By Behrooz Moniri

Visingain outlines new projects and technical innovations, and analyzes the market factors in key regions to assess the state of the global market. This article highlights the breadth of this industry, providing insight into the multitude of opportunities for companies to exploit.

Solar Power Photovoltaic Market Overview

The global solar power photovoltaic market for installations grew over 100% in 2010 with an addition of almost 18 GW of Photovoltaic (PV) power in 2010. According to estimates, growth is highly likely to continue, but at a lower pace as there are some obstacles along the growth path that have to be overcome. Solar power can be divided into two major types; thermal panels?making use of the heat generated by the sun and PV panels?generating electricity directly from the sun. In this article, the latter type is the focus of attention.

Although the photovoltaic industry is still a very small market, it generates around 1% of electrical energy in countries where it is installed. Nevertheless, government financial support and potential for growth of this form of electricity production is vast. The photovoltaic industry is a global market and international trade means that many countries, particularly those in Southern Europe, import PV panels from other regions of the globe such as China, Germany and Japan. The European Union aims to boost its distributed PV generation capacity to make member states and their economies less dependent on imported gas and other primary fossil fuels, for electricity production.

Until recently Japan was the single largest producer of PV panels, but huge gains from cost-cutting methods of production over the past decade has made China the single largest producer of PV panels in the world. Meanwhile, Germany is one of the biggest installers of photovoltaic panels despite Italy, France, and Spain having a much better geographical position, with more direct sunshine.

Different types of photovoltaic materials and purity ‘grade’ determines the efficiency of panels at converting sunshine into electricity. This efficiency ranges from 7% to 35%. The highest efficiency is attributed to concentrating photovoltaic dishes. These types of cells are very rarely used domestically as they require a tracking device to constantly be under direct sunlight. These devices are also much more expensive to manufacture, therefore, mainly flat panels are installed on rooftops for domestic purposes, and they are also more aesthetically appealing to households than concentrating dishes. Nevertheless, the latter type is used in large-scale fields, which occupy large areas. These fields or plants are normally set up by energy companies and their output can reach a few hundred megawatts.

The main difference between the electricity that PV panels produce and that of domestic mains is that photovoltaic panels produce Direct Current (DC), whereas the mains have Alternating Current (AC). Therefore, there is a need for turning direct current to alternating to satisfy the requirements of various devices and applications. Inverters, which are designed for such tasks, are also very much part of a photovoltaic system. In some cases, the power that is produced by PV installations is connected to the mains and acts as a source of energy generation for the grid. With appropriate equipment and government policy, the PV devices can effectively run the electricity meter backwards when the owner of PV panels is not using the generated output. In a few rare cases, PV panels are connected to batteries to save power for a later stage before selling to the grid. Batteries then need to have their stored power stepped up to the correct voltage and run in tune with the alternating current that household devices require. Batteries and all other associated electronic filtering devices make up a significant proportion of the cost of PV installation.

Drivers and Restraints in the Solar Power Photovoltaic Market

Table 1 shows a summary of drivers and restraints of solar power photovoltaic market.

There is a need for distributed generation in remote areas of the globe. According to the World Bank, some 1.6 billion people do not have access to electricity. PV cells are a way of enabling decentralized electricity generation in developing countries. Reportedly many of those without access to electricity burn particulate laden kerosene, which means they breathe in fumes dangerous to their health. Falling costs of PV cell manufacturing is another driver. These costs are partly driven by lower upstream costs of producing related materials such as polysilicon.

Electricity prices have been rising around the globe in line with fossil fuels such as oil and gas. As it is illustrated in Figure 1, this rise has been significantly steep in recent years.

Electricity prices are soaring as a result of high commodity prices and energy companies are faced with difficult investment decisions with regard to sourcing their future electricity supply. Some energy companies are favoring solar power as a solution because of its low maintenance cost and the financial incentives provided by the government.

Although in the past electricity prices have fallen like those in late 1990s, the recent surge in electricity prices is expected to continue as private energy companies have to pay more for the underlying gas and coal prices.

Percentage growth in the photovoltaic market measures growth of revenues generated. This should not be confused with growth in electrical installation capacity which is growing at a more rapid pace. Due to falling prices, the revenues show a slower pace of growth compared to installations.

Prices are also affected by the fact that a large proportion of electricity is generated by nuclear power which may be reduced within the next ten years in Europe, particularly in the U.K., unless there is more investment in nuclear power generation facilities. The upfront investment cost of nuclear power plants is very high. Furthermore, with the recent nuclear disaster in Japan, the risks of nuclear power are heightened to the point that some countries like Germany are moving away from them all together. Nevertheless, there are still 60 nuclear power plants under construction around the globe currently and many more are proposed to meet the increasing demand for electricity.

The prime factor behind the rise in electricity prices is the rise in electricity consumption in emerging economies such as Brazil, Russia, China, India and many others. The rapid increase in energy demand is due to a rising standard of living and population growth, but on the demand side, the supply of electricity has been constrained by lack of generation capacity and high primary fuel prices. The recent market abnormalities such as the Japanese earthquake and Libyan crisis have also provided further constraints that indirectly increase global primary fuel prices.

Germany has declared that it will shut down all 17 of its nuclear power plants by 2022. Italy will also refraining from new investment in nuclear energy following a referendum rejecting the move. This could have considerable consequences and will certainly provide substantial stimulus for the renewable power generation capacity of these countries, as the majority of the general public had desired it do. The renewable sector created just 6.6% of Germany’s electricity in 2000, but now accounts for 16.5% of the entire electricity produced. Nuclear power accounts for 23% of the electricity produced and Germany will have to take drastic measures if it is to replace that power. These politically driven decisions to suspend all nuclear reactors by 2022, will motivate the renewable industries to grow faster and creates greater employment opportunities than otherwise would be the case.

Although other European nations are unlikely to take such drastic measures in the foreseeable future, the general trend in European countries is similar to that of Germany. Particularly the EU 20-20-20 policy which requires all of its member countries to reduce their carbon emissions by 20% and gain 20% more efficiency, pushes all renewable sources to grow. The solar power PV industry is one of many ways of generating renewable power; it is particularly practical on a small scale, where as wind, biomass and hydrogen fuel cells usually require large-scale manufacturing and operations. Micro-scale wind turbines can be purchased for domestic-level generation.

On the downside, the electricity generation from PV panels is highly dependent on the sunny hours of the day and less direct sunshine results in lower power. Furthermore, the manufacturing costs of very efficient silicon PV panels is a drawback and for this reason some governments around the globe have provided a Feed-in Tariff (FiT) to help the industry lift itself to a self-sustaining level.

The future for photovoltaic solar power generation is brighter than ever before as the costs of production is falling and new power technologies are enabling companies to roll out photovoltaic panels on a larger scale, with greater efficiency. Although in many regions of the globe consumers still require financial support from governments to buy PV panels, the cost of electricity from PV panels is expected to fall continually over the years to come, and eventually be as competitive as conventional processes of electricity generation. In remote locations unconnected to the grid, solar photovoltaic power is already an effective replacement for grid connections. In countries like Australia and the United States, long distances and few distribution points make centralized power relatively expensive. The use of solar power photovoltaic along with storage systems is becoming an alternative option to a direct grid connection. 

Energy companies and governments around the world will invest large sums of money in solar power photovoltaic infrastructure over the coming years. The replacement of old centralized and often carbon-intensive infrastructure is required as well as the satisfaction of a rapidly growing demand for electricity. Many governments around the globe still offer very generous feed-in tariff rates to support the fledgling photovoltaic industry. Governments are also spending large sums of money directly, supporting utility-scale photovoltaic solar farms. 

Behrooz Moniri has a Masters degree in Economics from London Birkbeck College. Since graduation, he has worked for a macroeconomic consultancy firm for three years, where he has gained report writing experience on macroeconomic indicators. He joined Visiongain (www.visiongainglobal.com) in February 2011 as an Energy Report Writer. Meanwhile, Behrooz is also pursuing a degree qualification in Renewable Energy Engineering on a part time basis.