Solar Energy: Rapidly Evolving

Technologies, Markets, and Policies

Robert M. Margolis
National Renewable Energy Laboratory

Presented at
NREL/DOE Strategic Energy Analysis Seminar Series
Washington, DC
May 8, 2008
 Agenda
• Context for the Solar America Initiative (SAI)
• Overview the SAI
• Rationalizing the SAI goals
• Rapidly evolving investment environment
• Positive feedback loop for solar
• Where do we go from here?

– Market context for the SAI

Slide 2
 Converting the sun’s radiation into
electricity – two main pathways
Photovoltaics (PV)
Cells of semi-conductors absorb photons and
directly convert them into electrical current.
Can be used anywhere in the U.S.
Slide 3
Concentrating Solar Power (CSP)
Mirrors focus solar radiation to heat fluids that are
used to drive electric generators.
Predominantly in the Southwest U.S.
(requires direct sunlight)
 In the U.S. (and globally) solar resources
significantly outweigh energy use
• Currently, solar
provides less
than 0.1% of the
electricity used in
the U.S.
• For the U.S., less
than 2% of the
land dedicated to
cropland and
grazing could
provide all of our
electricity.
• Covering less
than 0.2% of the
land on the earth
with 10%-efficient
solar cells would
provide twice the
power used by
the world.

Slide 4
 Government and industry are pursuing a
range of promising PV technologies…

20x-100x 500x Cu(In,Ga)Se2 ~ 1-2 um c-Si ~ 180 um

Slide 5
 … and a range of promising
Concentrating Solar Power (CSP) technologies

Trough Linear Fresnel Dishes Tower

Utility scale power plants – intermediate and base load power

Slide 6
 Both PV and CSP applications and markets
are evolving very rapidly
Commercial
Residential

• Solar is a growing
source for distributed
& centralized
electricity generation
Utility-scale
Slide 7
 Dramatic reduction in cost and increase in
efficiency of PV over past 25 years
Historical PV Cost Curve (Silicon-based Technologies)

• Government
investment in
solar R&D has
had a
significant
impact.
• System prices
must come
down another
50-70% to
achieve grid-
parity
nationwide.

* System price is dependent upon location, application and variable financing options.
Source: NREL.
Slide 8
 PV growing rapidly in key countries
• Grid-connected
PV is fastest
growing market.
• Incentives have
driven steep
growth in
installations.
• Average annual
global growth rate
has been 40+%
for the past 5
years.
• Solar could
capture > 30% of
market share for
new capacity
additions within
next 5-10 years.
Source: International Energy Agency (2007).

Slide 9
 Agenda
• Context for the Solar America Initiative (SAI)
• Overview the SAI
• Rationalizing the SAI goals
• Rapidly evolving investment environment
• Positive feedback loop for solar
• Where do we go from here?

– Origins and status of the SAI

Slide 10
 SAI timeline
• Launching SAI:
– Summer 2005: Initial proposal for SAI drafted.
– Fall 2005: Refined rationale for, structure of, and benefits estimates of
SAI in order to build support within administration.
– January 2006. President included SAI in State of Union address and in
FY07 budget request to Congress.
– April 2006. TPP Technical Exchange Meeting held in Chicago, IL.
– June 2006. TPP Funding Opportunity Announcement (FOA) issued.
• Series of awards announced during 2007/8.
– March 2007. TPP awards.
– June 2007. Incubator awards.
– November 2007. Next Gen awards.
– November 2007. Concentrating Solar Power awards.
– March 2008. University Product and Process Development awards.
• Additional awards announced/in process.
– December 2007. Solar Energy Grid-Integration FOA.
– April 2008. Second round of incubators FOA.
– Coming soon. Supply Chain FOA…

Slide 11
 The Solar Program’s budget increased
substantially as part of the SAI
Solar Energy Technologies Funding, FY01 – FY08
180

160 Concentrating Solar Power

140
Photovoltaic Energy Systems
120
Budget (Million $)

100

80

60

40

20

0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

• Funding is issued through competitive grants to Labs,

Industry, University, Municipalities
Slide 12
Evolving technical performance and industry structure led
to changes in the Solar Program’s goals & strategy

Slide 13
 The SAI R&D pipeline

• The initial emphasis of the SAI has been on filling in the

R&D pipeline for PV, however, SAI is currently being
expanded to include CSP and grid-integration.
Slide 14
 The SAI PV R&D pipeline

• Supporting technologies /companies, through a series of

funding opportunities calibrated to their level of maturity.
Slide 15
 Current status of SAI R&D solicitations

• SAI solicitations complement increasing support from

DOE’s Office of Basic Energy Sciences (BES).
Slide 16
 Agenda
• Context for the Solar America Initiative (SAI)
• Overview the SAI
• Rationalizing the SAI goals
• Rapidly evolving investment environment
• Positive feedback loop for solar
• Where do we go from here?

– Achieving a self-sustaining market

Slide 17
 Expect to reach grid parity in U.S. between
2010 and 2015
But many challenges:
• Reducing cost
• Improving
performance and
reliability
• Maintaining balance
between supply and
demand (polysilicon
supply, manufacturing
capacity, distribution/
installation networks)
• Understanding and
acceptance by
financial sector,
regulators, utilities
• Integrating solar with
other systems (grid,
buildings)

Slide 18
 2007 residential PV and electricity price
differences with existing incentives
• Analysis for
1000 largest
utilities in
the U.S.
• Currently
PV is only
attractive
where there
is a
combination
of high
electricity
prices and
incentives.

Slide 19
 2015 residential without incentives and moderate
increase in electricity prices
• Attractive in
about 250 of
1,000 largest
utilities, which
provide ~37%
of U.S.
residential
electricity
sales.
• 85% of sales
(in nearly 870
utilities) are
projected to
have a price
difference of
less than 5
¢/kWh.
Slide 20
 2015 residential without incentives and
aggressive increase in electricity prices
• Attractive in
about 450 of
1,000 largest
utilities, which
provide ~50%
of U.S.
residential
electricity
sales.
• 91% of sales
(in nearly 950
utilities) are
projected to
have a price
difference of
less than 5
¢/kWh.
Slide 21
 Agenda
• Context for the Solar America Initiative (SAI)
• Overview the SAI
• Rationalizing the SAI goals
• Rapidly evolving investment environment
• Positive feedback loop for solar
• Where do we go from here?

– Changing role for public and private sectors?

Slide 22
 Total global investment in solar energy

• Total global investment in solar increased from $66M in

2000 to $12,387M in 2007, representing a 111% CAGR.
• Investment accelerated over the past three years as public
equity offerings became an even larger source of capital.
Slide 23
 Total U.S. investment in solar energy

• U.S. DOE funding of solar technologies dropped from

53% of total investment in 2000, to 4% of the total amount
invested in U.S. companies in 2007.

Slide 24
Global venture capital funding by clean
energy technology

• Solar and energy efficiency technologies have

received the lions share of venture investment.
Slide 25
 Global solar venture capital trends
• Venture deal volume
and average round
amount have
increased
substantially…

• While, early round

activity has continued to
accelerate, indicating
that the market for
innovation has not been
saturated. Slide 26
 Global private investment in solar by
region and technology

• U.S. investors are pursuing a more diverse set of

technologies than investors in other regions.
Slide 27
 Agenda
• Context for the Solar America Initiative (SAI)
• Overview the SAI
• Rationalizing the SAI goals
• Rapidly evolving investment environment
• Positive feedback loop for solar
• Where do we go from here?

– Changing dynamics in the market place.

Slide 28
Solar’s inflection point is still well off

Slide 29
Market demand has produced super
exponential growth

Slide 30
 Which has stimulated investment in the
solar sector
Total Global Investment In Solar Energy

$12,000

$10,000
Solar Public Equity Activity PV Industry Revenue (across value chain)
VC & PE Investments
100

$8,000 90
Historical Projected
$ (Millions)

80

Total Revenue Pool ($ billion)

$6,000
70

60
$4,000
50

$2,000 40

30
$0
20
2004 2005 2006 2007
Source: New Energy Finance / NREL / FACC Year 10

0
2003 2004 2005 2006 2007 2008 2009 2010
Year
Source: Photon Consulting (2007)

Slide 31
Leading to manufacturing scale-up, and…

Slide 32
 … associated cost reductions

Source: Historical Data from Navigant (2007).

Slide 33
 Driving innovation in business models and
government policy
Concept:
• Power Purchase
Agreements (PPA)
• Feed-In-Tariffs (with solar
carve out)
• Investment and residential
U.S. Non-Residential PV Installations tax credits
160 • REC / Carbon Policy
Historical Forecast
140 • Creative Funding Vehicles
Annual Installations (MWac)

120
Implementation:
100

PPA (MW)
• Federal Installations
80
Non-PPA (MW) • LEED / E-Rating
60
• Clean Renewable Energy
40 Bond
20
• Property Tax Assessment
(no double dipping with ITC)
0
2002 2003 2004 2005 2006 2007 2008 2009
forecast forecast
Source: GreenTech Media (2008)

Slide 34
 A number of factors are driving strong
growth in the solar industry
• Federal, state, and local policy
incentives.
• Market volatility and high cost of
natural gas and oil.
• Climate change and likely
carbon regulations.
• Energy security issues.
• Need for increased energy
production to meet growing
demand (China, India, etc.).
• Interest from financial
community in “next big thing”.
Slide 35
 Agenda
• Context for the Solar America Initiative (SAI)
• Overview the SAI
• Rationalizing the SAI goals
• Rapidly evolving investment environment
• Positive feedback loop for solar
• Where do we go from here?

Slide 36
 Potential future directions for SAI
• Supply-chain development
– Establish and optimize manufacturing processes and
develop necessary equipment to increase domestic solar
component and system production capacity.
– Work on upstream and crosscutting product and process
development to avoid future bottlenecks during industry
scale-up.
• Grid integration: Renewable Systems Interconnection
– Address renewable energy generation intermittency by
developing and demonstrating low-cost integrated control
and storage technologies for all renewable generation
facilities, power-plants, systems, and equipment, including
PV. (for set of recently completed reports see:
http://www1.eere.energy.gov/solar/solar_america/rsi.html)

Slide 37
 Potential future directions for SAI
• Expanded CSP initiative
– Establish activities to enable CSP to become competitive as a
baseload power source, i.e., with adequate storage, by 2020.
Including increased focus on high temp storage materials, dry
cooling options, broader range of CSP technologies.
• Pre-incubator: SAI PV R&D Evolution
– Research and development to move from a concept or lab
demonstrated process of a device or module to a prototype.
Address the barriers to the prototype entry, with emphasis on
commercialization further down the road.
• Workforce development
– Address the emerging human capital shortage in the solar industry
by cultivating a strong solar labor pool with training and ideas at
the cutting edge of research, development and industrial
deployment.

Slide 38
 Potential future directions for SAI
• Expanding existing activities:
– University R&D,
– Incubator,
– Testing and evaluation,
– Resource assessment,
– Market transformation
• Develop new efforts related to:
– storage,
– transmission,
– university research centers (with BES?)
• Other
– Your suggestions are welcome

Slide 39