Printable Version

Why PV Is Important to the Economy

As Americans, we're clear about our preferred energy future — we want plentiful and reliable sources of clean energy at reasonable prices. More and more, our nation's economic health and security depends on reliable, clean, abundant, and affordable energy. And by 2020, our already voracious appetite for energy is projected to increase by about 32% (White House Web site, National Energy Policy (PDF 372 KB) Download Adobe Reader.). Although solar electricity (also known as photovoltaics or PV) is not the sole answer to our myriad energy challenges, this renewable energy option can make an important contribution to the economy of the United States and the world.

Electricity from the sun is a versatile technology that can be used for applications from the very small to the very large, from grid-connected systems to grid-independent systems, to hot water, space and industrial process heating, and power plants. Increasingly, in a competitive market, the U.S. electrical grid will come to rely on distributed energy resources. The modular nature of the technology enables us to construct distributed electricity-generating systems in increments as demands grow, to improve supply reliability, and to moderate distribution and transmission costs. In addition, many regions of the United States are becoming limited by transmission capacities and local emission controls, but solar electric power systems can be easily sited at the point of use with no environmental impact. And because sunlight is widely available, we can build geographically diverse solar electric systems that are less vulnerable to international energy politics, volatile fossil-fuel-based markets, and transmission failures.

Distributed energy technologies are expected to supply an increasing share of the electricity market to improve power quality and reliability problems that have caused power outages and cost the United States economy $119 billion a year (Electric Power Research Institute, Consortium for Electric Infrastructure to Support a Digital Society, (PDF 20 KB) Download Adobe Reader.). We have only to remember August 14, 2003, when more than 50 million people in eight U.S. states and parts of Canada were left in the dark in the biggest blackout in the history of North America, to realize the potential power of adding solar electricity to our energy mix (see below and, The Washington Post for examples).

Sunny Economic Forecasts

The solar energy industry, which encompasses technology, research, manufacturing, training, and installation, has a direct impact on many facets of U.S. commerce. Since the 1970s, when the solar energy market was virtually nonexistent, the business of solar energy has seen 100-fold price decreases, which has led to the production of millions of watts per year and created a national market worth about $2 billion. The current U.S. solar industry employs some 20,000 men and women in high-value, high-tech jobs, representing about 300 companies, universities, and utilities (estimates based on Directory of the U.S. Photovoltaics Industry. 1996. Washington, DC: Solar Energy Industries Association [SEIA]). And by 2020, the industry is expected to grow toward a workforce of 150,000 ("Energy Alternatives and Jobs." 2000. Renewable Energy World, 3(6):November/December, pp. 26-32). Jobs associated with the solar energy industry are in engineering, science, management, architecture, construction, planning, education, sales, skilled labor, finance, and design. And the steady decrease in the costs of the technology has private investors and entrepreneurs perking up their ears as well.

Recognizing the growing market for solar energy, companies tapping the power of the sun range from small-installation contractors to large multinational corporations. These companies are investing millions of dollars to increase their market share by diversifying product lines and improving product performance. PV cells and modules and solar-thermal collectors primarily define the current state of solar manufacturing in the United States.

The solar industry continues to grow steadily as costs for solar systems decline in the expanding markets for renewable energy. Since the late 1990s, the market for solar energy has grown at an annual rate of 20%. The solar industry estimates that growth rates above 25% annually are possible, resulting in a $27 billion market by 2020. With technological innovations lowering costs and increased market growth leading to new jobs and export opportunities, solar energy can become a major high-tech growth industry that contributes significantly to our economic growth and improves our trade balance.

Who's Using Solar Electricity Today?

Look around you. Chances are that something you'll see relies on solar energy. Automated teller machines (ATMs), cellular telephones, pagers, global positioning systems for transportation, microwave transmissions, communication repeaters, direct TV — all these products already depend on solar electric power for their information transfer. In addition, designers and manufacturers of emergency warning systems; telephones and telecommunications; uninterruptible power supplies; premium power; highway, information, and construction signs; and numerous consumer products have selected solar electricity as the most reliable power option for these facets of our daily lives. And demand is growing for residential and commercial distributed generation, because solar electricity is helping to solve the critical power-delivery problems spreading throughout our nation. Although many solar energy systems are still more expensive than the traditional options, history has shown us that — as with any other technology — the cost, performance, and convenience of these systems will continue to steadily improve, allowing solar energy to successfully compete in energy markets. The solar industry's continuing march toward lower costs and higher performance can change the question to: Who ISN'T using solar electricity?

To see how more and more large companies and organizations are installing solar electric systems, check out the commercial installation directory and the list of SEIA members.

How Do We Solidify Solar Electricity's Place in Our Future?

In the long term, solar energy's role in our economy will be determined largely by economic factors, such as the cost of energy from solar versus conventional sources. To calculate the cost of energy for solar energy systems, as well as for conventional energy sources and equipment, analysts use a "levelized energy cost (LEC)" calculation. In calculating LEC, capital cost, operating and maintenance costs, and financing costs are considered.

But solar energy has other values that may not be recognized in the conventional marketplace:

• Price stability relative to volatile markets for fuels such as natural gas
• Reduced emissions
• Local economic development.

And legislative and regulatory authorities may recognize these benefits through policy mechanisms:

• Renewable portfolio standards
• Emissions credits
• Production and investment tax credits for large systems
• State and federal tax credits for small systems
• Other buy-downs or credits for installation of a solar system
• Favorable mortgage interest rates for solar-equipped buildings.

These incentives can help encourage early adoption of solar energy and bridge the gap between the LEC of solar energy systems and that of the lower cost conventional alternatives. However, in the long term, solar prices will need to be competitive with conventional technologies without these incentives, so we're setting our R&D goals accordingly.

So What's Next for Solar Electricity?

That's our vision. And our challenge is to rapidly expand the U.S. PV industry's manufacturing capacity to meet growing demands while significantly expanding the domestic market to retain manufacturing plants and jobs in the United States. To meet these challenges, the U.S.-based PV industry has developed a "roadmap" (see sidebar) as a guide for building our domestic industry, ensuring U.S. technology ownership, and implementing a sound commercialization strategy. Putting the roadmap into action will call for reasonable and consistent co-investment by industry and government in research and technology development. But the energy security, environmental, and economic benefits will far exceed the investment.

The goal of the activities outlined in the roadmap is to meet 10% of U.S. peak generation capacity by 2030—the energy equivalent of some 180 million barrels of oil in that year. By 2020, solar electric power will be delivering a significant share of new, additional peak electricity-generating capacity in the United States. Although solar electricity is currently not cost competitive with bulk, base-load power — it does not have to be. Instead, it supplies electricity when and where energy is most limited and most expensive, making a highly valuable and strategic contribution. It does not simply replace some fraction of generation; rather, solar electric power displaces the right portion of the load. By mitigating the risk of fuel-price volatility and improving grid reliability, solar electricity can guarantee a more stable energy economy.

The roadmap spells out four strategies for implementing the vision:

Maintain the U.S. Industry's Worldwide Technological Leadership

Technological leadership is necessary for economic competitiveness and to make solar electricity a significant contributor to the nation's economy. Mounting foreign investments have eroded U.S. market share and have overtaken our R&D lead on the technology front. To secure our future, we must strengthen and expand our investments. We must take our core R&D and other intellectual resources and integrate them with U.S. industry's best interests — resulting in sound and well-conceived programs and sustained investments that clearly support and guide U.S. PV industry leadership worldwide. Sustained partnerships between the U.S. solar electric industry and national laboratories and universities are a critical element of this effort.

Achieve Economic Competitiveness with Conventional Technologies

In the last 25 years, the cost of PV has come down by several orders of magnitude, and the industry has grown at average annualized rates of 15% to 20% — a growth rate comparable to that of the semiconductor and computer industries. Based on the actual cost of electricity at the point of use, current PV systems are within a factor of 2 to 5 of conventional sources for distributed applications (e.g., residential rooftops). As its cost approaches that of conventional technologies, enormous markets will open up for PV. The roadmap charts a course that will result in competitive power (i.e., costs of under $3 to $4 per peak watt) in a period of time that will ensure a competitive position.

Maintain a Sustained PV Market with Accompanying Production Growth

Sustained growth in production capacity and markets will establish solar electricity as a significant contributor to the nation's energy portfolio, which, in 2000, consisted of about 825 gigawatts (that's 825 billion watts) of peak electrical generation capacity. The roadmap projects industry growth at about 25% per year — a level that should be achievable according to recent market data (PV News. P. Maycock. February 2001). At this level of growth, domestic PV capacity will approach 10% of U.S. peak generation capacity by 2030.

Make the PV Industry Profitable and Attractive to Investors

The industry's aggressive growth strategy will require considerable private investment. To propel the industry toward becoming a domestic business sector with an annual revenue of $10 to $15 billion, we are putting forth strategic guidance and attracting funding now. Through research partnerships between the U.S. Department of Energy (DOE) and members of the U.S. PV industry, we are also working to improve PV manufacturing processes and equipment; accelerate manufacturing cost reductions for PV modules, balance-of-system (the rest of the system) components, and integrated systems; increase commercial product performance and reliability; and enhance the investment opportunities for substantially scaling up U.S. manufacturing capacity and increasing our market share.

By bringing these strategies to fruition, we'll create thousands of new, high-tech, high-value jobs. We'll reduce energy imports, dependence on foreign oil, and energy rate and supply pressures. We'll displace pollution equal to the emissions of 1 million vehicles. We'll build a more stable domestic energy environment. We'll give our citizens choices about their energy. And at the end of the day, we'll make sure that the lights stay on for all Americans.