Chapter 6 The Demand for Solar PV Energy in the United States
6.4 The Outlook and Potential for Future Solar PV Demand
6.4.5 Other Factors Effecting Demand for Solar PV
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electricity generation cannot be controlled based on supply and demand considerations the same way as conventional energy generation.
“To balance supply and demand continuously when there is significant intermittent generation on the high voltage network requires that system operators have the capability to respond very quickly to rapid changes in power flows at different locations on the network by holding more dispatchable generation in operating reserve status and having the capability to monitor and adjust the configuration of power flows on the transmission network to balance supply and demand continuously while minimizing costs.” Smart grid technology will also be important for managing remote distribution systems on the grid as well. Automatic control mechanisms and monitoring will need to be in place at the local level to adjust to fluctuations in PV system generations efficiently and safely as the number of PV systems connected the utility grid increases in magnitude.
6.4.5 Other Factors Effecting Demand for Solar PV
Many factors might influence later developments in the PV industry in U.S. states.
According to statistical analysis by the George Washington Institute of Public Policy, the expected developments in a state’s PV market are influenced by the following variables (Lopez et al., 2012):
1. States with larger populations have more solar energy deployment;
2. States with higher average incomes have greater solar energy deployment;
3. States with higher electricity or natural gas prices have more solar energy deployment;
4. States with higher electricity or natural gas prices have more solar energy deployment;
5. States that need to import more energy have greater solar energy deployment;
6. States with better solar resources have more solar energy deployment; and 7. States with a more liberal citizenry have greater solar energy deployment.
A study on the plausibility of renewable energy sources becoming the predominate source of electricity in the United States finds that the power sector would need to make major adjustments. The required adjustments include: greater flexibility in the utilization of conventional energy sources, extensive electricity storage capacity, new
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transmission infrastructure, changes in power system responsiveness (smart grids), distributed and diverse sources of renewable power, dispatchable renewable generators, and development of demand-side technologies (Mai et al., 2012).
Limitations on the power generation capabilities of solar PV include: conversion efficiencies, performance limitations of inverters, battery storage technology limitations, and performance degradation due to time and weather (Timilsina et al., 2011). A Potential impediment to the rate of future growth in renewable energy includes the cost of infrastructure to connect remotely located renewable energy locations to the utility grid, in reference to utility-scale PV plants. There are also additional costs involved with the connections to the grid themselves (Heiman and Solomon, 2004).
The development of advanced battery technologies will be important for the future development of the solar PV market. Many countries are investing in the development of batteries to support utility-scale renewable energy projects. “(The) Most advanced economies in the region (Asia Pacific), including Japan, South Korea, and Australia, are moving toward smart grid and microgrid energy delivery models, which form natural tie-ins for energy storage, particularly batteries.” Battery development is centered on lithium ion, sodium sulfur, and flow battery technologies. Stored energy such as pumped hydro, which is more widely used in China, can be another approach to utilizing electricity produced by PV systems to create a readily accessible source of power (Chan, 2013b). Perhaps the United States could learn from these developments and emulate some of the strategies used in the Asia Pacific if proven successful.
Financing has been a barrier to solar PV power installations in the United States.
Solar PV has been growing quickly but is also considered a risky investment by some.
Financing for solar energy projects can be burdened by higher financial charges “because solar energy projects have a shorter history, lengthy payback periods and small revenue stream” (Timilsina et al., 2011). Much more can be done to provide the financing needed to support more investment in PV systems.
Third-party-owned (TPO) and power purchase agreements (PPAs) continued to gain market share in the year 2012. TPOs accounted for 90 percent of Arizona’s new residential PV installations, and have accounted for more than 50 percent of new installations in most major residential markets. This has attracted new investment for
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companies hoping to profit from such arrangements. “GTM (Greentech Media) Research forecasts that the third-party-owned residential solar market will maintain its momentum and become a $5.7 billion market by 2016” (SEIA, 2013f).
“Crowd funding,” a form of pooled funding investment, could develop into a more significant source of funding for PV systems in the future. The company Mosaic is a relatively new company using the crowd funding concept. It has raised over a $1.1 million U.S. from nearly 1,000 different investors solely for PV project investment. It recently partnered with a solar project developer to finance its first utility-scale PV plant totaling 6 MW (Carus, 2013b). Although crowd funding currently does not provide a large investment platform for the PV market in general, it is a relatively new approach to investing in PV, and its potential as a major investment vehicle has yet to be determined.
Another approach to diversifying the solar PV market comes in the form of “solar gardens.” An example of this is given by the company REC Solar, which develops community solar projects under Colorado’s Community Solar Gardens Act legislation that recently came into effect. The program caters to customers who are interested in PV electricity, but who are unable to get PV systems installed on their roofs. The program allows customers to purchase solar energy from the system operator through the utility and also receive benefits from the federal renewable tax credits. To qualify as a solar garden under the program there must be at least 10 subscribers within the same county, and the PV system can be no larger than 2 MV. Similar programs could be implemented in other U.S. states in the future. “California currently has two community solar bills proceeding through the legislature and the state’s investor owned utilities have put forward their own community solar plans to regulators” (Carus, 2013c).
There are many investment vehicles available globally that have not determined the solar PV market in the United States to be an appropriate form of investment for a variety of reasons. “According to research from the US-based Climate Policy Initiative think-tank, institutions such as pension funds and insurance firms worldwide manage around US$71 trillion of investors’ money, capital that could be used to meet a quarter to a half of the investment needs of renewable energy through to 2035” (Willis, 2013).
However, this enormous amount of potential funding for renewable energy projects such as PV is not likely to be made accessible without changes in government policy and
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financial regulations. Because financial incentives for PV investment are largely based on income tax credits, tax exempt funds do not benefit from such investments.
There is currently an example of how successful incorporating PV systems into the construction of new buildings can be in supporting growth in the PV market in the United States. PV supplier and developer SunPower has partnered with property developer KB Home to construct new energy efficient homes that come complete with solar PV systems. In less than 2 years, their partnership had resulted in 1,000 new homes being constructed that include PV systems. The two companies plan on continuing their partnership with further construction projects (Alexopoulou, 2013).
There are some arguments that can be made in favor of residential PV systems over utility-scale PV arrays. As mentioned earlier, smaller PV systems cost more to install but benefit from reduced delivery cost of the electricity over the lifetime of the PV system. A large increase in residential solar PV systems could reduce the necessity for the installation and maintenance of transmission lines that carry electricity from large-scale or centralized generation of electricity. It is suggested that an increased use of residential PV systems would result in reduced costs for the distribution infrastructure for the utility grid (Borenstein, 2012).
One of the positive effects of smaller-scale PV installations, and one of the reasons they cost more per watt to install than large projects, is that they require more labor hours per watt to install and a greater number of projects to achieve similar capacity.
This translates into more jobs related to the PV industry. “These jobs are more widely distributed in communities across the nation, including rural locations” (DOE, 2012a). If installed PV capacity shifted more to residential PV systems it would have a larger and more dispersed impact on the U.S. economy as a whole.
6.5 Summary
In summary, as the demand for solar PV in the United States has increased, so has the global PV production of PV components. Utilities of scale have increased from the PV supply-side vertically, from the basic materials needed to produce PV cells to the system installation process. This has lowered prices for PV systems, which in turn has stimulated further demand for solar energy. Prices for installed PV systems have
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plummeted the last few years. The demand for PV in the U.S. is growing robustly, and cumulative installed PV capacity has grown even faster than expected.
Despite the rapidly falling prices for PV systems, most of the price declines are a reflection of the reduction in PV component cost. BOS costs continue to create a barrier to solar PV-generated electricity becoming cost-competitive with traditional forms of electricity generation. Cuts to production costs and greater PV cell conversion efficiency in the future will help to make PV technology more economically viable, but even more needs to be accomplished in reducing the cost of installation.
Government policies and financial incentives have been vital for creating PV demand. Without such policies the demand for PV in the U.S. would likely not have grown nearly as much. Government policies are still important for the PV market. The recent price declines for PV systems are still not sufficient for achieving a self-sustaining market. There are several examples of recent attempts to diversify the PV market in the U.S. and stimulate further demand. These approaches seem mostly successful, but are also contingent on financial incentives for their models to work. More needs to be done to help enable the U.S. PV industry to access the vast amounts of investment capital available on the global financial stage.
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