Solarpraxis AG, based in Berlin, Germany, a leading organizer of conferences in the renewable energy sectors, hosted its third annual conference focusing on solar power plants last week in Phoenix, Arizona and offered a snapshot into the overall solar industry. The conference offered sessions centered on a wide array of topics associated with the solar power plant sector including: market analysis, transmission, smart power grid, financing, plant operation, construction, performance, technology trends and public policy. In specific, the conference provided a glimpse into the status of the overall solar industry and key impediments and driving forces for growth.
The recent US-China trade dispute case initiated by SolarWorld is clearly having a ripple effect across the whole industry. Many analysts in the industry believe that the US will eventually become the largest market for solar installations based on its overall appetite for clean energy solutions to its increasing power demands. It is looking more like the US Department of Commerce will side with the US solar manufacturers in the trade dispute case with China, which would ultimately lead to significant tariff policies for imports of solar components.
As a result, more global companies will decide to build manufacturing facilities in the US to avoid the tariffs in order to sell directly into the US market. This action will also be motivated by the reduction of shipping costs, which are expected to increase with overall trends of higher oil prices. Utility-scale solar projects are more sensitive to transportation costs due to the larger size and quantity of panels compared to residential projects.
Amid these forecasts for growth in the US, many manufacturers are being squeezed by the significant price declines for all types of solar panels due primarily to the abundance of supply on the market. The cut-throat nature of cost for these companies is leading to a stifling of innovation in research and development, which has led to smaller leaps in efficiency improvements for many technologies. This may lead to a self-fulfilling prophecy of simplification and commonality inducing more commoditization of solar panels. Thus, in this scenario, it would favor the emergence of increasing production from foundry-like companies modeled after the Taiwanese Semiconductor Manufacturing Company (TSMC) for microchips, as this company has already entered the solar market.
Consolidation across the solar industry is already happening at an alarming rate and expected to increase based on current economic trends. Signs of this trend are evident even in Arizona in the bankruptcy of Sterling Energy Systems based in Scottsdale and Solon discontinuing its manufacturing line in Tucson. Surprisingly, Arizona has consistently been ranked in the top 5 of US states for renewable energy jobs; however, many of these jobs have been temporary in the field of construction. Altogether, the fact Arizona is ranked this high and has not developed a distinct image as being a solar leader simply enunciates the lack of pervasiveness of solar across the US, as it constitutes less than 1 percent of America’s energy generation.
In order for states to really accelerate utility-scale solar power generation, a number of factors have to be met. First, the utilities need strong evidence for return on investment for solar energy projects and the necessary transmission line construction to bring them in unison with the electric grid. Executing these large capital projects need to be evaluated in terms of electric rate recovery passed onto consumers, as many utilities are subject to outside parties regarding rate increases, as in the case of the Arizona Corporation Commission with respect to APS.
There are many other issues on the table such as environmental land usage, government permits and financing. In addition, power sharing agreements across state borders is not well-defined and there is no standard policy for many regions. If a state is interested in becoming a leading exporter of solar power, analogous to Texas for oil, these agreements need to be enveloped into its overall comprehensive strategy. In comparison, it is much more straightforward to incentivize solar manufacturing versus power generation when it comes to exportation of goods across state lines.
From the utility perspective, the intermittency of solar power remains one of the top issues impeding its incorporation into their overall portfolio. Solar power plants are primarily used for peak power supply to consumers when the demand is highest during the day, albeit sunny periods, as opposed to base load power from stable sources such as natural gas or coal plants. However, solar could be implemented for more constant base load supply as storage technology is improved.
Overall, there is not enough emphasis on innovation in battery or related technology with respect to power storage for solar across the industry. If solar was capable of meeting these more critical and larger-scale power demands, the market would grow exponentially. Unfortunately, storage is not discussed at many solar conferences including the recent Solarpraxis PV Power Supply Conference in Phoenix and is overlooked due to the high degree of segmentation across the industry, where leading top tier solar manufacturers simply produce solar panels without any role in the storage market. This sentiment is part of the lack of an overall comprehensive clean energy agenda for policy-makers and industry leaders. The dismantling of the initial support for the carbon cap and trade bill and related legislation in the US Congress in June of 2009 has added to this dilemma.
In a post-health care and post-Solyndra political climate in the US, it is not likely that the renewable energy industry; especially solar, will receive the benefit of a comprehensive clean energy policy and will have to lobby for bits and pieces of government support, such as the 1603 US government solar grant program up for expiration at the end of the year, as it continues to snip around the edges. This industry has heavily relied on government support globally and is not poised to develop highly disruptive game-changing solutions on its own.
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