Economics of photovoltaics

Time and again, economic factors contribute to the decision for or against PVs. Kyocera's Henson says the way utilities price electricity today ignores the externalities, such as environmental damage, of its true costs, which keeps PVs from becoming competitive with conventional energy-producing technologies. Nevertheless, Henson, like many in the PV industry, views this as a short-term problem in light of decreasing fossil-fuel supplies and increasing energy costs. The biggest market change, Henson says, occurred when governments created incentives for grid-connected PV installations, which helped shift the balance of demand for PVs away from their traditional market of off-grid applications for isolated buildings and infrastructure such as highway call boxes and signs.

Widespread government initiatives like those in Germany and Japan offering incentives for rooftop residential solar installations account for the key differences in the size of these markets compared with the U.S., and underscore the reason Japanese electronics firms dominate the PV cell production industry. PVs are now so standard in Japan, incentive programs have been phased out.

Ray Noble, with BP Solar in England, said government subsidies have helped spur development of rooftop and stand-alone installations, but haven't significantly encouraged building-integrated PVs. "This is turning into a real mass-production industry, though, so that will push down prices," Noble says, adding that he expects more oil companies to enter the business once PVs become directly competitive with nonrenewable energy sources. Noble also points out that since demand for silicon in the PV industry has eclipsed that of the semiconductor industry, which requires a higher grade of silicon, it's likely PV-grade silicon will go into production and further reduce costs.

Noble says many European countries, like Germany and Spain, have developed building-integrated photovoltaic incentive programs to lessen the aesthetic consequences of conventionally mounted rooftop and stand-alone systems. In cities such as London and elsewhere, he says, lack of space practically necessitates building integration of PVs.

The Bush administration has proposed the Solar America initiative, which would infuse nearly $150 million (an increase of $65 million from last year's budget) into research and production programs, but its adoption as policy has not been assured. While NREL's Ginley thinks research funding levels fall short in the States, he sees smaller companies making huge strides thanks to a ready supply of investment capital. "In a sense, PV may very well be the next large area of technology," Ginley says.

Gary Gerber, of Sun Light and Power in Berkeley, has been installing small residential rooftop PV modules since the 1970s, so he's seen the industry rise and fall with the times. This year, Gerber says they've had so much demand for their systems, which rely on PV cells from Mitsubishi, they can't always ensure the availability of product. Gerber, a board member of the California Solar Energy Industry Association, says the state's market has risen again thanks to the California Solar Initiative, a state-funded program that will pump $3.2 billion in incentives for PV installations over the next 11 years. "In 10 years, I really don't think we're going to need incentives," Gerber says. "People who don't use solar by then will be an oddity."