Solar Energy - Summary

Summary “We know the country that harnesses the power of clean, renewable energy will lead the 21st century” President Barack Obama (Presidential Address to Congress, 2/24/09) Solar energy is the cleanest, most abundant, renewable energy source available which described as the sun’s rays that reach the earth and can then be converted into either thermal (heat) or electricity. Solar energy converted into heat can be used to: heat water for use in homes and buildings and heat spaces. Solar energy can be converted into electricity in two ways: 1) photovoltaic cells; and 2) solar thermal plants (also known as concentrated solar power or CSP), which are essentially similar to coal and other fossil fuel power plants; however they use sunlight instead of coal or natural gas to generate electricity. According to the United States Department of Energy, sunlight falling on less than 0.5% of the mainland is sufficient to satisfy all U.S. electricity needs.
The high cost of power from solar photovoltaic (PV) panels has been a major deterrent to the technology’s market penetration. Proponents have argued, however, that typical analyses overlook many of the benefits of solar PV. Some of those benefits are in the realm of environmental and security externalities, but others occur within the electricity markets. In this paper, we attempt to do a more complete market valuation of solar PV.
We incorporate the fact that power from solar PV panels is generated disproportionately at times when electricity is most valuable due to high demand and increased line losses. We find that the degree to which the timing of solar PV production enhances its value depends very much on the extent to which wholesale prices peak with demand, which in turn depends on the proportion of reserve capacity held in the system. In a typical US system with substantial excess capacity, we find that the favorable timing of solar PV production increases its value by 0%-20%, but if the system were run with more reliance on price-responsive demand and peaking prices, the premium value of solar PV would be in the 30%-50% range.
Solar PV is also argued to have enhanced value within an electrical grid, because the power is produced at the location of the end-user and therefore can reduce the costs of transmission and distribution investments. The analysis, however, suggests that actual installation of solar PV systems in California has not significantly reduced the cost of transmission and distribution infrastructure, and is unlikely to do so in other regions. We then bring together these adjustments to the valuation of solar PV power with calculations of its cost to analyze the market value of solar PV. The market benefits of installing the current solar PV technology, even after adjusting for its timing and transmission advantages, are calculated to be much smaller than the costs. The difference is so large that including current plausible estimates of the value of reducing greenhouse gases still does not come close to making the net social return on installing solar PV today positive.
Although both solar PV and solar thermal technologies are capable of producing electricity on a large scale, the development of solar PV has been much faster than CSP over the past decade. The majority of the world’s CSP capacity is concentrated in the nine CSP power plants constructed in the Mojave Desert, California, during 1984–1990, and the world’s CSP capacity has increased at a very gradual pace since then. The different fate of these two solar technologies can be attributed to the relatively large space requirement for the construction of a “solar farm” under CSP (188,000 square meters per 30MW plant3), the higher operating cost compared with other renewable energy sources (10% of investment cost instead of less than 1% for solar PV) and the lack of government incentive in promoting CSP.
In This research paper, we provide insights into what solar power system of home usage can benefit the California. Solar Power has historically been viewed as an expensive source of alternative energy generation. However, we expect ongoing transformation of the industry supply chain to cut solar electricity prices by half. Moreover, as the United States and other countries create mechanisms for pricing the external costs of carbon dioxide emissions into the marketplace.
Solar Energy Global Market Size
Solar electric energy demand has grown by an average 30% per annum over the past 20 years against a backdrop of rapidly declining costs and prices. This decline in cost has been driven by economies of manufacturing scale, manufacturing technology improvements, and the increasing efficiency of solar cells.
In 2009, the photovoltaic solar industry generated $38.5 billion in revenues globally, which includes the sale of solar modules and associated equipment, and the installation of solar systems. According to the Solarbuzz, they produces various forecast scenarios which, depending on the factors, see growth in the world PV market from $46.3 billion to $96.8 billion in 2014.
PV installations grew to 7.3 GW in 2009, up 20% from the prior year. Expected to reach 8.413.1 GW in 2010, the various forecast scenarios predict demand rising to 15.437 GW in 2014, more than five times the size of the 2009 market. The worldwide on-grid segment grew by 20% in 2009, and the off-grid market grew 23% in 2009, faster than on-grid for the first time in 15 years but on a much smaller base.

Source: Solarbuzz 2010 Marketbuzz

Regional Market Growth
The largest on-grid market by far has been Germany, where demand has been stimulated by very attractive feed-in tariffs. This is followed by Japan, where grid-connected applications are also stimulated by market incentive programs.

Source: Solarbuzz 2010 Marketbuzz
Driving Forces of Growth in Country Markets
Among industrialized countries, the German and Japanese governments have led the way in legislating high incentives to stimulate development of their domestic solar markets. The German feed-in tariff model has been increasingly used in countries around Europe, including Italy and France. As a result, the industry structure has evolved, leading to strong distributor and dealer networks with well-trained installers and good customer support capabilities. Government policy is designed to reduce CO2 emissions via solar deployment and to create high-tech jobs through the development of a strong national solar industry. In the United States, utilities have played a stronger role in market development.
As can be seen, regional solar energy demand where the solar energy is connected to the electricity grid is driven by the following: * Incentive programs led by national or state governments: Subsidies allow customers/investors to gain a financial return on the PV system by selling solar electricity at preferential rates. * Enthusiasm of customers for green energy, especially solar * Local electricity tariffs: High electricity rates encourage alternative sources of energy. * Sunlight conditions: Solar electricity prices fall as sunlight levels increase. * Marketing strategies by solar companies * Delivery infrastructure, which is the number of local suppliers and qualified installers
In developing countries, markets have benefited from the steady decline in solar PV prices, but they have also been stimulated by continued multi-lateral and bi-lateral development aid. This has meant that solar has been an enabling technology for developmental programs for education, clean water, and healthcare. There is an increasing focus on micro-finance to improve the affordability of solar PV systems, which may be economical over their lifetime but have high initial costs. Such credit schemes have been effective at a small scale, but a culture of credit does not exist yet in many developing countries. For example, Kenya is notable for its strong commercial market, where customers opt for low power (10-20W) entry-level modules.
Hypothesis
Solar power system for home usage has economic benefit in California
Variables
Financial benefits to residents
At first, after applying the solar home power system, the resident’s electricity bill is expected to be lower than before dramatically. Second, the other benefit of having solar power system at home is that the homeowners can sell the electricity which generated by solar system to utilities. In the United States, this is normally done through “net metering” plans. When the electricity generation rate from the solar power system is greater than the household electricity consumption rate, than the homeowner will have extra electricity to generate. The monthly electricity bill can reflect the net energy consumption precisely. The homeowners and business owners who have solar power system at their spot would have extra income from their electric utility for the surplus power they produce. Third, a home’s value may increase due to having the solar power system. Assuming we are selling our house out, a house with solar power system refers to having a low electricity bill. The biggest cost of having a solar powers system at home is the installation fee. As a result, once that system is in place, the low electric bills can help to reduce the cost of operating the home.
Employment opportunities Despite a fierce recession, the solar power industry added new solar system function installations for total 441 megawatts, pulled in $1.4 billion in new venture capital investments, created 17,000 new jobs in 2006 and grew by 36 percent in revenue in that year. Solar power system now burst a total supply chain that supports 46,000 jobs in the United States in 2009, and it is likely to surpass 60,000 by the end of 2010. Local businesses selling and servicing solar home systems provide employment for local residents. According to Bureau of Labor Statistics sources, there are an estimated 7,000 solar power system installers currently working in the U.S., and about half of them located in California. Solar panels are especially popular in California because the state provides great incentives for homeowners to install solar electric power, such as tax credits and the weather. As other states and the national government continue to increase incentives like these, the solar power industry is expected to expand rapidly and opportunities for solar panel installers will increase. The demand is growing and this means solar energy products and services will be mass manufactured, opening a huge market of solar jobs. There are several jobs related to solar energy, or energy that is produced by sunlight.
Government Support Solar power system costs normally vary depending on the size of the system, panel, model, and roof type. It is normally exceeding $2,000 including the gross costs, rebates, and tax, which is vital to the willingness of adopting a system to the residents. If the government can provide more subsidies on rebates, it may help to increase the willingness of adopting a system. The California Solar Initiative (CSI) rebates are existed for this purpose. It is generally based on the volume of solar megawatts installed within each utility service territory. The tax credit is applied to the installed cost after the CSI rebate. California launched the 10-year, $3 billion Go Solar California campaign. The largest part of this campaign is the California Solar Initiative (CSI). The CSI was designed as a 10-year program, so the industry in California can rely on long-term policy stability. Beginning in 2008, California needed municipal utilities to provide solar incentives. Then, a bunch of the municipal utilities have offered incentives for many years. In addition to that, some larger municipal utilities, in Sacramento and Los Angeles, have installed a large number of solar power systems over the past decade or more.
Cost and Benefit of Solar Power System
Benefit:
1. Solar subsidy outlook not the disaster currently priced in : In the US, the 30% federal income tax credit (ITC) provision that was set to expire this year was extended until 2016 and many other favorable amendments were also added to the ITC Act such as the abolition of the $2,000 tax credit cap for residential photovoltaic (PV) systems. President Obama has also announced that investing in renewable energy is part of his plan to add 2.5 million jobs over the next couple of years in the U.S. Thus many more initiatives to support renewable energy could potentially be announced through 2009. 2. Demand elasticity will likely remain high: During the current times of high risk aversion, we believe investment in solar systems in countries with feed-in tariffs such as Germany can provide investors with stable and certain cash flows with a decent return on investment. Although solar module prices will have to decline in 2010 due to the reduction in feed-in tariffs in the two major solar markets, Germany and Spain, any significant drop in prices greater than the reduction in feed-in tariffs would significantly increase the potential return from solar power system investment, which could encourage investors to invest in solar and also make it much easier to access credit. Thus we expect price elasticity of demand to remain high, which could stimulate demand if prices drop sharply, thereby potentially providing a downward support to prices. 3. Energy security: Despite the recent collapse in oil prices, the considerable power of suppliers of fossil fuels, whether gas or liquid, increases the vulnerability of key economies in the Western world as well as the economies of fast-growing countries such as China and India, which do not have their own captive resources of fossil fuels. Hence these countries are supporting and subsidizing the growth of renewable sources. In fact we do not expect low prices of oil to stop investment in alternative technologies because such investment would help prevent the rise in oil prices when the economy exits the current recession.
Cost
1. The prices of solar power system have reduced because of the collapse in energy prices. Traditional energy sources such as oil, coal and gas, had gradually increased in price over the past 3 to 4 years. This supported the case for competitive energy sources to bring down the long-term prices of these traditional sources and to create an alternative energy infrastructure. However, the combination of very high prices for oil, gas and coal and the recessionary conditions in various leading economies has resulted in a collapse in the prices of gas, coal and as a result of power itself. Unlike other renewable sources such as wind, solar electricity is far from grid parity in most regions. The combination of the recession and the much cheaper traditional sources of energy now available due to the significant decline in their prices. Thus, the power generated from traditional sources, has pushed solar power system further away from grid parity thus less economically viable. 2. Credit crisis hurting demand of solar power system: Solar modules whether installed in a home or in a solar farm are a capital-intensive investment. Besides, they are generally financed using some combination of debt and equity. However, with current turmoil in the credit and financial markets, obtaining financing for solar projects has become difficult and more costly. This has impacted solar demand with many large-scale solar projects being delayed or shelved altogether. Due to the tighter and tighter credit conditions, most of the solar cell or module manufacturers have seen the warning signal that the demand of solar power system is weakening.