A recent newspaper article [Arizona Republic 06/30/08 - Cost Impediments Remain to AZ's use of solar power] summarized a lot of questions people are asking about the solar power industry in addressing the affinity people are developing for renewable energy technologies in this era of climate change, but decrying the costs of installation. The article was focused on the state of Arizona which would seem to be a very favorable climate and terrain for solar power, and questioned why there weren't more solar power installations. The reason for the lack of installations was given simply as cost: solar power plants are expensive propositions in a state where electricity is fairly inexpensive right now. In contrast, California with its relatively high electricity costs, was pointed to as a place where solar is doing better and solar photovoltaic (PV) technology was particularly singled out for its potential. But given the high energy costs currently plaguing consumers and the attention energy policy is receiving from Congress and the Presidential candidates, the time for renewable energy to finally reach its potential seems to be now. The issue is how this can be accomplished?

B&D Consulting put these and other questions to Mr. Jigar Shah, Chief Strategy Officer and founder of the SunEdison Corporation. SunEdison builds commercial to utility-scale PV installations, and has taken a different approach to providing solar-based electricity to its customers by owning, operating and maintaining the solar installations it builds on its customer's premises, and selling the electricity generated back to the customer who contracted for the plant.

How would you respond to those that say High Costs are the major obstacle to the more widespread deployment of solar power?

Most central station energy projects have a five to ten year "build-out", which represents the total time from planning to commissioning of the plant. When you consider the costs of a five to ten year duration for a build-out, solar PV costs the same or less than other peaking sources. The main obstacle to solar PV is the reluctance of some utility companies to empower their customers to take advantage of on-site instead of central-station power.

What's the payback period for a "typical" solar PV installation?

A more relevant question solar may be: "what is the risk adjusted cost of solar vs. grid power?" Over the 40-year life expectancy of a solar PV system, solar is projected to be between 5-25% cheaper than the grid alternative for peak power. Recent price hikes have pushed the predicted savings in future years to the higher end of the range.

What's on the horizon for future solar photovoltaic technology that will make it more efficient, or help with the intermittency issue?

The cost of solar PV has consistently declined 5% per year over time. Some short-term material shortages have increased price, but cost has continued to come down. Some of those reductions come from thinner silicon wafers, high efficiency, thin-film technologies, and other innovations. While we are seeing PV technology cost continuing its 5% annual cost reduction, we do not see dramatic improvements accelerating that trend.

Regarding the intermittency issues, these are really only relevant for wind power. Solar is very coincident with air conditioning loads. European utilities that have solar capacity installed love the technology. Combined with basic demand response which utilities are already investing in, distributed solar PV is a firm resource meaning that it can be counted on to reduce demand on utility systems during peak usage times.

Storage technologies are said to be key to solar's future; do you agree? Will new utility-scale storage battery technologies help with non-peak applications?

No, I don't agree. Storage is a technology for the utility to create a more robust grid, and is not tied to or essential for solar reaching a high penetration rate.

Would a discrete ten year program of declining federal government subsidies be enough to finally establish solar PV as a competitor to fossil electric power?

Absolutely. This was true for nuclear in the 60s & 70s ($66B invested), natural gas in the 80s, and wind in the 90s. This is the decade for solar PV where the government can serve the national interest for energy security and cleaner air by investing in the technology as it reaches scale. Once this scale is reached, the government incentives will just have to be normalized to the other energy technologies on a BTU basis. If the government is finally able to reduce coal, nuclear, natural gas, and oil subsidies to zero given their high profit margins, solar can also live without subsidies.

With a number of state governments moving towards renewable portfolio standards or requirements, will this help the industry finally be competitive?

Solar is a distributed generation technology. Forcing utilities to buy renewable energy will still not incentivize nor empower their customers to install renewable energy.

If costs are a major obstacle to solar PV in Arizona, would it work in less sunny states like Massachusetts or Indiana?

If utility companies were to pay the exactly the same peak power premium for distributed solar PV as they are paying for central station solar thermal, solar PV would be more cost effective. The problem is that utility companies are afraid of distributed generation technologies, just like the traditional phone companies were afraid of distributed cell phones.

Given the concerns over Climate Change and the role of developing countries, what would you say are the prospects for solar power internationally?

Solar PV markets have grown over 40% per annum over the past 5 years. On an absolute dollar basis, the industry is bigger than the wind industry in 2007. Prospects are good.

Are the economics of solar PV more amenable to developing country markets and applications (i.e., with higher numbers of sunnier days in developing world markets, is PV more useful than for peaking applications)?

Solar PV is ideal for places all around the world from remote areas in Alaska with limited sun and high diesel fuel prices, to the deserts of Africa where there is ample Sun and little access to other energy sources.

While SunEdison is focused on commercial markets, what would you say to residential customers that would want to take advantage of solar PV technology to lower their energy costs?

For consumers interested in solar, they should advocate for local city officials and utilities to deploy a more cost effective centralized solar solution for their communities as a whole. It’s aggregation benefits the entire community and immediately helps the local environment.

It would seem that the next President and Congress will have the opportunity to help Solar PV and other renewable energy technologies to firmly and finally establish themselves. If a program of tax credits for renewables can be designed over a longer-term but discrete time frame, we may finally see renewables as a significant, self-sustaining contributor to US power needs and a new, greener economy for years to come. The end game is to provide one of many needed bridges away from high-carbon content fuels.

Submitted by R. Campbell; August 27, 2008