The Demand Side of Solar 2

Solar energy’s critics love to discuss reasons photovoltaic (PV) solar energy is a bad investment. Some go so far as to say that solar power does not even work, others talk about an oversupply of PV modules on the world market, and tell us that this “glut” proves solar will fail as an industry and that green energy in general is a scam. These of course are lies, perpetuated by fossil-fuel industries (and/or their investors and/or their beneficiaries) who are terrified of losing significant market share to cheap, clean, renewable energy.

The charge that solar does not work is laughable and I won’t waste space defending the basic, obvious science. As far as the scam charge goes, I would counter that it is fossil fuels that are the scam. Fossil fuels have proven to be not only dirty, health-endangering, planet-warming, leaving us vulnerable to supply disruptions and keeping us under the thumbs of unfriendly regimes, but also ultimately the most expensive forms of energy. Do its proponents really think folks can’t see that the non-stop requirement to locate, mine, drill, ship and refine fossil fuels can possibly be as cheap large scale renewables, which literally get their energy source material for free from the sky?

How cheap will solar become? At current silicon prices, about US$52 per kilogram, US$700 worth can power an average European home indefinitely. Energy expert Kees van der Leun has done the math:

I realized how little silicon was needed to supply the annual electricity consumption of an average European family (4,000 kWh). Under European solar radiation, it would take 1,400 cells, totaling less than 30 pounds of silicon. Of course, you need to cover the cells with some glass and add a frame, a support structure, some cables, and an inverter. But the fact that 30 pounds of silicon, an amount that costs $700 to produce, is enough to generate a lifetime of household electricity baffled me. Over 25 years, the family would pay at least $25,000 for the same 100,000 kilowatt-hours (kWh) of electricity from fossil fuels — and its generation cost alone would total over $6,000!

And Europe’s not even that sunny; as you move south, the cost keeps dropping. For me, this shows how cheap solar really can be, and therefore how scary it must be to fossil fuel executives. Small wonder they’ve brought out the big guns of disinformation, stock shorting and congressional lobbying. Enough said here for now.

On to the supply glut argument. This is the critics’ best argument, because, over the short term, it is to some degree true. The huge cranking up of supply we’ve seen in the last couple of years is by design, though; it is intended to make solar modules cheap enough to penetrate the world energy markets deep and at every level. So in fact the argument of oversupply is actually a position against the solar industry’s best growth tactic. Let’s take a look at who’s buying.

Back on May 6th, Reuters reported that China had upped its solar installation plans to grow from less than one gigawatt today to 10 gigawatts (GW) of installed capacity by 2015 and, according to Fortune, to 50 GW by 2020. A more than 50 fold increase in nine years.

China has a primary renewable plan that includes leading the world in both solar production and installed capacity. For the moment, the U.S. still has a solar industry trade surplus with China, but the differences in policy and attitudes have put that leadership at risk. China is likely to increase its installed solar capacity by at least 1,000 percent by 2015, a short four years from now. Anyone interested in China’s key role in the solar story will want to read Melanie Hart’s outstanding analysis of China’s solar policies and plans, published on Climate Progress.

India, according to its government’s National Solar Mission, is expecting to grow its installed solar capacity from a tiny 54 megawatts in 2010 to nine GW by 2016 and to at least 20 GW by 2020. Bear in mind that even one GW of installed solar PV power means about 3,000 acres of panels, even in sunny India.  China’s and India’s official solar growth plans alone will require 210,000 acres of PV modules by 2020. This may or may not be reduced by the additional deployment of solar thermal as well.

But even India’s and China’s aggressive solar plans would be small next to potential Saudi Arabian plans to generate enough solar electricity to equal the energy content of all its oil exports. In a previous post, I took a swing at estimating how much solar PV this would require. Suffice it to say here that there’s not enough solar manufacturing capacity in the world today to meet that kind of demand. If the Saudi’s hit 1/10th of their goal, module manufacturers will be plenty busy.

What of the world’s largest economy? All in, the U.S. currently has maybe 2.7 GW of total installed capacity. But with prices falling, our demand curve is so steep that the Solar Energy Industries Association believes we’ll be bringing on 10 GW of new solar capacity each year by 2020. This alone will consume most of the 70 percent annual increase in global solar production capacity. Solar is America’s single fastest growing industry.

GE’s 50 megawatt solar plant in Cadiz, Spain (image source).

All in, it looks like the booming increase in solar energy capacity production will not ultimately result in a “glut,” but will do well to keep up with demand. It’s fortunate that there is in some places (China, GE, e.g.) enough foresight to ramp production sufficiently to have any chance of meeting all these development plans.

And all this is just the beginning; these are merely the growth stories I could easily glean in routine scanning of the news. A truly comprehensive catalog of solar development plans would no doubt require a long book.

GE CEO Jeff Immelt sees all this clearly. GE is next year opening a thin film solar manufacturing plant in Colorado, capable of producing a new panel every 10 seconds. Like me, Immelt believes demand for PV is soon to exceed supply, so I’ll give him the last word:

“We are all-in. We are going to invest what it takes … Because I know by 2020 this is going to be at least a $1 billion product line. I don’t care about Solyndra or any of that other stuff, we did this with no government funding. We can do this. It’s fair to be critical of Solyndra but make no mistake, in India and China between now and 2020 there is going to be 200 gigawatts of solar power (installed),” Immelt said. “So let’s not lose the forest for the trees. It’s not like something is inherently wrong with solar energy.”

Note: Immelt’s remarks at Columbia University, as reported by Reuters on 11/03/11

Disclosure: Green Alpha has no positions in GE.

Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, and is co-manager of the Green Alpha ® Next Economy Index, orGANEX and the Sierra Club Green Alpha Portfolio. He also authors the blogGreen Alpha’s Next Economy.”

Original Article on Green Alpha Advisors

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  1. In paragraph 3, it should be “silicon”, not “silicone”. Silicone is the material breast implants and aquarium sealer are made from. It’s not just a nitpick; when someone writes a semi-technical article for the purpose of persuading their audience that they know what they are talking about, an error like that casts doubt on their credibility.

  2. Thanks for the catch, Mr. Gunn. Can’t imagine where that particular typo could have come from! I’ll just call it a Freudian slip. At least (SF Editor) Scott and I got a laugh out of it! – Garvin

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