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Chapter 1 Introduction
There are several different types of solar energy technologies. These include: both passive and active solar energy systems, thermal and photovoltaic (PV), and concentrating and non-concentrating energy designs. Passive solar energy makes use of heat and light energy from the sun without converting it into other forms of energy.
Active solar energy designs include photovoltaic and solar thermal power. Photovoltaic technology is able to use sun light to stimulate electrons from semiconductor materials to produce electrical current. Heat produced by solar thermal technology can be used for heating applications or to produce electricity using other mechanisms. In my thesis I will focus my study on solar photovoltaic (PV) technology.
The last 10 years has seen high growth in solar energy utilization in several countries in the world. PV solar energy is becoming an emerging new source of energy in these countries for a variety of reasons: the desire to reduce greenhouse gases that cause global warming, to offset the negative health effects of air pollution, to develop a more sustainable source of power, to provide increased energy security and limit dependence on foreign suppliers for energy imports, and in the case of Germany, to provide a safe alternative to nuclear energy, for example. Although Europe has been the leading the world in PV power installations for several years, solar power in the United States has risen sharply over the last few years as well.
Lower PV system prices over time, combined with government incentives, has encouraged continued growth in the solar PV market in the United States. Although electricity produced by solar PV is not yet competitive with traditional forms of utility electricity generation without government aid, the outlook for solar PV market growth remains positive despite a reduction in government incentives in some cases. Many factors will influence the economic viability of solar PV electricity generation in the coming years.
1.1 Motivation and Methodology
My motivation for this study is a personal interest in the energy dynamics in the United States and how they affect the economy and the way people interact with their
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environment. I am interested in the factors that influence the growth of solar PV use in the U.S. and its development as a fast growing sector of the renewable energy market.
The purpose of this study is to gain a greater understanding of the PV solar energy market in the United States and its likely developments.
I expect the results of my study will demonstrate that the use of solar energy in the United States is likely to increase and become a more important portion of the U.S.
energy mix in the future. However, there are still many challenges to PV energy becoming a more mainstream source of electricity, and there are many variables that could affect the PV market either positively or adversely in the future. The methods of my research will consist of evaluating primary data sources and qualitatively analyzing secondary academic sources. I will also use industry reports to supplement my ideas and conclusions, as well as to touch on current developments in the PV industry. All of the dollar amounts given in my thesis will be given in USD.
1.2 Framework
In chapter 2 I will give an overview of energy production and consumption in the United States. I will discuss the main types of power sources used in the U.S. historically, recently, and what is projected for future use. Fossil fuels have been the primary energy source in the U.S., and coal has been the major source of electricity. Despite the prevalence of fossil fuels as a source of energy (electricity in particular), nuclear and renewable energy use has increased over time. Natural gas has also gained in importance as a source of electricity generation. Hydroelectric power has traditionally been the most important source of renewable electricity generation, but wind and solar energy have recently been increasing at a much faster rate.
In chapter 3 I will give a brief history of the early developments of the PV solar energy market around the world and how it progressed into a more viable energy source in different regions. Photovoltaic solar cells using silicon were first developed in the United States in the 1950s. PV cells have been an expensive source of electricity since their inception and were not widely used. In the 1960s, Japan started producing the first practical solar modules for some applications, namely for powering lighthouses in remote coastal areas. In the 1970s, solar energy gained new interest during the global energy crisis; this led to more development within the PV industry. The global PV industry
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slowly progressed in the 1980s but was still mostly a niche market for off-grid applications. By the year 1999, worldwide production reached 1gigawatt (GW).
In the early 2000s, the U.S. was the dominate producer of solar electricity. After 2004, solar electricity in Japan and Germany began to increase substantially, with Germany becoming the world leader in 2006. By the year 2009, Germany was producing more than twice as much electricity from PV cells than any other country. However, due to cuts in government incentives, Germany is projected to command a decreasing share in global PV installations, with China, Japan, and the U.S. increasing their global share of installations.
In chapter 4 I will discuss the governmental policies in the United States that encourage the proliferation of PV solar energy. On a federal level, the major PV initiatives I will discuss are the Million Solar Roofs Initiative (MSR), the Solar America Initiative (SAI), and the SunShot Initiative. These federally supported programs have been important for encouraging and supporting growth and development in the PV industry. Federal tax credits and cash grants have been vital in supporting the demand side of PV energy. After several years of government programs and financial incentives, the United States is developing into one of the larger world markets for PV energy. At the state level, the California Solar Initiative (CSI) has had a major effect on PV installations.
The financial incentives it offers have done much to make California by far the largest PV market in the nation.
In chapter 5 I will discuss the factors of the supply of PV solar energy in the United States. In the late 1990s, PV shipments by U.S. suppliers started to rise. In 2003, the rate increased and again rose sharply in 2005. The total shipments of both solar cells and modules continued to rise even faster in subsequent years. However, in 2007 imports began to exceed exports and outpaced exports greatly in 2009. The price of both solar cells and modules started to fall substantially due to oversupply in the market. The manufacturing capacity of solar cell and module producers continues to exceed global demand. This has resulted in low spot prices for cells and modules, with prices lower than most suppliers can produce them. The problem of oversupply and excess production capacity will likely continue to plague suppliers for the next couple of years or even longer.
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In chapter 6 I will discuss factors of the demand for PV solar energy in the United States. Solar energy consumption in the U.S. remained fairly constant from 1991 to 2006.
It began to rise noticeably in 2007 and increased more each year, more than doubling from 2007 to 2011. Federal and state incentives have proven effective in launching solar energy as a high growth market. In the year 2006, California had the third largest solar energy capacity in the world, behind Japan and Germany. Although California is by far the nation’s leading state in solar power installations, several other states have begun to provide their own incentives to encourage growth in solar power use.
Solar leasing contracts are becoming popular, and its market is expanding quickly.
Solar leasing companies provide another option for customers to purchase solar electricity without having to purchase the solar power system themselves. This has helped to create new demand for residential solar installations. Historically volatile energy prices and predictions of higher energy prices in the future make PV systems an appealing investment. Falling PV module prices, combined with greater cell conversion efficiency, has made the price of solar electricity per watt more affordable than ever before.
In chapter 7 I will give my conclusion and suggestion for the solar PV market in the United States. When the cost of producing electricity with PV systems becomes comparable to utility retail electricity prices, solar power is poised become a more mainstream source of power for consumers. For the meantime, government policies will still be important for ensuring the demand for PV energy systems. Because solar modules are designed to retain most of their productivity for 25 or 30 years, solar energy is also an attractive option for hedging against not only rising energy prices, but against future inflation of the U.S. dollar as well. PV component manufactures will remain challenged to make profits for the time being, and additional bankruptcies and plant closers are likely.
Nevertheless, those that are able to survive the solar shakeout will likely emerge as profitable and competitive enterprises and will be in good position to prosper in a future PV market with higher demand.
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