Closing the gap on solar

Posted on January 12, 2008
Filed Under Uncategorized |

by Willy Ritch

The Financial Times ran a good story this week on the solar industry’s efforts to reach “grid parity” with conventional power sources–that is, to start producing solar power that costs the same or less than power from fossil-fuel sources.

Before I get into the meat of the FT story, let me just point out that most cost comparisons between clean and not-so-clean energy sources are usually not accurate. There are so many hidden costs associated with fuels like oil and gas, simply looking at the cost to the utility of the energy misses quite a bit. First, there are substantial subsidies that go to the oil and gas industries every year. From preferential tax rates to free or discounted lease agreements for drilling on taxpayer-owned land, companies like Exxon Mobile collect billions of dollars a year in government aid. But that pales by comparison to the environmental costs of burning fossil fuels. It’s pretty hard to put a number on it, but reputable estimates put the figure at somewhere between $54 and $232 billion a year. Then, of course, there is the military cost of defending US oil interests in the Middle East.

Putting hidden costs aside though, the FT story says that solar power is comparatively expensive because of the current costs of producing the solar panels. But people far smarter than I’ll ever be think those costs are going to shrink dramatically. Like Jeffery Immelt, the CEO of General Electric:

I am convinced that in the next five years, the solar industry has the ability to take out half its [manufacturing] costs.

About a third of the cost of a solar panel comes from silicon, and right now it’s only produced by seven companies–the Seven Silicon Sisters. But since the solar industry is so hot, as many as 50 new companies have started up, adding competition and increasing supply, which will put a downward pressure on prices. (One of the new companies, building a factory in China, thinks they can cut silicon prices nearly in half in seven years.)

Another factor is not the falling cost of solar power, but the rising cost of fossil fuel generated electricity.

Richard Doornbos, chief executive of Hemlock Semiconductor, owned by Dow Corning of the US and Mitsubishi Materials and Shin-Etsu of Japan, says predictions that grid parity will be reached by around 2012 are “credible”…. “If the world brings in some kind of carbon taxation [as part of an effort, linked to tackling climate change, to make fossil fuels more expensive] then the costs of solar power will look even more attractive,�? says Mr Doornbos.

Closing the gap on solar

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