Solar Photovoltaic

Sunny days

 

Solar is the most abundant renewable-energy resource in the world and has the potential to meet all global primary energy demand. Solar irradiance, the instantaneous amount of power provided by the sun at a given location and time, is of fundamental importance in the use of solar power. It is considered good to excellent between latitudes of 10° and 40°, South and North. Nevertheless, the solar resource is one of the most evenly distributed energy resources available on Earth.

Solar PV is one of the four main direct solar-energy technologies, the other three being concentrating solar power (CSP), solar thermal and solar fuels. Electricity is generated via the direct conversion of sunlight into electricity, in PV cells. Light shines onto a semiconductor (e.g. silicon), generating electron-hole pairs separated spatially by an internal electric field, which induces a voltage and a direct current when connected to a load. PV cells are interconnected to form PV modules with a power capacity of up to several hundred watts. PV modules can be further connected in series or in parallel to form arrays. These are combined with a set of additional components (e.g. inverter, support rack, switch…), known collectively as balance of system (BOS), to form PV systems.

PV technologies are categorized by the type of material used in the cell's absorber (Figure 1). Wafer-based crystalline silicon (c-Si) cells are the most common type of PV cells (with a market share of around 93%). This technology is the most mature and benefits from high conversion efficiency. Crystalline silicon is expected to continue to dominate the PV market in the near future, as most solar PV projects are based on crystalline silicon technology.

Figure 1. Classification of Solar PV Cells

Some thin-film technologies made from semi-conductors have also become commercial and account for roughly 7% of the market. However, thin-film technologies are less efficient than c-Si and their cost advantage has been eroded by a recent decline in c-Si prices. New thin-film PV technologies are being investigated in the hope of achieving ground-breaking reductions in module costs and enabling novel PV applications by virtue of properties such as transparency and versatility. Nevertheless, these technologies are still at the research stage. Concentrated PV (CPV), which uses mirrors or lenses to concentrate and focus solar radiation on high-efficiency cells, is an alternative to concentrating solar power (CSP), but requires better solar irradiance than other PV technologies and is, at present, far less common. Figure 2 provides an over view of solar PV cell technologies and their technological maturity.

Figure 2. Solar PV Technology Maturity Curve1

The electrical and mechanical devices that make up the BOS are critical components of solar-PV systems. While some BOS devices, such as inverters, are common to most PV systems, the presence of some components depends on the application (e.g. whether the system is off-grid or grid-connected, sun-tracking or not). Among other developments, solar tracking systems and plant-level controllers could be instrumental in exploiting the full potential of utility-scale PV systems.

The vast majority of installed PV-systems are connected to the power network, inducing challenges for grid management

Solar PV has various applications. Contrary to common belief, the vast majority (99%) of PV capacity is connected to the grid, either through small-scale rooftop or ground-mounted systems installed on residential or commercial properties, or through utility-scale PV farms (1 MW or more). The share of the latter has increased quickly since the late 2000s, largely because of development in China and the U.S. But commercial PV systems (typically up to 1 MW) and residential PV (typically up to 20 kW) still account for more than half of grid-connected PV capacity – 39% and 19% of the total, respectively.

It is important to make a distinction between grid-connected PV capacity and off-grid systems (Figure 3). The latter (typically up to 5kW) account for around 1% of global PV capacity. While the development of grid-connected PV has far exceeded that of the off-grid market in recent years, growth in off-grid applications is now accelerating in several countries. There are high expectations for off-grid solar PV and, for instance, its use in supplying electricity to remote communities or powering isolated telecommunications facilities. Having been at the forefront of early PV deployment in the 1980s, off-grid systems could yet regain momentum and become instrumental in alleviating energy poverty.

Figure 3. Solar PV Applications and Market Segments

PV technologies are constrained by the intermittent availability of solar energy. Indeed, solar is distinguished from other sources of energy by its imperfectly temporal predictability and deterministic variability. Its output is variable, imperfectly controllable and predictable, and subject to sudden changes – in the event of a passing cloud, for example. Therefore, the development of solar PV tends to increase flexibility needs in the forms of dispatchable power plants, energy storage or demand-side response. Flexibility needs and associated costs are, in general, increasing in line with growing solar PV penetration in the power mix. Nevertheless, solar output tends to be closely correlated with demand, especially in areas where peak demand occurs during the sunniest hours and where it can mitigate the need for expensive power plants to meet marginal demand (e.g. in the Middle East or in the Southwestern United States, where air-conditioning usage drives demand peaks). Finally, distributed solar PV, like other distributed generators, may require enhancements in the distribution system to improve grid stability and ensure power reliability, although the need for long-distance transmission lines is limited.

Solar PV has taken off in the past decade

Solar PV development, which began in the 1990s, has accelerated since the mid-2000s, with numerous countries introducing policies to support it. By the end of 2016 – another record-breaking year for the solar PV market – cumulative capacity had reached 291 GW (Figure 4).

Figure 4. Installed Capacity by Region

Initially driven predominantly by Europe and Japan, solar PV deployment has spread to other areas of the world. In recent years, there has been rapid development of PV systems in China and the U.S., for example. At the end of 2016, China (77.4 GW) led in terms of cumulative capacity, followed by the Japan (41.6 GW), Germany (40.9 GW), U.S. (32.9 GW) and Italy (19.2 GW). Together these five countries account for about 73% of the total global installed capacity.

Solar PV’s contribution to the global generation mix remains marginal and it currently produces only 1.8% of global electricity (2016). This is largely explained by solar PV’s low capacity factor. However, some countries have high penetration rates; PV supplies more than 7% of the electricity consumed in Greece, Italy, Germany and Honduras. Japan is just short of the 5% mark, while other majors like China and the U.S. exhibit penetration rates of less than 2%.

Installed PV capacity is expected to rise from 175 GW in 2014 to 547 GW in 2021. Asia is forecasted to be the principal engine of market growth (China, Japan and India being major contributors). The U.S. market is expected to grow by 60 GW between 2014 and 2021, driven by utility-scale projects. By 2021, PV capacity in other regions (Middle East, South Africa, etc.) will witness rapid growth to 30 GW, which will be more than cumulative global PV capacity in 2009. Europe will lag behind in capacity additions, but may still witness solar PV making bigger contribution in its overall generation mix compared to other regions as they suffer curtailment and delays in grid-connection.

In the long run, solar PV is expected to play a crucial role in most visions of the energy future. Under the IEA’s 2°C Scenario, for example, solar PV would account for 9.4% of global electricity supply by 2050. To meet this target, all applications - i.e. utility-scale, distributed generation, and off-grid - will need to coexist and expand rapidly.

PV Energy Technology has experienced rapid and significant annual cost reductions as a result of falling module prices

PV is a capital-driven technology. Total PV investment costs typically range between $1.3 and $5.1 per watt, depending on project location, application, scale, and market conditions. Annual operating and maintenance costs account for only 0.5%-1.5% of the initial investment. Investment costs can be divided into two components: module costs and BOS costs.

Once accounting for the majority of PV costs, modules now account for a limited share of total investment costs (typically 20% and 36% for residential and utility-scale systems, respectively). This is largely because, over time, modules have experienced significant decreases in prices: costs have fallen on average by 22% for each doubling of cumulative production capacity. The prices of PV modules associated with various technologies have converged. Cost reductions are expected to be limited in the future, as manufacturers are already selling modules at no margin.

BOS costs typically account for 80% and 64% of investment costs for residential and utility-scale systems respectively, and vary significantly, depending on the labor costs and regulatory environment of each local market. Reducing balance of system (BOS) costs has become a priority to drive down overall PV system costs. The main ways of doing this include lowering the costs of hardware components, improving module efficiency and standardizing and modularizing PV systems. In some regions, market growth may also lead to reduced soft costs due to greater competition, lower customer acquisition costs and processes.

PV has experienced significant cost reductions as a result of falling module prices. Reflecting the strong decline in costs, variations in solar irradiance and the large number of manufacturers and technology in existence, solar PV generation costs vary significantly. This is reflected in the levelized cost of electricity, LCOE, which typically ranges from $60 to $400 per MWh. However, significant subsides have recently contributed to an LCOE as low as $30 per MWh.

PV generation costs are still, on average, higher than those of conventional technologies. Generation costs are often compared to the prices paid by end-consumers of electricity to highlight the growing competitiveness of solar in some regions. Grid-parity is commonly used to design the tipping point at which the levelized cost of electricity (LCOE) from solar PV falls below the consumer price of electricity. However, as relevant as it may be for off-grid solar, grid-parity does not suffice is assessing PV’s competitiveness, since it does not take into account: transmission and distribution fees; the taxes that are usually included in final electricity prices; and the time at which the electricity was produced.

Despite a maturing industry and the development of innovative business models, the ecosystem of solar PV is largely shaped by public support policies

Government support policies remain crucial for solar PV deployment. Support instruments are usually categorized according to whether they mandate a certain minimum quantity (quantity-driven), or alter the prices to which investors are exposed (price-driven). Figure 5 highlights that these measures vary significantly between countries, but feed-in tariffs, tax incentives and renewable portfolio standards are generally the preferred choice of governments. Net energy metering is another support policy that has proved efficient in bolstering distributed solar PV in some regions, such as California, but is criticized for not being sustainable it the long run.

Figure 5. Renewable Energy Policies and Main Solar Policy Incentives for Selected Countries (2015)

A number of new business models have emerged to overcome barriers to solar PV deployment. In addition to the role of public support, the outstanding dynamic and innovativeness of the solar PV ecosystem should be recognized. Among various business models, third-party ownership (leasing or purchasing-power agreement) have proved highly efficient in fostering the deployment of distributed solar PV by reducing upfront investment costs and revealing cost savings. At the same time, the entrance of new financing players, combined with the introduction of new investment vehicles, such as Yieldcos (dividend growth-oriented public companies), have lowered financing costs, a key success factor in any capital-driven technology.

The solar PV industrial landscape is highly competitive. The latter can be involved at various stages of the solar PV value chain, from the production of raw materials, such as feedstocks, ingots and wafers, to the operation and maintenance of solar panels. As an industry, solar PV is experiencing fierce competition, reflected in production overcapacity and numerous trade disputes in recent years. Despite the recent elimination of numerous companies as part of market rationalization, Asian companies now dominate the silicon value chain. China continues to be the dominant player in module production, accounting for around two-thirds of global production. European and North-American companies, meanwhile, remain strong in engineering, procurement, construction (EPC) and development activities.

Solar-powered water desalination has the potential to increase access to fresh water significantly in many arid locations. Desalination is an energy-intensive process, consuming 75 TWh of electricity per year (in 2012). Currently, less than 1% of the energy used for desalination globally comes from renewables because it remains substantially cheaper to use grid electricity generated from conventional fuels. However, recent studies indicate that solar PV desalination is more economical than other low-emissions alternatives (including nuclear energy) and, under certain conditions, can even compete with conventional desalination (Figure 6).

Figure 6. Comparative Analysis of Desalination Combinations1,2

Solar PV-driven desalination integrated with water storage instead of electricity storage presents promising potential, especially in water-stressed regions, such as Middle East. Recent research results from Saudi Arabia indicate that water storage is more cost competitive than electricity storage because of high battery costs.

Solar PV is not facing significant environmental and social challenges, despite concerns over rare materials

The manufacture and installation of PV systems account for the bulk of greenhouse gas emissions from and the energy consumption of PV systems. Nevertheless, contrary to common belief, the energy payback of solar panels (the time it takes for a solar system to generate the same amount of energy that was used to manufacture it) is relatively short – typically less than two years with moderate solar irradiation of around 1,700 kWh/m2/yr.

With respect to lifecycle GHG emissions, median emissions range around 41 and 45 gram of CO2 equivalent per kWh (gCO2eq/kWh) for rooftop panels and utility plants, respectively, but can reach up to 180 gCO2eq/kWh. This level depends mainly on the material used in the cells, the manufacturing process, the power mix and recycling measures. For the purposes of comparison, median emissions range around 11 gCO2eq/kWh and 490 gCO2eq/kWh for onshore wind power and combined cycle gas turbines, respectively.

Recycling is crucial in ensuring the PV industry is sustainable, since it generates large amounts of electronic waste. It is predicted that 80%-96% of the rare materials used could be recycled. Since solar PV systems require relatively little land and almost no water, and as no greenhouse gas (GHG) or other pollutants are emitted during the producing life of PV plants, they are considered environmentally benign and are usually accepted by the public.

Research, development & demonstration (R,D&D) is focused on improving efficiency and minimizing the cost of materials used to produce cells

Reducing solar PV costs is the main focus of R,D&D. Several technological approaches seek to boost the efficiency of solar cells and BOS components. R&D efforts are also aiming to improve reliability and increase lifetime and to reduce material requirements through the development of thin-film technologies, and reuse and recycling. At the same time, manufacturing technologies and processes are being improved in order to reduce raw-material use, energy consumption and costs.

R&D is also increasingly exploring flexibility means, such as energy storage, and there is real momentum behind solar PV combined with battery systems. Despite the launch of commercial, energy-storage batteries in 2015 in the U.S., Australia and Germany, R&D is still actively trying to make the case for battery use. Battery makers’ priorities are higher-durability chemistries and materials. In addition, improvements in power electronics and hardware technologies are making it possible for distributed PV to supply an increasing share of power, without impairing the reliability of electricity supply.

Solar PV experienced significant R&D investments in 2008-2014 (Figure 7), with a 14% compound annual growth rate (CAGR) leading to a peak of $6 billion in 2014. Since then, R&D spending on solar has declined and amounted to $3.6 billion in 2016 (a negative 23% CAGR since 2014).

Figure 7. R&D Investments in Solar1

Private funding accounted for $1.6 billion of the total, while public support remained similar to previous years, at around $2 billion. However, this still exceeded spending on the next two biggest renewable-energy sectors (biofuels and wind) combined.

 

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