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SOLAR GENERATION V -
2008
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Solar power is booming. By the end of
2007, the cumulative installed capacity of all PV systems
around the world had surpassed the landmark figure of 9,200
MW. This compares with a figure of 1,200 MW at the end of
2000. Installations of PV cells and modules around the world
have been growing at an average annual rate of more than 35%
since 1998.
The market value of the solar PV market reached an annual €
13 billion in 2007. Competition among the major
manufacturers has become increasingly intense, with new
players entering the market as the potential for PV opens
up.
Although growth in recent years has been primarily in the
grid-connected sector, the demand side of the international
PV market can be clearly divided into four sectors. These
market categories are used throughout this report.
Demand Side Market Sectors
1. Goods and
services
Applications
 Solar
cells or modules are used in a wide range of consumer
products and small electrical appliances, including watches,
calculators and toys, as well as to provide power for
services such as water sprinklers, road signs, lighting and
phone boxes.
Typical of new applications is the use of PV to control air
conditioning in cars. A small system integrated in the roof
keeps the temperature inside at a constant level by
operating a ventilator when the car is parked, especially in
the sun during summertime. This results in lower peak
temperatures inside the car and a much cheaper air
conditioning system, due to a lower requirement for power.
Manufacturers may also be able to save on the cost of
expensive heat-resistant materials in the vehicle’s
interior.
Market development
In 2007, this sector accounted for roughly 1% of global
annual production. As demand for a mobile electricity supply
increases, it is likely that the consumer goods market will
continue to grow in absolute terms (although its relative
share will decrease), especially with the introduction of
innovative low-cost solar electricity technologies such as
organic solar cells.
2. Grid-connected systems
Applications
PV applications which have a permanent connection to the
electricity grid are categorised as on-grid applications. PV
can be installed on top of a roof or integrated into the
roofs and facades of houses, offices and public buildings.
Private houses are a major growth area for roof systems as
well as for Building Integrated PV (BIPV). A 3 kW solar
electricity system in southern Germany delivers
approximately 3,000 kWh/year, sufficient to supply up to
100% of the annual electricity needs of an energy-conscious
household.
PV is also increasingly used as a design feature by
architects, replacing elements in a building’s envelope.
Solar roof tiles or slates can replace conventional
materials, flexible thin film modules can even be integrated
into vaulted roofs, whilst semi-transparent modules allow
for an interesting mixture of shading and daylight. PV can
also be used to supply peak power to the building on hot
summer days, when air conditioning systems need most energy,
thus helping to reduce the maximum electricity load.
If a solar electricity system is recognised as an integral
part of a building, then the money spent on decorative
materials for facades, such as marble, can instead be
invested in solar modules. Solar power doubles up as both an
energy producer and a building material. For prominent
businesses, it can provide the public face of their
environmental commitment.
Distributed generation using solar facades or roofs can also
provide benefits to a power utility by avoiding grid
replacement or by strengthening and potentially reducing
maximum demand for conventional electricity, especially in
countries with a high cooling load. In particular, PV can
soften the peak demand caused by the use of air conditioning
systems. In many areas around the world, the extensive use
of air conditioning during the summer months leads
repeatedly to black outs and brown outs. Since supply from
PV systems matches perfectly the
demand from air conditioning systems. on bright, sunny days
it can help to reduce the number of power cuts or
reductions.
Large-scale grid-connected PV arrays (> 1 MW) represent
about 10% of the European PV market. These systems are
particularly suitable in areas where there is no competition
from other land use demands. Such large plants function
solely as power plants, and are therefore exclusively
delivering electricity to the grid, without
self-consumption. Sun-drenched desert regions present good
opportunities in the longer term for large-scale plants,
especially as module prices continue to fall, for instance
in the south-west United States, Africa and Mongolia. In
Germany, large-scale ground-based systems in the megawatt
class have become a new market in recent years. This offers
a fresh source of income for farmers, who can rent their
land to investors, with the advantage of a secure revenue
for at least 20 years.
Market development
This market segment is the current motor of the PV boom,
with most development taking place in the OECD countries.
More and more national governments see PV as an important
technology for the future and have already established, or
are in the process of establishing, support programmes.
Whilst in 1994 only 20% of new PV capacity was
grid-connected, this had grown to approximately 90% by 2007.
A growing number of countries have followed the successful
examples of Germany, Japan and the USA, which have all
established support programmes for gridconnected PV systems.
These programmes will continue to provide an impetus for
market growth for some years to come - until PV becomes
competitive with domestic electricity prices (see Part Six:
Policy Drivers). Another substantial benefit of the
grid-connected domestic market is the control which PV
systems allow the consumer over their power supply. Not only
is electricity generated at the point of demand, avoiding
grid losses of electricity, but the consumer is effectively
transformed into the operator of his or her own power
station. As international power markets steadily liberalise,
this is likely to have increasingly important market
implications. The full effect will be visible as soon as PV
gets close to achieving parity with domestic electricity
prices.
3. Off-grid
electrification
Applications
PV provides vital power for communities in the developing
world who have no access to mains electricity. About 1.7
billion people around the world currently live without basic
energy services. 80% of them live in rural areas. This huge
market is a great opportunity for both the PV industry and
the local population.
 PV can provide electricity for both private consumption and
industrial uses. Domestic energy systems provide high
quality lighting and communications (radio/TV/internet),
whilst energy used for cooling, water pumping or powering
tools can be a crucial motor for local economic development.
PV has the potential to deliver much more than just
electricity for lighting or improved health care. By
providing the power supply for computers, for example, it
can enable people to access better education or information
through the internet.
There is also a powerful need to provide clean drinking
water in the developing world. The World Health Organisation
estimates that 10,000 children die each day from water-borne
diseases. Solar-powered water purification systems and pumps
are easily transportable, easy to maintain and simple to use
and, as part of rural health initiatives, could be an
important tool in the fight against disease.
Market development
Apart from its clear social advantages, the economic
justification for using PV is through the avoided fuel
costs, usually expensive diesel, or by comparison with the
cost of extending the grid. For subsistencelevel
communities, the initial stumbling block is often the
capital cost of the system. Although numerous rural
development programmes have been initiated in developing
countries, supported both by multi- and bilateral assistance
programmes, the impact has so far been relatively small.
However, it is expected that this market segment will
capture a substantial part of the global PV market share in
the coming decades. In 2007, approximately 4% of global PV
installations were dedicated to rural electrification.
4. Off-grid industrial
Applications
 The most common industrial uses for off-grid solar power are
in the telecommunications field, especially for linking
remote rural areas to the rest of the country. In India, for
example, more than a third of the PV capacity is devoted to
the telecommunications sector. There is a vast potential for
repeater stations for mobile phones powered by PV or
PV/diesel hybrid systems.
Desalination plants are another important off-grid
application for PV. Others include traffic signals, marine
navigation aids, security phones, weather or pollution
monitors, remote lighting, highway signs and wastewater
treatment plants.
Market development
Apart from avoided fuel costs, by totally or partly
replacing a diesel engine for example, industrial PV systems
offer high reliability and minimal maintenance. This can
dramatically reduce operation and maintenance costs,
particularly in very remote or inaccessible locations.
The demand for off-grid industrial PV systems is expected to
continue to expand over the next decade and beyond,
especially in response to the continued growth of the
telecommunications industry. Mobile telephone masts and
repeater stations offer a particularly large potential,
especially in countries with low population densities.
Providing communications services to rural areas in
developing countries as part of social and economic
development packages, will also be a major future market
opportunity for photovoltaics. About 4% of global PV
installations were used for PV industrial off-grid
applications in 2007.
Supply Side Market - Manufacture
 Solar grade silicon Silicon is the basic material
required for the production of solar cells based on
crystalline technology – 90% of the world market. The
availability of sufficient silicon at reasonable prices is
therefore an essential precondition for a dynamic PV
industry.
Until recently, the silicon industry produced electronic
grade silicon exclusively for the semi-conductor industry,
mainly for use in computers. Only a small fraction was
delivered to the PV industry, which represented a good way
for the suppliers to level out demand fluctuations from the
semi-conductor industry. With the dynamic growth of the PV
industry in recent years, however, the situation has
changed. In 2007, more than half of the worldwide production
of electronic grade silicon was used to produce solar cells.
This growing demand has motivated the silicon industry to
change its approach. Silicon for solar cells can be of lower
quality than that required for semiconductors, and can thus
be produced more cheaply. Several companies have therefore
begun to develop processes for producing solar grade
silicon. The development of these production lines and
construction of the first factories will still take time,
however. So, until all the new planned production facilities
for solar grade silicon are operational, the PV industry
will continue to compete with the semi-conductor industry
for the currently limited supply available on the market.
It is expected that by 2008 the availability of solar grade
silicon for the PV industry will lead to a much more relaxed
situation in the silicon market. Between 2008 and 2010 it is
projected that more than €4.1 billion will be invested in
upscaling silicon production
capacities.
Solar cell and module production
In 2008, the level of investment in
new plants to manufacture solar cells and modules is
expected to exceed €1.6 billion. This excludes wafer and
silicon manufacturing capacities. This figure underlines the
pace at which the PV industry is expanding in order to
satisfy global demand.
Up to now, the manufacture of solar cells and modules has
been concentrated in three key geographical areas – Europe,
Japan and the United States. However, the country with the
strongest growth in production facilities is China.
The leading cell production companies can be seen in Figure
2.5. Although until a few years ago the market was dominated
by BP Solar, a subsidiary of the multinational oil company,
this situation has radically changed with the entry of new
Japanese and European players. More recently, the leading
company in cell production has been the Japanese company
Sharp. However, in 2007 Sharp has continued to lose market
share relative to its competitors, in particular the
German-based Q-Cells and Solarworld and the Chinese Suntech.
These have together
 decreased the dominant position of Sharp
from 23.6% in 2005 to 8.5% in 2007. In 2007 Q-Cells became
the new market leader. Just over 53% of all cell production
is handled by the 10 biggest companies (compared to 75 % in
2006); nearly all of these are currently investing heavily
in new production facilities.
An important issue for manufacturers is being able to match
the opening of new production capacity with expected demand.
Investors need a planning horizon that goes beyond a typical
factory’s write-off period of five to seven years. Some
smaller companies have nonetheless been able to obtain
investment from public share ownership, often through one of
the increasing number of green investment funds. This is why
the relative stability of systems such as the German feed-in
tariff, has proved crucial to business commitment. In
anticipation of a flourishing market, Germany has seen a
steady increase in both solar cell and module manufacture
from 1995 onwards. Further encouraged by the Renewable
Energy Law, updated in 2004, annual production of PV cells
increased from 32 MW in 2001 to around 850 MW in 2007.
 The higher up the PV value chain one travels, the fewer
companies are involved. At the upper end of the chain,
silicon production requires substantial know-how and
investment, as does the production of wafers. At the level
of cell and module producers, on the other hand, where
knowhow and investment needs are smaller, there are many
more players in the market. At the end of the value chain,
the installers are often small, locally-based businesses.
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