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Monday, April 30, 2012

The Inevitability of Solar

Three Charts That Illustrate Why Solar Has Hit A True Tipping Point

A new report from the prominent global consulting firm McKinsey shows why solar photovoltaics have hit a tipping point.
As the economics of solar PV continue to improve steadily and dramatically, McKinsey analysts conclude that the yearly “economic potential” of solar PV deployment could reach 600-1,000 gigawatts (1 million megawatts) by 2020.
In the year 2000, the global demand for solar PV was 170 megawatts.
That doesn’t mean 1 million megawatts will get built per year after 2020; it’s just an estimate of the economic competitiveness of solar PV. When factoring in real-word limitations like the regulatory environment, availability of financing, and infrastructure capabilities, the actual yearly market will be closer to 100 gigawatts in 2020.
That could bring in more than $1 trillion in investments between 2012 to 2020.
The McKinsey report, appropriately named “Darkest Before Dawn,” highlights three crucial factors that are giving the solar industry so much momentum — even with such a violent shakeout occurring in the manufacturing sector today.

1. Because solar mostly competes with retail rates, the economic potential for the technology in high resource areas is far bigger than actual deployment figures would suggest. McKinsey predicts that the cost of installing a commercial-scale solar PV system will fall another 40 percent by 2015, growing the “unsubsidized economic potential” (i.e. the economic competitiveness without federal subsidies) of the technology to hundreds of gigawatts by 2020.

2. The most important cost reductions in the next decade will come not through groundbreaking lab-scale improvements, but through incremental cost reductions due to deployment. The McKinsey analysis shows how the dramatically these cumulative cost improvements can change the economics of solar. (For more, see: Anatomy of a Solar PV System: How to Continue “Ferocious Cost Reductions” for Solar Electricity.)

3. Solar is already competitive in a variety of markets today. As the chart below illustrates, there are at least three markets where solar PV competes widely today: Off-grid, isolated grids, and the commercial/residential sectors in high-resource areas. Of course, the competitiveness of the technology varies dramatically depending on a variety of local factors. But this comparison shows just how steadily the cross-over is approaching.

Wait, solar is actually competitive? Didn’t the death of Solyndra mean the death of the solar industry? Addressing the solar skeptics, the McKinsey analysts counter the notion that the solar sector is down for the count:
“Those who believe the solar industry has run its course may be surprised. Solar companies that reduce their costs, develop value propositions to target the needs of particular segments, and strategically navigate the evolving regulatory landscape can position themselves to reap significant rewards in the coming years.”
The short-term picture for solar is extraordinarily challenging, particularly for manufacturers trying to figure out how to make a profit with such a massive oversupply of panels on the market. But this is not an industry in its death throes; these are natural pains for a disruptive, fast-growing industry. The tipping point is upon us.


11 Responses to Three Charts That Illustrate Why Solar Has Hit A True Tipping Point

  1. Anne van der Bom says:
    Those cost projections for The Netherlands in the residential sector are already outdated. See this price list of a well known installer with good reputation. You can have an average system (around 3 kW) installed for about 2 euros per Watt peak including VAT. DIY is very doable and a lot cheaper. No permits required.
    Let’s assume an expected lifetime of 20 years, a yield of 1 kWh per watt peak per annum, and an interest of 5%. My spreadsheet says the price per kWh is 16 eurocents, including 19% VAT. That is 21 dollarcent per kWh. This report still says 30 cents. It is scary how fast costs are falling. Average rate here is 22 cents per kWh.
  2. fj says:
    The report also indicates the potential for healthy growth in the finance industry creating real value in secure financial instruments funding the photovoltaic buildout.
  3. Tom King says:
    No matter how cheap solar gets, we can’t rely solely on market forces to eliminate fossil fuels. The problem is that green energy will reduce the demand and therefore the price of dirty energy. There needs to be trade agreements that stop imports from carbon based economies.
    • fj says:
      Yep, the existing market is phony since natural services are not considered to have any value when the reality is just the opposite; and it should be just the opposite from so-called conventional market methods when valuing systems, i.e., natural including human capital first.
      • Tom King says:
        “the existing market is phony since natural services are not considered to have any value when the reality is just the opposite”
        Such a succinct way of describing a fairly complex situation deserves to be admired and repeated.
        • Mulga Mumblebrain says:
          The market fundamentalist loonies see the economy as the bedrock reality of existence, and the ecology as, at best, a sub-set of the economy, or, more often, a mere ‘externality’, that can be ignored. This sort of magical thinking, irrational, unscientific and frankly deranged, is required by all adherents of the ‘Market Cult’. The Market has replaced God, Gaia, Nature, Reality as the supreme deity. The maniacs actually believe nonsense such as that remedying all ecological crises is merely a question of getting the ‘price signals’ right, then leaving it to the Market. Humanity is being driven to destruction by deranged simpletons who fancy themselves sages.
    • What do you think about carbon fee and dividend? We’d like to pass this law in the U.S. and return 100% of the proceeds to the ratepayer. Start at $10 per ton of emitted C02 and increase $10-15 per year through 2020. Thoughts?
      • Leif says:
        I am a “People” and come from a long line of “people.” If I throw a paper cup out the car window, Bingo, ~ $100+ fine. Corpro /People, a new kid on the block, gets to fill the air, water, dirt and seas with toxin. Even the tit milk the Daughter-in-Law feeds the grand kidder has some of those toxins, yet Corpro/People get to profit Big Time. Even get my tax dollars! What gives. You try spreading toxins around the neighborhood, even Real Thin and give me a report. Shake a broken CFL over each yard in turn,(still less than the proximity of a coal plant). Time Cropro/People learn to play nice with others.
      • Mulga Mumblebrain says:
        Andrew, I think that it would be preferable to keep some of the proceeds aside for renewable research and development, and for the urgent need to address ecological repair. 100% could be returned to the poorest, and lesser amounts the higher up the income and wealth (inverted) pyramid you go.
  4. ibsteve2u says:
    If you’re of a mind, there is a way you can use your idle computer time to do research into finding polymers to replace or augment the current silicon-based photovoltaics, thus opening up new methods of deployment and preventing the recurrence of more collusive monopolies of corporations and/or nations such as now manipulate the supply of energy:
    I’d note that the existing energy monopolies have a lot to do with the funding and direction of “the right”; breaking them would literally be a blow for freedom and our planet – and so the children of our world.
  5. Your comment is awaiting moderation.
    The Millenium hath come! The rebels are coming out of the blogwork to state in ever stronger ways, the obvious. We have what we need without any new inventions, only some creative integrated engineering to make pre-fab solar enrgy appliances that are UL approved and can be simply plugged into the home the way you plug in a refrigerator. Anybody can do it, no permit required. Take a look at
    I am already building integrated pre-fab systems. The problem is, the most practical approaches don’t fit the National Electric Code. Until we get stupid rules to give way, we are doomed to repeat the past, until we are history.
    Jonathan Cole
    Light on the Earth Systems