Solar Set to Soar

Sept. 17, 2008

Science has known for more than a century that the radiant energy impacting Earth from the sun supplies more power than produced worldwide by all forms of generation combined. In 2004, worldwide power consumption was estimated at about 15 terawatts, and someone has calculated that the entire planet receives 84 terawatts net of sun power. (A terawatt equals 1 trillion watts: 1012.) One constraint of using sun power has been the inefficient ways that are available to capture it. For example, it's been estimated that a silicon-based solar panel array capable of replacing power from a typical centralized coal generator would require about 65 square kilometers of solar collection surface. Another constraint has been the cost per watt that was several times that of a traditional coal power source. Although solar photovoltaics (PV) are commonly used in lower-power applications and use more silicon than microchips in computers, they have not really captured a large share of the centralized grid-connected renewable power market. Now, that could change dramatically. The basic problem has been attempting to compare solar power to centralized power plants. Instead, when you compare solar technology to decentralized and local or distributed generation, the bottom line looks a lot different. News reports indicate that at least three developments are poised to launch solar power into much faster growth: new technology, capital investment, and support of utility companies. Here's a summary discussion of each new development gleaned from reports circulating on the Internet.

New Technology
In an electronic media report, Aaron Hand, executive editor, Semiconductor International, described the pending shift to thin-film solar cells. Crystalline silicon (c-Si) technology, comprising both multicrystalline and monocrystalline, presently makes up some 90 percent of the PV market. But, thin-film solar cells are on the rise for several reasons, including a shortage of polysilicon that has kept a growing solar industry from realizing its full potential. Although thin-film silicon solar cells don't have conversion efficiencies as high as most competing technologies, they offer compelling capabilities in terms of cost per kilowatt-hour of energy. Thin-film silicon panels use a thin layer of amorphous silicon (a-Si) on a glass substrate rather than the bulky substrate of crystalline silicon (c-Si.) Other thin-film technologies use no silicon at all. They rely instead on materials, such as cadmium telluride (CdTe) or copper indium gallium selenide (CIGS). Lowering solar module cost to $1 per watt has been the brass ring for solar power because it's approximately at this point that solar energy will reach grid parity (i.e. the ability to economically compete with traditional fossil-fuel energies).

In addition to thin-film panels being cheaper to produce (largely because of much lower substrate costs), they perform better in some locations. Although module manufacturers often rate performance based on watts, or power output, the utility market is more interested in the kilowatt-hours of energy the module can provide, and that is significantly influenced by the panel's location on the planet. One of the advantages of thin-film technology is that it performs better even in diffuse light. So, even in cloudy areas or less sun-filled climates, you get more effective kilowatt-hours produced using thin-film technologies than you do with crystalline silicon materials.

Capital Investment
A story by Jonathan Shieber, detailing a flock of new venture money infusions financing expansion of solar production, appeared in Clean Technology Investor, published by Dow Jones & Co. Here‘s the rundown.

A second wave of venture-backed photovoltaic technologies flowed to Nanosolar Inc., which raised more than $300 million in its most recent financing. The Palo Alto, CA-based company is using the capital for a massive build-out of its manufacturing capacity in both Palo Alto and Berlin, according to Nanosolar CEO Martin Roscheisen. The company has managed to achieve efficiencies of 14.5 percent with its CIGS process. Nanosolar will have 430 megawatts of available cells in its San Jose, CA, plant and another 620 MW in Berlin after the completion of its first phase of construction. Investors in the massive private-equity financing included Greenwich, CT-based Lone Pine Capital LLC, a hedge fund whose long investment portfolio is worth $8.6 billion, and Paris-based EDF Energies Nouvelles SA, an independent renewable-energy power producer, according to Roscheisen. Sources with knowledge of the investments said additional backers include AES Solar, the $1 billion joint venture of independent power producer AES Corp. (AES), and multi-billion-dollar energy buyout investor Riverstone Holdings LLC. Sources said that buyout firm Energy Capital Partners, which owns the San Francisco-based utility scale solar power project developer NextLight Renewable Power LLC, also participated in the Nanosolar financing.

Earlier this year, Roseville, CA-based thin-film manufacturer Solyndra Inc. quietly announced that it had signed more than $1.2 billion in supply contracts. That company is currently looking for $350 million in new financing. Meanwhile, Intel Capital-backed Sulfurcell Solartechnik GmbH, a Berlin-based thin-film manufacturer, has raised $130 million to build out its own capacity, and Santa Clara, CA-based Miasole is in the process of wrapping up a $220 million round for its own expansion plans.

There also are publicly traded makers of CIGS-based thin-film solar cells like DayStar Technologies Inc. listed on Nasdaq. It's building a 25-megawatt line in California and has a market capitalization of $107.8 million. Ascent Solar Technologies Inc., also trading on the Nasdaq, has a market cap of $164 million. Fanning the flames of investors' desire to back start-up solar thin-film companies is the success of publicly held First Solar Inc. (FSLR). The Phoenix thin-film solar manufacturer uses a material composition based on a combination of cadmium and telluride for its cells. As the first thin-film solar to make it to the public markets with a low-cost manufacturing process, First Solar has been valued with a $21.8 billion market capitalization. According to a recent institutional research report by the Stanford Group, First Solar has the lowest cost per watt of $1.14 in the industry.

Legacy silicon manufacturers also are beginning to diversify into thin-film technologies. Low-cost silicon photovoltaic manufacturer Suntech Power Holdings Co. said that it will build a 50-megawatt thin-film production line in the second half of the year, according to a Stanford Group report, and SunPower Corp. (SPWR) may soon follow Suntech Power's lead. "Thin films can be in a different world of cost efficiency relative to wafered silicon and other conventional solar technologies, and this benefit enables a very profitable and scalable business," says Roscheisen.

Support of Utility Companies
Reports floating across the Internet indicate that some leading-edge utility companies have changed their business plans to incorporate solar power projects. Some of this change is spearheaded by state demands, which mandate a specific percentage of power must come from renewable portfolios. Whatever the motivation, the results bode well for growth of solar power.

One such example is the business plan of Constellation Energy, a non-regulated, independent power producer from Maryland, that was organized out of the former Baltimore Gas and Electric Co. General Motors contracted with Constellation Energy on a 900-kilowatt rooftop solar power system at its 300,000-square-foot service and parts warehouse in Fontana, CA. The system will reduce greenhouse-gas emissions by 355 tons annually, but General Motors made sure the project benefited the bottom line, too. "At General Motors we understand that good environmental decisions are good business decisions, and solar energy is a perfect example of this," says Rob Threlkeld, manager of green initiatives at General Motors. "Any project that we do has to at least break even or save us money." The key to making the solar project work for GM was structuring the project as a long-term, power-purchase agreement (PPA), under which Constellation Energy owns and operates the system, and sells power back to GM. Constellation Energy pays all upfront and maintenance costs (approximately $7 million), and assumes the risk for construction or production delays. GM's estimated electricity cost reduction is 10 percent, and the long-term nature of the agreement provides a measure of stability and predictability in the company's energy purchases. The project acts as a physical hedge to future electric price increases, too.

Additionally, in the case of the GM project and a similar project for Alcoa, a thin-film solar PV system was chosen. The photovoltaic material is lightweight and applied with adhesive and Velcro. If designed properly for the application, these systems usually require that very little structural changes be made to the facility roof, saving money and time. When combined with other energy-saving technologies, such as improved lighting, efficient motors, and energy-management systems, these bundled projects result in significant avoided energy costs.

Southern California Edison is building a power plant unlike anything that's ever been built before. At its peak, the $875 million plant will produce 250 MW of electricity - the equivalent of the power required by 162,000 homes. So, what's the big deal? The plant is actually a bunch of PV installations on previously unused commercial building rooftops all over Southern California. The project amounts to the largest rooftop solar energy installation the world has ever seen. And, every clean, carbon-free kilowatt produced will be pumped directly back to the grid, benefiting the energy-using communities of Southern California. "The common approach to renewable energy is to go out to the desert and install solar panels, or put wind farms on top of a mountain," says Gil Alexander, spokesperson for Southern California Edison. "But, there are no electricity customers out there, so you encounter transmission and permitting problems. Actually installing the power-producing PVs in close proximity to the electricity customers is the most efficient strategy for renewable energy," says Alexander.

There are enough other examples like these to indicate that a definite utility-driven solar power trend is well under way, but I have run out of space to describe them all. So, don't be surprised if your utility company makes you an offer for solar power that you just can't refuse.

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