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Solar Power And the Markets

All the growth expectations regarding solar power have been surpassed during the past decade. In 2002, the globally installed photovoltaic (PV) capacity was 2 000 MW, and now, in 2015, we are expecting to exceed 200 000 MW. The capacity has more than doubled every two years, and does not show signs of slowing down. So what has really caused this rapid expansion and what does this mean for our future?

Photo: Sandia Labs

The ever shining sun
The following picture illustrates the huge potential of solar energy. The size of the bubbles indicates the abundance of the energy sources on Earth (in terawatt-years=TWy), and the annual need of our world, 16 TWy, is presented by the orange ball. On the right side, there are the fossil fuel sources, which are finite. Those bubbles are shrinking every year. The renewable sources are on the left, and the size of the bubbles indicates how much we can get from these sources annually. As you can see, solar power really dominates this image, showing the huge potential solar power has.

To put things into perspective, only an area of 25 km x 25 km covered in solar modules would be needed to produce the electricity consumption of Finland and to produce enough electricity for the whole world, an area equal to 40% of the area of Finland would be sufficient (okay, this is only the case in theory, as the energy would need to be stored and transferred, resulting in energy loss, but I’m sure you are starting to see the huge potential that the solar energy has).


The potential of solar power. Image from: Perez R. and Perez M., 2009. A fundamental look on energy reserves for the planet. The IEA SHC Solar Update, Volume 50

Not only is solar energy readily available, solar panels are easy to install and it is modular (you can have systems from one module of 250 W up to hundreds of megawatts), safe, predictable (as long as the weather is predictable) and long-lasting, with a lifetime of at least 25 years. The advantages are, therefore, evident. However, currently only about 1 % of our world’s electricity demand is met by solar power. So why is this?

Storing it away
The currently existing challenge with solar energy is that, we don’t have economically feasible ways to store electricity in the scale that would be needed (So we’re still waiting for innovations!). Besides energy storage, smart grid operation and grid balancing (interconnections, demand-side response, flexible generation…) has to be greatly developed humanity to move into renewable resources.

As the sun does not always shine, the development and use of other renewable energy resources is also important. For instance, wind power and solar power make a pretty good team, as typically when the sun is hiding, the wind is blowing. Utilizing other renewable energy sources such as hydro, biomass, tidal, waves and waste are also needed in to help us move into more sustainable energy consumption. Of course the optimal balance between the different energy sources will depend on the country/region, as weather conditions differ, so there is no single one-size-fits-all solution. However, providing enough energy from purely renewable resources in the future is looking very promising.

Free fuel
Sunshine, the fuel for solar cells, is free. Therefore the efficiency of solar panels “does not matter as much” as it matters in conventional oil/gas/coal power plants, where fuel prices have to be predicted, secure fuel supply must be ensured and so on. Nonetheless, efficiency does matter: the higher the efficiency is, the less materials and land or roof area are needed, and the less the relative cost of the solar cells (potentially).

The rapid expansion of solar installations was caused by the rapid price drop in silicon panels starting from 2008. There was a huge oversupply in the markets, and the prices dropped a staggering 80 % in a very short time period. The progress both in cells and in their prices has not reached their limits yet. Comparing to conventional power generation technologies with steam cycles and turbines, which have been developed for centuries, solar and wind have still a plenty of room for improvement. In many sunny regions, PV is already now the cheapest way to generate electricity. Grid parity – PV being competitive without incentives – will be reached also in many European countries in next few years.

It all comes down to politics and economics
Feed-in-tariffs (FIT) and other subsidies provided by governments have contributed to the PV boom. So why do governments introduce FIT’s? Well, as a new technology, PV has needed support to compete with conventional power plants, though this will most likely change as the technology improves and production volumes increase. Introducing FIT’s is not a new phenomenon, but in fact, most of the fossil fuel power plants around the world are subsidized. In the long run, introducing FIT’s to renewable energy resources is a good bet, as renewable energy production will provide a secure supply of electricity, self-sufficiency, sustainability and jobs (through local production). Simply said, it makes economic sense to support the installation of solar panels. And yes, concerns over global warming may have driven interest for PV in some countries, but as many experts say: maybe a fifth of PV installations have been done due to climate concerns, but 100 % of them has been done because of the economics.

So then, how will the current low prices of oil impact solar PV’s? Well, they won’t have a too big of an impact. PV generates electricity, but in the modern world, oil is typically used for other purposes, such as transportation. And again, though some benefit from the low oil prices, market laws tell us, that the price will go up again. This is not really the case with PV, so if you already have solar modules installed, you do not have to worry about the changes in fuel prices.

But don’t be fooled
Though the operation principles of PV or solar modules are fairly easily explained, you can still decide to spend the rest of your life in the laboratory studying solar cells, as there is still much to be learned. For instance, cell efficiencies are constantly improving as solar cells are understood in more depth (for a more informative efficiency chart, google “NREL research-cell efficiencies”). Furthermore, there are multiple other technologies and cell materials that can be explored, but that is another interesting story.

Elina Nissilä Recent graduate (M.Sc. (Tech.)) from Aalto University with Engineering Physics/Energy Sciences as a major subject. Her Master’s thesis focused on concentrating photovoltaics (CPV) and its feasibility. She works with Solar Business Development at Fortum.