By Adam Webb, President, Sentinel Power Systems

Solar photovoltaic (PV) power is one of the fastest growing energy sources on earth and while it currently accounts for less than 0.01% of the global energy mix, it attracts an amazing amount of press, investment and public interest. The technology is ubiquitous, used in everything from calculators to communications satellites and yet how it works is largely a mystery from both a technological and a market point of view. Here we set out to clear up a few misconceptions about PV technology and provide some insight to Energy Advantage readers on where the industry is headed.

When was solar power realized?

Despite its high tech nature, the concept of solar electricity is actually a rather old one. The phenomenon of light moving electric charge (the photovoltaic effect) was first documented in 1839 although it was not until the semiconductor revolution of the 60s and 70s that a modern solar cell could be made. Since the early cells were made for the space program, the technology has steadily evolved, becoming cheaper and more efficient every year to the point where the $14 million array that powered the MIR space station would cost roughly $30,000 today.

How do solar cells function?

While there are several different kinds of solar cell on the market today, almost all of them work on the same basic principle: packets of light called photons, knock electrons from one side of a silicon cell to the other. The various types of cells are manufactured in different ways and use slightly different additives to facilitate the photovoltaic effect but they are all made from high purity silicon with very small amounts of chemical additives. (The exact details of how the cells are made and how they facilitate the photovoltaic effect are beyond the scope of this article). The individual cells have a native voltage of roughly 0.5V and are strung together and laminated into panels to provide higher voltages. The differing processes and materials mean that each type of cell turns light into electricity with a different efficiency, will degrade at a different rate and will cost a different amount. It is these three factors; efficiency, durability and cost, that determine how effective each of the cell technologies will be for a given application.

The high purity silicon that is used to make the various types of solar cell is also the main feedstock for the semiconductor industry. The simultaneous explosion of both industries has led to periodic shortages of high-grade silicon and resulted in the preference for solar cell technologies that use proportionately less silicon. However, even thin film and other “low silicon” solar cell technologies use a lot of silicon and the cost of processing, cell manufacturing and assembling the cells into panels has served to keep the cost of solar panels relatively high when compared to other renewable technologies such as large scale wind.

The silicon used in solar cells must be extremely high purity (in excess of 99.99%) and the processes used to make the cells are complicated, which makes constructing the cells rather expensive. The comparative advantage of solar is that the panels are simple, require no maintenance and will produce power for a very long time (upwards of 30 years in most cases), making them excellent power sources when viewed over their entire life span.

What are the economics?:

Despite being relatively simple devices, solar panels are extremely expensive when compared to other sources of power. The sun is free and so the panels cost nothing to run, but they are expensive to buy. At today’s prices, solar systems are still relegated to specialty applications and to jurisdictions with favourable subsidies.

As a result of the nature of the technology, the economies of scale that go along with solar are somewhat muted and large industrial projects are often only half the cost per watt of a residential consumer system. For this reason, the vast majority of growth in the global solar industry has happened in a small handful of countries with favourable regulatory regimes; Japan, Germany, Denmark, US. The most common regulatory policies in use are capital subsidies, operational subsidies and portfolio standards.

What incentives are there to use solar power?

• Capital subsidy programs promise a certain amount of money, paid by the regulator to the generator to offset the high capital cost of solar energy equipment. These programs can take the form of a tax credit, product rebate or cash subsidy. California has a state funded capital incentive that has been quite effective in getting lots of solar deployed both on residential roofs and in solar farms. However, there are some problems. The installer/supplier market has raised prices to take advantage of increased consumer buying power, resulting in fat margins but unsustainable business models. Perhaps more disconcerting is that consumers have no incentive to ensure that their system remains in good working order. In fact, recent surveys have suggested that up to 30% of all the residential PV systems in California may not be working up to spec if at all.

• Operational subsidies pay an ongoing subsidy to the generator based on how much power they have generated. These programs provide ample incentive to keep equipment in good working order and no incentive to overprice equipment or installation. Several European countries, including Germany, have deployed some combination of operational subsidy and capital subsidy to fuel growth in the solar and wind segments. Germany’s program has been particularly successful and has allowed the country to secure 20% of the global PV production market on account if its domestic demand. The Ontario Government’s recent Standard Offer Program (SOP) is an operational subsidy.

• Portfolio standards are an extremely interesting method of regulation and more familiar to most governments. These regulations take the form of a law or mandate that demands utility companies deliver a certain amount of their power as “green power”. How this is accomplished is left up to the market. No subsidy is paid and the regulator periodically audits the utility firms to ensure compliance. New Jersey is an example of a jurisdiction that has enacted this type of regulation. While extremely effective on spurring wind and biofuel developments, portfolio standards generally have little effect on solar unless it is mandated as part of the power mix because there are more cost effective means of delivering the required renewable energy.

On account of the various regulatory regimes around the world, solar has become an increasingly popular source of power, moving out of the specialty applications it had been relegated to for decades. The industry is still small, accounting for roughly $14 billion, half in production and half in installation and accessories, but few industries on earth can boast the 15 consecutive years of 25% or higher growth that the global PV industry can. While the majority of this growth has been in only a few places, PV’s potential as a reliable distributed energy source should continue to make it an attractive option especially in industrializing nations that lack central power grids. Japan continues to be the largest producer in the world and Germany the largest domestic market but the rest of the world is rapidly catching up.

And Canada?

Canada has come rather late to the game in terms of regulatory framework and so its solar industry lags far behind, as does the rest of its renewable sector. There are no major solar manufacturers in Canada and only a relatively small number of installers and integrators. The combination of low energy prices, absent regulation and generally poor solar resource has served to keep solar as a fringe technology in Canada, although that will likely change as energy prices rise, solar photovoltaic costs drop and governments strive to address climate change.

TO SIGN UP FOR OUR MONTHLY NEWSLETTER, FOLLOW THIS LINK