Solar power

A race to reap the economic benefits of green innovation is�beginning all over�the world as concerns over limited oil and gas resources and future prices trigger�a quest for alternative energy forms. Moreover, political commitment to a low-carbon future is becoming imperative as the global community hammers out�a new international climate agreement.

In March 2007, EU heads of state and government adopted a binding target to source 20% of the EU's overall energy from renewables by 2020. In order to reach the target, in January 2008 the European Commission proposed a new directive�promoting the use of energy from renewable sources, which was endorsed by the European summit in December�that year�(see�EurActiv LinksDossier on 'EU renewable energy policy').

The legislation, replacing the�previous 2006 directive, sets national targets for renewable energies but gives member states a free hand to decide which mix of renewables to pursue. In June 2009, the Commission issued a template for National Renewable Energy Action Plans (NREAPs), which member states have to�produce when�presenting their chosen course of action by the end of June 2010 (EurActiv 01/07/09).

But the uptake of solar will ultimately depend on the successful integration of these decentralised energies into the electricity grid, which will require significant infrastructure upgrades across Europe.

The new�directive on the internal market in electricity (see�EurActiv LinksDossier on 'EU electricity market liberalisation'), adopted as part of the EU's third internal energy market package in June 2009, aims to remove barriers to renewable electricity's access�to the grid. Moreover, it obliges member states to consider the 20% goal when authorising the construction of new generating capacity.

Small-scale solar is also promoted in the recast of the Energy Performance of Buildings Directive. The Commission's November 2008�proposal seeks to oblige member states to ensure that decentralised energy supply systems based on renewable energy are considered in all new buildings, as well as those undergoing�major renovations.

Issues:

The sun provides the most abundant source of energy available. Experts�estimate that harnessing all�the solar energy that reaches�Earth for�just for an hour would be enough to�satisfy global energy demand of an entire year.

Solar energy is utilised in three main ways:

Expensive technology

Despite its great promise, the sun's energy is difficult to exploit on a large scale at a competitive price.�Solar energy currently provides less than 1% of energy sold globally, mainly�due to�its intermittent nature and low intensity.

Photovoltaic electricity has been used cost-effectively in remote areas, which would be expensive to connect to mains electricity. It is also commonly used at competitive prices in many industrial applications, including traffic signals, parking meters, and consumer goods like calculators.

Grid-connected solar electricity is still considerably more expensive than electricity from fossil fuel sources � both when produced in small-scale residential systems and in power plants. But�costs have�come down drastically in the past decade, and the European PV industry believes that it will have become competitive in some regions, notably southern Italy and Spain, by 2010.

As for solar-thermal power, 90% of it is produced in small residential installations.

Solar electricity will become attractive to consumers when it�falls below 'grid parity' with alternatives like coal, gas, nuclear and wind. Grid parity is the point�at which�the cost of�buying and installing�solar panels is more than�compensated by the resulting�savings in electricity bills.

Grid parity is not quite within reach yet,�despite innovations in the manufacture and mounting of solar cells which�make them much cheaper.�

Nevertheless, decentralised electricity generation boasts a significant advantage�in that�it does not require transmission networks or the construction�of new power plants, which�make up the lion's share of the price a consumer pays for traditional energy.

Industry eyes grid parity with fossil fuels

The market for solar electricity is growing rapidly as more countries�introduce subsidies to�bring down�production costs and to boost research into more efficient techniques.

The industry believes that solar will be able to compete with fossil fuels�to generate�electricity�in the coming years. When exactly this will happen will�be driven by economies of scale, which accelerate the drop in prices.�The price of crude oil will also be a�major factor, as it is expected to become�more expensive amid depleting resources and a carbon premium added to the price.

The International Energy Agency (IEA) estimates that solar power could provide as much as 11% of global electricity production in 2050. But this is conditional on many countries putting in place incentive schemes to support solar energy in the next five to ten years so that investment costs come down. The share would be roughly�divided�equally between photovoltaic and concentrating solar power.

In 2008, cumulative global photovoltaic capacity�touched 15 GW, growth of 5.6 GW�on the�previous year. Europe is a clear leader, as 65% of installed capacity lies within its borders.

The European Photovoltaic Industry Association (EPIA) projects that PV could rival other forms of electricity production in most of the EU market without the�help of subsidies by 2020 if political support measures are taken in the next five to seven years to boost the volume of production�and to benefit from economies of scale (EurActiv 23/06/09).

Solar-thermal is the most mature solar technology and has provided households with affordable�domestic water and space heating, as well as cooling. It accounts for the lion's share of the total solar market, but receives less attention and R&D funding than the more technical photovoltaic (PV) solar sector (EurActiv 24/08/09).

The European Solar Thermal Industry Federation (ESTIF) reported a 60% growth�in�solar-thermal capacity in the EU in 2008.

Incentives fuel demand

Where solar installations have taken off, they tend to have been encouraged by generous state subsidies. Germany is the obvious point of reference as it became the world leader in photovoltaic capacity once the federal government had put in place a favourable policy framework for renewable energies.

The main driver�of Germany's photovoltaic boom in recent years is�2000's Renewable Energy Sources Act (EEG), which guarantees a favourable feed-in tariff for solar energy.

Spain, another key global market for solar power, experienced an unprecedented�growth in photovoltaic installations�after introducing a very favourable feed-in tariff in 2007. But the government grossly underestimated the appetite for solar,�leading to an unprecendented surge in installed solar capacity as the alternative energy became�competitive with coal-fired power plants.�

By the end of 2007, the country had already�far exceeded�the target of 400 MW installed solar capacity that it had set for 2010, and the programme was suspended.�The successor scheme of 2009�reduced tariffs�considerably and introduced a cap of 500MW�for capacity to be built.

The government's�decision to cancel�these expensive subsidies�led to�a crash�in the artificially-inflated�market, as�a�surplus of panels drove prices down.

While the feed-in tariff in Spain has become a watchword for government renewables policy gone wrong, the German model�and its�incremental tariff reductions has been followed by France, Italy and the Czech Republic, all of which are keen to enter the solar race.

The idea�is that�feed-in tariffs�will be reduced over time as�production costs come down, eventually ceasing to exist altogether�when the alternative energy source is able to�compete with conventional sources of electricity. In Germany, for example, the cost of PV�systems halved between 1997 and 2007.

Concentrating solar�makes it to the big league

While solar power lends itself well to residential applications,�huge doubts have been expressed as to whether it will ever be able to rival nuclear and even wind power when it comes to utility-scale electricity production.

Solar farms have primarily been built�in Europe, the biggest of these�being the 60MW Olmedilla photovoltaic park in Spain. But the electricity these installations produce is expensive compared to conventional power plants and the panels needed take up considerable space, inviting the wrath of environmentalists.

But many are now looking to concentrating solar power as a promising technology to put solar on a par with conventional electricity generation. When used in conjunction with solar-thermal power generation, the technology avoids�using silicon and allows for larger, cheaper generation.

The EU's first commercial concentrating solar thermal power plant was inaugurated in Seville, Spain in 2007. It uses hundreds of mirrors, called heliostats, to focus sunrays on a receiver at the top of a tall tower, converting the beams into steam that drives a turbine. The plant is expected to supply enough power to serve the needs of the 600,000 citizens of Seville.

With several new large-scale projects in the pipeline, Spain has taken the lead on concentrating solar, but several projects are being planned and developed in the US too. A study published by Greenpeace International, the European Solar Thermal Electricity Association (ESTELA) and the International Energy Agency's SolarPACES in May 2009 estimated that CSP could meet up to 7% of the world's power needs�by 2030.

The greatest potential for CSP�lies in areas that get a lot of direct sunlight without much humidity,�like deserts. Experts thus expect the most�growth�to take place�in areas like the southwest United States and�the Mediterranean countries�of Europe and Africa.

Saharan sun to power Europe

While solar power's potential far exceeds�demand in the most promising areas, importing solar electricity is becoming an interesting prospect for those countries where the resource is less abundant.

In Europe, Germany is leading a group of countries interested in bringing solar electricity from North Africa to meet their climate goals and diversify their energy mix. The most prominent example is the Desertec project, which has created�a large�political buzz in Germany and has the backing of�European Commission President Jos� Manuel Barroso and French President Nicolas Sarkozy (EurActiv 22/07/09).

The project aims to bring solar thermal electricity generated in the Sahara�via concentrating solar power technology to Europe via a high-voltage cable. The investors, including German�energy giants RWE and E.ON, envisage that desert sunlight could eventually provide 15% of Europe's electricity needs.�

Positions:

The�European Commission has embraced concentrating solar power by investing �5 million in Europe's first commercial power plant using the technology. "These new technologies give Europe a new option to combat climate change and increase energy security while strengthening the competitiveness of the European industrial sector and creating jobs and growth," said�Energy Commissioner Andris Piebalgs.

The industry is upbeat about�the prospect of solar energy rivalling fossil fuels in the coming decades.�Industry representatives�point out that both climate objectives and security of supply concerns speak for the clean alternative.

The�European Photovoltaic Industry Association (EPIA) said that while the photovoltaic industry has not escaped the credit crunch, it is confident of continued growth. "A diversification of the market is taking place with countries adopting appropriate support policies. This is very good news for the PV industry and the environment," said�EPIA President Winfried Hoffmann.

The industry is expecting favourable policy frameworks to boost demand for PV�in countries like Germany, France, Italy and the US.

The�European Solar Thermal Industry Federation (ESTIF) argued that solar thermal is already well-anchored in European markets and stimulates the contracting economy with impressive growth records. "With oil prices rising again, we believe that our sector will continue to grow steadily and be less affected by the current economic turmoil," said�ESTIF President Olivier Dr�cke.

The association conceded that the take-up of solar thermal varies widely between countries, requiring action to convince installers and heating equipment traders in laggard countries that solar thermal is an attractive option. But it added: "Where solar thermal has reached a 'critical mass' we see that companies invest further in market development, which leads to more buildings being equipped with solar thermal collectors."

First Solar, a leading manufacturer of solar panels, believes that its cadmium telluride technology will make affordable solar electricity a reality. "Looking ahead to the next two to four years, First Solar will be in a position to produce power from the sun at costs competitive with conventional electricity generated from fossil fuels, paving the way for a large-scale transition to the cleaner energies we need to prevent irreversible damage to our planet," said�First Solar CEO Mike Ahearn.

Applied Materials, a manufacturer of equipment for solar panels, urged EU policymakers to maintain the pressure to bring about a paradigm shift to renewable energies. "PV electricity has the potential to make a serious contribution to energy security and savings in Europe. We need to think of PV not simply as an added cost: it is an investment by society into a cleaner and greener environment," said�Applied Materials CEO Mike Splinter.

Environmentalists have welcomed solar power as an important part of sustainable policies.

Greenpeace congratulated the EU for enabling its 20% target for renewables like solar to become a reality by setting binding national targets in the new Renewables Directive. "This agreement is a new dawn for a clean energy future that will benefit both the climate and the economy," said�Frauke Thies, Greenpeace EU's renewables policy campaigner.

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