By Paula Mints, Strategies Unlimited
If you listen carefully you can hear the photovoltaic (PV) industry celebrating a banner year – more than 1 GW in shipments, 1.2 GW in production, 1.5 GW in capacity – cause for a party, particularly when you think about how far the industry has come from the 200 kW of product shipped in 1976. After the celebrations die down, the PV industry may just get around to solving some of the problems that dog it … that go bump in the night, so to speak. These nagging problems have lent an air of anxiety to the festivities, and if this anxiety breeds change, the industry should hold tight to it. Why? Because silicon feedstock supply constraints dog it, expectations of unrealistically low system costs haunt it, marketing remains a low priority, and demand is largely driven by government programs.
In 2004, continuing into 2005, Germany’s über successful feed-in tariff law (a version of which is promised soon by Spain) is primarily responsible for driving global demand for solar electric products. The German law, the EEG, provides the owner of a solar electric system a fixed reimbursement for each kilowatt-hour fed into the public grid. Though the reimbursement for new systems decreases by 5 percent each year, many have likened the German plan to a 20-year annuity.
Given shipment growth of 53 percent in 2004 over 2003 numbers, and a 42 percent compound annual growth rate over the last five-year period, it seems oxymoronic to write about the potential for strong demand in the PV industry. Demand, diffused as it is across global regions, appears to be here. However, growth of the magnitude experienced in 2004 (from shipments of 675-MWp to 1,030-MWp), along with compound annual growth rates of more than 40 percent, is unlikely to continue over the long term.
To continue to grow, an industry needs sustainable demand, and there is reason to hope at this juncture that certain regions of the world have made progress along the adoption curve. Referring to Everett Rogers’ diffusion of adoption theory, an innovation needs to have several characteristics to begin the adoption cycle. It must be compatible with existing patterns, easy to use, available for testing, observable by others in the adoption queue and have a relative advantage. Solar electric energy has, due to many factors, expense and perceived technological complexity among them, been languishing in the innovator category of the adoption curve for decades. While other regions of the world are further along developing a market for solar products, the United States is slowly moving from innovator to the early adopter stage. Should strong demand in the United States suddenly become a reality (as it did in Germany), the industry would have a difficult time meeting it, given current constraints. And, along those lines, two bills for a German-style production credit currently moving through the Washington State legislature may signal a sea of change in the U.S. attitude towards solar as a mainstream electricity choice.
The PV industry is currently ramping up manufacturing capacity based on the hope that strong demand will continue, and that ongoing problems will be solved so that demand can be met. Increasing cell and module manufacturing capacity will, of course, only exacerbate silicon supply constraints, without reducing the high initial capital cost of systems, and the long timeline for return on investment. In addition it will not address widespread and simplistic comparisons of solar electric energy with grid-connected power at present-day costs. Of course, correctly articulated, the attributes of solar electric energy, such as the low running costs, independence from unstable utility pricing, and the potential of profit in areas with feed-in tariff programs, or net metering programs that zero out the system owner’s energy bill, make the technology quite attractive to the end user.
With current strong demand, the photovoltaic industry now has an opportunity to prove its worth to the world, and must do so with excellent products, superb customer service, and a reasonable return-on-investment. Not to gainsay the achievements of 2004, but they should be tempered with a real awareness of the problems still to be solved. Symbolizing how far the PV industry has come, celebrating more than 1 GW in shipments is almost a requirement. As long as the industry does not forget how far it still needs to go, let the celebrations commence and continue.
Paula Mints is a senior photovoltaic analyst for Strategies Unlimited, a PennWell Corp.-owned company located in Mountain View, Calif.