The Solar Singularity Is Nigh

“It’s tough to make predictions, especially about the future,” quipped Yogi Berra. I keep his wise admonition in mind as I make predictions about our energy future, but we have many reasons for optimism when it comes to the future growth of solar power.

Here’s the summary: solar is taking over. We can now see many years into the future when it comes to energy, and that future is primarily solar-powered. Why my optimism? Well, let me explain.

The “solar singularity” will, by my definition, occur when solar prices become so cheap that solar becomes the default power source based on cost alone and without subsidies. We aren’t there yet but we’re probably just a few years away from that point, particularly since we’re seeing energy storage costs declining significantly already. (I’m not going to address storage in this article further but, of course, a grid can’t run on variable solar power alone so we’ll need storage and other backup technologies to ensure reliable grids as solar power penetration grows).

Swanson’s Law, named after the founder of SunPower, a large American manufacturer of solar panels, states that the price of solar panels generally drops by 20 percent with every doubling of shipped panels. This has been the general trend since solar became a viable technology — hence its designation as a “law,” even though there are times when some deviations from the trend take place. For example, from the mid-1990s until 2008 solar costs declined by relatively small amounts, primarily due to stubbornly high silicon prices in a backdrop of increasing commodity prices across many markets, until the crash of 2008. Since 2008, however, panel cost declines have accelerated and the general trend is now back and then some.

When we compare recent cost declines for solar to other energy prices we get a pretty picture indeed and this is why solar is now getting very serious attention by investors and pundits alike.

REN21, a nonprofit organization, releases an annual report on the global status of renewable energy. Their 2014 report showed a phenomenal 39 percent growth in solar power, with 39 gigawatts added. REN21 haven’t released their figures for 2014 yet but we can expect similar figures for 2014 to those we saw in 2013. It must be satisfying for Swanson to see his predictions come true in spades. When he wrote his 2006 paper, global solar installations were only about 5 gigawatts. We are now, in early 2015, at almost 200 gigawatts, about forty times the installations in 2006, with prices declining much as he predicted.

Figure 1. Global solar power growth through 2013 (source: REN21).

REN21 global solar growth through 2013

Total U.S. installations now stand at about 20 gigawatts, or 10 percent of the total and enough power for about four million U.S. homes. The U.S. was a latecomer to the global solar party, but with 2014 installations at about six gigawatts the U.S. is now back at the top of the heap in terms of largest markets for solar.

What About Subsidies?

Subsidies have been a big part of getting solar to where it is today but subsidies are becoming increasingly unnecessary as solar prices plummet. This is additional good news. California’s residential and commercial solar rebate program (the California Solar Initiative or CSI) is all but gone as the rebates have been used up, and yet California’s retail solar market is still growing strongly.

On the wholesale side, the federal 30 percent investment tax credit (ITC) is set to decline to 10 percent at the beginning of 2017. The conventional wisdom is that we’ll see a big drop in installations when this happens. However, a silver lining to the Republican-controlled Congress and their antipathy to green power is that there is little hope at this point that the 30 percent ITC will be extended.

tambookThis means, contrary to the similar discussion with respect to wind power’s tax credits over the last decade (they’ve expired a number of times, leading to a slowdown in installations for a year and then a rebound when the credit is renewed), there won’t be a slowdown in anticipation of an eventual renewal of the tax credit. We should see solar companies simply adjust to the lower tax benefit and keep on trucking.

SunPower, a major player in today’s markets, is already predicting little impact from the reduced ITC, based on the ability to develop profitable projects even with the reduced ITC of 10 percent.

James Smith, an investment analyst at Catapult Research, recently issued a very bullish report on solar, providing some good corroboration of my predictions here. He stated in his report, excerpted here: “I’m saying that if the cost of solar drops 20% in price every time the installed base doubles, it is only a matter of time before solar takes over from fossil fuels. My best guess is that it starts to really happen from 2017 onwards.”

Is The Past A Reliable Guide To The Future?

Making predictions (especially about the future) is difficult because there is no guarantee, of course, that the past is a reliable guide to the future. However, when it comes to solar power we see the very clear trend of price reductions continuing for some time because there are no inherent limits to further reductions. Jeremy Rifkin has made the case that solar panels will become practically free with zero marginal cost for production, in his book The Zero Marginal Cost Society. As we’ll see below, this is a reasonable prediction.

Solar panels are not the only cost component for solar systems and they are increasingly becoming a minor cost because of ongoing panel cost reductions. The main components of overall costs are now soft costs like labor and the “balance of system” costs for equipment like inverters, racks and wiring. However, these other costs are also declining substantially and groups like GTM Research predict further major cost reductions.

The basis for my predictions is, however, quite simple: we have reached the point where low costs are driving installations higher, which in turn drives costs lower, which in turn drives installations higher… The virtuous circle seems to be locked in and based on history we can expect further 20 percent cost reductions with each doubling of capacity, with no inherent limit to cost reductions over time.

Under this trend, we can expect by 2020, under a 30 percent global rate of growth, to see total solar costs for utility-scale systems at around $0.84/watt, based on GTM Research’s projected $1.10/watt for 2017. By 2025, the cost drops to about $0.54/watt and by 2030 it will be a practically free cost of $0.34/watt. By 2040, we can expect under these trends to see costs at about 14 cents per watt. A five kilowatt home-size system costs at this price only $700.

That counts as free in my book because that system will provide power for about 25 years at almost no cost above that of the initial installation. 25 years of production for $700 equates to about 2.8 cents per kilowatt-hour. For comparison, the average retail cost of power in California today is about 15 cents per kilowatt hour, so this future cost of solar power will be less than 1/5th the cost of today’s power. And this analysis leaves out inflation. If we include inflation the comparison is even more favorable.

What Could Derail The Solar Singularity?

While I’m fairly confident in the coming solar singularity I’d be foolish not to recognize some inherent uncertainties about making such predictions. I’ll discuss a couple of the biggest uncertainties here.

The biggest source of uncertainty is the rate of growth in installations. In my calculations above I assumed a 30 percent rate of growth, which is reasonable given the far higher rates of growth we’ve seen in recent years (this results in approximately a 2.3-year doubling time). However, it is likely that we’ll see growth rates decline for a variety of reasons. If installations increase at only 20 percent per year we see about $0.54/watt by 2030 and $0.28/watt by 2040. At only 10 percent growth we see about $0.75/watt by 2030 and $0.56/watt by 2040. At these price and installation levels the singularity still arrives but it’s delayed.

The second biggest source of uncertainty is the degree to which there are fundamental limitations in how fast power generation fleets can turn over. Most power generation assets are financed (amortized) over the course of many years and these investments often require long power sales contracts to justify such investments. This means that a lot of the fleet is locked in contractually at any given time. If a ton of solar is installed in any particular grid system the threat of “stranded costs” — costs that are at risk of not being recovered due to under-utilization or an early shut down — becomes high.

We’ll see how the stranded cost issue shakes out in each country but there is good reason to believe that even if some grids see a slow-down in solar installations because of concerns about stranded costs, or other problems, that other countries will take up the slack and the general global trend of ever-increasing solar will continue apace.

One issue that I don’t think will be a real problem in the next couple of decades is lack of space for new solar. For all practical purposes, the space for installing solar around the world is infinite. We’ll run out of power demand long before we’ll run out of space for solar. As costs plummet for solar, more and more countries will see it become economically viable and more and more locations, such as roadways, areas over metro rail lines, etc., will be covered by panels.

In sum, we have some very good reasons to believe that the solar singularity is indeed nigh. What does a world of free or practically free energy look like? That is a topic for another column.

Tam Hunt’s new book, The Solar Singularity: Why Our Energy Future Is So Bright, will be released later this year. 

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8 comments
  1. We don’t have years. We have to totally revamp our entire political and economic structure. If we don’t we are going to obliterate ourselves. Here we are on beautiful planet earth and what do we do instead of vacation? We smash ourselves to smithereens. We smash everything, rock, the atom. Yet we have everything to live like in paradise. Nature has everything we need. What distorts our minds is money. It’s not rocket science to come up with another system or at least, base money on something worthwhile like hemp or time, or satisfaction. But base it on greed? Nothing good can come from that.

  2. Tam: Have you read Ozzie Zehner’s book ‘Green Illusions?’ His take is that wind and solar has yet to replace a nuk, coal or gas turbine because demand keeps increasing. Zehner shows that the only viable alternative to hydrocarbons – if that is the goal – is conservation and nuclear power. http://www.amazon.com/Green-Illusions-Secrets-Environmentalism-Sustainable/dp/0803237758/ref=sr_1_sc_1?ie=UTF8&qid=1426882238&sr=8-1-spell&keywords=gree+illusions

    You say solar is taking over. Are you speaking of residential or industrial? Indeed, the rate of solar installs has increased, but how has it compared to demand and as a percentage of total power demand and capacity? The German experience has shown that home solar systems are a nightmare for grid managers, home owners and bankers. industrial sites do better, but it takes a lot of acres to produce useful power.

    You claim: Total U.S. installations now stand at about 20 gigawatts, or 10 percent of the total [capacity? IC] and enough power for about four million U.S. homes. The U.S. was a latecomer to the global solar party, but with 2014 installations at about six gigawatts the U.S. is now back at the top of the heap in terms of largest markets for solar.
    Wiki shows A total of 5GW (4,995 MW) PV production as of March 6, 2014, 19 MW planned. I might be reading it wrong but that’s a huge discrepancy. http://en.wikipedia.org/wiki/Solar_power_in_the_United_States

    Just so you know my point of reference: I grew up on a farm with a 32v wind turbine that charged a cellar full of batteries that ran a radio, DC sewing machine and a few lights. We went to bed at dusk on most days because the batteries only powered lights for a few hours. Windmills pumped water, kerosene fired a refrigerator and we had a pitcher pump at the sink, gasoline powered clothes washer, kerosene lamps and outhouse. We tinkered with gasoline generators. When the REA came thru with commercial power we were so eager to get it that we cleared the right of way and dug holes for the poles. Commercial electricity changed our lives: Indoor plumbing; field irrigation; stay up after dark, get rid of the jars of batteries, no kerosene in the house. I seriously doubt many homeowners would choose going back to any of those things.

    I have remote property and invested in a 500 w solar system, inverter and batteries. Four feet of snow crushed the panels, shorted the inverter and batteries and rendered it all scrap plus collateral damage. We also invested in fuel cells. We got flim-flammed. We built a hydroelectric plant and hydro-ram on a nearby spring. 14 years and still idiot resistant. It keeps the batteries charged and water flowing. They meet our needs, which are not electricity intensive. But it’s maintenance intensive.
    The average homeowner doesn’t tolerate any of that nonsense either.

    Are you familiar with the term ‘capacity factor?’ CP is the ratio of data tag capacity vs actual production averaged over some time period. It’s a critical consideration for power production, but promoters brush it off as ‘site specific’. Well, partly.

    Power grid managers throttle nuk, hydro, coal and gas turbines to meet the load and avoid brownouts or blackouts. They have a CP in the mid 90 range, and are energy dense, producing huge outputs on a few acres.

    Nature throttles green power sources. A solar project might have a data tag capacity of 1Mw, but loss due to dirt, insects, clouds, inverter efficiency, temp, damage, latitude and angle to the sun reduce CP to around 10%. Then it goes to zero about an hour before sunset and stays there until an hour after sunrise, maybe longer.

    Playing with the calculator, how much land will it take to replace a 1000MW coal plant with solar? The numbers get out of hand rather quickly: If a one meter square photovoltaic panel produces 150W in optimum conditions with a PF of .1, the reliable output is about 15W/M^2. A hectare is 10,000M^2 so 10^4*15=150,000 watts/he, or 150KW/he

    to produce one megawatt we need (10^6/15010^3)= 6.7 He of PVs

    To replace a 1000 MW coal plant requires 10^3*6.67 = 6,670 He

    A Hectare is about 2.5 acs, so allowing for no roads, a1000 Mw solar project would need

    6670*2,5= 16,765 acres to replace an equivalent coal plant that can run 24/7. Lets round it to 17,000 acs to allow for roads, maintenance shacks, inverters and power poles.

    There are about 1300 coal plants in the USA. Assuming they average 1000 MW (aka one TW), we need 13 TW of solar equivalent,

    13*10^9* 17*10^3 acs =3.9 million acres, and only produce during the day. Like I said, the numbers get out of hand rather quickly.

    If PV CP somehow magically increased from 10% to 50% then we can assume a real estate reduction by 1/5: 0.2*(3.9*10^6)=780,000 acs.

    The coal plants they replace might take 100 acs each, or 1300 acs total. So this becomes a real estate problem.
    Lets say you also install 1000 MW of lead acid batteries to store and buffer output from the 1000MW PVs. (Here’s a good place to start with battery types, chargers etc: http://batteryuniversity.com/) So the PVs can either meet the grid demand or charge the batteries. Here’s the rub: Batteries need TLC and special charge profiles and if drawn down to their lowest cell voltage can take days to top off or they boil, sulfate or overheat, none of which are life extending). You’ll need twice the PVs to both meet day demand and charge batteries to meet night demand. Even so, the batteries might only be available every other night. So now you need yet another one-TW PV/battery project to produce consistent night power 24/7.

    Generation must be near the load. Long distance transmission is incredibly inefficient due to heat losses.

    Cost: projected and actual cost have not aligned well. The half life of batteries is about 5 years. The half life of a roof-mounted home solar project (panels, structures, inverter, cabling) is about nine years. The ROI of just the panels is about 30 years. Add batteries, hail or wind damage or a blown inverter and it reaches infinity. The Tampa FL courthouse solar project is a good case study. http://wattsupwiththat.com/2014/08/30/how-not-to-do-a-solar-power-project-great-moments-in-solar-panel-engineering/

    I have no idea what aiming systems cost to align PVs to track the sun thru the day and the season. They would improve CP, but at what cost?

    Schemes that ‘sell’ residential/farm power to the grid are major irritants to grid managers who want to control the throttle as customers want them to.

    Siting is also a problem: The best places are probably taken: They cannot be shaded, need an angle perpendicular to the sun and don’t have hail or wind storms, and are near the load. High-latitude areas will suffer a lower CP than near the equator.

    Like fuel cells, solar is great for remote locations or when the subsidy trough runs over. Wind seems to be enjoying better production rates than solar, but Germany’s experience is less than stellar with either wind or solar. http://www.forbes.com/sites/realspin/2013/03/14/germanys-green-energy-disaster-a-cautionary-tale-for-world-leaders/

    It will be interesting to see how California’s PV and thermal projects fare when the subsidies die. Remember the hydrogen economy? Huge push in CA to make it happen, billions spent, cars and production facilities built. No takers. How’s the Chevy Volt doing? Like Solyndra, the taxpayer is the dead end kid.

  3. Two potential problems for this rosy forecast.

    1. Solar power depends on rare-earth elements which are almost entirely produced in China because of the cost of extraction and the amount of toxic pollution resulting from the refining process. If China decides to cut back production, the solar power industry is dead in the water until refining facilities in the USA, Canada and Australia come on line. Resulting higher prices for rare earth metals and the opposition of environmentalists to operation of refineries will diminish the assumed savings considerably.

    2. Less than 20% of US land area is suitable for large-scale solar power production. And any attempt to build solar power plants will be opposed by the same environmentalists that oppose wind power, water power, nuclear power and fossil fuel power plants.

  4. Ok first of all, the photo for this article has nothing to do with the sun. It is a picture from the movie called interstellar and that is a black hole and a planet just outside of it from the movie. So kind of misleading right from the getgo.

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