Solar – it’s barely scratched surface of $2 trillion market

sunpower

As operators of utilities desperately clinging to their WWI-vintage business models prepare their Maginot Line defences of altered tariffs and higher connection fees, it might pay them to pull out the periscope and peer over the trenches to see what exactly is about to come their way.

Last week, the top executive team from the US-based solar company SunPower held an all-day analysts briefing ā€“ their first for a few years.

It was fascinating stuff about the future of the multi-trillion global electricity market. And if they are right, the flood of panels on rooftops, and pooled together in large scale solar plants, may be the least of the problems for the utilities. The solar industry is not just intent on hitting the industry on the flanks, it intends to come right over the top of the present incumbents.

There were a couple of key points that were made, and weā€™ll go through them one by one. If anyone is interested in seeing their slide-pack, and listening to their briefing, they can find it here.

Solar has barely scratched surface of $2.2 trillion market

The first point made by CEO Tom Werner is that the solar industry has barely scratched the surface of the $2.2 trillion global energy market (thatā€™s an annual figure by the way).

Sure, itā€™s recorded spectacular growth through the ā€œfirst moverā€ market that has been mostly been subsidised.Ā  ā€œWe are just at the beginning of a fundamental transition,ā€ Werner said. ā€œWe are going to have huge market opportunities. The non-incentivised market is way bigger than the early adopter market.”

To flesh out that point, Howard Wenger, the firmā€™s president of regions, presented this graph below. It highlights just how nascent the solar technology is. There is an ā€œaddressable marketā€ of 23,000TWh in the world, or which less than a third is made up of buildings (homes and businesses). So far, SunPowerĀ  has just 0.01 per cent of that market, and just 0.02 per cent of the utility market.

sunpower market

The key point is that because of grid parity, which has been reached in numerous countries over the last few years, the solar industry is now able to attack that market with gusto.Ā  ā€œWe are just at beginning,ā€ Wenger said.

Costs will continue to fall, efficiency will rise

Grid parity already exists in many market ā€“ not just at the ā€œsocketā€, where electricity from rooftop panels is far cheaper than grid-sourced power ā€“ but also at utility scale, in competition with fossil-fuel plants. Ā And solar will continue to increase its competitiveness.

SunPower boasts the world record on efficiency with 21.5 per cent from its commercial modules. It expects that to grow to 23 per cent over the next few years, which will translate into a fall in costs of 35 per cent ā€“ even after the dramatic falls in recent years.

ā€œThere will be fundamental change over next 3 years,ā€ products chief Jack Peurach said. ā€œWe will be on offence on LCOE (levellised cost of electricity). Thatā€™s the foundation of this technology.”

To illustrate that point, Peurach presented this graph below about the LCOE of rooftop panels. Even though SunPowerā€™s upfront costs are higher than the ā€œcommodity marketā€, its higher efficiency (40 per cent above the rest) and reliability means that its long term costs are lower. (This is something that most consumer buyers of household appliances understand, bu seems to escape most of our large utilities and pricing regulators).

 

sunPower

Solar companies will not just produce modules, theyā€™ll manage energy

This is the key, because it marks an important evolution of the solar industry. Werner noted that over the last 10 years, the company has moved rom selling solar cells, to selling solar modules and then solar systems.

Within three years, however, that will change again. It wonā€™t be just energy, it will be energy management solutions. That will include storage and the smart controls to allow homeowners and businesses to manage their energy production and consumption. Thatā€™s a whole new ball game, itā€™s what the utilities have been doing for the 100 years and presumed they would continue to do.

One of the reasons that is happening is that in most markets outside the US, the value of rooftop PV is found by consuming on site. Thatā€™s because, as in Australia, the utilities pay little (or in some cases nothing), for the energy that is exported back into the grid. And they want to hit the solar households even harder with higher network costs.

This may suit the utilities now, but it is a dangerous game, because it invites the solar industry to find other solutions ā€“ such as adding storage and smart controls.

ā€œStorage will be economical in the very near future,ā€ Peurach said. ā€œWhen it is, it will become a vital part of the solar PV system, and storage systems will easily integrate into the energy management platform.ā€

It should be noted that SunPower has recently bought a stake in Australian retailer Diamond Energy, and Australia is one of the seven key country markets that it is targeting – along with the US, France, Germany, Italy, Spain and Japan. It will be fascinating to see how that evolves, and the impact on the market.

And now for Big Solar

SunPower says it was the first company to build a 10MW utility scale solar PV system – that was less than 10 years ago – and it is currently building the worldā€™s largest again ā€“ the 579MW Antelope Valley solar farm in California. It has a total of 2GW in contracted and constructed projects, and says it has another 6GW in the pipeline.

SunPower says one of the advantages of its technology is its modularity. It developed in 2010 a standard system, the Oasis 1.5MW ā€œpower blockā€, that is simply repeated over and over to meet the specifications of a particular plant.

The company says this has helped in the reduction of balance of systems costs ā€“ installation, maintenance, financing etc ā€“ which one of the key targets for the solar industry beyond the actual cost of the modules.

According to SunPower it has achieved a 50 per cent reduction in BoS costs in just the last two years, and is well ahead of its plans. (See graph below)

SunPower says this power block is standardized and bankable. And it sees a sweetspot in the global market of 10MW to 50MW installations. Thatā€™s what is being touted as the idea size for Australia in coming years.

Interestingly, France will be its focus for new growth this year (French oil giant Total is its major shareholder), and it is already laying claim to 10 per cent of the burgeoning Japanese market. Its relationship with Total could also give it inroads into the Middle East and north Africa markets, which are looking seriously at utility scale solar. It already has 1.5GW in the pipeline from MENA countries.

sunpower

 

 

Comments

24 responses to “Solar – it’s barely scratched surface of $2 trillion market”

  1. MorinMoss Avatar
    MorinMoss

    SunPower’s site mentions a planned 579 MW PV installation at Antelope Valley (actually 2 co-located projects) not 780 MW.

    There’s a 230 MW install under construction (100 MW recently went online) by FirstSolar that’s perhaps 10-20 km away.

    Given that these projects will take up only a few square miles and nearby Edwards Air Force Base is over 450 sq mi, perhaps the military can get into the solar game as well.

    1. Keith Avatar
      Keith

      MorinMoss,

      The US military are well down the track with renewable energy of all kinds.

      In April 2012, the White House announced the Defense Department was making one of the largest commitments to clean energy in history, by setting a goal to deploy 3 gigawatts of renewable energy — including solar, wind, biomass or geothermal — on Army, Navy and Air Force installations by 2025. That is enough energy to power 750,000 homes.

      The Army’s goal is 1 gigawatt of that total. These goals support the broader DoD goal to enhance installation energy security and reduce installation energy costs.

      See link http://www.army.mil/article/102675/Army_MATOC___First_awards_under__7_billion_renewable_energy_contract/

      for first contracts (May 2013) in a major 2013 program (geothermal first, but solar, wind, biomass to follow this year).

    2. Giles Avatar
      Giles

      My mistake. The AV project is 579MW, the combined PPA with a neighbouring project is 780MW

      1. MorinMoss Avatar
        MorinMoss

        Is that the FirstSolar / Exelon 230 MW project I found or is there another?

  2. Guest Avatar
    Guest

    Articles can say what they want, but in reality it’s what I’ve witnessed which makes me upset. My neighbour and a few friends have mentioned they’re making around 20-100$ per quarter from their solar panels, yet they rely on the grid 100% at night or cloudy days. They aren’t contributing to any network upgrades or maintenance and as well as the money they make it all comes from our pockets as simple as that. And power companies seem to all be about profit, well in states other than VIC it seems where network costs are the cheapest. It makes me sick

    1. Sean Avatar
      Sean

      Fascinating, anonymous people start complaining online after power companies start targeting solar PV. I’m not saying you are an astroturf strawman, just, a very interesting coincidence. the fact that you start with “I dont care what this article is about, i’d like to try and derail this conversation,” makes ME sick.

      You seem to have conveniently ignored why the PV owner is getting payments – because they are selling electricity back to the grid. Unsure if it is jealously or ignorance but the sums were simple enough to do, if you wanted to do it, you could have – or raised your objection at the time.

      As far as power companies being all about profit, Welcome to capitalism, what did you think privatisation was about?

  3. Sammy Corstrato Avatar

    What a joke. Whilst residents like me who can’t consider solar as an option due to the characteristics of our home, our only source of energy will diminish. This “revolution” is going to be a disaster as utilities go broke and many will be left in the dark. As hated as they are, utilities will always be needed, well their networks at least.

    1. Louise Avatar
      Louise

      “What a joke. Whilst residents like me who can’t consider solar as an option due, to the characteristics of our home, our only source of energy will diminish.”

      I find that impossible to believe.

      I have a solar powered calculator which works indoors, using diffuse light.

      No direct sun light needed, works on indirect light and does not even have to be sun light.

      Unless you habituate underground in total darkness, I am certain you can power your home to 100% on solar power. If you do not get much direct sun light then you may use thin film solar panels, which work better than silicon solar panels in indirect, viz diffuse light conditions.

      I have a 5kW system installed and on an annual basis the system produces slightly more than I consume. Therefore, my home is electricity autonomous. I have roof space to add another 7kW of solar panels should the need arise, in future.

      Please keep in mind that batteries are expected to come down in price over the next few years and Plug In Hybrid Electric Vehicles are available already.

      Thus it is worth considering eliminating your petrol bill and electricity bill entirely, getting a suitable solar system and disconnecting from the grid entirely.

      My road map is to disconnect from the electricity grid in 2016, as I believe that the cost of a 100% off grid system is going to a compelling reason to implement sound financial management at an individual level.

      The current grid served us well in the last century, so did horse drawn carriages and ice-boxes, but how many people live last century’s lifestyles anymore?

      In a decade from now, I expect that home builders will opt to build energy self-sufficient homes instead of financing “rent-seeking” suppliers.

      I just read your post again and let me ask you, do you work for an electricity company?

      The reason for my asking is that I could not imagine that any person not working for an electricity supplier and associated fields would write such a misleading message.

      I have not seen an -above ground home- in Australia that could not be powered by solar power.

      .

      1. nathan994 Avatar
        nathan994

        Are you for real? I know people with 5kw systems that don’t even generate enough power to supply their homes in normal conditions. I live in a heavily forested area so no solar isn’t an option. And what do you mean the grid “served” us well? How do you expect large shopping centres, CBD’s, sky scrapers, street lights, traffic lights and rail systems to function? It’s IMPOSSIBLE to supply out country completely via small scale solar. We need the grid, you mean the large coal plants served us well and should be shut down. Well good luck with going off grid, with batteries have such a limited life cycle and the already high costs they are now you won’t even have your system paid off before it needs replacement.

        1. James Hilden-Minton Avatar

          SunPower is focused on both the distributed power and power plant (utility) segments. No one is proposing that all power be rooftop solar. Utilities have scale advantages over rooftop. All they need to do is provide electricity cheaper than rooftop to be competitive. They can easily fight solar with solar. If they choose not to, their undoing will be their own fault. Some utilities are trying to threaten rate payers to keep solar out. This will not work. Rooftop provides real competition that will force retail rates down in a way that regulatory rate setting never could. It’s called market competition. The utilities will not be able to raise rates on you so long as you’ve got alternatives, and rooftop solar is a key alternative. It means ultimately you can opt out of the monopoly.

    2. Sean Avatar
      Sean

      Energy companies will only go broke for as long as they perceive distributed generation as their enemy. By refusing to extend the market to residential customers they are killing themselves trying to hedge all market conditions, then complaining that they are going broke. If they focus on providing transmission, not on regulating the price of power, Nathan994 has nothing to worry about.

      1. nathan994 Avatar
        nathan994

        I agree! they need to embrace this instead of fighting it off as currently both industries are fighting against each other. We can live without the solar industry but that will leave these big companies in control ripping us off, and the solar industry has the power to destroy the utility industry. There will be a disasterous outcome if one of the two fail so they really need to work together.

        1. Sean Avatar
          Sean

          ah, but you are missing the most vital point nathan, utilities are killing themselves, as they see themselves as the ONLY source of energy. it matters not if it is petrol generator, wind turbine, solar panel, Natural gas that is the competition, behaving as if you are a monopoly will get you killed, if only your competition is given a chance.
          People get pissed off if they feel they are ripped off. the difference now is they have an option to fight back.

          1. nathan994 Avatar
            nathan994

            How do you think the current utility model needs to change to fix these issues?

          2. Sean Avatar
            Sean

            instead of having a bullshit guess as to
            a) what will be the incoming spot price of power at any particular moment
            b) what demand will be
            c) what infrastructure utilisation will be
            at any given moment, then rolling it up and saying TADA! here’s the price you are going to pay for the next year
            They provide the average punter with a insurance guarantee that electricity will never go over 44c/kwh regardless of the actual cost of power. And then bitch that this promise is costing them a fortune.

            we have finally realised that there should be a spot price for generation, why the hell did we stop there?

            transmission companies are having kittens over lack of consumption. what do they care what i do with it? why cant i buy it and sell it back later? why should they get all the market benefit?
            i want to use their transportation system, and they are saying sorry son, you can only have your power flow go one way. They arn’t generators, im not providing an alternate form of transmission, simply a power source.

            change ALL consumption to a spot price. different on each phase, depending on the load. Then consumers can backfeed power according to demand, working with transmission companies to balance the phases, and correct phase angles (Inverters are Fantastic!) Im willing to provide the phase correction for free, if only they can tell me where they want it (A,B or C) by providing a price indicator.

            transmission is a hard game, trying to balance loads and power factors, whilst knowing nothing of the end users plans, or equipment. They dont need to make life harder for themselves buy pricing themselves out of the market.

  4. Martin Nicholson Avatar

    There is something seriously wrong with SunPowerā€™s analysis here. Implying the total market for solar is 23,500 TWh is plain nonsense. According to the EIA the total world demand in 2010 was just over 20,000 TWh. The idea that we might be able to power the world with solar alone leaves a lot to the imagination.

    http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=2&pid=2&aid=12

    1. Giles Avatar
      Giles

      Really Martin? “Something seriously wrong???” The IEA world energy outlook puts 2010 at 21,400TWh, and growing at 3 per cent a year, which in 2013 puts it about smack on SunPower’s figures. The IEA’s most recent publication on renewables say that production in 2012 was 4,564TWh, 19% of the total, which again puts it just above SunPower’s figures. And where in their presentation do they suggest you can power the world with solar alone?

    2. Sean Avatar
      Sean

      There is something seriously wrong with your logic Martin. Implying that people will continue to purchase power at a higher price simply because it isn’t solar, is plain nonsense.

      1. Martin Nicholson Avatar

        Sean I’ve got no idea what you are talking about. I responded to Giles’s comment but it seems to have disappeared.

        1. Giles Avatar
          Giles

          when did you reply? I haven’t deleted anything, but some people been having problems and i’ve had to post on their behalf. perhaps try again.

  5. Martin Nicholson Avatar

    Thanks Giles. My original point was that any solar company that states that its ā€œTotal Available Market in 2012ā€ is 23,500 TWh (by implication the total market for its products) where that is actually the total market for electricity, is really saying we (or our direct competitors) can supply the whole market.

    I havenā€™t heard anyone seriously state that solar can provide all our electricity needs. Perhaps with vast amounts of storage (probably for many days in some cases) it might be possible in some locations, but realistically unlikely to be cost effective in the whole world. Certainly those countries lucky enough to have abundant hydro are not
    going to replace it with solar.

  6. Giles Avatar
    Giles

    Hi “Sammy”, “Nathan” and “Guest” – i notice you are all filing from the same IP address. Are you one and the same or just good friends?

    1. nathan994 Avatar
      nathan994

      Giles sammy and nathan are me, I have no idea why its changed my name (sam) to “nathan994” as ive linked disqus with with my facebook account. The post by “guest” was a mistake in which I tried to remove the comment but the flawed system instead removed my name and marked it as a post by guest. Anyway this isnt even relevent….

      1. Giles Avatar
        Giles

        OK, thanks for letting us know

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