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Chapter 7 Conclusion and Suggestion
Many factors involving PV energy in the United States have been mentioned in the previous chapters. Although its total generation capacity is still small compared to most other forms of electricity in the U.S., PV is gaining in importance as a source of renewable energy. In this chapter I will list my conclusions about PV use in the U.S., as well as offer my suggestions.
7.1 Conclusion
In the last several years the United States has experienced impressive growth rates in solar PV installations. California has set the pace for solar PV in the U.S. and its PV market continues to expand; now several other states are quickly expanding their PV markets. Falling prices for PV components have had a positive effect on the demand for PV energy. As the demand has increased, more investment has been made in PV manufacturing, which in turn has created economies of scale and downward pressure on PV prices. So far this relationship has favored customers the most as the continual drops in system prices makes PV systems a more attractive investment. Based on my study, I have reached the following conclusions:
1. Government policies and financial incentives are important for PV demand
A recurrent theme in this thesis has been government policies and financial incentives. Government incentives are likely the single greatest factor in determining the success of a particular PV market. The countries with the best financial incentives for PV systems in relation to the cost of energy have the highest rates of market growth, and the U.S. states with the most extensive financial incentives for PV systems have the highest rates of PV market growth in the nation. Until the cost of electricity generation from PV becomes competitive with the cost for retail electricity sold by electricity utility companies, government policies and incentives will remain important for the continued expansion of PV system installations. The incentives needed for market growth will vary depending on the state and municipality because electricity prices and market conditions can differ greatly by region. There is also the political appeal of the subject of clean forms of renewable energy. Depending on political climate and particular elected and
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appointed government officials, political considerations could have a significant impact on policies affecting the PV market.
2. PV manufacturers in the United States will continue to suffer financial difficulty For PV manufacturers, the solar shakeout that has existed the last couple of years is still in effect. Several U.S. PV suppliers have gone bankrupt or ceased production as a result of PV cells and modules getting priced below the cost it takes to produce them. The problem of oversupply in the PV supply chain will not disappear quickly. Many tier 2 and tier 3 PV manufactures in China continue to exist as potential PV supply capacity as they lie dormant when not fulfilling orders for tier 1 companies. Only the most cost-effective and efficient producers will emerge from the glut of the oversupply that is mostly blamed on Chinese manufacturers. In addition to the challenges created by oversupply, new challenges for global PV suppliers include meeting localized requirements and preferences for PV components in various regions. Large companies with manageable debt, a strong supply network, and a well-received name brand seem most likely to survive the current market climate. Because there are higher profits to be made from PV project development, PV suppliers that are successful as project developers are also more likely to prosper financially.
3. The market for solar PV will be affected by natural gas used for electricity
The capacity and utilization of natural gas used for electricity generation has grown over the last decade. It has recently become more cost competitive with the largest source of electricity produced in the United States, coal. Because of the vast amounts natural gas that exist in shale deposits in the U.S., combined with improved technology in horizontal drilling that can now better access it, the potential for large increases in the supply of natural gas give it potential as an increasingly important source of electricity generation.
If the supply of natural gas is maintained as abundant and cheap, and because it is a cleaner source of electricity than coal, it could likely develop into the major source of new electricity generation in the U.S. for years to come. In such a scenario, interest by energy investors and energy policy makers alike for renewable energy projects such as solar PV could wane as natural gas is called upon to provide a source of electricity that is as cheap and abundant as coal but only produces half the air pollution.
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7.2 Suggestion
The prices for particular energy markets can be difficult to predict, and much about the future developments of the PV market in the United States remains uncertain. We know that government policies, electricity prices, and the amount of electricity produced by natural gas will affect the future PV market. Based on my study of this topic, I would make the following suggestions:
1. Government policies that support PV energy should continue
It is important for financial incentives for PV to continue as necessary, but only in the amount necessary to elicit consist and moderate market growth. Any changes to incentive rates should be predictable and transparent in order to ensure confidence in investors. California has been successful at this approach with the California Solar Initiative (CSI). Incentive payouts have gone down steadily even though the rates of PV installations have gone up. The CSI has nearly achieved all of its objectives years ahead of schedule. Federal incentives have a history of being unpredictable and have changed often. The Business Energy Investment Tax Credit (ITC) and the Residential Renewable Energy Tax Credit have brought market incentive stability at the federal level since 2009 and is set to remain unchanged until the end of 2016. This has been very positive for encouraging investment in PV systems. However, there is much unknown about what the government will do to support the PV industry after 2016. The federal government should adjust its support for PV as market changes require and communicate its approach to providing the necessary financial incentives in a more transparent and predictable manner.
2. Priority should be given to residential PV systems over utility-scale PV
More effort should be made to focus on residential and decentralized PV sources rather than utility-scale PV systems. Much of the electricity utility infrastructure in the U.S. is old and will be costly to replace and maintain. Localized energy generation saves both cost and energy loss incurred from transmitting power over an extensive grid. In order to make the transition from traditional centralized power sources to several dispersed and localized electrical sources, smart meters and smart grids need to become mainstream resources. Energy storage technology will become pivotal in further reducing the need for a centralized grid. Small community grids centered on a localized electricity
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storage facility could serve surrounding buildings as a backup source of power that each PV system contributes electricity to. It could be partially backed by other microgrids, and buildings could possess energy storage of their own. A benefit of such an arrangement would be greater energy security, more efficient energy transmission, better protection from grid failures, as well as protection against future fluctuations in the price of electricity.
3. PV should be expanded in an effort to reduce greenhouse gas emissions
If climate scientists are correct and climate change is a human-made phenomenon it will become increasingly important to reduce the amount of fossil fuels used to provide energy needs. Currently, it is economically unrealistic to expect that most of the electricity in the United States will be met by renewable energy sources in the near future.
Natural gas is the best compliment to renewable energies such as solar PV in providing enough electricity for U.S. consumption while reducing greenhouse gas emissions as much as possible. Efficient hybrid plants using both renewable energy and natural gas should be developed. As PV technology and costs improve it could replace some of the use of natural gas and account for a larger portion of U.S. electricity generation. Ideally, in the future natural gas would only be needed as a reserve source of power while renewable energies such as PV provide the bulk of the electricity demand. Even if one is skeptical about topic of climate change, emissions from fossil fuels used to generate electricity results in air and water pollution. By increasing the use of PV energy, this pollution can be reduced and alleviate some of the complications of air pollution that people suffer from, such as affected respiratory development and increased rates of asthma, for example.
4. Taiwan should focus on effective government policies to support its PV market If reference to Taiwan, I think Taiwan can gain value from observing the success, and in some cases, failures, of the PV market in the United States. The United States and other countries with growing PV markets reveal the importance of effective government policies and incentives. The financial incentives need to be generous enough to spark the interests of investors, but they also need to be consistent, transparent, and reliable in order to make investors and financial backers comfortable investing in what is otherwise a relatively new energy market with unproven long-term results.
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Although Taiwan only had less than 10 MV of PV before 2009, its PV market has grown to 222 MW since the Renewable Energy Development Act of 2009. Taiwan’s Ministry for Economic Affairs and the Bureau of Energy recently announced a new strategy to prioritize the increase of residential and commercial rooftop PV installations to over 3 GW by 2030, and has targeted the renewable energy makeup of the country’s total power generation to 18 percent by 2025. These would seem like steps in the right direction for developing Taiwan’s PV market. Taiwan will be faced with familiar challenges as its PV market builds momentum, such as having qualified installers and the ability to effectively connect the PV systems within a larger grid. Consistent and manageable growth over the long term is more favorable than creating an unsustainable bubble that ends up crashing the market, such as what happened in Spain and the Czech Republic when the governments could no longer support their policy schemes.
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