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Solar & Alternative Energy

Photovoltaic solar electricity could improve life in developing nations

Although many hurdles remain, photovoltaic solar energy has the potential for wide use, particularly in developing nations where many people are not connected to a main grid.
10 August 2006, SPIE Newsroom. DOI: 10.1117/2.1200607.0285

Photovoltaic (PV) solar electricity is a major technology that can facilitate the development of national economies worldwide. It provides both industrial growth and an opportunity for two billion people to access clean electricity, which is crucial to education and development in poor and rural areas. Assuming a growth rate of approximately 25%, the total turnover on PV systems worldwide can be estimated at around 100 billion Euros in 2020 and well above that in subsequent years.

The PV vision of the European Commission for 2030 is to assure the implementation of all the socio-economic benefits provided by employment in large-scale high-tech production (short-term), by development of a viable industry that creates revenue and pays taxes (mid-term), and by significantly contributing to global energy needs by supplying clean PV solar electricity (long-term). PV solar electricity also reduces nations' dependence on oil and gas imports and provides a local energy supply. With the recent political instability in Iran and Iraq and the gas supply crisis between Russia and the Ukraine, a stable, low-cost energy supply can no longer be taken for granted. The costs and risks of dependency must be calculated on top of rising prices.

PV solar electricity has four main market segments: off-grid industrial, off-grid rural, consumer applications, and grid connected. The first three areas are already competitive. Overall growth in the past eight years was almost 40% per year. The first three market segments had ‘normal’ growth of about 18% per year, whereas the grid-connected market increased an astonishing 63% per year. These different growth rates have catapulted the contribution of grid-connected systems to the total PV solar electricity market from about 25% six years ago to more than 75% today. This development is mostly due to market support programs such as the feed in tariff systems in nations such as Germany and Spain, as well as investment subsidies in Japan, the United States, and some other countries. In a more liberalized global utility market, electricity produced by PV solar electricity systems, even with their higher generating cost, will not need support programs to compete against peak power prices from utilities. Three factors will determine when this competitiveness is achieved. First, a decrease in the price of PV solar electricity systems will have to lead to an equivalent decrease in the generated cost for PV produced kWh of energy. Second, truly liberalized electricity market will have to be developed. Third, the degree of irradiation will have to be sufficient between times of peak power demand and delivery of PV electricity.

As regards the first factor, the price of PV solar electricity systems is set to drop. The productivity of PV solar systems is increasing, improvements to existing technologies are ongoing, and new concepts are being developed to broaden the product portfolio in coming years. Based on price experience curves, we expect that a 20% drop in price will be required to double cumulative worldwide sales of PV solar electricity systems. This price decrease will have a very positive impact on off-grid rural applications, mainly in developing countries. These applications are strongly advanced due to the development of mini-grids and solar home systems that look very similar to on-grid applications in weak grid areas of the current electric network.

The second factor depends on the development of liberalized electricity markets in various regions worldwide. It should be emphasized that the future prices for electricity in such markets will increasingly reflect the different costs of bulk and peak power production. This will happen not only for industrial electricity customers (as has already occurred in many countries) but for private households as well.

The third factor correlates peak power demand and prices traded in various stock exchange markets with delivered PV kiloWatt hour. Combining the three factors and postulating reverse net metering, in which an electric meter literally spins backward as it puts power into the grid, the competitiveness of PV solar electricity as described is most likely to occur.

Looking at electricity spot markets, where goods are sold for cash and delivery is immediate, one can see clear price peaks that directly correspond to the energy yield of a PV solar array installation. The correspondence with respect to time is remarkable when one considers that the electricity is generated on the rooftop of the building where the energy is required. Thus, the generation costs of PV solar electricity and the price of conventional electricity must be compared at the point of sale, which is the socket-outlet. The Tokyo Electric Power Corporation (TEPCO) uses a differentiated tariff that changes during the day and over the seasons. Thus, during summer and in the daytime, PV solar electricity in Tokyo is already cost effective for TEPCO's customers. For this reason the Japanese market still has a 6–8% growth rate even though the incentives for PV in Japan have decreased dramatically.

In developing countries the cost and service of solar home systems are important. The Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) estimated average monthly energy costs in 2003. In homes without solar systems, the expenses for batteries, candles, and kerosene amounted to $6 to $8 per month. A 50W PV solar-electricity system with battery and charge controller is an investment of about $500. A low-interest loan from the World Bank, a national institution, or a bank supporting developing countries (such as Kreditanstalt fr Wiederaufbau) can make the system cost about $7 per month over six to eight years. This is competitive with traditional energy expenses. In the case of solar home systems, the performance, the operational lifetime, and the price per service are more important than PV module efficiency.

The development of solar villages in rural areas is very important due to the projected increase in global electricity consumption, which will rise from 16,000TWh in 2001 to 36,000TWh in 2040, according to the International Energy Agency. That is, the growing population in developing regions will produce a need for more than 20,000TWh within the next 35 years. Much of this increase should be covered by renewable energies, in particular by PV solar electricity. For cost reasons, more than half of the people in the developing world will live in rural areas unconnected to a main grid for decades. Half of the new energy needs will thus be in decentralized rural applications, 20 to 40% (2,000 to 4,000TWh) of which could come from PV solar systems. With solar electricity's competitiveness in grid-connected systems, it is not unrealistic to assume a contribution of 10–20% for this application (2,600 to 5,200TWh). In total, 4.600 to 9.000TWh (13–25% of the global energy supply) could eventually be covered by PV solar electricity.

The projected use of solar electricity is in harmony with Towards Sustainable Energy Systems, a thorough study conducted by the German Advisory Council on Global Change. The study predicts that more than one-third of the primary energy consumption in 2040 will be covered by renewable energies, with approximately 10% coming from PV solar slectricity and solar thermal power stations. The same study predicts that 85% of primary energy consumption in 2100 will come from renewables, two-thirds of that from solar thermal power plants and PV solar electricity systems. Although such long-term extrapolations are always uncertain, it is quite useful to get first ideas based on highly probable boundary conditions such as world population growth, energy usage by region and application, environmental constraints, and so on. All these predictions suggest the tremendous need to develop a decentralized energy supply based on PV solar electricity.

Winfried Hoffmann
Alzenau, Germany 
European Photovoltaic Industry Association
Brussels, Belgium 
Winfried Hoffmann is currently President of the European Photovoltaic Industry Association (EPIA) and of the German Solar Economy Association (BSW). He is also a member of the Scientific Board of the Fraunhofer Institute of Solar Energy (FhG-ISE) and the Institute of Solar Energy Research in Hameln (ISFH).
Lars Waldmann
Alzenau, Germany