Solar power about to go mainstream

How cutting costs throughout the solar industry will make panels affordable soon

Though solar power has been around for three decades now, it provides barely 0.1 percent of U.S. electricity.

Power from the sun remains considerably more expensive than fossil fuel technologies or other renewables such as wind and geothermal, and high costs have largely relegated solar panel installations to special applications like off-grid homes.

As a result, few people are aware that large-scale deployment is a viable solution to reducing carbon emissions.

Yet the solar industry is set to surprise a whole lot of people. Prices are coming down quickly, and the industry is hoping to revolutionize our energy system.

Solar power growing fast

Solar power has achieved tremendous development recently. Growth rates have averaged nearly 50 percent per year for over a decade. Yet for the technology to contribute a large fraction of our electric supply, this growth must be maintained for at least another 10 years to come.

If current trends continue, photovoltaic (PV) systems could contribute 10 percent of our electricity sometime in the early 2020s, a major gateway to future advances.

Yet the challenge of maintaining 50 percent growth rates for another 10 years cannot be overstated and will be particularly daunting with the current recession.

Ensuring solar prices continue to fall

Historically, solar power prices have dropped as the industry has grown. This trend must continue, and recent analysis by RMI's Energy and Resources Team confirms that today's technologies still have significant cost reduction potential.

• Economies of scale: As PV companies grow, they and their supply chains -- those who produce the silicon and glass for example -- will mature. Manufacturers can then benefit from dropping prices of products including steel wire, advanced chemicals, and electronics.
• Energy and resource efficiency: Each new manufacturing facility can and will be able to produce PV panels with less energy and materials.

Consider that consumables like lubricant, abrasive, chemicals, wire, and ink account for a large part of the PV cost structure and are frequently wasted. At the wafering step, for example, wafers are cleaned after they are cut and then cleaned again before cell processing. This requires excess water and chemicals.

In the future, waste like this will be driven out by a combination of process improvement, engineering breakthroughs, and adoption of best practices.

• Standardized installations: Today, most rooftop installations are designed and permitted individually, then built in place. As solar installations become more widespread and competition increases, installers will reduce costs and complexity by building standardized plug-and-play systems.

If opportunities like these are captured, solar power could be widely competitive by 2015. See this recent report by Photon Consulting for details.

We can look forward to cost reductions accelerating demand for PV systems and driving the industry to scale. As the industry grows, it will achieve additional cost reductions, enabling more demand. This virtuous cycle will propel solar power into the mainstream.

Can't wait for solar prices to drop?

In the meantime, as costs continue to come down, government subsidies and stimulus money can make solar a great investment today.

The federal government offers a 30 percent tax credit on investments in solar power installations. Utilities and state and local governments offer additional incentives. For example, in Colorado, Xcel Energy provides rebates of $3.50 per watt of system cost.

Programs like these can reduce the cost of a PV system by 75 percent. Savings in utility bills can then quickly pay back the purchase price.  Check out the DSIRE Database for detailed information about financial incentives in your state.

Sam Newman is a consultant on RMI's Energy and Resources Team.