maandag 20 december 2010

The (R)evolution of PV Power Plant Sizes

All the way back in 1995, a revolutionary 3.3 megawatt ground-based solar PV power plant was connected to the grid in Serre, Italy. At that time the world’s largest PV system, it was built as a demonstration project and financed through various subsidies.

From Big Beers to the Biggest PV Plant
It took almost a decade before the market for bigger PV projects really took off. From 2004, when the German Feed-In Tariff started to flourish, tens of power plants of 1 MW or more were being built in Germany. A 5 MW plant, at that moment the world’s largest, was built near Espenhain for 22 million euro, or 4.4 euro per Wp.
And in 2005 the new record was a 10 MW power plant project in Bavaria, which cost 49.5 million euro. Bavarians think big - be it cars, beers or solar PV.

From that point on, development grew faster and faster. By the end of 2007, even more PV plants of over 10 MW had been built, with several in Spain, where the lucrative Feed-In Tariff had started two years earlier, with further 10 MW projects in Germany.

Large-Scale Power Plants at Rocket Speed in Spain
Due to the Spanish FIT law, large-scale power plant developments gained rocket speed in 2008, with 4 power plants above 40 MW and one at a whopping 60 MW in Olmedilla, Spain. The latter was constructed in 16 months at a cost of 384 million euro, or 6,40 euro/Wp. Due to the lucrative Spanish Feed-In Tariff, the price could go up to provide a nice margin for everyone involved… Like a Pamplona bull run, the Government’s Feed-In law resulted in large-scale development of further such projects.  Even today, Spain still contains about 70% of the world’s large-scale PV power plants - in total over 1000 big projects. An impressive overview of the world’s largest PV power plants can be found on the great website www.pvresources.com.

Thin Film Enters the Ballgame
Although an outsider might think that the bigger the project the more interesting it will be to use high-efficiency modules, less efficient thin film technology entered the arena in 2009. In this year a few more +50 MW projects were completed, mainly in Germany, including one using Cadmium Telluride thin film modules. At the end of 2010, three projects of over 80 MW will be finished and connected to the grid, including the first one in North America: the Sarnia project in Canada, once again built using First Solar thin film, at around 3,75 Euro/Wp.

‘Small Step for the Industry…’  
From +50 to 250 MW is a relatively small step for the industry, but a giant leap for market development. Energy utilities are now starting to seriously consider solar PV. The next steps will likely take place on that side of the Ocean as well. Sunpower and NRG Solar plan to start construction of the 250 MW California Valley Solar Ranch project in 2011. And earlier this year, First Solar announced the development of a 550 MWp power plant project in the desert near Los Angeles. Energy utilities PG&E and SCE will buy the power.

Solar PV: Fast, Experienced and Cheap
What does this teach us? First of all, development of large-scale PV power plants is progressing rapidly. Secondly, the building process goes fast. In 2008 in Spain, over 2 Gigawatt was installed in the space of a year. Thirdly, there is a tremendous track record of experience. Finally, prices have come down, but there is room for improvement. If large-scale orders of top-tier module brands can be purchased for less than 1,30 euro/Wp and the other BOS-cost will be less than 1 euro/Wp, total system cost should be able close at 2,30 euro/Wp today. With module prices expected to decline the coming years, turnkey system costs must be achievable at under the 2 euro/Wp mark.

The Next Step: Better, Faster, Bigger and Cheaper
Anyone who says that solar PV is not yet a proven technology is invited to take a look at the overview of existing large-scale power plants throughout the world. And do not forget that behind each project are investors, installers, banks, engineers, consultants and many more experts involved who made this happen. Through sheer drive, these involved people and companies are keen to prove that they can do better, faster, bigger and cheaper next time around.

Not Available Around the Corner
And this will continue. We will see bigger projects, for cheaper. It will be nothing more than a natural development to see +100 MW plants being built over the next 3 to 5 years. Not one, but several. Because if one company can, others will want to prove they can do better and cheaper. For example in the case of First Solar taking the 500 MW mark, the market and industry are following suit, aiming at 1000 Megawatt projects. To my expectation, these projects will be announced within 3 years and built within 6 years.
These projects will require the involvement of strong, bankable, large companies. Even if the projects cost less than 2 euro/watt, the investment cost of a 100 MW project will be around 200 million euro. Not something a multinational energy utility will buy from the first PV installer around the corner....

A Different Ballgame
Today, production costs have been achieved at as low as 15 eurocents per kWh by a solar PV plant in France. The cost per produced kWh will soon get close to 0,10 euro/kWh, even without any support of feed-in tariffs. That is a different ballgame. The PV power plant proposition will become attractive for many utilities looking for quickly-installed, clean, reliable, cheap power, without future risks related to global political changes, possible CO2 taxes, fuel price and currency fluctuations.

Separating the Men from the Boys
The development of these large-scale projects will fuel industry consolidation and will distinguish the men from the boys in this industry. Only the real big bankable companies will be able to guarantee a continuous supply of these large amounts of modules. And these companies will compete heavily for these projects - they guarantee their base load manufacturing capacity, and take a hell of a lot less sales and acquisition time than selling 30,000 systems to households at the same volume…
And although the title “The biggest solar PV project in the world” is moving around faster and faster, it is not bad for your image and branding to have it bestowed on your company for a while....

maandag 6 december 2010

Why the Indian PV market will grow fast

India will not wait for centralized electricity grids

Why is India set to soon become one of the world's largest PV markets? Because all the necessary ingredients are there: Permanent energy shortages, strong economic growth, growing energy demand, lack of fossil energy sources, and abundant sunshine. Solar PV is already competitive in India in several market segments such as for powering telecom towers. Tens of thousands more will be built in the coming years. Interesting market... But let’s take it one step further. Solar PV will be competitive with grid electricity in India within 5 to 10 years.

We are talking serious business

Average electricity consumption per household in India is expected to show a stunning growth, from a little over 600 kWh to more than 1000 kWh. So wake up Europe and the US - this is still per year and not per quarter as is the case for us! Because India’s population is more than double that of Europe and the US combined, we are talking serious business. How to power the rapid economic growth in India?

Can anyone make a serious guess as to coal prices in 20 years’ time?

Import more fossil fuel? Build more coal and nuclear power plants? Like in most democracies - and India is the world’s largest - it takes a couple of years to have such a plant available for power supply. Bureaucracy comes with democracy. Let’s say the plan to build a new central power plant starts today. You will be a winner if the power supply is operational in 5 years’ time. Plus, you will need expansion of the grid. On the other hand, what will the cost of (decentralized) solar PV systems be in 5 years’ time? At the very least, a lot cheaper than today - and likely close to grid prices. But even more important, you can calculate the exact cost of the produced (solar) energy for its 25 years’ lifetime. Those costs will be flat and completely predictable. Put that against the cost of electricity from coal or oil over the next 25 years - not forgetting possible CO2 taxes. Can anyone make a reliable prediction? So, if you are an investor and you don’t like risks in your business model, what makes more sense?

Skip the old-fashioned cable phase

No wonder the Government of India is taking first steps with solar energy under the National Solar Mission. The target: 20,000 megawatts of cumulative installed solar power by the year 2022. This seems an impressive number, but the program might indeed become reality...
Let’s make a comparison with telecommunication systems. Countries like China and India went straight from no telephones to mobile telephones for everybody. They never went through the era of cabled phones. Phones with wires - how old-fashioned is that? Now, will it make sense for India to invest its money into expensive and financially risky projects like centralized fossil power plants and grid expansion? With solar PV sure to become competitive in India within 5-10 years, this outdated approach can be skipped. Like with mobile phones, India can go straight to a decentralized power supply from financially more attractive and predictable PV systems.

No waste of money on old-fashioned technologies

In fact, their growth and development stage gives India a clear advantage. They don’t have to waste money on old-fashioned technologies. They will learn from the mistakes we made in the past - and this in a period of strong economic growth. Compare that with financially struggling economies in the Western World, where government budget constraints hinder investments in renewable energies.

Bureaucracy? Talk to a Californian installer!

There are some hurdles here and there - such as bureaucracy and corruption. But, is that much different from the Western world? Ever talked to a Californian solar entrepreneur about all the paperwork required for a new PV installation?

Power to the wireless people

It won’t surprise me if market development in India progresses at a faster rate than the National Solar Mission is targeting. Within a decade people in India will not wait for the Government stimulus programs in order to use solar power - just as no-one waited for the Government in order to install cables underground for “new telephone connections.” Photovoltaic energy systems will just provide the cheapest energy. This decade, no-one will wait for expensive centralized fossil power stations and grid expansions. People and new entrepreneurs will use and provide decentralized cheap solar energy. More than ever it will be “Power to the people!”