Solar can be the truly disruptive technology that changes the way we look at energy. Here’s how we get there.
By Peter Lynch, Special Contributor
The photovoltaic (PV) industry needs to aggressively develop truly disruptive PV technologies to dramatically accelerate the industry’s growth. This will enable solar to play a significant role in worldwide electricity production (significant meaning more than 25% of worldwide electricity generation) and have a positive impact upon climate change.
Solar is the only currently viable technology that has any chance of truly affecting climate change because it’s available everywhere and truly abundant. Below is a slide by a friend of mine, Dr. Richard Perez, clearly showing that solar’s annual potential is 10-fold greater than all the remaining fossil fuel reserves on earth and thereby clearly the energy source of the future.
I truly believe that solar is the only technology that can be ramped up quickly enough to have a significant impact on climate change, but the only way that solar can exploit this enormous potential is for the cost of solar to drop below that of fossil fuels without the need for subsidies.
The only way that this is possible is with “disruptive” change and out-of-the-box thinking — not the current linear, incremental thinking that is currently dropping the cost of solar. It’s not dropping nearly fast enough to make a dramatic impact on climate change.
What Is An Innovative, Truly Disruptive PV Technology?
For the world to reach a tipping point, we need a technology that is truly disruptive. We need solar that is cheaper (with no subsidies) than fossil fuels. To do this, the new technology must possess all three attributes listed below:
- Low-Cost Manufacturing Facility: A low cost-per-watt manufacturing facility (CapEx)
- High Efficiency: A high conversion efficiency without concentration
- Low Cost-Per-Watt: A low cost-per-watt of manufactured product
Having only one or two of these attributes is a step in the right direction, but it will not allow us to get to the low-cost levels necessary to accelerate PV as a major worldwide energy source.
To date there are serious problems with each of these three necessary attributes:
Low-Cost Manufacturing Facility (CapEx)
To be capable of manufacturing a low-cost product, we first need to have a low-cost manufacturing facility. If we start out with an initial factory cost in the hundreds of millions of dollars or even billions of dollars, it will be nearly impossible to produce a product that will eventually be cheaper than its fossil fuel rivals.
Because expensive semiconductor technology is the current standard in PV manufacturing, it’s difficult to get the CapEx down to the necessary levels. The solar business is a low-margin business, and capital expenditures for production facilities (CapEx) will have to drop dramatically (currently in the $1 per watt range for thin-film factories) for the industry to compete with subsidized fossil fuels and also possess healthy profit margins.
With a much lower initial CapEx (less than 25 cents per watt for example, compared to the current $1 per watt), a number of significant things would be possible:
- A lower cost product can be manufactured
- Much less up-front capital necessary (lower financial risk) to accelerate PV
If the CapEx were low enough, it would eliminate the financial need for government incentives and allow private industry to step in and move much faster in expanding the industry worldwide.
The highest efficiency, without concentration, is currently averaging below 20% for a module and below 23% for an individual cell. This is not nearly high enough to sufficiently offset the balance of system (BOS) costs. (BOS is the other half of the cost for a completely installed PV system — roof racking, electrical work, installation, labor, etc.).
Without a significant decrease in BOS costs, there is no way for a disruptive cost reduction to be possible. In addition, the theoretical maximum for silicon is approximately 27 to 28%. As a result, the industry is starting to bump up against the theoretical limits of its primary material.
To compete with other electricity generation (gas turbines and coal-fired plants), efficiencies in excess of 50% (without concentration) are needed. Without this we will not be able to generate a high enough number of watts per square foot in relatively small areas to greatly expand the number of localized sources (e.g., residential and industrial applications) and create a robust and flexible distributed energy infrastructure.
Low Cost Per Watt
Over the past decade, the industry has made dramatic progress in lowering the cost of PV panels, from more than $3 per watt to under $1 per watt. The industry is to be commended for this progress.
But this has resulted in the current situation where intense, competitive price pressures and large unsold inventories have priced most of the thin-film technologies out of the market, and all of the crystalline manufacturers (including the Chinese) are losing significant amounts of money each and every quarter. The industry has gone from a low-margin business to a negative-margin business, and this can obviously not continue indefinitely.
To reach the necessary price levels to accelerate the industry forward and give manufacturing companies a reasonable margin, the manufacturing costs in the higher-efficiency-panel area need to be significantly below
50 cents per watt with the potential to go much lower.
Paradigm Shift Needed
To accomplish all three of the technical attributes and for the industry to accelerate worldwide, we need to push forward with unconventional thinking toward a fully distributed solar future.
In effect, we need to do what has been done many times before in history at key tipping points — embrace change and do what must be done to move strongly toward a renewable and sustainable energy future. It is, in my opinion, the fastest, best and the cheapest way to get there.
Lynch is a pioneer in the renewable energy sector of the investment banking industry and regarded as an expert in renewable energy. He brings a wealth of knowledge from his 35 years as a Wall Street security analyst, independent security analyst and private investor in small, emerging technology firms.