Solar power has long been the Mercedes-Benz of the renewable energy industry: sleek, quiet, low-maintenance.
Yet like a Mercedes, solar energy is universally adored but prohibitively expensive for most people. A 4-kilowatt solar photovoltaic system costs about $34,000 without government rebates or tax breaks.
As a result, solar power accounts for well under 1% of U.S. electricity generation. Other alternative energy sources, such as wind, biomass and geothermal, are far more widely deployed.
High costs of solar panels have been due to volatile silicon prices, low production volumes and high setup costs.
The outlook for solar, though, is getting much brighter. A few dozen companies say advances in technology will let them halve the price of solar-panel installations in as little as three years. By 2014, solar-system prices will be competitive with conventional electricity when energy savings are figured in, Deutsche Bank (DB) says. And that's without government incentives.
The solar industry is expected to triple in the next three years, from about $13 billion to $40 billion in revenue, says analyst Jesse Pichel of Piper Jaffray. (PJC) Turbocharging sales are government incentives in countries such as Germany and Japan. In the USA, generous customer rebates in California and New Jersey — by far the largest U.S. solar markets — along with a federal tax credit have trimmed system prices by a third or more.
Most states don't offer solar rebates, but prices still have fallen about 90% since the mid-1980s — 40% annually the past five years — as surging sales have led to cost efficiencies, says Rhone Resch, head of the Solar Energy Industries Association. Now, experts say it will take a quantum technological leap to quickly lower prices to utility levels. An armada of companies say they are poised to do just that:
•Traditional solar makers. This group, which includes SunPower, (SPWR) relies on standard silicon wafers as a semiconductor. They make up more than 90% of the solar industry. Some are using less silicon, because electricity is produced only in the top layer.
Evergreen Solar (ESLR) uses two ribbons to finely shape molten silicon. Others cut silicon into wafers, losing up to half insilicon sawdust. Evergreen's method eliminates the waste.
Sharp, the No. 1 manufacturer, takes a different tack, slashing setup costs by bundling panels with racks that attach them to roofs.
•Concentrating photovoltaic makers. They use lenses or mirrors to magnify sunlight. SolFocus' mirrors concentrate sunlight 500 times, letting them use a fraction of the semiconductor found in standard panels. But the systems don't work on cloudy days and require cumbersome trackers to follow the sun, making them suitable only for utilities and big industrial customers.
•Thin-film manufacturers. They have achieved the lowest costs by layering 1% of the semiconductor in regular panels on sheets of glass. They often use material that's cheaper than silicon. That's a big advantage, because a worldwide silicon shortage has pushed up prices. First Solar's (FSLR) production costs are $1.19 per watt of generating power vs. $2.80 for traditional solar systems. It says it will hit about $1 a watt, the price of building conventional power plants, by 2010. The start-up has contracts for $4 billion through 2012.
Another start-up, Nanosolar, embeds tiny semiconductor particles in ink, helping it churn out panels as easily as a printing press. And United Solar Ovonic deposits its semiconductor on flexible sheets of stainless steel that look like rolls of film and can be pasted on roofs at low cost.
One caveat: Thin-film panels are about half as efficient as standard systems. Thus, they need more space and are mostly geared to utilities and businesses.
Owens cautions that reaching grid-like prices could take longer than solar makers vow. States with more sunlight and higher power rates could get there sooner. Makers "have been promising the moon for a long, long time."
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