Solar PV: The sun is rising on the global power scenario

From a low base (<1% of global energy consumption, 2.5 GW of sales in CY06), solar photovoltaic over green-house emissions, decreasing cost of solar energy, and increasing government support  are the major growth drivers.

 

Demand side perspective: Opportunity for solar power

Solar constitutes a very small fraction (<1%) of the global electricity production, as of now. However,it has been growing rapidly on a low base, driven by cost reductions, favorable government policies and subsidies and also due to its being an environment-friendly source of energy.

The global solar industry is poised to expand from ~USD 11.7 bn in CY06 to >USD 52 bn in CY11E (in terms of solar systems sold). 

The cost of solar electricity (at > 25 cents/ Kwh) continues to be significantly higher than those of conventional electricity (<10 cents/ Kwh) and this has limited market growth historically.

 

Although production from solar systems varies according to the time of the day, peak output coincides with peak electricity demand. As peak electricity tariffs tend to be substantially higher than normal and comparable to solar power costs, PV systems are becoming economically more viable and hence, can be used as sources of peak power.

Supply side perspective

Technology is the key in this industry because it is a necessary component to create cost reductions. Within the supply chain in photovoltaic, the cell step affords a degree of differentiation, which drives cost reduction. The efficiency and production costs of solar cells are crucial for the efficiency of the entire solar module.

As the industry evolves, multiple players are expected to put up capacities in different stages of the solar value chain. As cell and module making stages require fewer investments and are quicker to ramp up, it is not surprising that capacity has built up more rapidly in these stages, which has resulted in raw material (silicon)  shortage. 

Silicon capacities take a long time to scale up as the manufacturing process is technologically cumbersome and requires huge scale for economic viability.

Improving cell efficiency is making solar power the new sunrise business.

Ashok Sinha , a veteran of the semiconductor industry, has an  clear view of the bottlenecks in the solar cell business. He believes that the industry is now blind to the shortage and unviable cost of polysilicon, its most essential raw material. Sinha has set up a company to explore his ideas — reducing the cost of silicon from $3 (Rs 120) a kilo to $1 (Rs 40) a kilo. “I know from the chip industry’s example that a high price differential is necessary between the raw material and the finished product,” he says.

Sinha is among several Valley veterans who have moved into solar power start-ups. One can find these for every part of the value chain — creating efficient solar cells, developing better production processes or, as in Sinha’s case, producing the raw material itself. The global market for photovoltaic cells is around $1.5 billion (Rs 6,000 crore). By 2020, the industry expects to employ over 150,000 people. The revolution over in the Valley is being felt in India too. Here, a host of companies are increasingly investing in renewable forms of energy and, in particular, solar power.

Globally, solar cell efficiency is improving even as its set-up prices fall. The Valley’s Sunpower produces the most efficient silicon photovoltaic cell in the world, which operates at 21 per cent efficiency (percentage of energy from sunlight that is converted into electricity). The theoretical maximum is 28 per cent. Spectrolab, a subsidiary of Boeing, makes non-silicon solar cells that reach 40 per cent efficiency. Last week, Konarka, a start-up from Boston, made the world’s most efficient plastic solar cell (6.5 per cent efficiency). Even though these are less productive, they can be cheaply and easily deployed on rooftops. Sunpower is another company to watch. It’s growing annually by 50 per cent and plans on doubling its manufacturing capacity. It is also setting up a second plant in the Philippines. India is next on the list. “India’s large market is always an attraction,” says Sunpower’s Vice-president Surinder Bedi.