Tuesday, July 11, 2006

Solar Convergence

If there's one alternative energy sector to which I've given short shrift in this blog, it's solar power. That's not because I think it lacks great potential. Instead, I've generally focused on fuels issues, since they are in the news more frequently and seem more urgent. Absent large numbers of battery-electric cars or solar-generated hydrogen, solar power won't affect the transportation energy markets for many years. Despite this, I'm intrigued by the apparent increase in important developments in solar technology, at least as reported in the news sources I follow. They suggest the beginnings of a technology convergence that could make solar power at least as important as wind power within a few years.

Wind and solar power diverged, when wind technology improved to the point at which it became essentially competitive--given modest subsidies or incentives--with conventional alternatives for generating electricity, such as gas-fired turbines. Solar has progressed, too, but remains farther from this kind of commerciality, even though its price hurdle is less difficult than wind's: solar power need only compete with the retail electricity prices that businesses and consumers pay their local utilities for delivered power, while wind must compete at the tougher wholesale level, which typically affords less than half the retail price.

So why has solar started to look more promising? It relates to developments in the same two key areas that moved wind out of the novelty category. First, there seems to be a sudden proliferation of new technologies that promise higher output at lower cost, enabling solar to be deployed in a wider market. More importantly, the capacity to produce solar cells or panels is being boosted by new manufacturing processes and by new cell technology that facilitates easier manufacturing at larger scales, with fewer bottlenecks of the kind that crystalline silicon has posed lately. More and larger "fabs" mean cheaper cells, which means higher demand, which drives the construction of more "fabs", in a virtuous cycle. There's some price at which you penetrate the full consumer power market (rather than small niches within it) and the cycle really takes off.

Here are some recent news items that I'd take as signposts of this kind of gathering momentum. Hardly a week goes by without something along these lines:

  • A company called Nanosolar, Inc. has devised a new way to produce thin-film solar cells--an alternative to traditional crystalline silicon cells--using a process similar to newspaper printing. They announced the construction of a new facility that by itself would boost global solar manufacturing capacity by roughly 25%.
  • Holograms may provide an inexpensive way to focus more of the sun's rays on collector, reducing the size--and thus the cost--of a solar array for a given power output and saving on manufacturing cost, as well.
  • Entirely new materials such as quantum dots could pave the way for a third generation of solar cells, which will be both more efficient and lower cost than current approaches.
  • A survey of the sector by a German tech analyst indicated that there were 50 companies working on new solar technologies, with significant new capital coming into the sector.

At the same time, the market for new solar arrays is being primed by a combination of high energy prices, growing environmental awareness, and big-budget incentive programs such as California's solar roofs initiative. The trick will be to get prices low enough to expand demand rapidly enough for it to become meaningful in terms of our total energy consumption, without drying up the profits that will be needed to fuel the continued expansion of the solar industry. That means that technology must continue to set the pace, and keep driving costs down.

There are many positive signs for solar, but we still need to keep them in perspective. Wide-scale implementation of photovoltaic arrays, particularly when combined with net-metering that allows excess solar power to be sold back into the grid, will reduce the call on peak-power generation from natural gas-fired turbines. That should free up gas for other uses. But without a breakthrough in the cost and efficiency of batteries, solar isn't going to have much impact on the demand fro big, base-load power plants, which in this country means coal. Until we can effectively shift solar power from where and when it's most abundant to where and when it's needed most, its contribution will be at the margin, not at the heart of our energy economy. That's still a pretty big market opportunity for today's solar startups.

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