PV – A Question of Scale
Mar 23, 2010 - J. Peter Lynch - renewableenergyworld.com
The PV industry happens to be the fastest growing industry in the world, with a promising chance to remain the fastest growing industry for the next 25 to 50 years. The PV industry worldwide grew at a compound annual rate of 35% during 2000-2009.
What is the cause of this enormous growth and why is it expected to continue? The reason is really quite simple. The market demand is enormous and PV has a number of unique characteristics that give it clear and significant advantages over any other source of electrical energy.
Unique Advantages of PV:
What the PV Industry Needs
What could an industry with all these unique advantages, plus being the fastest growing industry in the world, possibly need?
The answer is quite simple. It needs to reduce its cost of production. Bottom line, it currently costs too much to produce PV cells. In order to dramatically reduce the cost, the industry must deploy next generation technologies that are scalable to larger volumes that will enable the needed cost reductions.
How could there be an industry with a product that is too expensive be the fastest growing industry in the world?
This contradiction is a result of the fact that the market is so vast, and that despite the current tremendous industry growth, it is only the beginning of the industry’s long-term growth curve. Incredible as it may sound the industry actually has the potential to grow at 30% per annum rates for decades.
Regardless of this dichotomy, long-term world demand will exceed long term supply (even at current “high” costs) and when future decreases in cost are accomplished the demand will literally soar far beyond the capabilities of current technology.
To address this coming demand surge, new next-generation technologies, capable of far greater production volumes, will be necessary; hence process scalability will be needed.
United States Electricity Market
The current U.S. electricity demand is roughly 4 trillion watts (4 Terawatts or TW) and is growing at approximately 2.5% per year. Current projections place demand somewhere between 11 TW and 18 TW by 2050.
To illustrate the tremendous potential of the PV industry and also the current and future demand-supply imbalance facing the industry let’s look at a few macro numbers.
For PV to supply only 1% of the U.S. demand in 2010, the worldwide PV production capacity would have to be 44 billion watts, which is over 20 times larger than current worldwide capacity. It is obvious that expanding the total industry capacity 20 fold in a few years is impossible, one thing for sure, we MUST set the bar a lot higher.
Megawatt (MW) = one million watts of electricity
Gigawatt (GW) = one thousand megawatts (one billion watts) of electricity
Terawatt (TW) = one thousand gigawatts (one trillion watts) of electricity
U.S. Electricity Demand 2010 vs. Current PV Industry Capacity
The above table shows the enormous potential of PV and how large worldwide PV capacity would have to be compared to current industry capacity, for PV to achieve 1%, 5% and 10% of the worldwide electricity market.
At least two points become very clear from the table above:
Currently 90%+ of the world’s solar cells are manufactured using silicon technology. This technology is over 50 years old and the good news is that it has done an amazing job at dramatically reducing the price of solar cells over the years. The bad news is that the price needs to decrease even more and it cannot do this without technologies that can be scaled up to produce GW and not the current industry MW.
Unless the industry develops a manufacturing technology or discovers a new breakthrough technology that is capable of cost effectively producing PV at the GW level, PV can never make a significant contribution to future electricity generation.
Importance of Development of the Next Generation of Manufacturing
In addition to the obvious huge business opportunity, there may be other factors that will necessitate the rapid development of the PV industry and a host of new next-generation clean technologies. This future increase in demand may not be able to be addressed by fossil fuel sources for a number of reasons that, for the most part may be beyond our control:
Limitations to addressing this growth via fossil fuels:
The future of the PV industry and how significant of a role it will play is a question of scale. We have to start thinking big and we have to start right now.
The answer is clear: we need to accelerate our development of next generation technologies, with far greater production capacity, so that we will have far lower cost of production.
There are a number of other macro and micro factors that will also be needed, which I will cover in a subsequent article. But the bottom line from a macro point of view is quite simply:
The world needs PV technology capable of GW of PV production not MW.
J. Peter Lynch has worked, for 33 years as a Wall Street analyst, an independent equity analyst and private investor, and a merchant banker in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this area. He is currently a financial and technology consultant to a number of companies. He can be reached via e-mail at Solarjpl@aol.com. Please visit his site for the promotion of solar energy.
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