Outlook for Solar Gets a Bit Brighter

Source: By  STANLEY REED, New York Times • Posted: Thursday, March 19, 2015

Solairedirect, which built this solar panel array in France, hopes to branch out from Europe to countries in the developing world. CreditSolairedirect 

Britain, like other countries in the European Union, has pledged to sharply cut carbon dioxide emissions blamed for global warming. In practice, that largely means encouraging electric power generation from green sources like wind, which Britain has in abundance, and solar, a resource in which it is less well endowed. “Britain is the hottest market right now,” said Josefin Berg, a Barcelona-based analyst for I.H.S.

In part, Ms. Berg said, Britain’s solar boom is being artificially stoked by generous government subsidies. But solar, perhaps to a greater extent than other renewable energy technologies, has also seen a dramatic fall in costs, on the order of more than 60 percent over the last five years. That makes it worth considering as an energy source in places like Britain where investors and developers would have scoffed a few years ago.

”There is quite a lot of solar being built in the U.K.,” said Rory O’Connor, head of renewable power in Europe for the investment firm BlackRock. “This really demonstrates how far the industry has come.”

A number of factors have helped drive down the costs of solar panels. Manufacturers in China and elsewhere in Asia have scaled up, flooding Western markets with inexpensive panels. (The low prices have squeezed Western rivals and led to antidumping measures by the United States and Europe. causing costs to rise again, but probably only temporarily.) Silicon, the key ingredient in the cells, has also become much cheaper.

Costs around the world have fallen to such an extent that solar can compete with other forms of power generation like natural gas or coal and win, its advocates say.

”Solar can be built without subsidies everywhere,” said Thierry Lepercq, the chief executive of a French company called Solairedirect that recently began the process of filing for an initial public offering in Paris.

Mr. Lepercq continues to build solar parks in the south of France, where there are subsidies, though they are modest. But he is branching out from Europe to developing countries that want competitively priced electric power regardless of the source. “The rest of the world has no money for subsidies,” he said, referring to potential customers outside Europe and the United States.

One place Mr. Lepercq has had success is northern Chile, where high altitudes and proximity to the equator are ideal for solar generation. In Chile, he said, solar can generate electricity for about 20 percent less than coal and about 40 percent less than natural gas. His company also recently completed a solar park in India.

If in the future, as many analysts think, small, local power units are going to at least partially replace mammoth power plants, then solar looks promising.

Still, solar’s penetration is unlikely to proceed without speed bumps. Europe, which has in many respects led the world in implementing renewable technologies, has also seen some of the early pitfalls.

The subsidies used by European governments are proving a mixed blessing. Countries like Germany have been very successful at encouraging many individuals and companies to install solar panels.

But the high prices Germany and other governments have paid for the electricity put back into the grid have a downside.

To pay, they were forced to push up power prices in general, hurting economic competitiveness and spurring consumer protests.

In addition, solar panels are able to economically furnish only a portion of contemporary power needs, not least because they only generate electricity during daylight hours.

Solar is about to be stress-tested by a change in the subsidy program in Britain, shifting from generous incentives to an auction system that forces companies building large solar installations to bid competitively for guaranteed rates.

In the first auction, held in late February, two solar companies won guaranteed rates of just 50 pounds, or about $74, per megawatt hour. That is just slightly over the wholesale price of power.

In a statement, Edward Davey, the energy minister, hailed the process for driving down prices and securing “the best possible deal for this new clean, green energy.”

But James Rowe, chief executive of Hadstone Energy, one of the auction winners, said he doubted his project would ever be built on those terms.

Despite such teething problems, solar is gaining momentum. The amount of solar installed globally per year surged by almost sixfold between 2009 and 2014, with China leading the way last year, followed by the United States and Japan. I.H.S. forecasts that over the next five years, solar capacity will nearly triple globally from current levels.

The technology will probably continue to spread — even in Britain.

Last week, an American company, Sun Edison, began offering British homeowners the option of installing solar on their rooftops for free, with savings on their electric bills of up to 15 percent.