Solar has had an amazing decade, but it’s just the start

Solar’s ascent over the past decade has been remarkable.

In those ten years, it has evolved from expensive, highly specialised applications, or heavily subsidised programmes, to capturing a large share of the market on the strength of economics alone. At the end of 2015, the unsubsidised levelised cost of electricity (LCoE) of utility-scale thin-film solar was $0.05-0.06 per kWh — lower than any conventional generation technology operating without the benefit of subsidised fuel.

Solar energy has reached the tipping point. Yes, it is benefiting because the world has come to realise the unsustainable environmental costs of fossil fuels, but the real difference is that solar’s economic advantages are increasingly coming to the fore. It is now recognised as clean, reliable and affordable, able to hold its own against conventional power generators.

Generous early policy efforts by governments in many parts of the world generated significant new demand that was relatively cost-insensitive. This led to a rapid scaling of the industry, which resulted in technology advancements and capacity additions.

When it became clear that much of this policy support was too costly to maintain in the long term, it forced a savage period of consolidation and cost-cutting. After the solar bubble burst in 2011, the industry was forced to grapple with a new, unsubsidised reality, which made competitiveness — both technological and cost — critical for survival.

Even as the industry continues to consolidate in this brutally competitive environment, it is clear that the financially fit and innovative will not only survive, but thrive.

The global PV industry consists of many competitors with a variety of technologies and widely differing strategies and market focuses. First Solar, with an eye on a long-term play, opted to invest heavily in R&D, successfully pushing our thin-film cadmium-telluride semiconductors to unprecedented levels of conversion efficiency, while continually attacking the entire value chain to drive down the LCoE.

We are not alone. Many other manufacturers have also been improving their technology and cost-competitiveness. The result has been a global decline in the cost of modules, which has made solar much more accessible and affordable. The cost reductions are proving to be one of the primary triggers of the global energy transition.

Policy support will continue to be important, but the scale of the change is possible only with a dramatic evolution in the cost structure.

One sign of the far-ranging impact of this transition is the growing recognition by hydrocarbon-rich nations that their renewable resources may be just as important in the long term, and that leadership in this transition is in their best interest.

First Solar has direct experience of this in the Middle East. Abu Dhabi was one of the first to lead the charge, as early as 2009, when it commissioned the region’s first grid-connected PV array in Masdar City and followed it up with Shams 1, which was, until recently, the world’s largest concentrating solar power plant.

Equally important is Abu Dhabi’s extensive investment, through Masdar and the Abu Dhabi Fund for Development, in promoting renewables in other parts of the world; as near as Jordan and as far as Fiji. And now, the Abu Dhabi Water & Electricity Authority is planning a 350MW PV plant that will be one of the biggest of its kind in the region.

Dubai doubled down on an initial 100MW second phase of the Mohammed bin Rashid Al Maktoum Solar Park, thanks to a record low tariff of $0.058/kWh, and is now tendering an 800MW third phase.

Elsewhere in the Middle East, Saudi Arabia has multi-gigawatt plans for solar; Egypt and Jordan have realised that they need to tap into their most abundant resource to achieve energy security; and Oman, Kuwait and Qatar all have initiatives to exploit solar on varying scales.

These investments, backed by experienced investors and financiers, are worth billions of dollars. Without exception, the key metric for such projects is profitability, and these solar plants are treated as valued assets, capable of delivering long-term value.

The critical difference between solar energy in 2006 and 2016 is that it is now capable of positively affecting the bottom line for investors, lenders, independent power producers and utilities. This is the real tipping point in the energy transition and an important step towards eventual ubiquity.

James Hughes is chief executive of First Solar

This piece was published as part of the Thought Leaders series. Recharge’s Thought Leaders Club brings together leading thinkers and participants from the renewable-energy sector to examine the key challenges facing our industry