then spread the additional costs across the utility bills of its customers. This fixed price is usually guaranteed for some specified period of time. (Germany, one of the most high-profile examples of a country employing feed-in tariffs, guarantees the fixed rate for 20 years.) These policies might also direct electrical grid operators to give priority to electricity produced from solar power or other renewables. Federal financial incentives include the Investment Tax Credit, which is valid until 2016, and the payment in lieu of tax credits (PILOT), which expired in 2011.
Other financial incentives to promote solar power can include tax incentives or credits, net metering, and loan programs. These incentives can be offered to utilities or to individual customers installing their own power systems.
Growth in solar power has relied heavily on policy and financial incentives, but price declines may make solar development profitable on its own. Europe had more than 51 GW of installed capacity in 2011, primarily because of FiTs and other incentives. In comparison, the United States only had 4.4 GW and China had 3.1 GW. Solar power in both countries is forecasted to grow quickly.
Related Business Environmental Leadership Council (BELC) Company Activities
Related C2ES Resources
Further Reading / Additional Resources
U.S. Department of Energy, Sunshot Vision Study, 2012 http://www1.eere.energy.gov/solar/pdfs/47927.pdf
International Energy Agency (IEA): Solar Heating and Cooling Programme, Solar Heat Worldwide: Markets and Contribution to the Energy Supply 2009, 2011 http://www.iea-shc.org/statistics/SolarHeatWorldwide/index.html
International Renewable Energy Agency (IRENA), Renewable Energy Technologies: Cost Analysis Series Volume 1: Power Sector, Issue 2/5 Concentrating Solar Power, 2012 http://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-CSP.pdf
Solar Energy Industries Association (SEIA) and Greentech Media Research, U.S. Solar Market Insight Report: 2011 Year-in-Review, 2012 http://www.slideshare.net/SEIA/us-solar-market-insight-report
European Photovoltaic Industry Association (EPIA), Global Market Outlook for Photovoltaics Until 2016, 2012 http://files.epia.org/files/Global-Market-Outlook-2016.pdf
International Energy Agency (IEA), Energy Technology Perspectives 2012: Scenarios and Strategies to 2050, 2010 http://www.iea.org/etp/
U.S. Department of Energy (DOE)
U.S. Energy Information Administration. Annual Energy Outlook, Renewables. http://www.eia.gov/forecasts/aeo/data.cfm?filter=renewable#renewable
International Energy Agency. Technology Roadmap: Solar Photovoltaic Energy. 2010 http://www.oecd-ilibrary.org/energy/technology-roadmap-solar-photovoltaic-energy_9789264088047-en;jsessionid=7tgn15975dltb.delta
International Energy Agency. Technology Roadmap: Concentrating Solar Power. 2010 http://www.oecd-ilibrary.org/energy/technology-roadmap-concentrating-solar-power_9789264088139-en;jsessionid=7tgn15975dltb.delta
International Energy Agency Solar Power and Chemical Energy Systems (SolarPACE). http://www.solarpaces.org/Library/AnnualReports/annualreports.htm
 Quantum Solar Power. “A Comparison of PV Technologies.” Accessed July 19, 2012.
 Barbose, G., N. Darghouth, R. Wiser, and J. Steel. Tracking the Sun IV: A Historical Summary of the Installed Costs of Photovoltaics in the United States from 1998 to 2010. Lawrence Berkeley National Laboratory, Report No. LNL-5047e, 2011. http://eetd.lbl.gov/ea/ems/reports/lbnl-5047e.pdf
 Barbose, et al., 2011.
 Shepherd, William. Energy Studies. London: Imperial College Press, 2003.
 U.S. DOE. SunShot Initiative Website: About. U.S. DOE. Accessed August 11, 2011.