Utility-scale Solar Power: A Bright Future Driven by Growing Acceptance, Falling Prices and Rising Demand

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It's a sunny day for developers of utility-scale photovoltaics (PV) and concentrating solar power, and the future is looking even sunnier and brighter, speakers told a breakout session at the 12th Annual Electric Power Conference & Exhibition in Baltimore last week.

The per-kilowatt cost of utility-scale PV installations fell sharply last year, and the trend is expected to continue because of improved supply-chain management techniques and declining module prices, renewable energy executives told the session.

"This is a boom-and-bust industry, and the recent cost declines are evident," Leo Casey, vice president and chief technology officer at Satcon Technology Corporation (NASDAQ:SATC) (Boston, Massachusetts) told attendees. Fully installed costs for utility-scale PV generation fell from $5 per watt ($5,000 per kilowatt) to less than $4 per watt ($4,000 per kilowatt) in California, and fully installed costs of $2.50 to $3 per watt "seem quite feasible in the near future," he said.

Chinese manufacturers have announced a target of $1 per watt to produce the modules, Casey noted. Balance-of-system costs for utility-scale PV installations generally hold steady at about $1.50 per watt, he and other panelists agreed.

Utilities in the U.S. installed about 485 megawatts of PV generating capacity last year, about 80% of which was installed in California, William Bottenberg, director of technology development for Applied Materials Incorporated (NASDAQ:AMAT) (Santa Clara, California), told the session. He sees strong demand growth in the U.S. in the coming years, driven by state renewable electricity standards and other factors.

Click on image at right to see Applied Materials' projected annual increases in U.S. PV generating capacity.

"Utilities have shifted their views and are embracing PV," Bottenberg said, referencing large commitments to PV by utilities such as Pacific Gas & Electric (San Francisco, California), Sempra Utilities (San Diego, California), and Florida Power & Light (Juno Beach, Florida. "This change in perspective is driving PV in the U.S. market."

Pacific Gas & Electric is the utility unit of PG&E Corporation (NYSE:PCG). Sempra Utilities is part of Sempra Energy (NYSE:SRE). Florida Power & Light is the utility subsidiary of FPL Group Incorporated (NYSE:FPL), which last week changed its name to NextEra Energy Incorporated. Next month, the NYSE will change the company's ticker symbol to NEE, but the name of its utility unit will not change, the company said last week.

PV module costs declined 27% last year, Bottenberg told the Electric Power session, adding that costs for the modules are expected to drop another 23% this year, and a further 29% in 2011-12.

In an interview with Industrial Info, Bottenberg said changing regulatory incentives have played a "huge" role in driving an increase in PV construction and operation. State utility regulators are now structuring incentive programs based on electricity production from a new PV installation; previously, regulators incented PV construction.

An equally sunny outlook was offered for concentrating solar power (CSP), also known as concentrating solar thermal (CST). "Technology advancements, market development, and engineering ingenuity are the things that are driving increased demand for CST generating," said Bob McDonald, co-founder and chief executive officer at Skyline Solar Incorporated (Mountain View, California), a manufacturer of high-gain CSP arrays. McDonald credited reduced module-manufacturing costs and improvements to the balance-of-system costs as the main reasons driving down the installed cost of CSP generation.

"We're getting to installed priced and utility demand levels that will transform this business over the next five years, enabling further build-outs and scale-ups," McDonald told the Electric Power session.

Allan Hoffman, a senior researcher at the U.S. Department of Energy, noted that CSP units can be built quickly, and that CSP, unlike PV, incorporates energy storage. The energy storage component of CSP is contained in the unit's heated fluids. "The storage aspect of CST is not a major cost, and you can add more storage capabilities at affordable prices."

The energy stored in a CSP's fluid makes it a good load-following generation technology, Hoffman said. He added that CST was less expensive to operate than many utility peaking units, and was "competitive" with a utility's so-called shoulder generators. But because CSP has high upfront capital costs, requires large surface areas, and only operates optimally in certain geographic areas--like Phoenix, the Mojave Desert, and North Africa--CSP could only be part of a utility's overall renewable generation portfolio.

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