Tag Archives: PV

Ongoing ‘Decreasing International Solar PV Prices’.

Simon Batchelor from Gamos writes to continue the theme of global solar PV prices, and their continuing price reduction.

In his blog on Decentralised Solar PV Acceleration in South Africa, my colleague, Mark Borchers, noted that “Where national grid power prices are rising fast, as is the case in many African countries, the decreasing international solar PV prices will sooner or later lead to a situation where it makes sense for businesses to install their own grid-connected rooftop systems.”  In a blog last year “Will Solar Photovoltaics Continue to Decrease their Cost?” we shared some insights into the ‘decreasing international solar PV prices’.

It is well worth keeping an eye on this price descent of solar, and this blog takes the opportunity to refer to a new report by IRENA – The International Renewable Energy Agency. The report “THE POWER TO CHANGE: SOLAR AND WIND COST REDUCTION POTENTIAL TO 2025” focuses on utility scaled activities, nevertheless they present an up to date analysis of solar photovoltaics and suggestions of costs through to 2025.

They confirm that solar PV modules have high learning rates (i.e. cost reductions as technology manufacturers accumulate experience) (18% to 22%) and rapid deployment – there was around 40% growth in cumulative installed capacity in each of 2012 and 2013 and around 30% in 2014 and 2015. These factors resulted in PV module prices declining by around 80% between the end of 2009 and the end of 2015. In 2011, price declines accelerated as oversupply created a buyer’s market. The price declines then slowed between 2013 and 2015 as manufacturer margins reached more sustainable levels and trade disputes set price floors in some markets. Current country average module prices range from USD 0.52 to USD 0.72/W. They believe that module costs are set to continue to fall, and they state that by their reckoning, module costs will have dropped by 42% by 2025.

However these module costs are only part of the system costs. IRENA shows that there are considerable gains to be made by reducing all the other system costs. In their figure 2 (see below) they show some of the balance of system costs for various countries of utility scale PV projects. It is interesting to note that the difference between China and Germany on the one hand and Australia and Japan on the other is a factor of 3. The report suggests that there is considerable room for reducing these balance of system costs further and it is improved efficiencies of installation that will continue to drive the system prices down.

The report also considers the levelised cost of electricity (LCOE), which takes into account the lifetime of the system, the ongoing operation and maintenance costs, as well as the capital investment. They note that the LCOE of solar PV fell 58% between 2010-15, making it increasingly competitive at utility scale. Of course looking ahead there are many unknowns, however their predictions are that utility scale PV could have project costs in the range of USD 0.03 to USD 0.12/kWh by 2025.

This general trend highlighted by the report in the context of utility scale PV nevertheless supports Mark Borchers’ observations on shopping malls and PV. He noted that “a combination of steadily reducing international solar PV prices and consistently higher-than-inflation electricity price hikes” was behind the decision to put solar PV on malls, and that “such installations are now a financial no-brainer – giving an 18% internal rate of return (IRR) with a 5 year payback”. While the IRENA report had a slightly different focus (scale of PV), it nevertheless confirms that PV is likely to continue its price descent, making the IRR for shopping malls in South Africa even better in the coming years.

Mark ends his blog by stating that since this is financially worthwhile, and will inevitably become even more so, he calls for urban areas to think about the “big implications for sustainable energy planning”. We echo that call.

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Decentralised Solar PV Acceleration in South Africa

Mark Borchers from SEA writes on a recent visit to an embedded photovoltaic generation project in a commercial building, and the insights into the industry acceleration gained there.

I recently visited a shopping mall in Tshwane, South Africa, which had installed a grid-connected solar PV system on its roof (called an ‘embedded’ generator – because it is embedded in the local distribution grid). This is not unusual in the country nowadays, and estimates are that over 1000 embedded, distributed PV systems are in existence around the country, generating 40 to 50 Megawatts during the day. But I was struck by the fact that the mall developer said that for them such installations are now a financial no-brainer – giving an 18% internal rate of return (IRR) with a 5 year payback (whereas the decision to build a mall only requires a 10% IRR). So they intend to do these installations on all malls they construct. What’s behind this trend? Largely a combination of steadily reducing international solar PV prices and consistently higher-than-inflation electricity price hikes. Also, mall and other commercial operation load profiles tend to match solar PV generation quite well, being daytime-peaking.

rooftoppv1

While national government and most municipalities do not yet have clear regulatory frameworks to accommodate such installations, the financial case particularly in the commercial sector is such that they are happening anyway, leaving the government to catch a horse that has already bolted from the stable. A few quick calculations show that mall construction alone is likely to add 6 or more Mega-Watts (MW) of solar PV to the country’s electricity grid capacity per year. Others estimate that 500MW per year could be added from these embedded PV systems from all sectors. That’s about 1% of the total national generation capacity per year, which is significant, and something that national electricity planners will have to take seriously.

There are many benefits to these developments, but also challenges. The benefits include growth in renewable, low carbon energy, local economic development, and the fact that such generation capacity is entirely privately funded. The challenges include potential revenue loss from electricity distributors due to reduced sales, and balancing the grid power at a national level to meet the country’s demand – particularly the evening peak demand where solar PV does not contribute. There has been significant work done to show how the country can negotiate these challenges, but it does mean that well-entrenched systems have to adjust and change – which seldom happens quickly. Overall, this trend is in keeping with what is being observed internationally: that the future will move increasingly towards decentralized generation, with solar PV in particular becoming an increasingly big player. It has been suggested that the days of large power utilities are numbered. (Bloomberg.com)

rooftoppv2

This is a development we need to keep an eye on in urban Sub-Saharan Africa as a whole. Where national grid power prices are rising fast, as is the case in many African countries, the decreasing international solar PV prices will sooner or later lead to a situation where it makes sense for businesses to install their own grid-connected rooftop systems. And this is likely to happen irrespective of what government or utilities do, or don’t do, about it. It’s an inevitable transformation of the power sector which has big implications for sustainable energy planning in urban areas.

Bring Me Sunshine…

Simon Batchelor from Gamos writes on the Witkop Solar Farm in Limpopo Province, South Africa,

At our recent network meeting in Polokwane, we visited Witkop Solar Farm which is within the municipality’s boundaries.  Witkop is a 30 megawatt solar farm built and maintained by SunEdison in the province of Limpopo of South Africa.  There is remarkably little on the internet to describe this installation although that may be a function of the ease of installing and running solar farms?  It was part of South Africa’s push to get Independent Power Producers to install renewable energy.   In an overview of the processes involved, Eberhard, Kolker & Leigland  (2014) note the difference between South Africa’s competitive tender approach and a Feed in Tariff as used in many other countries.   “South Africa occupies a central position in the global debate regarding the most effective policy instruments to accelerate and sustain private investment in renewable energy. In 2009, the government began exploring feed-in tariffs (FITs) for renewable energy, but these were later rejected in favor of competitive tenders. The resulting program, now known as the Renewable Energy Independent Power Producer Procurement Program (REIPPPP), has successfully channeled substantial private sector expertise and investment into grid-connected renewable energy in South Africa at competitive prices.”

Witkop was cited in the preferred bids in 2011 by the South African government, named in the pipeline in 2012, and construction started in 2013. As part of the terms of the financing agreement, power generated from the two facilities will be purchased by Eskom, the national utility in South Africa, through a 20-year power purchase agreement.

As part of our network meeting, SAMSET created a video ‘Aide Memoire’ of the visit, as seen below.

Will Solar Photovoltaics Increase Their Efficiency Soon? / Will Solar Photovoltaics Continue to Decrease their Cost?

Simon Batchelor from Gamos writes below on the potential implications of the rapidly-decreasing price of solar photovoltaic panels, and electricity costs per unit from solar energy. With prices rapidly approaching parity for global average retail electricity, the potential for solar energy to move from an expensive, plant-based energy solution, or a small, household-scale system, to a more integrated and commonplace technology for varied energy services, is increasing greatly. Simon presents two sections below, focusing on the improvements in photovoltaic cell efficiency, and if the decreasing cost trend is to continue and its implications.

Fall-in-solar-prices-chart (1)

Source: renewableenergyhub.co.uk

Will Solar Photovoltaics Increase their Efficiency Soon?

In the past few years solar cells have undergone rapid changes in efficiency and cost. Currently the research being conducted by competing companies is improving the efficiencies and reducing the production cost. The industry itself is growing quickly and due to large scale manufacture prices are decreasing.

One of the ways to reduce the cost of solar cell production is to improve the efficiency of the cells as this enables them to convert more energy from the sun. New efficiency records are constantly being set by the leading companies in solar cell research; these are from the most up to date articles available. The latest breakthrough in solar panel efficiency was in December 2014, a press release from the Fraunhofer Institute in Germany announced that 46% efficiency had been reached with a concentrator (multijunction) photovoltaic system. MiaSolé (January 2014) produces flexible solar panels with an efficiency of 17%, these could have a range of uses that other, more efficient panels could not fulfil. Sharp has been trying to develop cells which can make use of the electrons released on impact with the panel surface, as of June 2014 this project was still getting started but predictions of 60% efficiency have been made if this project is successful. Researchers at Stanford University have been using a layer of perovskite on top of standard silicon as both materials absorb different sections of the solar spectrum, potentially increasing efficiency by 25%. The Economist (Feb 2014) reported that John Roberts of the University of Illinois has also been working on layers within solar cells which could improve the efficiency to a potential 50% by absorbing different parts of the solar spectrum. In August 2014 First Solar improved the efficiency of the CdTe Thin Film cell to 21.4%, 3% higher than their record in February 2013, while this cell has lower efficiency than multijunction ones it has the lowest production cost.

Will Solar Photovoltaics Continue to Decrease their Cost?

price-trend-modules-h Source: europe-solar.de

A study by MIT in 2013 showed that China is currently the world leader at producing low cost solar panels; in 2011 63% of solar panels production took place there. However this study provided hope for the American market that the lead the Chinese manufactures had was based on large scale production rather than a bigger workforce, American manufactures may be able to catch up. Due to over production in China it has been estimated 88 companies have had to close factories particularly in North America and Europe; companies in China have had to merge (Forbes, 2012). Q cells, a leading German research and manufacture company, which went bankrupt and was taken over by Korean company Hanwha (Economist, 2014). Hanwha announced in December 2014 that it was going to merge three companies (Hanwha Q CELLS, Hanwha SolarOne and Hanwha Solar Holdings) to become the global leader of solar cell production with a manufacture capacity of 3.28 GW. Companies in the US and Europe are unhappy with the over-manufacturing approach China has taken, anti-dumping duties are being applied on Chinese imports of solar panels to the US and EU (Economist, 2014). This has angered consumers as it pushes the cost of solar panels beyond an affordable price range. SunPower, the second largest US solar company, is doing well however and in April 2014 beat market predictions.

As with any product the value of solar energy varies due to the demand and production rate; there have been several fluctuations in both of these but currently they are increasing. Early in 2014 the Wall St Journal showed there was evidence for investors displaying renewed interest in the solar industry indicating a possible resurgence after the decline in 2008. This decline was due to over-manufacture in China and subsidy removal in Germany (previously purchasing half of the PV panels produced) resulting in an unsustainable stock price for solar (Wall St Journal, 2014).

Members of the Fraunhofer Institute in 2013 said that at the time the production of solar cells was greater than the demand for them but in the future the demand would outstrip manufacture capacity. Their aim was to start a large scale factory in Europe which could produce high volumes of solar cells in order to make a profit even when the prices dip below 50c/W. In the same article it was predicted that in 2050 the cost of solar energy may be 2 or 3c/kWh and could be the cheapest source of electricity; to provide 10% of the global energy demand there would need to be a capacity of 10,000GW. The International Energy Agency found that early in 2014 the total solar production globally was over 150 GW. There are predicted increases of solar production in many countries in the coming years due to the 2014 UN Climate Summit in New York. India is expected to reach 100 GW in 2022 and the US solar production is expected in double in 2015/ 2016 taking it to 40 GW.

The cost of solar cells will decrease but the decline may be slow as there is a surplus of solar panels and already low prices (Breakthrough, 2013). Between 2008 and 2013 there was an annual growth rate for solar power of 63.2%. Calculations in this article suggest that with a growth of 50% per year (accounting for an increase in global energy use of 3.4%) by 2020 there will be 2,400 GW of solar energy which will make up 8.1% of global energy. The International Energy Agency has predicted that by 2020 16% of global energy production will be solar and supplied by around 6250 GW.

Price projections of solar energy are necessary to forecast the industry growth however in such a dynamic sector these projections are difficult to make. Renew Economy (2013) found that there are differences in the predictions being made about the price of solar power; Citigroup has predicted prices of 25c/W in 2020. The US Department for Energy predicted a cost of $60/MWh by 2020 (at $1/W) whereas the Australian counterpart (The Bureau of Resource and Energy Economics) expected costs of around $140/MWh in the same year. If the targets from the UN Climate Summit in 2014 are met it would have an impact on the solar economy which may not yet have been included in available predictions. There are many price projections and some of them have in the past proved to have been too low. There were predictions that solar PV production might reach 42c/W in 2015 however the most efficient panels available according to ENF (09/01/2015) are Nice Sun PV at a cost of 45c/W. On 7th Jan 2015. the lowest price available per cell was $0.319. The lowest cost panels available are Sun Electronics at 34 c/Watt (09/01/2015).