Solar power takes giant strides

World Future Energy Summit: Cars and boats have featured at this year's summit in Abu Dhabi, and in the MS Tûranor PlanetSolar, the event hosts the largest solar-powered boat to brave the oceans..

January 17, 2012, Abu Dhabi, UAE: A Solar Powered boat, believed to be the first of its kind, is seen here docked at ADNEC's marina. The boat is in town for the anual Future Energy Summit. LeeShow more

No one can accuse the renewables industry of lacking creative impetus. Solar-powered aircraft, cars and boats have featured at this year's World Future Energy Summit (WFES) in Abu Dhabi, and in the MS Tûranor PlanetSolar, the event hosts the largest solar-powered boat to brave the oceans.

The futuristic, 100-foot-long vessel travelled 48,000km over two years to anchor finally next to the Abu Dhabi National Exhibition Centre, where WFES is held. And the solar industry will feel that it has come a long way over the past couple of years.

Last year alone, as much as 29 gigawatts of solar panels were installed, according to Bloomberg New Energy Finance. Solar technology was driven initially by environmental concerns in Europe, which led to generous financial incentives for power producers, and China's decision to make renewables a pillar of its energy policy has given the industry its latest impetus for growth.

China already has an installed solar capacity of 3 gigawatts, a number dwarfed by the 200 gigawatts it derives from hydropower. The Asian powerhouse has recently upped its targets, now aiming to generate 11.4 per cent of its electricity from green sources by 2015.

"To achieve these goals, we face many difficulties and will have to pay a big price," Wen Jiabao, the Chinese premier, said in his keynote speech at WFES on Monday.

In an ironic twist, solar photovoltaic (PV) panel producers are also paying a heavy price for those targets. The cost of their product has dropped through the floor as the application of Chinese industrial might to panel production led to a halving of panel costs last year.

This price decline has combined with a reduction in tariffs received in key markets such as Germany to turn once-healthy balance sheets into a sea of red.

In the second half of last year, notable US names such as Solyndra, Evergreen Solar and SpectraWatt filed for bankruptcy.

BP Solar stopped producing panels earlier last year and was dissolved by its parent company last month.

Players in the industry expect the cull to continue this year.

"We think there's going to be consolidation in 2012, there's going to be liquidation, there's going to be capitulation - companies just getting out of the business," said Andrew Beebe, the chief commercial officer at Suntech, the largest Chinese producer of PV panels.

As more panel producers hit the wall, pessimists might assume that the solar industry as a whole is suffering. Not so, counter industry players.

Falling prices are bringing the costs of solar power closer to grid parity, the level at which electricity coming out of solar arrays is as cheap as that flowing out of conventional power plants.

"I think people are talking about a crisis in the industry because prices have come down so fast, and companies are losing money," said David Eaglesham, the chief technology officer at First Solar, a US panel producer. "But it's also a turning point because prices have come down so fast."

A study released by the Emirates Solar Industry Association confirms what many already suspected: compared with diesel-fired power plants, solar-generated electricity is already cost-competitive in the region.

Cheap panels will only make solar more attractive, especially in markets such as the Middle East, India and much of Asia, where the rampant increase in demand calls for creative solutions on the supply side.

"Over the longer term, the trend bodes favourably for the big markets that are going to be consuming a lot of energy," said James Brown, the president at Utility Systems Business Group at First Solar.

With more players leaving the market, the basic principle of economics - that decreasing supply increases the price - should have a soothing effect on the balance sheet of the survivors.

"There are first indications that prices will be a little bit higher by the end of this year," said Hannes Behacker, the senior vice president for Asia Pacific and the Middle East at the German panel producer Q-Cells.