The Growth of Solar Concentrator Photovoltaic Markets in the Southwest US Author
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MP Title: The Growth of Solar Concentrator Photovoltaic Markets in the Southwest US Author: Sean Connor Advisor: Lincoln Pratson Date: April, 2008 Abstract: Worldwide solar photovoltaic (PV) markets have grown at an average rate at 38% over the past ten years. While polysilicon flat panel PV modules have traditionally dominated the overall solar market, a range of different solar energy conversion technologies are starting to gain market share. One such class of solar technologies, concentrator photovoltaics (CPV), is in its commercial infancy but offers a module manufacturing paradigm to greatly lower the cost of solar electricity production. This paper examines the attributes of CPV and analyzes how it might compete within the overall solar market. The Southwest US is used as a case study to examine specific subsidies, regulations, and business models that will affect the success of CPV. In addition, a financial model was created to examine important factors influencing retail and wholesale PV and CPV project costs under various scenarios. I. INTRODUCTION The global solar electricity market has experienced a second wave of 38 % average annual growth over the past 10 years (Maycock, 2007)spurred on by the lure of a self supporting industry providing clean electricity to the masses. For entrepreneurs, the race is to build cheaper solar systems and take advantage of the current subsidy-dependent demand growth while keeping their sights on making unsubsidized solar competitive with conventional fossil fuel electricity generation. This point of parity is expected to enable solar to take a significant percentage of the enormous market for new electricity generation. With the prize of enormous growth at stake, a multitude of companies have entered the market offering technological innovations and reformulated designs. One such technology is a concentrator photovoltaic (CPV) system whose inchoate development began in 1976 at Sandia National Laboratory. (Antonio Luque, 2007) The value of this design approach to photovoltaics (PV) has been touted because of CPV’s capability to reduce the use of semiconductor material while simultaneously enabling a more cost effective use of high efficiency semiconductors. While the working knowledge of CPV has been around for over 30 years, significant solar market penetration has remained elusive (Antonio Luque, 2007). However, a recent confluence of factors is projected to enable CPV grow from its current world solar market share of less than 1% (Figure 6) to 100 GW of a 1 TW annual global solar market in 2040 (Sharp Solar Systems Group, December 7, 2006). This report explores solar electricity markets with a focus on factors influencing the penetration of high- concentration PV (HCPV). Currently, solar markets are very dynamic and are being driven by an influx of venture capital, new market entrants, unstable government subsidies, high electricity prices, and the prospect of extensive US greenhouse gas regulations. In fact, one prominent industry icon, Jigar Shah described major market conditions as changing monthly. (Shah, 2007) In order to navigate through these market conditions and remain relevant as they change, this report identifies the underlying factors that will continue to drive solar markets and HCPV competitiveness amidst market fluctuations. While current factors will be identified, a focus will be placed on how market changes will affect the strength of solar in general and more specifically HCPV. This report contributes to the current solar literature by assessing the competitiveness of HCPV to traditional PV in the face of general solar market dynamics which should be of particular interest to HCPV solar module manufacturers, systems integrators, and anyone curious about HCPV. While opportunities for HCPV are opening up globally, this report will focus in depth on the behavior of solar markets in the SW US given its abundant direct solar radiation (insolation), rapidly growing electricity demand, and states with contrasting solar policies. Given solar systems’ high capital cost, it is clear that government policies and incentives have been a major driver of solar market growth worldwide. The US is no exception. State renewable portfolio standards (RPS), federal tax credits, state tax credits, and various other subsidies are designed to increase the percentage of clean energy generation while nurturing solar manufacturing competiveness to the point that subsidies are no longer required for significant growth. While the focus of the report is on HCPV, other electricity generating technologies will also be examined. On a general level, there are many economic substitutes for CPV and each substitute may exhibit comparative advantages. However, many government incentives are designed to promote specific technologies renewable technologies. HCPV generally receives the same federal and state government incentives as PV technologies. These PV technologies possess many of the same operating characteristics as CPV. In 2006, mono-crystalline silicon (Si) and poly-crystalline Si captured 84.6% of the overall PV market (Figure 6). Given the market dominance of Si PV and the similar operating attributes as HCPV, crystalline-Si PV technologies will be assumed the closest economic substitutes of HCPV in this study. These PV technologies include, fixed PV, 1-axis tracking PV and 2-axis tracking PV which are compared to 2-axis tracking HCPV. Given that the objectives of this report are to identify the current and future competitiveness of HCPV and the overall market conditions that will drive its growth, the following methodologies are utilized: The technological characteristics of CPV are outlined; current solar market conditions are identified along with the framework in which HCPV will compete; factors affecting the costs of retail and wholesale solar installations are examined; the importance of geography and insolation are examined. Finally, a case study was constructed of hypothetical installation in AZ to examine the impact of subsidies and a range of factors entering into the financial health of typical solar installations. To aid in this analysis, an Excel spreadsheet model was constructed to examine the factors impacting overall solar project costs. Installation cost and operational cost data used in this report’s cost analyses are based on Department of Energy (DOE) surveys. (Department of Energy, 2005) This cost data along with technological assumptions and financial assumption are inputs into the financial model that calculates the levelized cost (LCOE)1, net present value (NPV), and internal rate of return (IRR) of hypothetical solar projects involving the relevant technologies. Subsidies, taxes and projected electricity rates are included to produce results that might reflect real typical installation metrics. It should be noted that the resultant project financial metrics can vary significantly based on input assumptions and that the model is not meant depict specific installations. As a result, the model was designed with the capability to easily determine the sensitivity of the resultant financial metrics to a wide variation of input parameters. This sensitivity analysis is used to reveal the important factors affecting overall project costs. The structure of the report is organized in a manner following the methodology: Part 1 discusses CPV technology, its current status, and its strengths. Part 2 outlines the current status of solar markets in the US focusing in on markets in which CPV will likely compete. Future projections of these markets are also examined. Part 3 details this study’s methodology which includes a discussion of the major factors entering into solar projects and a description of the financial models constructed to perform sensitivity analyses on the project factors. Part 4 identifies the LCOE of PV and HCPV in various SW US locations with varying levels of insolation. Part 5 discusses the current LCOE of PV and HCPV, discount rates, and what that means for their competitiveness. Part 6 explores the role of subsidies in AZ on solar projects. Part 7 estimates the future competitiveness of PV and HCPV. Lastly, a number of factors in the solar value chain are connected to paint a picture of HCPV’s prospects. 1 Levelized is cost is computed in $/kWh (Walter Short, 1995): Where LCOE: levelized cost of energy ($/kWh) r: discount rate i: year PVprojectcosts: present value of project costs I. TECHNOLOGY BACKGROUND Concentrator Photovoltaic Technology The general principle that characterizes CPV systems is that they use lenses or mirrors to concentrate sunlight onto a small solar cell (Figure1). There are a myriad of designs employing different configurations of concentrators but the overall concept of reducing semiconductor remains similar - the area of the semiconductor material is roughly reduced by the level of the concentration. Thus, the cost of the cell surface is replaced by the cost of the cheaper optics and other auxiliary components. This reduced cell size makes the use of expensive high-efficiency single-junction and multi-junction solar cells more cost effective. For example, a high-efficiency (~35%) multi-junction cell currently costs roughly 100X more than a single-junction Si cell, however, a 1000X optical concentrator reduces the required cell area by roughly 1000X. (Kinsey, 2007) Assuming that designers can adequately remove the added heat and series resistance issues stemming from HCPV, a module with a higher efficiency and lower cost ($/W) than