The Rise of Utility-scale Solar
We are familiar with the inexorable and welcome march of solar panels across our rooftops, but many might be surprised that utility-scale power plants are now the fastest-growing application for the photovoltaics (PV) industry. This sector has delivered a compound annual growth rate over the last five years of 100 percent, to reach a cumulative installed capacity above 10 GW by the end of 2012. At that time, there were some 400 solar generating stations with a nameplate capacity of 10 MW and over, but the number and capacity of large-scale PV plants continued to grow in early 2013.
The first MW-scale PV projects date back to the early 1980s, when Arco Solar built two large plants in California; but there was little else at this size until the German feed-in tariff (FiT) law was revised in 2004. Subsequently the first PV installations of 10 MW and more were built in 2006, and the sector burgeoned with the introduction of Spain's FiT in 2007. Notwithstanding the hiatus over the subsequent withdrawal of Spanish tariffs, other European markets pressed on and large-scale capacity totaling 3 GW was installed in 2011, led by almost 1 GW in Germany.
Grid Parity and All That
FiT programmes have two main objectives. The first motivation is to incentivise deployment, increasing the contribution of renewable generation in the overall energy mix. Secondly, they stimulate production and installation volumes, enabling costs to fall.
This approach proves particularly successful for photovoltaics because, as a solid-state semiconductor technology, costs can continue to decline exponentially with increasing volume. It has been estimated that PV modules have a so-called progress ratio of 82 percent. In other words, the costs reduce by 82 percent for every doubling of installed capacity.
As markets mushroomed, particularly under the incentive of FiTs, prices declined rapidly. The installation cost of a large-scale solar park, for example, has declined by half in less than two years and now stands close to €1 million per MW.
Conversely, the long-term prices of traditional fossil and nuclear energy have been rising inexorably. These two cost trends lead to a crossover where solar power inevitably becomes cheaper than traditional electricity. The point at which grid parity is reached depends, of course, on sunlight levels and electricity pool prices. It also occurs earlier where solar power can be delivered direct to the user and therefore competes against retail rather than the wholesale power prices.
A similar logic applies more parochially within the renewable energy sector. Many countries and states encourage renewables not through FiTs but by placing an obligation on their utility companies to source a growing proportion of their electricity from renewables. These obligations or Renewable Portfolio Standards (RPS) typically apply to renewable energy sources overall; rather than setting differential prices for each technology, as tariffs do. The utilities therefore seek to procure the lowest cost renewable sources. In most cases this has historically favoured onshore wind and hydro power. Recently, however, the rapid decline in PV costs has meant that solar is often the low-cost renewable, so it has been increasing its penetration into these schemes.
The onset of grid parity will become the major driver for the continuing deployment of solar power plants, as incentives such as the feed-in tariffs progressively fall away.
The focus of global activity is changing as these economic dynamics impact on the marketplace. Europe dominated the installations of large-scale solar stations in the early years. The FiTs in Spain and Germany, in particular, provided a strong incentive to make solar viable.
New Markets Fuel Growth
Each year until 2010 Europe's share of the global installations of utility-scale projects exceeded 70 percent. By 2012, even though Europe managed to notch up another record year, this had declined to 40 percent. It will be much lower again in 2013, when both the US and China are expected to leapfrog Germany at the top of the table for cumulative installed capacity.