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Solar Emergence

Models are evolving for utility-scale solar development.

Fortnightly Magazine - March 2011

very near future—especially impressive considering that China’s first utility-scale solar project, which was put out for bids in 2009, hasn’t finished construction.

India may very well become a world leader as it creates one of the largest markets for CSP and, in contrast to China, the growth is largely driven by private entrepreneurship. The government recently announced that its solar energy goal is to generate 20 GW by 2022, of which 50 percent will be CSP. Both large and small companies are getting involved in CSP, learning the technology, developing working partnerships with the right companies and successfully driving down costs. With a strong economy, a large population and dedicated entrepreneurs, India may provide the strongest case for private development of the solar industry.

Europe has successfully created a large solar market through the use of feed-in tariffs. Feed-in tariffs involve three key provisions. First, producers are guaranteed grid access for any power they choose to sell. Second, the utility is obligated to purchase the electricity pursuant to a long-term contract. Finally, the purchase price is set by the government and is methodologically based on the cost of the energy generation.

Opponents of feed-in tariffs argue that competitive bidding rather than government involvement in pricing would lead to more cost effective projects. Feed-in tariffs are utilized in the U.S., but typically state feed-in tariffs only apply for small-scale producers. Ontario established a strong feed-in tariff program in 2009 and revised it further in 2010. Along with controlling the price, Ontario requires a certain percentage of the services and equipment to come from Ontario-based companies. The result has been a boom in solar projects.

Perhaps a common ground between direct government funding (such as the China example) or pure private research and development is the recently announced Department of Energy Solar Demonstration Zone project. In an effort to develop cost-competitive solar technologies, DOE announced that it will fund $50 million in testing and demonstration efforts. The focus is on cutting-edge solar technologies and the goal is to deploy the technology at such a scale (utility-scale projects larger than 20 MW) so as to provide meaningful operating and economic data. This DOE project is in its very early stages, so it’s hard to determine what impact it and similar initiatives might have on the development of the industry.

Incentive Market

Solar power has come a long way. Technological advancements have significantly decreased the installed costs of solar arrays. Tax credits and alternative financing models are encouraging the further development of residential-scale projects. Commercial-scale projects are being pursued by businesses looking to green-up their image. State RPS policies are creating a market for utility-scale projects. But, at least for today, solar projects must rely heavily on government-created incentives.

Tax credits, stimulus funding, grants, loan guarantees and accelerated depreciation all add to the attractiveness of a solar project, to the extent that projects that don’t rely on government incentives aren’t competitive with CCGT plants. With more states adopting new RPS policies and expanding existing ones, the need for solar projects likely won’t decrease. But, for the