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September 17, 1996 17:0 Annual Reviews DRACDUN.TXT AR 16-14
Annu. Rev. Energy Environ. 1996. 21:371–402
Copyright c© 1996 by Annual Reviews Inc. All rights reserved
PROGRESS COMMERCIALIZING
SOLAR-ELECTRIC POWER SYSTEMS
Raymond Dracker
Bechtel Corporation, San Francisco, California 95105
Pascal De Laquil III
EnergyWorks, Landover, Maryland 20785
KEY WORDS: solar, photovoltaic, solar thermal, renewable energy, electric power, rural elec-
trification
ABSTRACT
The commercial status of the principal solar electric technologies—photovoltaic
and solar thermal—is reviewed. Current and near-term market niches are iden-
tified, and projected longer-term markets are explored along with the key strate-
gies for achieving them, including technological breakthroughs, manufacturing
developments, economies of scale and mass production, and market creation.
Market barriers and public policy impacts on commercialization are discussed.
CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
SOLAR ENERGY TECHNOLOGY STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
Solar Thermal Electric Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
Parabolic Troughs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374
Power Towers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376
Parabolic Dishes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379
Solar Photovoltaic Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382
Cell and Module Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382
Balance-of-System Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384
Market Applications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385
COMMERCIALIZATION PATHWAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386
Technology Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386
Market Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388
Collaborative Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392
LONG-TERM DEPLOYMENT STRATEGIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395
Resource Areas and Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395
Societal Needs and Goals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397
371
1056-3466/96/1022-0371$08.00
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372 DRACKER & DE LAQUIL
Public/Private Partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398
Global Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399
SUMMARY AND CONCLUSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400
INTRODUCTION
The radiant energy generated in the nuclear reactions of our sun is the principal
energy source for this solar system, including the planet Earth. The sun’s radiant
power gives light and heat, creates movement in the atmosphere and oceans,
and provides energy to all the earth’s living creatures. For centuries, people
have used sunlight, the winds, falling waters, ocean currents, and various forms
of biomass in many ways. Today we have the technology to efficiently produce
electricity from all these forms of solar energy.
Sunlight is a vast resource. Forty minutes of sunlight striking the land surface
of the United States provides more energy than the country’s annual fossil fuel
use. But because sunlight has an intensity of about 1 kW per square m, a great
deal of surface area is required to collect it. Yet less than 0.1% of the earth’s
land space, if devoted to solar electric power systems, would produce enough
electricity to satisfy the global electricity needs of the modern world.
Two methods are used to create electric energy directly from sunlight: solar
thermal and photovoltaic (PV). Solar thermal devices convert sunlight into
heat, and in solar thermal electric devices, the heat is collected at a high enough
temperature to drive an efficient heat engine and electric generator. PV devices
convert solar photons into electrical charges, which drive an electric current
through a load.
SOLAR ENERGY TECHNOLOGY STATUS
Solar Thermal Electric Power
Archimedes is credited with one of the earliest applications of high-temperature
solar energy. He used sunlight reflected off the burnished shields of soldiers
to set fire to the sails of the Roman fleet in 212BC. Today’s solar thermal
electric technologies use mirrors or lenses to concentrate the suns rays onto
a heat exchanger, where a heat transfer fluid (HTF) is heated and used to
drive a conventional power conversion system. Applications for solar thermal
electric systems range from central station power plants to modular, remote
power systems. In addition to producing electricity, solar thermal systems can
provide high-temperature process heat, and they can directly process advanced
fuels and chemicals, such as hydrogen. Systems can be hybridized to run on
both solar energy and fossil fuel, and some systems contain integral thermal
energy storage, which allows dispatchable, solar-only operation. Because these
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COMMERCIALIZING SOLAR POWER SYSTEMS 373
systems all focus sunlight, they use only direct rays from the sun and are best
located in regions with very clear skies.
All solar thermal systems have collectors, receivers, and power conversion
systems. Some have storage systems and/or backup fossil-fuel systems for
times when sunlight cannot provide enough energy. The three principal solar
thermal technologies are classified according to the method used to collect and
concentrate sunlight (1, 2):
1. A parabolic trough is a linear solar collector that focuses sunlight onto a
tubular receiver that runs the length of a mirrored trough. An HTF, typically
a synthetic oil, is heated as it flows through the receiver pipe in each col-
lector. Large systems are built by using a field of collector assemblies that
are plumbed together. The HTF is used to make steam to drive a conven-
tional turbine power plant. The plant can also have a gas-fired boiler or HTF
heater to supplement the solar energy. Because they focus sunlight along a
line, rather than to a point, parabolic trough systems achieve concentration
ratios of 10–100 and working temperatures of 100–400◦C, which are much
lower that those of other solar thermal systems. However, parabolic trough
systems are the most fully developed solar thermal technology, and major
installations for process heat and electricity production already exist in the
United States.2. A power tower, also called a solar central receiver, collects sunlight with
a field of sun-tracking mirror assemblies that concentrate sunlight onto a
tower-mounted receiver where a circulating fluid is heated and used to pro-
duce power. Power towers typically contain cost-effective thermal energy
storage and are intended as central station power plants for peaking and in-
termediate load applications. The key features of solar power towers are that
they (a) collect solar energy optically to a single receiver and minimize the
thermal energy transport requirements; (b) achieve sunlight concentration
ratios of 300–1500 and working temperatures of 500–1500◦C, which allow
high efficiencies both in energy collection and in its conversion to electricity;
(c) incorporate thermal energy storage; and (d) allow economies of scale in
the energy storage and power conversion systems. A precommercial power
tower demonstration plant is currently operating in the United States, and
additional technology demonstration projects are being planned in Europe
and Israel.
3. A parabolic dish is a tracking solar collector assembly that concentrates
sunlight onto a receiver at its focal point. The receiver can serve as the heat
source for an individual Stirling engine or gas turbine generator also located
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374 DRACKER & DE LAQUIL
at the focal point of the dish, or the heat can be collected using an HTF piped
to a centrally located heat engine. Parabolic dishes are the most efficient
of all solar thermal collectors and can achieve concentration ratios of 600–
2000 and working temperatures in excess of 1500◦C. Parabolic dish/Stirling
engine systems have achieved a maximum net solar-to-electric conversion
efficiency of 29.4% and an average daily net efficiency of 22.7%. These
record-setting performance levels are due to the high collector efficiency
and to the Stirling engine’s low thermal inertia and good part-load perfor-
mance (3). Prototype commercial parabolic dish systems are being tested
in the United States, Europe, and Australia.
Parabolic Troughs
Between 1984 and 1990, nine utility-scale solar thermal power plants, referred
to as Solar Electric Generating Systems (SEGS), with a total installed capac-
ity of over 350 MWe (megawatts electric), were constructed by Luz Internat-
ional, Ltd. (Luz) in southern California using solar parabolic trough technology.
These first-generation, commercial solar thermal systems used a heat transfer
oil to make steam to drive a conventional turbine power plant. Natural gas is
used as a backup fuel to provide 25% of the annual power generation. The plants
are central station, solar-fossil hybrids, and the last two plants, 80 MWe each,
represent the current state of commercial readiness for solar thermal electric
systems.
Luz used the combination of the standard-offer utility contracts available
in the early 1980s and the federal and state tax incentives then in place to
develop these early commercial power plants. The plants all operated reliably
from their initial startups, the cost of electricity from the latest plants was
more than four times lower than the initial plants, and the technology was
approaching market competitiveness. The largest (80 MWe) and most recently
built SEGS plants at Harper Lake, California are shown in Figure 1. Luz had
power purchase contracts to build six additional 80-MWe plants. However, a
lack of governmental support for key market incentives at both the state and
federal levels, along with decreasing natural gas and electricity prices in the
early 1990s, prevented the financing of the tenth plant (4).
Luz became overleveraged and went out of business in 1991 as it attempted to
develop and build those additional plants. However, all nine plants built by Luz
continue to operate reliably under new management and operating companies
formed by the principal investment groups.
Because Luz’s technology has performed reliably, new parabolic trough
power projects are being pursued in at least eight countries and could result
in several hundred megawatts of new installations before the year 2000. The
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COMMERCIALIZING SOLAR POWER SYSTEMS 375
Figure 1 Photo of the two 80-MWe SEGS plants at Harper Lake, California.
government of India has applied to the Global Environmental Facility (GEF)
to provide a grant for a solar trough power plant in the state of Rajasthan, and a
135-MW integrated solar combined cycle system (ISCCS) is being considered
for a project in 1997. In Mexico, a World Bank Phase 1 prefeasibility assess-
ment has been completed for a parabolic trough combined cycle plant, and a
GEF grant application for the project is pending by the Mexican Government.
A GEF project is also under evaluation in Morocco, and a conventional solar
trough project is being considered by the government of Crete.
The ISCCS parabolic trough plant configuration, which is being proposed
for many of the new projects, promises to significantly improve their cost ef-
fectiveness. An ISCCS plant combines a conventional combined cycle power
plant with a parabolic trough steam supply system. Solar-generated steam sup-
plements or replaces the generation of steam in the gas turbine heat recovery
steam generator of the combined cycle plant and increases both plant perfor-
mance and plant output. Capital costs are in the range of $1000–1500 per kW,
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376 DRACKER & DE LAQUIL
and electricity costs have been calculated to be within 0.5–1.0 cent per kWh
of conventional combined cycle power plants. The annual solar fraction for
these integrated combined cycle configurations is typically 20% or lower, but
because they reduce both the market entry cost and risk hurdles, they may lead
to earlier introduction of commercial plants.
In addition, Direct Steam Generation (DSG) solar troughs (as opposed to
the use of an intermediate HTF oil) hold the promise of reducing solar trough
collection system costs by 10–20%. The German, Spanish, and Israeli govern-
ments are supporting a DSG test program now underway at Almeria, Spain.
The Israeli company Solel is working jointly with staff at the Plataforma Solar
de Almeria to design and evaluate the concept.
Power Towers
Several pilot-scale solar power tower projects were built and operated during
the 1980s in the United States, Europe, the Soviet Union, and Japan. The
largest and most successful of these projects was the 10-MWe Solar One plant
near Barstow, California. Between 1982 and 1988, the plant operated with high
reliability as an intermediate-load utility power plant, achieved all of its design
performance targets, proved the technical feasibility of this solar power plant
concept, and established a technical foundation for more advanced designs.
Two power tower technologies are approaching commercial readiness. In
the United States, systems have been developed that use molten nitrate salt
as both the receiver and thermal storage fluid (5). This technology is being
demonstrated in the Solar Two Project, which is a retrofit of the 10-MWe Solar
One plant. In Europe,development of a volumetric air receiver technology with
ceramic brick storage has been proven in a 2.5-MWt subsystem experiment,
and efforts are being directed at developing a 30-MWe demonstration project.
In the Solar Two Project, concentrated sunlight from the heliostat field heats
the molten salt to 565◦C in a tubed, stainless steel receiver. The hot salt is
stored in a large stainless steel tank and used to generate steam to run a high-
efficiency steam-turbine power plant. Integrated thermal storage makes this
system dispatchable and makes it a true intermediate load, solar-only power
plant. The molten salt, a mixture of sodium nitrate and potassium nitrate, is
a safe and readily available material. System designs with up to 60% annual
capacity factor appear economically feasible, and they would operate as base-
load plants in the summer and as intermediate-load plants in the winter.
The Solar Two Project is being cofunded by DOE and a consortium of utility,
industry, and other organizations, led by Southern California Edison Company
(SCE). Joining SCE in sponsoring this project are the Los Angeles Department
of Water and Power, the Sacramento Municipal Utility District, Idaho Power
Company, PacifiCorp, Arizona Public Service, Salt River Project, Bechtel Cor-
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COMMERCIALIZING SOLAR POWER SYSTEMS 377
poration, Rockwell International, the California Energy Commission, and the
Electric Power Research Institute. The Solar Two Project is estimated to cost
$48.5 million for design, construction, and three years of operation and eval-
uation. The goals of the Solar Two Project are to reduce to acceptable levels
the economic risks in building the initial commercial power tower projects and
to accelerate the commercial acceptance of this promising renewable energy
technology. The project’s principal objective is to validate the projections for
the cost, performance, and reliability of the initial commercial plants. Figure 2
shows the 10-MWe Solar Two Project.
The nitrate salt technology being used in the Solar Two Project promises
to be significantly more efficient than the water/steam technology of Solar
One. Solar Two will capture and store solar energy when the sun shines, and
it can be dispatched to generate electricity when the power is most valuable.
Construction of Solar Two is complete, and testing, evaluation, and operations
will continue through 1998.
A Commercialization Advisory Board (CAB) was formed by Solar Two
Project participants to guide the development of a commercialization strategy,
which will overcome the market entry barriers facing the technology and lead
to the financing and construction of the initial power plants. With the support
of the CAB, a market entry plan for the initial nitrate salt solar power towers
has been formulated, called SolarPlan, which will create regional plans to build
several solar power towers that have the backing, support, and involvement of
stakeholders in that region. Interest in power tower projects has been expressed
by government and private sectors in India, Brazil, Egypt, Chile, and Jordan.
The SolarPlan activities are being coordinated with two other efforts: the
Solar Thermal Manufacturing Technology Program (SOLMAT) and the Solar
Enterprise Zone (SEZ) in Nevada. The purpose of SOLMAT is to support sup-
pliers of solar thermal component hardware (such as heliostats and receivers),
and the program involves the development of design improvements, manufac-
turing methods, and field assembly and installation procedures. One program
goal is to install several manufacturing-prototype heliostats at Solar Two to gain
confidence in the projected collector system cost estimates.
In Europe, an industry consortium is working to develop a 30-MWe demon-
stration plant in Jordan using a volumetric air receiver and ceramic storage
(6). A solar/fossil-fuel hybrid design configuration without thermal storage is
currently planned for the demonstration plant. The consortium is working with
the European and Jordanian governments to secure the necessary agreements
to move the project forward.
Integrated solar, combined cycle plant configurations are being developed
for power tower technology, which will significantly lower costs for early com-
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Figure 2 Photo of the 10-MWe Solar Two Project.
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COMMERCIALIZING SOLAR POWER SYSTEMS 379
mercial plants. High-temperature solar energy from power towers can be inte-
grated with the gas turbine topping cycle, as well as with the bottoming steam
cycle. Capital costs are in the range of $1000–1500 per kW, and electricity
costs have been calculated to be within 0.5 cents per kWh of conventional gas-
fired combined cycle power plants. The annual solar fraction for power tower
combined cycle configurations will likely be about 20%, but it can be higher if
more than a minimum amount of thermal storage is incorporated into the plant.
Because the integrated combined cycle configuration reduces the market entry
cost and risk hurdles, it may lead to earlier introduction of commercial plants.
Higher solar fraction plants can be built as the relative economics of solar and
fossil energy change.
A 170-MWe solar central receiver combined cycle power plant has been
proposed for the SEZ in Southern Nevada (the SEZ is discussed in more detail
below). The plant, proposed for 1999 operation, would integrate solar energy
with fossil energy in both the gas turbine topping cycle and the bottoming steam
cycle.
Parabolic Dishes
This modular solar thermal technology has achieved the highest net solar-to-
electric conversion efficiency by using a Stirling engine at the focal point of a
dish reflector. Under development are specially designed free-piston and kine-
matic Stirling engines, which promise the long lifetimes and low maintenance
costs required for these systems to be economical. Systems are being designed
for remote and distributed utility applications and may also be hybridized to
burn natural gas or other liquid and gaseous fuels and thereby provide base-
load power. In regions where suitable biomass fuel exists, such systems can be
fully based on renewable energy. Several companies in the United States and
in Europe are developing dish-engine systems for both remote applications and
grid-connected, distributed power applications (7, 8).
In the United States, development of parabolic dish-Stirling systems is being
carried out under three Department of Energy (DOE) joint venture programs.
The first joint venture development program with Cummins Power Generation
(CPG) is developing a 7-kWe (kilowatt electric) system for remote power ap-
plications. Started in 1991, this program currently has four prototype systems
being tested at several sites, and CPG expects to begin commercial production
in 1997. The new solar dishes will be marketed through the Cummins Engine
marketing and distribution network. Figure 3 contains a photo of a prototype
dish Stirling system.
The second joint venture program, which is also with CPG, was started
in 1994and will develop 25-kWe dish-Stirling systems for distributed grid-
connected applications. The first prototype systems are being tested by several
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380 DRACKER & DE LAQUIL
Figure 3 Photo of a Cummins parabolic dish solar collector.
utility companies in the United States in 1996. The third joint venture pro-
gram, led by Science Applications International with Stirling Thermal Motors,
is developing a 20-kWe dish-Stirling system also for distributed applications.
This venture hopes to begin marketing 100 units per year beginning in 1998,
principally in high-value off-grid applications. Over 1000 units per year are
anticipated, beginning in 1999, for a variety of distributed generation applica-
tions. Utility interest in dish engine systems has been organized into a Utility
Dish Stirling Group to keep track of development progress, to provide host sites
for prototype systems, and to provide feedback to the manufacturers.
In Australia, the Australian National University has developed a 50-kW dish
concentrator system driving a small, ground-mounted steam power plant (9).
In Darwin, Australia, the territorial utility is considering a 5-MW combined
cycle application using small gas turbines and an array of several dishes. There
are a wide variety of solar thermal technologies in various stages of develop-
ment covering a range of applications. Table 1 gives projections for cost and
performance of each solar thermal-electric technology.
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Ta
bl
e
1
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la
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th
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m
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a 19
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382 DRACKER & DE LAQUIL
Solar Photovoltaic Power
Although the photoelectric effect was discovered by Becquerel in 1839, the first
practical PV devices were not created until 1954 by Bell Labs. PV devices were
initially used as the primary power source for early satellites. However, since
the mid-1970s they have been used increasingly for remote commercial power
applications such as microwave stations, signal buoys, highway call boxes, and
railroad crossing signals.
A PV device consists of layers of semiconductor materials that convert sun-
light directly into electricity. When a PV cell absorbs energetic photons of
light, electron-hole pairs are created, which generate a voltage across the cell
and drive an electric current. PV devices are of two basic types: Flat-plate
systems are comprised of PV modules that absorb both the direct and diffuse
components of sunlight. Concentrator systems use mirrors or lenses to focus
the direct component of sunlight onto a small area equipped with PV cells.
Cell and Module Technologies
The first PV devices were made using wafers of very high purity single crystals
of silicon. Today’s commercial PV cell technologies include crystalline and
polycrystalline silicon, as well as various thin-film materials. A large percent-
age of cells are still made from wafers sawed from large boules of very pure
silicon. However, the cost reduction possibilities for this technology (because
of minimum thickness requirements to minimize breakage during subsequent
processing steps) are limited by the large amount of silicon used in the wafers
and the large silicon losses in the sawing process. Most of the research and
development (R&D) has therefore focused on direct wafer growing techniques
and thin films of various materials.
Direct wafer growing techniques lower production costs because they sim-
plify manufacturing processes and eliminate most of the sawing, which reduces
silicon wastage. Wafer can be grown directly by several techniques, such as
pulling ribbons out of molten silicon vats and extruding large castings through a
die. One unique manufacturing technique creates wafers by uniformly imbed-
ding tiny beads of silicon on a sheet of aluminum.
Thin films offer even simpler manufacturing processes and minimal use of
the PV materials. Thin films are usually only 1–2 microns thick, and they
are grown through many techniques, including plasma vapor deposition, wet
chemistry, and epitaxial films. A wide variety of materials are used, and al-
though amorphous silicon is the most common, cadmium telluride, copper in-
dium diselinide, and gallium arsenide are receiving significant attention. Cur-
rent and expected efficiencies for a range of PV cell technologies must be
considered in the context of the following definitions:
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COMMERCIALIZING SOLAR POWER SYSTEMS 383
1. Maximum theoretical efficiency is limited primarily by the range of photon
energies in solar radiation, which can create electron-hole pairs in a given
PV material.
2. Maximum practical efficiency includes the impact of losses due to reflection
of light from the cell surface, leakage currents, and loss mechanisms that
prevent electrons and holes from completing the electric circuit.
3. Laboratory efficiencies are those achieved in testing of carefully prepared
cells.
4. Module efficiency is measured on commercially manufactured modules
tested at standard temperature and sunlight levels.
5. Field efficiency is measured for PV modules or arrays of PV modules in
field service conditions.
The theoretical efficiency for single crystal silicon cells has been projected
to be in the 25–30% range, and efficiencies of approximately 19% have been
attained in the laboratory. Efficiencies of up to 50% are theoretically possible
for modules made by stacking cells sensitive to different portions of the solar
spectrum. Laboratory efficiencies of 30–35% have been measured for stacked
cells (e.g. GaAs/GaSb).
The relatively high laboratory efficiencies achievable with carefully produced
cells is difficult to attain in large-scale production. Typical module efficiency
for single crystal silicon is 11–14%, and the efficiency of field installations
ranges from 9–13%. Module efficiencies are approaching laboratory values as
manufacturers refine and advance their manufacturing processes.
Laboratory efficiencies of 10–17% have been reported for various thin-film
cells (e.g. epitaxial film). Thin-film module efficiencies are currently 4–8%,
and systems in the field have typically shown efficiencies of 3–7%. However, in
1996, several manufacturers will start production of 10–20 MW–per year man-
ufacturing facilities that will produce tandem junction amorphous modules with
approximately 8% efficiency. Triple junction cells with over 10% efficiency
should go into production within a few years, with target module efficiencies
above 11%.
A PV module may be made from several crystalline silicon cells or may be
comprised of a single thin-film sheet sized for use as a module. Modules are
fabricated in various sizes and shapes to meet a range of needs from powering
small electronic devices to generating power for remote homes. A typical
power module is 4000 cm2 in size, is comprised of 36 single crystal silicon cells
connected in series, and generates about 50 W at 17 V. The cells are laminated
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384 DRACKER & DE LAQUIL
between a polyvinyl fluoride (PVF) back sheet and a low iron–tempered glass
cover. The laminate is typically ethylene vinyl acetate (EVA), which must seal
the module against moisture. The modules may have an aluminum frame for
strength and ease of mounting, or they may be frameless to reduce cost. The
output connections are located in a junction box glued to the back of the module.
Modules generally have a diode to bypass current around the module when it
is not generating power (when shaded) and thus avoid overheating and fire
damage. Modules are usually mounted to an array structure on an aluminum
frame or, if they are frameless, a mounting device is attached to the module
back with adhesive.
PV concentrator technologies substitute relatively high-cost PV materials
with lower-cost mirrors or lenses. The modules focus sunlight onto high
efficiency cells, and module efficiencies of 15–20% have been demonstrated.
Point or line-focus Fresnel lenses are typically used in concentrator modules,
and two-axis tracking systems are required to provide necessary optics. Effi-
ciencies of field installations range from 14–18%.
Although concentrating PV energy holds promise for lowering overall system
costs compared to flat plate systems, such economies have not been realized in
commercial systems. Further development and mass production should reduce
cost over the next several years, and systems that achieve 20% conversion effi-
ciencies will likely have low balance-of-system costs. Systems that concentrate
PV energy should begin to make significant inroads in commercial markets in
the late 1990s.
Balance-of-System Technologies
Although the PV module is the primary element of a PV system, several other
components are essential. Portions of the PV system other than the PV mod-
ule are designated as the balance of system (BOS). The PV modules require a
structural support system to keep the array of modules in the proper orientation
to generate maximum power and can withstand environmental loads such as
wind and snow. Modules are generally wired in series and/or parallel combi-
nations to generate the required output voltage and current. For large power
needs the modules may be grouped into several identical source circuits, each
generally limited to less than 600 V (open circuit). Many mechanical fasteners
and electrical connectors are used and must be carefully selected and installed
to avoid expensive rework. The source circuits from the PV modules array are
generally terminated in dc junction boxes and consolidated into larger cables
that connect to a power conditioning unit (PCU) for conversion from dc to
ac. Dc disconnect switches and breakers are used wherever needed to isolate
the system for maintenance. The ac power output from the PCU can be con-
nected directly to a load, or may be connected through appropriate breakers and
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COMMERCIALIZING SOLAR POWER SYSTEMS 385
transformers to a utility grid. When battery storage of energy is required, addi-
tional BOS components are necessary to control battery charging. An overall
control system may be required if, for example, the PV system, a battery, and
a diesel generator are to be operated as a hybrid system.
Market Applications
For several years, PV devices have been the cost-effective choice for stand-alone
power systems remote from electricity grids. Total sales of PV modules in 1995
were over 80 MW, which is up from 62 MW in 1993. Current cost-effective ap-
plications include 1. consumer products such as watches and calculators; 2. off-
grid industrial applications such as navigation buoys, cathodic protection, and
telecommunications; 3. off-grid habitation services such as residential lighting,
radio and television, water pumping, and community lighting; and 4. distributed
grid-interactive applications. Worldwide, about 95% of all PV systems are cur-
rently installed in off-grid applications (10). Between 1976 and 1992, prices
for PV modules decreased by a factor of ten as cumulative production increased
by a factor of 1000 (11). However, at module prices of $4.00–4.50 per watt,
and system costs approximately double that, PV systems are still relatively ex-
pensive for grid-connected applications. Many small off-grid systems (which
include structure, batteries, and controllers) are cost effective at current prices
of $10.00–20.00 per watt, but the off-grid habitation market begins to open
significantly for systems at $7.00 per watt or less. For grid-connected utility
applications, PV systems are approaching cost effectiveness only in very spe-
cialized applications, where system benefits such as voltage stability, reduced
line losses, deferred distribution costs, and increased reliability are important.
Some high value grid-connectedapplications are occurring at present system
prices of $7.00 per watt (at system costs of $7.00 per watt, electricity costs are
in the range of 20–30 cents per kWh). Substantial distributed grid-connected
utility use is anticipated at system prices of $3.50 per watt.
The PV market has been dominated by crystalline cells, which in 1993 ac-
counted for about 48% of the worldwide PV shipments. Polycrystalline silicon
cells represented 29% of the market, and amorphous silicon 21% (12). The
remaining 2% of the market comes from advanced technologies, including rib-
bon silicon, silicon film, and cadmium telluride. Most of the amorphous silicon
cells went to the consumer products market.
Industry experts believe that crystalline and polycrystalline module prices
can become as low as $2.50 per watt and that new markets will open up at these
prices. However, most experts also believe that only thin-film technologies
have the potential to reach module prices of $1.00 per watt or less. Only at this
price will PV systems be able to compete in the grid-connected, bulk power
market (JH Caldwell, personal communication).
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386 DRACKER & DE LAQUIL
COMMERCIALIZATION PATHWAYS
There are two aspects to every commercialization effort: 1. development of the
technology into a product or system that is sufficiently cost effective in its initial
market niche and 2. development of the market through activities that provide
incentives to the purchasers, manufacturers, or investors in the technology or
service being offered. These aspects of the commercialization process are often
called technology push and market pull.
Technology Development
New technologies are never as inexpensive or as efficient as they promise to
become at some point in the future until they have benefited from several gen-
erations of product improvement, manufacturing process improvement, and
investment in production factories. Since the 1970s, solar electric technology
development has progressed significantly, and several cost-effective market
niches now exist, the best example of which is PV systems for remote elec-
trification. However, these technologies either require further development in
order to open new, larger markets, or they need to be demonstrated to prove
their market readiness. Technology proponents, in both the private and public
sectors, are necessary parts of the technology development process.
GOVERNMENT RESEARCH AND DEVELOPMENT Most of the early development
of solar electric technology was initiated and led by governments. In the United
States, the National Science Foundation sponsored early research and systems
analysis. Next, the Energy Research and Development Administration (ERDA),
and then DOE, led the R&D efforts, with much of the work being performed at
various national laboratories or in private industry. In the 1970s and early 1980s,
private industry involvement was significant, but a relatively large percentage
of the total funding was from the government. Most of the projects built during
this period were predominantly government-funded demonstrations of first-
generation technologies. The objective of these early projects was to prove
technical feasibility, not cost effectiveness.
By the mid 1980s, two major events in the United States had caused a shift
away from government-led technology development programs. First, continued
reductions in R&D budgets under the Reagan administration all but eliminated
the DOE’s ability to fund such activities. Second, the sharp drop in oil prices
and the availability of inexpensive natural gas reduced the economic incentives
for quick commercialization of the technologies. Yet it was during this period
(1984–1990) that 350 MW of solar parabolic trough power plants were con-
structed and the worldwide market for PV modules grew from about 18 to
48 MW.
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COMMERCIALIZING SOLAR POWER SYSTEMS 387
COLLABORATIVE EFFORTS The Bush administration and the US DOE em-
braced a collaborative approach to technology development and began to fa-
cilitate private industry–led and cost-shared initiatives. The Photovoltaics for
Utility Scale Application (PVUSA) program was a precursor of many similar
50/50 cost-shared technology development and demonstration projects. The
most important of these efforts for solar electric technologies were the Central
Receiver Utility Studies, the PV Manufacturing Technology (PVMaT) pro-
gram, the dish-engine joint venture programs, the solar trough operation and
maintenance cost reduction project, and the Solar Two Project. In each of these
efforts, some combination of technology suppliers and electric utilities guided
and cofunded the program with DOE’s cofunding and technical assistance. To-
day the amount of private sector investment being leveraged by government
spending has grown to over 40%. In the solar thermal electric program, indus-
try cost sharing has grown from zero in 1990 to 43% in 1994 and 46% in 1995.
A similar trend exists in the PV program.
PRIVATE SECTOR INITIATIVES Several significant commercialization efforts
were carried out primarily by private industry with little or no support from
the DOE. The most significant of these are the major investments in PV tech-
nology and manufacturing capability made by several major oil companies in
the 1980s, and the commercialization of parabolic trough technology by Luz.
The initial success of Luz was made possible by two principal factors. The
federal and state market incentives in place during the early 1980s created
the opportunity, but it was Luz’s financial ingenuity and willingness to “bet
the company” on the performance of their technology that allowed them to
develop 350 MW of power plants, during a period when many others tried
unsuccessfully to develop similar projects. The irony of Luz’s experience is
that uncertainty about market incentives, not about the performance of their
technology, contributed most to the company’s failure.
During the 1980s, much of the private sector investment in PV technology
and manufacturing capability was driven by high oil prices and predictions of
even higher prices in the future. However, it was the emergence of several niche
markets for remote power applications and consumer products that allowed the
early companies to grow steadily. Several large PV purchases by DOE and
a few utility companies caused some aberrations in this steady growth, but
the largest installation of this time period—the 6.5-MW Carrisa Plains plant—
was financed by ARCO Solar, the leading PV module manufacturer at the time.
Later in the decade, oil prices dropped drastically, and many of the oil companies
sold out to other private sector companies. These new investors, including many
European companies, were motivated in part by the environmental benefits of
the technology and a growing perception of the size and long-term importance
of the rural electrification market in developing countries.
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The latest private sector initiative to emerge is being led by the Enron Cor-
poration, whichhas entered into a joint venture with Amoco to mass produce
high-efficiency thin-film solar modules and develop large, low-cost power sys-
tems for bulk power markets. In a major departure from the largely accepted
diffusion model of PV commercialization, the Amoco-Enron Solar Power
Development Company (AESPD) is offering to build large-scale PV central
power plants of 50–150 MW, in increments of 5–10 MW per year, in exchange
for long-term power purchase contracts. What is most remarkable about this
initiative is that power will reportedly be sold at prices of 5–7 cents per kWh,
which is very low for PV power systems. AESPD has proposed a large PV
project at the SEZ in southern Nevada and has received a contract with the state
government of Rajasthan in India for a 50-MW PV power plant.
Market Development
MARKET NICHES The modular nature of PV technology has allowed it to fill
several specialized market niches starting with small off-grid applications such
as calculators, watches, navigational buoys, and microwave repeaters stations.
Although these market niches were small, they allowed a manufacturing, mar-
keting, and service industry to develop and grow. As costs have come down
and system performance has improved, larger off-grid applications for remote
communities and customers, as well as distributed grid-connected applications,
have emerged to allow continued growth in PV manufacturing capability and
expansion of PV markets. Global markets for this energy segment are vast, and
the capture of a measurable portion of this market (∼ 25%) by PV technologies
would represent an increase in production of several orders of magnitude over
today’s levels. The next steps beyond that sizable market are the grid-connected
peaking power market and the bulk power market. This diffusion model of pro-
gressively larger and more cost-competitive market niches is shown in Figure 4.
The market development paths for solar thermal electric technologies can
also be viewed in the context of this diffusion model. Solar dish engine sys-
tems are being initially developed in a 7-kW module size for the larger off-grid
applications of remote communities and customers. Entering the market at
this size application requires a significant investment in systems development
before commercial systems can be marketed. For example, CPG started devel-
opment of its solar dish technology in 1989, and their evaluation of prototype
commercial off-grid systems will continue through 1996. The initial, warranted
commercial systems will be available in 1997.
Larger dish engine systems, with module sizes of 25–50 kW, have been under
development since 1990 for distributed grid-connected applications, as well as
for the larger off-grid applications. Their commercial availability is expected
in 1998.
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COMMERCIALIZING SOLAR POWER SYSTEMS 389
Solar trough and power tower technologies that use steam turbine or com-
bined cycle power systems have module sizes of at least 30 MW, which is too
large for off-grid and distributed generation applications. They must enter the
market with near cost-effective systems for bulk power, which is the most com-
petitive and lowest cost market. The initial commercial systems will require
large investments and bring high financial risks if they do not meet expectations.
Solar trough systems successfully entered the market during a period of high
fuel prices and market incentives. However, that favorable market climate does
not exist now to help the developers of commercial power towers overcome
these significant market hurdles.
MARKET BARRIERS Several market barriers hinder, and in some cases prevent,
the increased utilization of solar power. The most fundamental of these barriers
is the absence of a long-term policy commitment, which prevents an orderly
and sustained development of the technologies and their market applications.
Neither the huge R&D budget increases of the 1970s nor the drastic budget
cutbacks in the 1980s were effective public policy. Also, during this period the
political commitment to market incentives at both the federal and state levels
changed drastically, creating market uncertainty and resulting in wasted effort
by manufacturers and developers.
Figure 4 Diffusion model of PV market niche applications.
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Another barrier is the failure of energy pricing policy to value the environ-
mental and societal benefits of solar energy. Although most people would agree
that paying a little more to not produce pollution is better than paying a great
deal to clean up a contaminated environment, little public policy is directed at
achieving this goal. Solar electric systems emit no gas, liquid, or solid waste
products into the environment unless they are built as hybrid plants, which
significantly reduce the relative level of emission from the power plant. In
addition, the construction of such systems creates significantly more jobs than
does the construction of a conventional fuel-based power plant because the 30-
year fuel supply is manufactured and constructed as an integral part of the plant.
The value of a clean environment and the societal benefits of resource diversity
and local economic development are very difficult to quantify, yet they have a
real impact on quality of life.
Another benefit of solar electric systems is that they allow countries to reduce
their dependence on a single type of fuel. Many developing and industrialized
countries, including the United States, are dependent on imported fossil fuels.
These countries spend significant amounts of money (which could be used to
develop their economies) to purchase these fuels, and their dependence makes
them vulnerable to politically motivated disruptions in supply. The industrial-
ized countries devote large percentages of their military budgets to protecting
access to Middle East oil, and many developing countries spend large portions
of their available hard currency on imported fuels. By increasing its use of solar
electric systems, countries can diversify their mix of generating technologies
and become less dependent on any one fuel. The use of solar electric systems
not only increases energy security and preserves hard currency for growth-
oriented investments, but also creates local industries and jobs that enhance the
country’s economy and foster community self-reliance.
The existence of imbedded subsidies for conventional fuels is the fourth fun-
damental barrier to solar energy use. These conventional energy subsidies can
be found in almost every country. The United States has oil and gas depletion
allowances and a tax exemption for petroleum-derived jet fuel. In most devel-
oping countries, electricity prices are controlled and electric services are subsi-
dized, especially to rural areas where diesel generator sets are dominant. These
subsidies create artificially low prices against which solar electric and other
renewable energy systems must compete to gain market share. Tax subsidies
for solar electric systems can be used to level the playing field, but eliminating
the subsidies for conventional fuels would accomplish the same goal and save
taxpayers money.
Inconsistent and unfavorable tax structures constitute the fifth major mar-
ket barrier. The capital-intensive nature of solar energy systems results in
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COMMERCIALIZING SOLAR POWER SYSTEMS 391
significant tax inequities under today’s federal, state, and local tax laws. Anal-
ysis sponsored by the California Energy Commission shows that the total lev-
elized tax burden paid by all participants in a solar electric power plant is over
twice the total tax burden of its conventional alternative (15). Further analysis
for other renewable technologies shows a similar result (16).
Another major barrier is the lack of local, long-term financing mechanisms.
For off-grid applications, which often have poor customers, the availability of
and access to investment capital is critical to market growth. A solar energy
system could be the most cost-effective option for power, and customers may
even be able to make monthly payments, but without institutions to provide
financing, few systems can be purchased.
MARKET INCENTIVES AND SUPPORTS Investment tax credits have been a com-
mon market development incentive for solar power. They have proven to be
very effective because they provide incentives for the private sector to invest in
the development of new technologies and for the customer to purchase applica-
tions of new technology. In the United States during the 1980s, the solar energy
investment tax credit stimulated the development of a sustainable wind industry
and the commercialization of solar trough technology. Some of the equipment
fielded was not fully developed, and several technology developers went out of
business. This is the natural attrition process that always takes place during the
initial development of any technology. Today, the development of solar electric
and other renewable energy technologies has progressed significantly, and those
regions and countries implementing similar tax credits run a much smaller, but
not zero, risk of poorly performing systems. A significant amount of technical
expertise in this area now exists worldwide, and many of the new participants
in the business are entering into joint ventures with established suppliers.
The World Bank, US AID, and other grant and lending organizations have
sponsored programs that have established the majority of the PV market in de-
veloping countries. The World Bank, through the Global Environmental Fund,
has established a $50 million fund to commercialize PV, wind, and hydro tech-
nology by strengthening the Indian Renewable Energy Development Agency
(IREDA). The fund has reserved $5 million for PV energy.
The United Nations Conference on Environment and Development (UNCED)
has helped promote programs that have resulted in:
1. Mexico using PV energy in 60,000 villages (accounting for the largest share
of US exports),
2. Indonesia working to secure World Bank financing to bring electricity to
30,000 villages,
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392 DRACKER & DE LAQUIL
3. Sri Lanka working with the World Bank to fund the electrification of 20,000
villages,
4. DOE and National Renewable Energy Laboratory (NREL) assisting rural
electrification in Brazil.
Other more innovative incentives are also emerging. In January 1995, the
state of Virginia began offering an incentive to PV manufacturers of 75 cents per
watt of rated capacity of PV modules sold. In the form of an annual grant, the
incentive is paid directly to the manufacturer, and it has already helped two of
the leading PV manufacturers, Enron/Amoco and United Solar Systems, locate
new manufacturing plants in this state. The program will be in effect through
1999, and Virginia politicians anticipate a large, long-term payback from their
investment in this incentive program (17).
Many other incentive programs exist. For example, 33 states offer tax in-
centives to renewable energy systems, 17 states offer renewable energy project
loans, and 7 states offer or have a utility that offers net billing for small renew-
able energy systems and provides users with retail electricity rates for electricity
produced in excess of their consumption (18).
Collaborative Efforts
In 1992, executives from the utility and PV industries met to discuss how utilities
could act collaboratively to encourage the use of cost-effective PV applications
within their service territories. They hoped that stimulating demand for PV
systems would increase PV manufacturing volume, decrease costs, and accel-
erate use of PV systems. In the United States, the Utility PV Group (UPVG)
was formed following that meeting to coordinate this collaboration, and it now
contains 90 utility members from all sectors of the electric utility industry. In
1993, UPVG submitted its TEAMUP proposal to DOE, which outlined an effort
by electric utilities to install 50 MW of grid-connected and small-scale off-grid
PV systems. Utilities, industry, and regulators collaborate at the state level
to promote PV development in a parallel organization called PVs for Utilities
(PV4U).
In the off-grid area, UPVG is supporting the creation of market develop-
ment/buyers groups for coordinating and negotiating with product and service
suppliers for a wide range of applications. In fact, UPVG has identified over 80
separate PV-powered applications that are cost effective under a wide variety of
conditions and may lead to new customers for electric utilities. Their market re-
search indicates a US market potential of almost 300 MW for remote residential
service, water pumping, and cathodic protection. Other off-grid applications
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COMMERCIALIZING SOLAR POWER SYSTEMS 393
with a potential market of almost 500 MW offer new energy opportunities for
electric utilities. These applications include national park lighting, pond and
lake aeration, remote military installations, railroad crossings, and billboard
lighting.
Another collaborative effort was started in Nevada in 1993, when a Task Force
was created by Senator Bryan and DOE Assistant Secretary Ervin to determine
how a SEZ might be implemented in southern Nevada. The objectives of the
SEZ are to support the sustainable development of cost-effective solar energy
technologies and establish a strong solar energy industry in Nevada.
The SEZ Task Force contained representatives from the governor, state or-
ganizations, labor unions, financial institutions, and the solar industry. This
group concluded that the implementation of a SEZ in southern Nevada was
feasible and set a goal of creating 1000 MW of solar power systems by the
year 2002. The Task Force concluded its efforts with the creation of a non-
profit entity to implement the objectives of the SEZ. The Corporation for
Solar Technology and Renewable Resources (CSTRR) was formed in 1995 to
(a) provide a competitive framework for the implementation of market-entry
solar electric projects at the SEZ, (b) facilitate marketing of the power produced
by the market-entry plants, and (c) provide incentives to support private invest-
ment in these market-entry solar power plants through tax-exempt financing,
land, and infrastructure supports.
In May 1995, CSTRR issued a request for proposals for financially sustain-
able solar electric projects. The solicitation was for 100 MW of solar power,
and the supportsoffered by CSTRR are meant to provide a bridge to market
applications for renewable technologies that are completing their development
cycle. Projects that include all four of the solar technologies presented here
(parabolic trough, power towers, dish/engine systems, and PVs) have been pro-
posed to CSTRR, and development of the early SEZ projects is expected to
begin in 1996. A total of 1000 MW of renewable energy projects are planned
for development at the SEZ over a period of 7 years.
In India, the Ministry of Non-Conventional Energy Sources and the Govern-
ment of the state of Rajasthan have just begun planning the creation of a SEZ in
the desert areas of that state. As with the US SEZ, the Indian SEZ plans to offer
solar power plant developers land at favorable lease prices and infrastructure
support, and guaranteed markets for the power at favorable prices.
Another form of collaboration is evidenced by the Department of Defense
(DOD) Photovoltaics Review Committee, a tri-services organization that has
grown from an ad hoc group formed in 1985 by the Office of the Secretary of
Defense to a well-organized program that is leading the introduction of cost-
effective PV systems for military bases and applications. To date, over 3000
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systems have been installed, displacing about 2 MW of diesel and battery loads.
This tri-services collaboration has opened the remote military market, which
is believed to be hundreds of megawatts in the United States, and thousands of
megawatts globally.
UTILITY SECTOR INITIATIVES Recently, a few utility companies in the United
States have begun solar energy market initiatives based on both expanding
services to remote customers and “green pricing” principles. Three examples
are summarized below, but other programs exist, including one with Public
Service of Colorado. In Australia, a low-interest credit card is available that
can be used to finance a range of remote lighting and power systems.
In 1993, the Sacramento Municipal Utility District (SMUD) embarked on a
multifaceted PV commercialization effort based on principles of sustained or-
derly development aimed at accelerating the cost reduction of grid-connected
PV systems. The PV Pioneer Project established a partnership with customers
willing to assist in early adoption of rooftop PV systems. SMUD purchased,
installed, owns, and operates 4-kW systems located on the customers’ rooftops.
The customers participate through a form of green pricing by providing their
roof space and by paying a monthly premium on their electricity bill ($4.00
per month for residential customers). One hundred residential systems were
installed in 1993, 118 in 1994, and annual increments of over 100 systems are
planned through 1997. Commercial customers can also participate as PV Pio-
neers; an initial 40-kW system was installed in 1993, and 144 kW of commercial
rooftop systems were installed in 1994. The third element of the SMUD pro-
gram is substation-sited PV systems that provide distribution system benefits.
A 210-kW system was installed at their Hedge substation in 1993, and three
additional systems totaling 317 kW were installed in 1994; a 214-kW system
is planned for 1995 (19).
In 1993, Idaho Power recognized that off-grid PV systems were a cost-
effective option for many small-scale applications within their service territory.
They created a fixed off-grid tariff system for charging customers for the services
(stock watering, remote residences, etc) provided by the PV systems, which
were designed, installed, owned, and maintained by Idaho Power. The program
has been very successful, and although most of the systems are small, one instal-
lation is an 80-kW PV diesel hybrid system for a remote military installation.
In 1994, Southern California Edison (SCE) created an off-grid tariff system
similar to that of Idaho Power, with the exception that the systems are de-
signed, installed, and maintained by qualified third-party service providers se-
lected through a competitive bidding process. Recently, SCE has also launched
a 5-year program to expand its use of grid-connected PV systems under a
green pricing approach. The program will include architecturally integrated
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COMMERCIALIZING SOLAR POWER SYSTEMS 395
PV systems for new residences and commercial buildings, and the rooftop
systems for existing residences (20).
LONG-TERM DEPLOYMENT STRATEGIES
Solar electric systems have the potential to provide a significant fraction of the
world’s electricity and energy needs (21, 22). If this potential is to be achieved,
broader cooperation among all levels of government, the electric utility commu-
nity, private industry, and the financial community will be required to complete
the development and market introduction process for the technologies. Govern-
ment support for research, technology development, and demonstration projects
is necessary, but it is not sufficient. Market incentives are needed to overcome
barriers in the user and financial communities that exist because these technolo-
gies are new and unfamiliar, may contain unknown risks, and provide societal
benefits that are not valued in the financial calculations.
Resource Areas and Markets
Today, solar electric power systems provide an insignificantly small percentage
of energy use in any country or region around the world. As we pointed out
above, in the section on Market Development, solar technologies are making
significant inroads into several relatively small-scale market sectors. However,
in order to have a measurable positive impact on the environment or on energy
security, solar power must achieve “energy significance.” Plausible scenarios
do exist in the foreseeable future in which solar energy can achieve energy
significance, at least on a regional basis.
Globally, there are over two billion people without any access to electricity.
Most of these people live in developing countries, and many of the regions where
these people live have a good solar resource. Many people without electricity
live in cities, but the vast majority of them live in rural areas. Most of these
rural areas have small electrical loads and are far from transmission grids, which
makes grid extension expensive. Distributed systems are appropriate for this
rural electrification market. Studies have shown that solar electric systems
are often cheaper than diesel engines (the traditional power option for rural
electrification) and quicker to install than grid extensions (23).
The rural electrification market is both enormous and enormously difficult
to penetrate. Having small amounts of electricity for lighting, radio, and tele-
vision can substantially improve the standard of living of rural people, and it is
widely desired. However, the major market barrier has always been the ability
of the people to pay for the electricity. New market-entry strategies to replace
traditional energy sources have emerged. In many countries, these electric ser-
vices are being purchased in the forms of kerosene, dry cells, and rechargeable
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396 DRACKER & DE LAQUIL
batteries. Recent experience in the Dominican Republic and studies in In-
donesia indicate that properly sized solar electric systems can provide equal or
better service for the same cost as conventional sources (24). PV systems are
the predominant solar electric system in this market today, and they have a wide
area of applicability because they use both the direct and diffuse components
of sunlight and therefore operate well in areas with hazy skies. The market
for solar thermal electric systems is more limited because they use only the
direct component of sunlight. Thus, they require clear skies and are best sited
in semi-arid and desert regions.
Several solar thermal electric systems will be entering the commercial mar-
ketplace before the year 2000. Dish-engine systems will compete with PV and
other remote power systems for the off-grid market. They will need to enter
the market with relatively low capital costs and establish a record of reliable
low-maintenance operation if they are to be successful. Solar trough and power
tower systems must compete in bulk power markets, which are undergoing a
major transition around the world.
As large-scale PV and solar thermal technologies mature technically and
become cost competitive, such systems can be deployed in several regions on
a very large scale. Egypt has estimated that up to 4000 GW of solar electric
power plants could be built in that country in identified areas of excellent solar
radiation and good grid access. Large-scale development is also feasible across
North Africa and throughout the Middle East. Given the fact that an electric
grid surrounding the Mediterranean is already under development, and plans
are in place for subsequent interconnection north into the European continent,
solar power could supply 10–25% of a local or regional electricity need within
a 20-year period. Regional centers of very large scale solar power production
are also under evaluation for the contiguous Mojave and Sonoran desert region
of Mexico and the United States, the Thar desert region in Western India and
Southern Pakistan, Central Australia, and Southern China.
The restructuring of the electric utility industry around the world is creating
many challenges for the solar energy industry. The strong emphasis on lowest
short-term prices in many markets threatens to freeze out renewable energy
and energy efficiency options. Much progress is being made at the state utili-
ties commission level through Integrated Resource Planning (IRP) in creating
frameworks for addressing and monetizing externalities and for including pub-
lic attitudes in making decisions about new generation sources. Several issues
will impact how generation choices are made in the restructured utility mar-
ketplace; these include the valuation of environmental and societal benefits,
the amount of consumer choice, and the viability of green pricing marketing
approaches. How these issues will be resolved is unclear.
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COMMERCIALIZING SOLAR POWER SYSTEMS 397
The world’s appetite for electric power is large and growing rapidly. No
single energy option can serve the bulk of this growing need, and many sources
will need to be tapped. Within a 20-year time horizon, solar energy can begin
to make a sizable contribution on a regional basis on the scale of nuclear or
hydro power today.
Societal Needs and Goals
As the millennium approaches, humankind is approaching, for the first time, a
global civilization. Currently our civilization defines societal needs and goals
primarily at the national level. However, since World War II, a multitude of
international organizations have grown and generated a network of governmen-
tal, financial, business, environmental, and political institutions that are now
the foundations of this emerging global civilization.
This global civilization faces huge challenges, not the least of which are its
own population growth rate and the fact that more than two billion people,
mostly in developing countries, live below the poverty line. In general, these
people have no electricity or many of the other services that energy can provide.
Yet key social indicators, such as increased life expectancy, reduced infant
mortality, improved literacy, and lower fertility rates, correlate positively with
increased per capita energy use (25). Energy consumption, per se, does not
produce these results, but energy is required in meeting many basic human
needs, and electricity is a key infrastructure element that can provide better
living conditions and improved communications. Providing electricity to these
people will help the developing countries accelerate their process of nation
building and increase their participation in the global civilization.
Every country can and should determine how this process takes place, and
many have clearly recognized the importance of the services that electricity
makes possible. Governments such as Indonesia and India have established
goals for electrification of all villages and households, and they have imple-
mented policies, often with the support and encouragement of the World Bank
and other multilateral organizations, to attract private sector interest and invest-
ment to this very large and important market.
Solar electric as well as other renewable energy technologies can be corner-
stones of a sustainable world. Several recent studies have identified how we
can make the transition to a sustainable energy infrastructure (26, 27), a tran-
sition that we can manage through a combination of public policy and private
enterprise.
Several recent polls have shown that Americans strongly favor making re-
newable energy and energy efficiency technologies the highest priorities for
federal energy funding. The most significant of these polls was a nationwide
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398 DRACKER & DE LAQUIL
survey in late 1994 conducted by Republican pollster Vincent Breglio (28).
According to the poll, 42% of Americans believe that renewable energy sources
such as wind, solar, geothermal, biomass, and hydro should be the highest pri-
ority for continued R&D funding. Another 22% rated renewables the second
highest priority, making a total of 64% who placed renewables first or second.
These results were reflected across both party lines and regional boundaries.
Although they have strong public support, solar electric and other renewable
energy technologies face significant market barriers. Barriers exist in the user
and financial communities because these technologies are new and unfamiliar
and may contain unknown risks. The technologies provide substantial envi-
ronmental and societal benefits, but these are not valued in typical economic
calculations. In addition, the technologies are capital intensive and do not
appear as attractive to investors as expense-intensive conventional technolo-
gies when the two are compared in a discounted cash-flow analysis. Finally,
their capital-intensive nature results in significant tax inequities under today’s
federal, state, and local tax laws.
Implementation of the following policy change suggestions would accelerate
the market introduction and utilization of solar electric and other renewable
energy and energy efficiency technologies:
1. Remove subsidies for fossil fuels and allow their price to more accurately
reflect the fact thatthey are a finite resource that is being depleted.
2. Provide a means of including remediation costs of environmental and health
impacts of various energy sources at the point of consumption of those
energy sources.
3. Promote long-term investment practices for energy technologies.
4. Equalize the tax treatment of energy technologies.
5. Increase government support for technology development and commercial-
ization activities.
Public/Private Partnerships
The public policy approaches that have generated the most impressive tech-
nology and market development results are those that have provided incen-
tives for the private sector to invest in the development and application of
solar energy systems. Whether these market incentives are in the form of tax
credits, manufacturing grants, special power purchase contracts or buy-back
rates, technology development joint ventures, project development supports, or
concessional financing, these public sector investments often leverage several
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COMMERCIALIZING SOLAR POWER SYSTEMS 399
times their immediate value in private sector investment. The result is increased
employment, the creation of environmentally friendly businesses, and increased
tax revenues from the resulting new businesses and projects. These long-term
public sector returns more than outweigh the initial public sector investments
in the solar energy incentives.
Currently, the world’s leading solar electric technology companies are mostly
in industrialized countries, and although much of the technical expertise resides
in these companies, the spread of technology and manufacturing capability to
developing countries is accelerating. Solar electric systems are being accepted
most rapidly in areas where local governments have adopted incentives to stim-
ulate the private sector to invest in power systems and manufacturing capability.
The rapid development of a wind industry in India exemplifies how successful
appropriate market incentives can be. The incentive is spurring investment in
much needed power plants, and it is stimulating joint ventures between Indian
companies that have manufacturing or other expertise and western companies
that have technological expertise and investment interest. For developing coun-
tries, solar electric and other renewable energy technologies can provide not
only the energy infrastructure needed for modernization and improved stan-
dards of living, but also some of the needed new businesses and jobs.
Global Cooperation
Several mechanisms have been created recently that encourage industrialized
countries and developing countries to work together toward their mutual goals of
protecting the global environment and implementing a sustainable civilization.
Established in 1990, initially as a 3-year experiment, the Global Environ-
mental Facility (GEF) is intended to protect the global environment and transfer
technology to the developing world by providing grants to investment projects,
technical assistance, and research in four areas: 1. global warming, particularly
the effects of greenhouse gas emissions from fossil fuel use and the destruction
of forests, 2. reduction of biological diversity through the destruction of natural
habitats, 3. pollution of international waters, and 4. depletion of stratospheric
ozone. The GEF committed about $1.2 billion to these activities during its
initial 3-year pilot phase, which began in 1991. The fund was replenished in
1994 with an additional $2 billion for its next phase, which began in 1995.
Several solar electric projects are utilizing or plan to utilize GEF grant funds.
A PV Green Carrot program is currently under development by the GEF
that would award $15–20 million to each of three companies or consortia with
the most innovative proposals for accelerating commercial applications of PV
technology in the developing world. Under the Green Carrot program, funds
could be used to subsidize PV products, invest in new manufacturing processes
or facilities, create custom financing mechanisms, or other innovative ideas (29).
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400 DRACKER & DE LAQUIL
“Joint implementation” is a term that refers to cooperation between industri-
alized country partners and developing country partners for the implementation
of a project in the developing country that supports the United Nations Frame-
work Convention for Climate Change that grew out of the 1992 Earth Summit in
Rio de Janeiro. Under joint implementation, the industrialized country partners
may seek credit for emissions reductions against their individual country obli-
gations (30). Joint implementation is not yet in place, but a few pilot projects
are in progress. However, joint implementation is unlikely to have a major
impact on solar energy project development until greater economic value can
be attributed to the credits; e.g. through a carbon tax or mandatory greenhouse
gas reduction levels.
Multilateral lenders such as the World Bank have been increasing their level
of support for solar and other renewable forms of energy. Recent World Bank
reports have recognized the increasing economic attractiveness of solar energy
systems (31). A Solar Initiative has been developed by the World Bank as both
an operational program to integrate commercial and near-commercial renewable
energy technologies into the World Bank and the GEF funding/project pipeline,
and an R&D program to encourage consistent and reliable solar energy research
and development budgets.
Global corporations will also play an increasingly important role in the
commercialization of solar energy systems. Some large corporations, such
as Siemens, are already players. Others are actively entering the market, as
evidenced by the Amoco and Enron joint venture for PV manufacturing and
project development as well as the Bechtel and PacifiCorp joint venture to form
a renewable and distributed energy development and investment company. Still
others, such as Shell, recognize the inevitable need to make a transition to re-
newable energy technologies.
SUMMARY AND CONCLUSIONS
A range of technology concepts, size ranges, and target applications exist for so-
lar thermal and photovoltaic power. Encouraging progress has been made with
solar technology across the spectrum of the commercial development process.
Thin-film and crystalline PV technologies have made significant inroads into
commercial distributed power markets over the past several years. Although
solar trough project development stalled, the 350 MW of plants in California
have continually improved their operations. Power tower, solar dish, and con-
centrating PV technologies have made significant development progress and
are poised to begin entering commercial markets.
In spite of this broad spectrum of technical progress, significant economic
hurdles and market barriers still stand in the way of widespread deployment
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COMMERCIALIZING SOLAR POWER SYSTEMS 401
of solar power. While PV power is cost effective in small-scale distributed
applications, solar power costs are typically two–four timesthat of conventional
generation where abundant supplies of fossil fuels exist. With the present focus
of global energy markets on lowest short-term cost, and with little real economic
value placed on the environmental benefits of solar energy, the private and
public sector initiatives responsible for achieving the technical progress face
big challenges in turning that progress into successful business.
There are, however, several encouraging developments in the market.
Developing countries with large populations still unserved by electric power
have begun to strongly consider distributed solar technologies as viable op-
tions. The World Bank and other financial institutions are prepared to support
distributed solar projects if they can be shown to be the appropriate rural elec-
trification solution.
Large-scale solar power development is being planned and developed in
India, the United States, and Egypt. Up to 1000 MW of solar power could come
on-line in each of those regions over the next 5–10 years. With the support of the
Global Environmental Facility, large solar trough combined cycle hybrid plants
are being planned for Mexico, Morocco, Rajasthan, and other locations globally.
This hybrid approach represents an innovative, alternative commercialization
pathway for solar power as long as fossil fuel supplies remain abundant.
Although the private sector remains very focused on the short term, some
governments are able to look ahead and remain conscious of important envi-
ronmental issues. The government of Germany and the European Union have
indicated a commitment to support solar power development around the world.
The future of solar energy holds great promise and great challenges. To sus-
tain the technical progress of the recent past, solar energy must begin achieving
significant commercial market penetration and business success. A multitude
of commercialization pathways can lead to such progress and success, and these
pathways need to be carefully and diligently pursued.
Any Annual Reviewchapter, as well as any article cited in anAnnual Reviewchapter,
may be purchased from the Annual Reviews Preprints and Reprints service.
1-800-347-8007; 415-259-5017; email: arpr@class.org. Visit
the Annual Reviews home pageat
http://www.annurev.org.
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