Thursday, June 7, 2007

Non-Technological Cost Reductions to Solar Power

Last week, SolarTech, a collaborative initiative of a dozen solar technology companies in the Silicon Valley, launched the Solar Center of Excellence, with the goal of transforming the Silicon Valley into a Solar Valley, and serve as a model of solar power adoption to the rest of the U.S. and the world. It released a highly informative white paper outlining the areas and issues where opportunities for cost reductions exist.

Most interestingly, the paper starts with the proposition that PV installation costs in the US are twice of that in Germany and Japan, and that building permit and utility interconnection costs in the U.S. are also significantly higher than in Germany and Japan, and proceeds to focus on primarily on non-technology issues (i.e. the price of silicon or increasing conversion efficiencies) such as harmonizing standards for PV performance installation, utility interconnections and building permits; promoting workforce training in the PV industry; and promoting third-party financing mechanisms (through power purchase agreements) to reduce upfront capital costs of solar installation for consumers. It is the hope that the combination of these measures will substantially reduce installation costs and also reduce installation times from 29-50 weeks (as is the case now) to as little as 9 weeks. [See related blog post by the Spicy Solar Guy on why solar installation in Germany significantly lower than that of the U.S.]

An interesting side note is that solar modules only account for 50-60% of the costs of a solar system's price. The remainder consists of installation, as well as various "balance of system" components such as the inverter and mounting systems. Thus, apart from increasing conversion efficiencies of PV cells and reducing installation costs through the above measures, a meaningful opportunity exists in reducing the costs of inverters and mounting systems, components that are hardly as sexy or get the press attention as solar modules themselves. Indeed, the white paper reports that the "learning rate" for inverters is only about 10%, compared to 20-25% of PV modules and other balance if system components. One of the paper's recommendations is thus increased R&D in inverters.

Another paper (titled "What the Solar Industry can learn from Googel and"; free registration required) by The Topline Strategy Group discusses the challenges that must be overcome to make solar power a "short fuse technology" (i.e. a technology that has a shorter early adopter period and achieves widespread mainstream adoption far faster than traditionally thought possible). This paper covers makes many of the same proposals as the SolarTech white paper, including harmonizing standards, streamlining utility interconnection and permitting processes, and increasing innovative financing mechanisms to reduce upfront capital costs of installation. Another proposal unique to the Topline paper is to create a secondary market for solar equipment (this way a homeowner won't feel stuck with fixed costs of a PV system which lasts 30 or more years when such homeowner doesn't think he'll stay in the home for that long a time) by making the accompanying warranties to the PV system transferable (currently they are not transferable).

All these kinks suggest how very much in infancy the solar industry is (even thought the technology has been around for decades), and how much opportunity lies ahead to proliferate PV's use.

I'm salivating.

Note: Thanks to the Green Wombat for first bringing Solartech's efforts to my attention.

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