The solar energy revolution has only just begun, but has already quite established itself. There are many reasons why the generation of electricity from sunlight will continue to grow forever. This blog explains the 'why' with ten key arguments and trends.
1. The global market expands and continues to grow.
Some facts and figures at a glance for the perspective:
- The market is dominated by Germany, which accounts for 50% of the global market.
- 3 countries install more than 1 gigawatt (= 4 million solar panels)
- 9 countries install more than 1 gigawatt
- China is accounting for 12 gigawatts on her own, and is thus claiming a convincing first place.
- The total installed capacity in 2013 is 37 gigawatts, a growth of over 20% compared to 2012
- In total there will be a capacity of 134 gigawatts of solar energy installed by end of 2013
- Solar energy accounts for more than 1% of electricity demand in over 15 countries now, with Italy at the top with nearly 7%. All of this is just the beginning.
- The global market is growing two-dimensional: the growth applies in individual markets and is expanding to more and more countries
- Again a growth of 20% is predicted, resulting in approximately 40-45 gigawatts of new installed PV capacity
- The European Solar Industry Association (EPIA), predicts that the market doubles within 5 years. EPIA often proved to be too pessimistic in its predictions in the past.
- Renowned research agency Solarbuzz even states that an annual installed capacity of 100 gigawatts should be achievable by 2018
- The International Energy Agency - founded by the "oil countries" - expects more than 5% of global electricity demand to be covered by PV by 2030, against 0.85% in 2013.
2. Solar energy still becomes cheaper
Who would have thought that in 2014 it would be possible to produce solar power for seven dollar cents per kilowatt-hour? That is a cost price that can compete with the production of electricity from coal or nuclear power. Admittedly, this is solar energy generated in 'Sunny California', however also in the Netherlands solar energy is cheaper for an average household than electricity from the grid without any form of subsidy.
The cost of solar panels reduced again in 2013 and will provisionally continue to drop. This was predicted by one of the largest manufacturers of solar panels, the American First Solar, that will even halve its production costs over to 2018. It is even more important that the costs of complete solar systems will continue to decline. Why? Not only the costs of the solar panels, but also those of the other components (such as inverters) decrease. In addition, the increasing efficiency of companies in the installation of PV systems lead to lower costs. If an installer places not tens but hundreds of roofs a year full with panels, the overhead costs per system decrease. The IEA thinks that the production costs of one kWh of solar power could drop to $ 0.045/kWh in 2050, however the same organization thinks that $ 0.07 is possible by 2030, and that objective has already been achieved in 2014.
With scale size, costs of financing decrease. And contrary to popular belief, these will be more crucial than the cost of the solar panels.
3. People want solar energy
Last year 101,000 new PV systems were installed in the Netherlands. Especially among households there is a revolution going on. Even in the United States, still regarded by many people as the domain of fossil energy, people want solar energy. Research shows that seven out of ten Americans think the federal government should do more to support Solar. Across America, 140,000 new PV systems were installed in the past year. Aside from California and Arizona, the market volume in the other States is even smaller than in the Netherlands.
Why would people want PV? It is a combination of a feeling of independence; financial benefits; certainty about future energy costs; distrust of the large energy companies; and green dreams. Private initiatives arise everywhere, from the local tennis club to new solar energy cooperative. And this is copied in the business market: from agrarian to Google. Europe and the USA lead the way in this. The other continents will follow soon, because the motives are universal. In absolute sense, Germany is still leading the market, with more than 1,3 million solar energy systems .However the USA is only just gaining momentum with 445.000 PV systems on a total of 70 million households. In China, the residential market is still untapped. So the market potential is enormous.
4. Solar energy produces peak current in a growing energy market
Solar energy systems produce energy when the demand is at the highest: at daytime and during sunny times (air conditionings on).'Previously', we are talking about 5 years ago, electricity was most expensive on the trade market for energy in Germany during summer. Now the over 150 million solar panels in the country are supplying almost 50% of all required power on sunny days, and the prices on the power exchange are precisely lower than on other days. This saves hundreds of millions of euros a year. This is not directly a benefit for energy companies, who used to make more profit during peak hours. The demand for electricity at peak and other times will only continue to grow worldwide. According to the ' New Policies Scenario ' of the IEA, will increase by more than 67% in the period from 2011 to 2035. In 2013, the contribution of PV was less than 1% of global electricity demand.
5. New construction goes to 'zero energy concepts'.
The focus of the PV industry has mainly focused on the most favorable existing roofs so far. Now that solar energy is profitable in more and more markets without subsidies and the cost drops even lower, the application at new residential buildings and structures is an inevitable choice. It is the time to let the depreciation run along with that of the building. Thus the production costs are even lower, making you a thief of your own wallet if you let this opportunity pass. Clients and architects favor energy efficient and energy-neutral new construction more and more . The market for new construction will only increase globally as a result of increasing population and growing prosperity, particularly in emerging economies. The EU has determined Directive 2010/31/EU that by 31 December 2020, all new buildings have to be nearly zero-energy buildings. And in the U.S. Obama has set a target that 100% of all new federal government buildings have to be energy neutral by 2030.
6. Power to the people: independence and cooperatives
Certainly in Western countries there is a trend towards ´independence´. 'Power to the people', more transparency and reduced reliance on large institutions. Not only in the financial sector (crowd funding instead of banks), but also in the energy sector. New local energy cooperatives thrive in many countries, from the UK to the Netherlands, Germany to the USA, who together choose to generate green electricity in a fair and transparent manner. With energy storage in the near future, the quest for independence can take further shape. 'Breaking free of large institutions and the government' is something that appeals to more and more people. Those same energy companies are therefore, according to experts, in a .With the increase of decentralized sustainable energy, the demand for electricity from conventional coal, nuclear or gas plants decreases. The fixed costs of these plants must be supported by an ever smaller group of customers and thus increase, leading to an even greater flight of customers to the ever-cheaper all renewable energy.
7. The new revolution of EVs and energy storage
Although the storage of solar energy is still in its infancy, there is already a revolution going on. Just look at the mobile phone. Modern Li-ion batteries have twice the capacity per unit weight as the first commercial versions that Sony sold in 1991 - plus they are 10 times cheaper. And this is only the beginning. Energy storage is ' the next big thing ' and a stimulator in the renewable energy revolution. The cost of storing energy in the years ahead will drop spectacularly. Not only by the telecom applications, but also by the rise of EVs (electric vehicles). The storage of renewable energy will be so cheap that you as a producer of solar energy decide when you want to use power and when you want to send it back into the grid and thus 'sell' it at the best price.
The linking of PV with EVs is obvious. That link is also made by FastNed, the company that is constructing a network of 200 'solar powered' fast charging stations at strategic points along the Dutch motorways. Additionally EV trendsetter Tesla itself constructs its own network of 'Tesla Superchargers' in Europe, of course with PV on the rooftop.
The expectation of the IEA (International Energy Agency) is that worldwide, by 2020 more than 20 million plug-in electric and hybrid electric cars are in use. If those will run purely on solar energy, that in itself will require hundreds of Gigawatts of new PV capacity. And this development does not stop by 2020.This market is also in its infancy.
8. Technological progress
Solar energy is not a new technology, as many think; it was already used in satellites in 1958 and from 1966 onwards in buildings. The technology celebrates its 60th anniversary of the discovery of the solar cell. The efficiency of solar panels still increases every year, just as cars become more efficient each year. The panel efficiency of the market leading First Solar has increased from 9.5% to 13.2% since 2006.This is an increase of 39%, while in the same period, the cost of the panels have decreased with 55%.Their roadmap for 2017 provides a panel efficiency of 18.1 to 18.9 percent, while on a laboratory scale is already a record of 20.4% was achieved. Technologically the end is still far from being achieved and in sight. Theoretically, the solar cell efficiency can be much higher. Today's multi-crystalline silicon solar panels contain solar cells with an efficiency of around 20%, while the best cell in the research lab already has an efficiency of 44% .Those 'high end pieces' are however very expensive to produce and therefore more suitable for aerospace. Nevertheless, technological progress will infiltrate into commercial applications, as the Formula 1 is a testing ground for the automotive industry.
Major technological steps are taken not only in the development of solar cells and panels, but also in the analysis, measurement and control (via software) solar installations. For good reason the brainy college MIT in Boston puts 'Smart Solar Power' in its Top 10 'breakthrough technologies' in 2014 .Through careful analysis of the wealth of information on the optimal operation of solar energy systems and advanced artificial intelligence, detailed forecasts and projections can be made. These ensure that solar energy systems, roofs and parks are able to work more efficiently and will have a higher yield. In addition, it means that solar power can be integrated into the electricity network more smoothly and with larger quantity.
9. Era without subsidies
In more and more markets PV application has passed the grid parity moment now: self-generated solar power is cheaper than electricity from the grid. In Western markets without subsidies, such as the Netherlands, Belgium and Italy, it is more economical to invest in PV on your roof, then to put your money in the bank. Therefore, Deutsche Bank predicts a second "solar gold rush". In rural applications, solar energy is almost always cheaper than electricity from diesel generators. This while the prognosis is that this diesel market by itself is expected to reach over 40 billion dollars in 2018.now what hinders this growth? Some countries and lobbies of energy companies are anxiously trying to stop PV application with bizarre rules, such as in Spain, a country where PV has been profitable for a long time now. People who want PV panels mounted on their roof there, are risking a fine of 30 million... The fact is that the power companies get in a 'death spiral'. Their sales drop because customers generate solar power themselves, and on the other hand, the fixed costs of existing fossil power plants have to be distributed among less sold kilowatt hours. As a result of these rising costs to be even more clients will invest in solar energy. McKinsey defines this as "The disruptive potential of solar power". Big energy companies have seen their share decline, in turn affecting their financial strength. RWE lost 70% since 2008 and has now decided to focus more on Renewables. The other giant E.On invests it in Sungevity , one of the PV market leaders in the USA. Turning the business model of the energy giants towards the sun means even more consumers and businesses are prompted to choose solar energy.
10. Financial world will embrace
Besides energy companies the major investors also increasingly discover the benefits of solar energy as an investment. Business Week recently reported that the investments in solar energy in 2013 increased by 23%.Take for example the world's most successful investor Warren Buffet. His company MidAmerican Energy offered $ 1 billion in bonds at 5.375 percent interest to finance half of world's largest PV plant in California. In total, Buffets company already invested several billion dollars in solar energy. Another forerunner and famous investor in solar energy is Google. Why do they do this? Solar power plants are even more predictable and constant in yield than windmills. And a predictable, 'steady cash flow' for at least 20 years, that (large) investors love. Through contracts with energy companies (PPAs) deals are closed with a term of 20 years. No worries about yields, impending CO2 levies, unsuspected environmental, uncertain costs of fossil fuels. Solar power can compete in more and more places and can operate for a long time with little maintenance. And after 20 or 25 years, just replace the panels for even cheaper and more efficient ones. All infrastructure remains and the engine is staged, resulting in even cheaper electricity for another 25 years. Pension funds are the next group of major lenders that will explore solar energy. And this big money contributes to more major projects, cheaper financing, cheaper solar power and more investors.