*William T. Coyle, former Senior Economist, USDA, Economic Research Service; Fumiko Yamazaki and Mechel S. Paggi are Senior Research Economist and Director respectively, Center for Agricultural Business, California Agricultural Technology Institute, Jordan College of Agricultural Sciences & Technology, California State University, Fresno. 

 

 

 

 

AWhitePaperonSolarEnergy:

EconomicandEco‐SystemsConsiderations 

by 

William T. Coyle, Fumiko Yamazaki and Mechel S. Paggi* 

December, 2010 

1

Table of Contents

U.S. Solar Sector: Current Status and Future Outlook .................................................................................................. 2

Executive Summary ...................................................................................................................................................................... 2

I. Introduction .................................................................................................................................................................................. 4

II. The state of technology .......................................................................................................................................................... 5

Photovoltaics (PV) .................................................................................................................................................................... 5

Solar thermal approaches ..................................................................................................................................................... 7

III. Types of projects and study zones .................................................................................................................................. 8

IV. Distributed solar versus other electricity-generating options ....................................................................... 10

Declining PV costs .................................................................................................................................................................. 10

Other cost-related factors .................................................................................................................................................. 12

Utility prices likely to rise .................................................................................................................................................. 13

Availability of sunlight key but not decisive to solar’s economic viability ................................................ 14

Policy affects competitiveness of PV............................................................................................................................. 15

Structure of current solar industry ............................................................................................................................... 17

Economic and other factors favor distributed over central solar power ................................................... 19

V. Project location issues ......................................................................................................................................................... 21

Threatened wildlife ............................................................................................................................................................... 21

Proximity to transmission lines ...................................................................................................................................... 22

Water use ................................................................................................................................................................................... 23

VI. Solar finance ........................................................................................................................................................................... 24

VII. Concluding points:.............................................................................................................................................................. 26

List of Figures................................................................................................................................................................................ 28

List of Tables ................................................................................................................................................................................. 28

List of Maps .................................................................................................................................................................................... 29

References ...................................................................................................................................................................................... 30

End Notes ........................................................................................................................................................................................ 32

2

U.S. Solar Sector: Current Status and Future Outlook

Executive Summary

Growth in U.S. solar-generated electricity both from photovoltaic (PV) and solar thermal

projects has been rapid in the last 5 years. Nevertheless, solar’s share of total U.S. electrical

generation capacity and production is still minuscule, less than one percent. The principal

barrier to its broader use is its high relative cost. Production costs are 8-20 cents per KWh

for solar thermal and 14-30 cents per KWh for solar PV, compared to an average 5.7 cents

per KWh for electricity from all sources. The average retail price was about 10 cents per

KWh in 2010. Capital and installed costs for a 10 MW system capable of producing 10

MWh per year, the approximate average U.S. household electricity consumption, is about

$80,000 at $8 per installed watt, but these costs are trending downward. One reason PV

costs are high is the characteristic low capacity factor of solar power, constrained by

limited hours of sunlight per day. Solar’s high capital costs are, thus, spread across fewer

productive hours compared to other energy sources.

The future economic viability of solar will depend on a combination of factors, primarily

lower costs of production, higher electricity rates, and the availability of sunshine.

Sustained policy support will be needed to assure the first two trends continue.

Technological advances will be a key driver in the decline in solar’s cost of production and

rising fossil fuel prices will make solar more economically attractive relative to competing

fossil fuels and renewable alternatives. The availability of sunshine, while not always

decisive (e.g. success of solar in low-sunshine countries like Japan and Germany), raises

system productivity and lowers cost of production.

There are two major options for solar electricity: distributed systems, in which production

is close to or at the point of consumption, and centralized systems that are distant from the

locus of demand. Most distributed systems use photovoltaics, either crystalline silicon cells

or thin film. A variety of factors favor distributed PV over centralized PV or thermal

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options: low or no siting costs, lower maintenance and operating costs, no transmission

costs, no water requirements, easily integrated with current infrastructure, and small

environmental impacts. All the fast-tracked Bureau of Land Management centralized PV

and solar thermal projects will occupy large tracts of land and will have a variety of impacts

on water, land, wildlife, and transmission costs. Centralized systems, however, benefit from

economies of scale and allow for more rapid and certain growth in capacity toward

meeting, sometimes ambitious, state renewable portfolio standards.

4

I. Introduction

Energy is the lifeblood of the U.S. economy. With expanding energy demand, particularly in

developing countries, and constrained fossil fuel supplies, real energy prices rose through

most of the last decade. High energy prices along with concerns about energy security and

fossil fuel impacts on the environment spurred a renewed and more intensive effort to

develop and commercialize alternative energy resources, including the generation of

electricity from solar energy. Solar as well as other alternatives is vying for a more

mainstream role in the U.S. energy market.

The future of solar will depend on meeting the following challenges:

--Lowering the cost of producing electricity from solar energy;

--Getting sustained and predictable policy support to aid in the technological

challenges of lowering costs and in stimulating consumer demand;

--Developing financial vehicles for overcoming the investment barrier of high

frontend capital and installation costs for distributed systems; and

--Overcoming the myriad spatial, temporal, and environmental challenges of

centralizing solar power generation, including the transmission of energy from

remote, undeveloped areas to population centers.

Among renewable sources of energy, the cost of generating electricity from solar energy

remains relatively high (Figure 1). This high cost of production explains solar’s modest

current role in the U.S. energy system (Figure 2) and is the most important challenge facing

the industry. Lowering these costs will depend on advances in both photovoltaic

technology and the design of solar thermal systems.

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II. The state of technology

There are two principal approaches to converting solar energy to electricity: the direct

conversion of sunlight to electricity using photovoltaic cells and the indirect conversion, by

concentrating solar energy to heat water or some other liquid medium to drive more

conventional electrical generating processes.

Photovoltaics (PV)

The direct conversion of light into electricity by a solar cell, the so-called photovoltaic

effect, was discovered more than 150 years ago but has only been practically developed in

the last 50-60 years.

The space program in the 1950s gave impetus to the development of PV technology for

providing electrical power to satellites, and later to manned space flight. Until the early

1990s, photovoltaic conversion was a “soft energy” option, and used primarily in local

applications, not connected to the larger electrical grid system. Then, the cost of PV

applications was ten times the cost of grid energy from nuclear and fossil fuels (Solar

Electric Power Association, 2010). The decline in PV cost and the rise in fossil fuel prices

has led to larger centralized projects, more commercial applications, and expanded grid-

tied residential use.

There are two major classes of PVs: crystalline silicon cells and thin film cells (Figure 3). In

the longer term there may be others, but given the long time it takes to develop and

commercialize PV technologies, these two likely will be the market leaders for the next

decade (Electric Power Research Institute, 2009). Primary research and development

objectives are focused on lowering cost of production, raising conversion efficiency, and

increasing reliability (National Academy of Sciences, 2009).

--Crystalline silicon cells represent the most mature PV technology and have

maintained a near 80 percent market share of worldwide cell production for the

past three decades. They have the most highly-developed manufacturing processes.

Mono or polycrystalline silicon cells are currently the most widely used, averaging

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solar-to-electric efficiencies of about 16 to 18 percent. Polycrystalline (also called

multicrystalline)(poly-Si) and ribbon silicon modules are slightly less expensive but

also a few percentage points less efficient, about 13-15 percent. Super

monocrystalline (c-Si) modules have the highest efficiency, about 19 percent (Solar

Electric Power Association, 2010). The cost of highly purified silicon remains a

barrier and the manufacturing process for silicon cells is relatively slow and difficult

to automate.

--Thin film cells are made from thin layers of semiconductor materials, a few

micrometers thick mounted on a low-cost plastic, glass, metal foil, and even fabric

backing. They have potential cost advantages over crystalline cells in having lower-

cost more automated manufacturing processes. Their manufacture requires smaller

amounts of semiconductor material and can draw on a greater diversity of non-

silicon material. Their application is more flexible, being more easily integrated into

roofing and other parts of a building, as well as having other uses. But these

advantages now are offset by lower efficiencies, making their costs per watt of

output about the same as for crystalline silicon. Amorphous silicon modules are the

most common thin film cells with efficiencies of only 6-9 percent, CIS (copper

indium diselenide) /CIGS modules with efficiencies in the range of 8-13 percent, and

CdTe (cadmium telluride) modules with 9-11 percent (Solar Electric Power

Association, 2010).

--Next-generation PVs include multi-junction, dye sensitized, and concentrator

concepts. The multi-junction approach (micromorphous) stacks two or more layers

of silicon or other semi conductor material, each layer designed to convert a

different segment of the light spectrum. When sunlight passes through all the layers,

a broader spectrum of light can be harvested, thus increasing conversion efficiency.

Other technologies under development include dye sensitized solar cells (DSSC)

covered with a molecular dye that absorbs sunlight much like the chlorophyll in

plants (Electric Power Research Institute, 2009). Concentrator systems are not

widely used with PV while they are central to solar thermal technology. Since PVs

7

are more efficient under concentrated light, concentrator systems use mirrors or

lenses to focus light on specially designed cells. Since they require direct sunlight,

tracking systems are used to follow the sun's path through the sky during the day,

and/or to adjust to the sun's varying height in the sky through the seasons.

--Hybrid cells combine high efficiency monocrystalline silicon with ultra-thin layers

of amorphous silicon. The monocrystalline silicon is sandwiched between

amorphous thin film, achieving efficiencies greater than 15 percent.

--Arraying solar cells—A solar array is a number of solar panels, or modules,

arranged together to form one interconnected system. Solar arrays can be very large

or relatively small, but due to their modularity can be located and oriented in almost

any way to maximize exposure to the sun. The use of trackers which keep the PV

panels directly facing the sun can increase panel productivity by as much as twice.

The use of trackers has to be assessed in light of increased cost and mechanical

complexity.1

Solar thermal approaches

Unlike PVs that convert sunlight directly into electricity, solar thermal technology captures

the heat of the sun. Most solar thermal applications are for low energy systems like heating

swimming pools or heating building spaces but a growing number incorporate high-

temperature collectors for commercial electric power generation.

There are a variety of approaches used in these high-temperature applications (Figure 4).

--Parabolic trough. This system uses a long parabolic-shaped trough that reflects and

concentrates sunlight onto an insulated tube or heat pipe. The tilt of the trough changes as

the sun moves from east to west to assure the sunlight continues to focus directly on the

tube. A transfer fluid (synthetic oil, molten salt, or pressurized steam) in the tube is heated

and flows to a central power plant that converts about a third of the heat to electricity. The

world’s largest parabolic trough facilities, Solar Energy Generating System (SEGS), are

8

located in the Mojave Desert, consisting of nine plants producing 354 megawatts of power

at peak output.

--Power tower. This system is also known as a central tower or heliostat power plant. It is

comprised of thousands of mirrors arrayed within a several square mile area, with each

mirror individually tracking the sun, and focusing the sunrays onto a receiver atop a

centrally positioned tower. The concentrated sunlight heats molten salt to over 1,000o F in

the receiver. The high temperatures allow for the storage of heat and its use in driving a

turbine to produce electricity. The storage of heat allows this system, unlike PV systems, to

produce electricity night or day, and in all daytime weather conditions.

--Parabolic dish. This system consists of a parabolic-shaped concentrator shaped like a

satellite dish that reflects solar radiation onto a receiver mounted at the focal point of the

dish. The collected heat is utilized directly by a heat engine (like the Stirling engine)

mounted on the receiver which generates electricity. Parabolic dish concentrators are

similar to trough concentrators, but focus the sunlight on a single point.

--Linear Fresnel Reflector. This system is similar to the parabolic trough but uses modular

flat reflectors to focus the sun’s heat onto insulated tubes through which water flows. The

concentrated sunlight boils the water in the tubes, generating high-pressure steam for

direct use in power generation.

--Solar tower with updraft wind turbine.2 In this system air is heated under a ground-

covering glass sheet. The air under the glass heats up and moves by convection up through

a large chimney, powering wind turbines that generate electricity.

III. Types of projects and study zones

To date there are very few large PV or solar thermal projects in operation in the United

States (Tables 1 and 2). The great majority of solar PV production comes from small

distributed systems. In recent years, proposals for larger projects have grown as economic

factors and policy support, including grants through the American Recovery and

Reinvestment Act of 2009 and loan guarantees, make investments in larger projects more

9

attractive. Another key driver is California’s requirement that one-third of its electricity be

derived from renewable sources by 2020, the most aggressive renewable portfolio

standard (RPS) for electricity in the United States.

Since large solar thermal and PV systems are land intensive, the acquisition and

development of land is a key requirement and adds significant cost compared to small

distributed systems using already-owned rooftops and other spaces.

To help promote large projects, the U.S. Interior Department in mid 2009 designated

670,000 acres of land to be “fast-tracked” as potential areas for solar energy production.

Twenty-four tracts in six western states were identified as Solar Energy Study Areas. Only

lands with excellent solar radiation resources, suitable slope, closeness to roads and

transmission lines or designated corridors, and containing at least 2,000 acres of Bureau of

Land Management (BLM)-administered public lands were considered. Wilderness and

other high-conservation-value lands were excluded from consideration.3

The U.S. Department of Energy (DOE) and the Bureau of Land Management (BLM) then

began preparing a Programmatic Environmental Impact Statement (PEIS) to evaluate the

environmental and resource suitability of the selected lands for large-scale solar energy

production and to indentify wildlife concerns, potential conflicts with natural resource and

land use interests, and mitigation strategies. Public hearings were held in 2009 to help

identify additional concerns about the use of these lands.4

From the scores of applications, 14 “fast-track” projects were approved by the Bureau of

Land Management in late 2010 (Table 3). These included four PV and 10 solar thermal

projects in three states: California (9), Nevada (4), and Arizona (1). Solar developers will

have to bid on BLM land for leases and would be expected to pay royalties for project

income, although the legislation allows for deferral or reduction of royalties for the first

five years of the lease. As planned, the “fast-track” projects will have an aggregate capacity

of 6.1 GW and occupy more than 55,000 acres. They will average about 4,000 acres and

435 KW. When developed, these 14 projects alone would more than double existing U.S.

installed PV and solar thermal capacity.

10

IV. Distributed solar versus other electricity-generating options

Grid-tied distributed solar power generation is the fastest growing segment of the solar

sector and foreshadows the potential for decentralization in power generation as occurred

in the computer (PC) and telecommunications (cell phone) industries. Term “distributed”

is used because the electricity generated occurs on the distribution side of the electricity

system (National Academy of Sciences, 2009). These residential and commercial solar

systems are connected to the grid, supplying surplus electricity during peak sunshine

periods and drawing fossil fuel or nuclear-based electricity from the grid during the low

sunlight and nighttime periods.

From a macro perspective, there are ultimate limitations now on how much solar power,

either distributed or centrally-generated, could be used by the grid because of the

intermittency of solar energy and the lack of storage capacity, thus, having to rely on

backup electricity from other sources to guarantee energy reliability in the broader system.

Some estimates indicate that the system-wide upper limit for solar now is 20 to 50 percent

of total electricity.

Grid-tied PV systems range in size from a few 100 watts to a few megawatts. Investment in

these systems is driven by three key economic factors:

--Declining PV module and installation costs,

--Rising local utility costs, and

--Availability of sunlight.

Policy can affect the first two factors, and thus affect investment decision making about

adopting PV systems.

Declining PV costs

11

Declining PV costs are a function of a virtuous cycle of technological development

(reviewed in previous section), expanding market size, and economies of scale in PV

production and installation services. Photovoltaic (PV) module prices have declined 90

percent in the last three decades, with a doubling of sales for every 20 percent decline

in price (Electric Power Research Institute, 2009). Solar electricity generating costs

for solar PV and solar thermal still remain high relative to fossil fuels and other

renewable (Figure 1 and 5). Production costs are 8-20 cents per KWh for solar thermal

and 14-30 cents per KWh for solar PV, compared to an average 5.7 cents per KWh for

electricity from all sources (National Academy of Sciences, 2009). The average retail price

was about 10 cents per KWh in 2010

Modules account for about half the overall costs of PV systems. Non-module or balance

of system costs (inverters,1 installation, labor, etc.) are also declining. According to the

Lawrence Berkeley National Laboratory, solar photovoltaic system costs declined from

an average $12 per installed watt in 1998 to $8 in 2008—a one-third decline in ten

years. Non-module costs accounted for three-fourths of the decline (Wiser, et al.,

2009). These estimates put the installed cost of a 10 KW residential system at about

$80,000. Installed costs have been reported lower for some residential systems, as

little as $5 per installed watt, with buying groups, solar leasing programs, and

community solar projects.5

The declining trend in PV production costs is expected to continue. Manufacturing

costs are expected to decline for all types of photovoltaic modules. Non-silicon CdTe is

the least-cost thin film module now, with production costs under $1.00 per watt. All

other thin film types are expected to drop below $1.00 by 2015. Super monocrystalline

silicon, the most expensive PV, could drop from about $2.50 per watt now to under

$1.50 in five years (Solar Electric Power Association, 2010).

1 The solar inverter converts the DC electrical output of the photovoltaic (PV) module into AC current that is compatible with the commercial electrical grid.

12

Cost estimates for electrical power generation for mid-range rooftop solar systems are

14–19 cents per kilowatt-hour and about 14 cents for commercial-scale systems.

Sector-wide costs are projected to decline to about 7.5 cents per kilowatt-hour by 2020

(Blackburn et al., 2010). Current average electrical retail rates for the United States are

about 10 cents per kilowatt-hour,6 but vary with significant variation across the

country, with rates higher on the coasts and lower in the interior parts of the country

(Figure 6).

Other cost-related factors

Stable costs. While real prices of fossil fuels and electricity are rising and subject to

significant variability (particularly fossil fuel prices in the last decade; see Figure 9),

once the initial module and installation costs are paid, the nominal cost of PV

electricity remains stable during the life time of the system. Operation and

maintenance costs are low and fuel costs are zero. Thus, PV energy costs are

predictable, making the PV system investment a hedge against variability and likely

real increases in fossil-based electricity prices. 7

Net metering and peak pricing. Most utilities are now required to make net-

metering available to their customers (Energy Policy Act of 2005). Net metering

allows for the sale of surplus solar-generated electricity during peak sunshine

periods when demand for electricity is greatest, and the purchase of electricity

during low-sun and nighttime periods when demand tends to be less, paying the net

difference.

Shifting away from flat-fee pricing to varying the price of electricity throughout the

day depending on its changing cost would be beneficial to solar’s cost

competitiveness. Baseload electricity, usually generated with coal or nuclear power

and available throughout the day (high capacity factors), is the cheapest. Some

argue that the inherent timing of solar PV production enhances its value by

coinciding with peak electricity demand during the midday when solar generating

potential is the greatest (Figure 7). Assessing price of electricity this way and by

13

adding transmission costs to centralized generation would make on-site distributed

generation more competitive and more comparable to centralized power

generation. Nevertheless such changes in pricing may have limited impact on the

overall cost of solar. In one analysis, the timing of solar PV production enhances its

value by 0 to 20 percent in a system with substantial excess capacity and 30 to 50

percent if the system is more dependent on price-responsive demand. But despite

accounting for favorable timing and location of solar PV production, the cost of solar

PV remains many times higher than the market valuation of the power it produces

(Borenstein, 2008).

Some utilities resist net-metering requirements because they find it unfair to

provide backup infrastructure and electricity for customers who are generating

much of their own electricity independent of the utility. But utilities usually charge

a fee for connecting to the grid regardless of how much electricity is used. They

should be compensated for the services of providing backup capacity until

distributed solar systems can be fully independent by using fuel-cell generators or

other means to store energy for use when the sun is not shining (Bradford, 2006).

Utility prices likely to rise

Next to declining PV costs, rising utility costs have been most significant in boosting

the competitiveness of distributed and central solar power generation (Figure 8). The

decade-long (2000 to 2010)2 rise in fossil fuel prices (Figure 9) has been

unprecedented in the last 30 years and has sustained opportunities for efficiency gains,

stimulated energy conservation, and generated increased supplies from more costly,

harder-to-find traditional and alternative energy sources for electricity generation.

The current sustained rise in fossil fuel prices compares with previous periods when oil

prices rose sharply, usually induced by discontinuities from military conflict, peaked in a

matter of weeks or months, and then declined sharply. Coal and natural gas followed a

2 While energy prices were volatile during the 2000s, they generally rose during the decade except for the sharp drop in prices in 2008-09 because of the global financial crisis and economic contraction.

14

similar pattern. Following these price spikes, the rapid decline in the early 1980s made it

difficult to sustain alternative energy programs, including solar PV and solar thermal

project and reduced incentives for consumers to curb energy use.

Unlike previous high-price periods, the current energy market is driven by strong

demand-side factors, including robust energy demand from rapidly growing middle-

income economies, where consumers are aspiring to a higher standard of living and

exhibiting big appetites for energy. Almost two-thirds of recent global growth in

energy demand has come from China and other middle-income economies.

While the major fundamentals point to rising fossil fuel prices, their rise will not be in a

straight upward-rising line. Fuel prices likely will be volatile as they have been in the last

decade, with changes in supply and demand in response to higher prices. New fossil fuel

supplies may reduce the competitiveness of solar and other renewables in the short run.

An example of this are the large discoveries of natural gas in 2008 in Louisiana, Texas,

Arkansas and Pennsylvania, adding to other reserves to give the United States a 100-year

natural gas supply at current rates of consumption. U.S. natural gas production increased

16 percent in 2005-09, more than offsetting a 5.2 percent decline in U.S. coal production.

Natural-gas prices fell by half during this period (BP, 2010).

These market forces boosted the position of natural gas relative to coal (Figure 10) and

other fuels. Lower natural gas prices led utilities to burn more gas. According to the Energy

Information Administration, more than half of new U.S. power plants expected to be built in

the next few years will be fired by natural gas (Casselman, 2009). While increased natural

gas supplies may reduce the rise in fossil fuel and electricity prices in the near term, most

long-term forecasts do not show fossil fuel prices returning to previous low levels.

Availability of sunlight key but not decisive to solar’s economic viability

Along with local utility rates and PV module and installation costs, the availability of

sunlight (or insolation) is critical to investment decisions regarding solar power versus

other electricity-generating options. The better the solar resource, the greater the system

output and the lower the present value of lifetime system costs. Available sunlight in the

15

populated parts of the world varies with weather conditions along with daily and seasonal

cycles from about 125 to 300 watts per m2. As one would expect, solar radiation is greater

in the Southwest and less in New England and the Pacific Northwest (Electric Power

Research Institute, 2007).

In the United States the location of large solar thermal and PV projects tends to cluster

where the solar radiation is most intense (Map 1).

Availability of sunlight is not always a decisive factor in making solar electricity

competitive. Countries like Germany and Japan, with more limited sunlight than the United

States, have more widespread use of solar electricity because utility rates are high relative

to solar system costs. Electricity rates in Germany and Japan are among the highest in the

world (Figure 11).

Policy affects competitiveness of PV

Sustained federal and state government support in the form of rebates, tax credits,

mandates, and support for research and development continue to be vital to the

development of the solar energy market in the United States and elsewhere. These

programs primarily help to lower the cost of solar energy and enhance its competitive

position relative to competing sources of energy, such as coal, nuclear, and natural gas.

Some argue that government incentives are justified to level the subsidy playing fi eld

for renewables vis a vis fossil fuels or for promoting certain difficult-to-quantify social

benefits, such as reducing GHG emissions or enhancing national energy security.

Others see public support merely as a way to encourage inevitable market forces by

helping to reduce solar system costs and market risk, spur investment and

competition, and hasten deployment of solar systems that will deploy eventually

anyway.

Government support can induce competition and the achievement of economies of

scale among regional equipment manufacturers and installers (Wiser, 2009). The

states with the largest PV markets appear to have somewhat lower average PV costs

than states with smaller markets and less public support. There is also evidence that

16

state and local policies have had impact on lowering non-module costs, and thus

helping to reduce overall installation costs.

In addition to support for solar R&D at universities and other research institutions, public

support for solar comes in a variety of forms:

--Cash rebates: These reduce the users’ cost by some dollar amount per kilowatt

hour of certified installed solar capacity. Payments are made at once and can be as

much as 50 percent of system costs. They are usually provided by state or local

governments and reduce the risk of shifting future government priorities (Bradford,

2006). California recently lowered the rebate by as much as 30 percent and some

local governments raised permit fees for installing solar systems to reduce exposure

in an era of recession and budget deficits.8

--Tax credits: These are provided for investors, producers and consumer to reduce

one’s tax liability by a share of the amount spent on solar systems. The federal

government instituted a 30 percent tax credit for solar systems in 2005 for two

years, and then extended it in 2008 until 2016.

--American Recovery and Reinvestment Act of 2009—The economic stimulus

program places a big emphasis on renewable energy, including solar, and builds on

previous federal initiatives such as a Million Solar Roofs (Clinton) and the Solar

American Initiative (Bush). It created the Treasury Grant Program (section 1603),

providing owners of commercial solar property a 30 percent grant, in place of the

solar Investment Tax Credit (ITC). This temporary shift from using tax credits to

grants was motivated by the anticipated lack of taxable income during the 2008-09

recession which limited the usefulness of a tax credit. To date the program has

committed more than $400 million for about 1,175 PV and solar thermal projects

across the country, primarily in California, New Jersey, Florida, and Arizona.

Applicants must begin construction by December 31, 2010 and complete

construction by December 31, 2016.9

17

--Feed-in tariffs: This requires a utility to purchase power from a renewable energy

source at a fixed cents-per-kilowatt-hour rate for a certain amount of time,

sometimes as long as 20 years. This amount often is gradually reduced to coincide

with declining solar costs of production. This instrument was made popular by

Germany, and later adopted by Spain, Italy and other countries. Germany is the

global leader in installed PV capacity (Figure 12, Table 4). The United States is

using or considering the use of feed-in tariffs in various jurisdictions in California,

Washington, Florida, Vermont, and Colorado. 10 The program in Spain was so

successful that it led to 2.5 GW of PV installations in 2008; 11 a year later, the

program was capped at 500 MW of installed capacity and feed-in tariffs scaled back,

a reminder of the limits of government budgetary support in the midst of a

recession.

--Renewable portfolio standards: More than 30 states impose requirements on retail

electricity providers to supply a certain percentage of their electricity from

renewable sources, such as solar, wind and geothermal, by a certain date. Some

states require "carve-outs" for specific energy sources, like solar. Five states have

voluntary goals.12 California’s renewable standard of 20 percent in 2010 and one-

third in 2020 is the most ambitious.

Structure of current solar industry

To date most solar systems are distributed and quite small. Collectively they account for a

very small share of U.S. electricity generation, even among renewables (Figure 2). In the

case of California, the leading state for grid tied solar capacity (Figure 13) and where there

is significant public support for expanding its use, solar accounts for less than 1 percent of

electrical generation and was a shrinking share until 2006 (Figure 14).

One reference (Bradford, 2006) divides up the global PV market into the following

segments:

18

--15 percent for small independent projects like calculators, irrigation pumps, fresh water

distillers, and small systems that store excess PV electricity in batteries for use at night, like

yard lights and roadside phones;

--18 percent for off-grid PV systems for use in isolated areas in developed and developing

countries.

--65 percent for grid-tied systems for residential and commercial users, usually rooftop

based, ranging in size from a few 100 watts to a few megawatts. These systems use the grid

as a giant storage battery, taking surplus solar-generated electricity during the day time,

and drawing fossil- or nuclear- based electricity during the nighttime.

--2 percent for centralized utility-sized projects, ground based and in areas where there are

significant solar radiation resources.

In the United States, the share of utility-sized PV solar projects is larger and growing. The

top 27 PV systems (Table 1), account for about 200 megawatts of capacity, or more than 12

percent of the 1.6 GW of cumulative installed PV capacity in the United States in 2009.13

Most of the rest are relatively small grid-tied distributed commercial and residential

systems.

Solar thermal, like PV, has distributed options, primarily for heating swimming pools and

building spaces. Centralized solar thermal electricity projects have been more important

than central PV projects. On average, they are larger than their PV counterparts and have a

longer history of commercial viability, going back to the 1980s. There is keen interest in

them now. Current online utility-size solar thermal projects account for more than 400 MW

of electricity-generating capacity (Table 2), about twice that of large PV-based systems

(greater than 2.4 MW).

Solar thermal projects make up the majority of fast-tracked solar projects (10 out of 14)

(Table 3) recently cleared for construction, on federal lands, primarily in the Southwest.

Construction must begin by the end of 2010. Some of these projects will approach or

exceed the average size of a coal-fired electrical generation plant, about 500 MW. Along

with other announced solar thermal and PV projects, solar capacity in the United States

19

should expand several fold in the next 5-10 years if all these projects are completed (Table

5).

Economic and other factors favor distributed over central solar power

Like the choice between solar and other energy sources, the choice between distributed

solar and central solar depends on economic and other factors.

Factors favoring distributed over central:

Lower siting costs: While most residential and commercial distributed PV systems are sited

on rooftops, central solar production requires large expanses of land that need to be

bought and developed. These can be expensive. In some cases, however, areas with good

solar radiation are owned by the federal government, creating the potential for low leasing

fees to keep land costs relatively low (in the case of recent fast-tracked projects).

Lower maintenance and operating costs: The maintenance and operating costs for

residential and commercial PV systems are relatively minimal. On the other hand, central

PV and thermal systems have higher maintenance and operating costs. Tracking systems

Table 5 --Summary of exisiting and announced large solar projects

Solar thermal project PV projects

Item # MW Average # MW Average

Operational 16 434 27 27 208 8

California 11 367 33 5 38 8

Announced 62 14020 226 104 6321 61

California 42 11186 266 42 4198 100

Fast-tracked 10 5170 517 4 922 231

California 7 4221 603 2 395 198

Sources: Tables 1-3. See table footnotes regarding sources for announced projects.

The "fast-tracked" projects are a subset of the "announced" projects.

20

are complicated and have more moving parts prone to breakdown. Keeping mirrors and

lenses clear of dust to keep conversion efficiency high require water and raise labor costs.

Thermal systems require…“miles of pipe and thousands of joints and seals to circulate

heated fluid.”14

No transmission costs: While distributed solar systems are compatible with existing

electricity distribution infrastructure, centralized thermal and PV systems are often in

relatively remote and desolate parts of the country (e.g. Mojave desert), requiring

significant new investment in infrastructure. In addition to the high cost of new lines,

transmitting electricity over long distances add costs because of losses, as much as 10

percent, not incurred to this extent when production is close to the point of consumption.

No water requirements: Aside from requiring large amounts of land, centralized thermal

systems also require water for cooling and for cleaning dirty mirrors and lenses.

Marginal versus average cost pricing: Distributed solar benefits from marginal versus

average cost pricing. As the installed cost of PV systems declines relative to local fossil-

based utility rates, solar users benefit from the full decline in the relative cost, while

utilities buying from central solar projects average the solar-based electricity in with other

more predominant fossil-based electricity. This averaging process by utilities would only

have a slight effect on the average price of electricity for retail and commercial users.

Fewer environmental and other challenges: Distributed solar systems are more easily

integrated into established homes and buildings and the electrical grid. Since central

systems require significant land resources, they have a more disruptive impact on the

environment from the development of large tracts of land for the plant and for new

transmission lines.

Factors favoring central over distributed:

Economies of scale: The larger size of central solar systems tends to bring down per-unit

generating costs. Distributed systems have higher costs because each system is a relatively

21

small project, leading to higher per-unit labor and installation costs.15 Large-scale projects

also help in making rapid progress toward large renewable mandates.

Higher capacity factor: Central systems have the potential of achieving a higher capacity

factor by the use of tracking systems that reducer per unit costs. Not practical for most

rooftop systems, one- or two-axes tracking systems change the orientation of panel arrays

during the day and/or season to maximize sunlight conversion efficiency. A tracking

system can significantly raise the capacity factor compared to stationary rooftop systems.16

Problem of intermittency reduced: Centralized solar thermal systems have better heat

storage capacity for generating electricity at nighttime, reducing the problem of

intermittency common with current PV systems. Central hybrid systems are also used,

combining in the same plant solar- and fossil-fuel-based electricity generation capacity to

enhance reliability. The Solar Energy Generating System (SEGS) plants combine solar

thermal with natural gas and the El Dorado Energy Plant in Boulder, Colorado combines

thin film PVs with natural gas.

V. Project location issues

Companies proposing to develop large utility-scale solar plants face a number of issues

relating to project location, including environmental impacts, proximity to transmission

lines, and water use. The BLM “fast-tracked” projects will occupy relatively large areas,

ranging from 500 to over 7,000 acres. Such large areas are likely to have impacts on fragile

desert environments where many of the BLM projects plan to locate.

Threatened wildlife

Desert development can interfere with migration corridors, reducing the fitness and

resilience to disease of animal populations like the bighorn sheep. It can disrupt the

habitats and adversely affect plant and animal wildlife.

22

The desert tortoise as well as other threatened and endangered species of plants and

animals have been identified in many of the selected areas for the 14 BLM “fast-tracked”

projects (Table 6).

Companies have undertaken mitigative efforts to accommodate environmental concerns,

including relocation of species to adjacent land areas, adding habitat area close to the project

area, moving development away from sensitive desert washes, and even scaling back the overall

size of planned projects. Despite federal approval of the “fast-tracked” projects, challenges

remain. The California Energy Commission temporarily withdrew approval and the Sierra Club

is threatening legal action against the Calico Solar Energy Project for not doing more to protect

the desert tortoise. In another case, a federal judge recently halted development of the Imperial

Valley project, agreeing with a Native American group’s claim “it was inadequately consulted

about the project.”17

Proximity to transmission lines

While distributed solar PV is well integrated with the existing grid infrastructure, central

solar projects will depend increasingly on new or upgraded transmission lines. Since many

of the best solar radiation resources are in remote desert locations where the density of

transmission service is limited (Map 2), the availability or commitment to develop

transmission lines will be key to project success.

This is why California, with the most ambitious Renewable Energy Standard (RES) goals in

the country, set up the Renewable Energy Transmission Initiative (RETI) in 2007 to

coordinate a planning process to match transmission-line projects with potential

renewable resources in the state (solar, wind, geothermal) in a least cost and

environmentally sensible way to meet consumption goals. Thirty-one Clean Renewable

Energy Zones (CREZ) in California with over 80 GW of potential capacity were included in

the analysis, along with out-of-state resources adding another 100 GW (California’s current

electricity consumption is about 280 GWh and projected to be 316 GWh in 202018).

23

In the RETI process, the 31 zones were ranked by their cost-effectiveness, which included

environmental impacts, the quality of the resource, the cost of developing the resource, and

the cost of transmission to demand centers in the state. Electrical generation costs for each

renewable resource were based on the present value of total life-cycle costs divided by the

total potential lifetime electricity generated, yielding an estimate of $ per MWh for

comparing and ranking potential projects. A similar calculation was done for transmission

costs. Sensitivity analyses accounted for uncertainties like changing policy and the impact

of new technologies. Environmental impacts were evaluated qualitatively regarding

impact on land use for locating the plant and for the connecting transmission lines, as well

as the impact on wildlife. The analyses helped identify those zones with the lowest

development costs and lowest environmental impacts, setting the stage for establishing

priorities for developing transmission infrastructure (Black and Veatch Corporation,

2010).19

The sheer cost of transmission and distribution infrastructure is also a barrier to

deployment, especially in uncertain economic times. The estimated total cost of

modernizing and expanding the national transmission and distribution system is $225

billion for the transmission system and $640 billion for the distribution system, almost

$900 billion (National Academy of Sciences, 2009).

Water use

The areas of the country that have the most solar radiation also have limited water supplies

(Map 3). While PV solar systems use very little water, solar thermal systems are water

intensive, using about twice as much water per KWh as fossil fuel facilities for washing

mirrors and lenses and for cooling (Carter and Campbell, 2009). (Figure 15).

If the number and capacity of solar thermal plants expanded according to the announced

intentions compiled by various sources (see footnote to Tables 2-4), thermal solar

production is poised to expand rapidly, an increase of more than 30 times in the next 5

24

years or so. About a third of this expansion is from the 10 recently “fast-tracked” solar

thermal projects. Most of the planned solar thermal plants will locate in water-constrained

areas of California, Nevada and Arizona. According to NREL, solar thermal systems will

continue to grow in number reaching 55 GW of capacity by 2050, requiring a significant

supply of water, as much as 505 thousand acre-feet per year (Carter and Campbell, 2009).

The volume of water required depends on the cooling technology. Wet cooling requires

more water than dry cooling. If the Western Governors’ Association goal of 8 GW of solar

thermal capacity by 2015 were all located in Arizona, the water use would account for 1

percent of the state’s consumptive use of water (Carter and Campbell, 2009).

This competing demand for scarce water supplies in the Southwest could lead to rising

water costs, making water a significant constraint to the location of solar thermal plants in

certain areas, forcing plants to make adjustments to reduce the size of its water footprint.

Plants are already adjusting. Most of the solar thermal projects being proposed for

California are planning to use the less water-intensive and more costly dry-cooling

technology (Office of Senator Jon Kyl (2010)). Amargosa Farm Road Solar Energy Project

plans to install a dry cooling process that will reduce its annual water use by one billion

gallons. The Solar Two Project in Southern California will require about 10 million gallons

of water for cooling and washing mirrors and lenses, more than the area’s surface and

ground water supplies can support. The company is proposing to build an 11.8 mile

underground pipeline to use treated sewage water from the nearby town of Seeley.20

VI. Solar finance

A key reason solar energy has made only meager progress in penetrating the U.S. energy

market is high initial capital and installation costs for solar systems.

While technological advances have lowered production costs for PV modules, PV and solar

thermal systems remain expensive relative to other options. Household electrical

25

consumption averaged about 11,000 KWh in 2009. Producing this amount of electricity

would require a 10 KW capacity PV system. At $8 per watt, total capital and installation

costs would be about $80,000.

Solar costs are almost all incurred at the frontend. Annual maintenance costs are minimal

and fuel costs are zero. Such high initial costs are a significant barrier to investment. In

addition to the PV system costs, government incentives and local utility rates affect

investment decisions. Potential metering credits are also a factor.

Homeowners have traditionally used home equity loans, cash from home mortgage

refinancing, and cash with government incentives to purchase PV systems. A new set of

financial tools have emerged to help investors overcome the high initial cost of solar

systems (Coughlin and Cory, 2009).

These include third party solar leasing, residential power purchase agreements, and

property tax assessments.

In a leasing arrangement, a company installs and owns the PV system on a homeowner’s

roof. The homeowner puts no money down and pays a leasing fee that rises yearly by a

certain percentage for a set period, usually for 15 years or more, uses the electricity, and

benefits from any surplus production.

At the end of the lease period, the homeowner has the option to buy the system, extend the

lease, or have the system removed. Net electricity costs to the homeowner can be reduced

under such an agreement, depending on a variety of contractual details and local market

factors (Coughlin and Cory, 2009).

The Power Purchase Agreement (PPA), commonly used for commercial and public sector

solar projects and similar to a lease arrangement, is being increasingly used for residential

systems. In the PPA, the power provider agrees to buy, install, own, operate and maintain

the PV system, while the homeowner agrees to host the system on his roof and buy the

26

power generated by the solar panels for a set period, for 8 to as many as 20 years,21 with

some money down and flat or yearly increases in the electric rate, which is less than the

rate from the grid. The agreement is transferable if the home is sold. Like in a lease

arrangement, at the end of a PPA, the homeowner has the option to buy the system, extend

the arrangement, or have the system removed (Coughlin and Cory, 2009).

In the property tax assessment approach (used in Berkeley and Palm Desert, California;

and Boulder, Colorado), the public entity raises money by issuing long-term bonds, lends

the proceeds to homeowners to pay for the installation of a PV system, and then gets repaid

through an added annual property tax assessment which remains in place until the system

is paid off. The liability conveys with the property when sold.

Finally, some homeowners can collectively finance a large PV system by pooling resources,

with the added help of a local utility in some cases. A community can also jointly negotiate

a lower per- watt price for the installation of many individual systems.

VII. Concluding points:

Three concluding points emerge from this solar energy survey:

Expanding the use of solar-generated electricity in the United States will depend

fundamentally on reducing its cost. Relative to other sources of energy, solar’s cost ($ per

KWh) remains relatively high even among renewables. Future technological advances

discussed in this paper will help reduce module costs. Financial instruments will help

consumers overcome the large up front capital and installation costs by stretching out

payments over time. Rising fossil-based utility rates will also help to make solar more

attractive. But as long as most consumers do not perceive a significant economic

advantage in adopting solar, it will remain a minor player in the energy market. For an

average household, paying $80,000 for a solar system (10 MW would produce 10 MWh,

average household electricity consumption in 2008) is a high barrier even if future energy

costs are zero.

27

Government policy has played an important role in the development of the U.S. solar

market through rebates, tax credits, grants, feed-in tariffs, and renewable portfolio

standards. These policies can help lower the cost of solar and raise the cost of competing

alternatives (higher taxes on fossil fuel in Europe and Japan). The government role has had

dramatic results in Germany and Spain with the use of the feed-in tariff. This can also work

in the other direction. The dramatic expansion in Spain’s solar market came to a sudden

halt when limits were placed on its feed-in tariff program. In California rebates are being

reduced and installation fees increased in some locales because of budgetary constraints.

In an era of government deficits, can public support for the solar sector be sustained? And

is that support crucial? There is strong evidence that solar module and installations costs

are declining on the one hand, and that real utility rates are rising on the other. But it is

also evident that the price of natural gas, a key source of electrical power in the United

States, has also declined in the last five years relative to other fuels.

Finally, plans for rapid expansion of central solar projects, especially in the solar-rich

southwest, raise questions about environmental tradeoffs. Solar thermal and solar PV

systems are much lower emitters of life cycle CO2 than fossil fuels (Figure 16). On the other

hand, solar thermal power is more water-intensive than fossil-fuel based electricity. In the

United States, water scarcity is coincident with solar radiation abundance. Central solar

and PV projects and new connecting transmission lines are also land intensive, potentially

adversely affecting fragile desert environments where certain plant and animal species are

threatened. Expansion of central solar projects also raises questions about the advantages

of distributed solar PV systems that are low CO2 emitters, compatible with existing

electrical infrastructure, and have benign impacts on land and water resources.

28

List of Figures

Figure 1—The Cost of Electricity from Various Energy Sources

Figure 2—Solar’s Miniscule Role in US Electric Power Generation, 2008-09

Figure 3—Two Major Types of Solar Cells

Figure 4--Types of Solar Thermal Systems

Figure 5—Comparative Costs of Different Energy Technologies

Figure 6--U.S. Electricity Rates by Region, 2010

Figure 7—Peak-Load Pricing Will Make Solar More Competitive

Figure 8--U.S. Average Real Electricity Rates Rising in Last Decade

Figure 9—Real Energy Prices: Steady Upward Rise in 2000s Except for Natural Gas

Figure 10—U.S. Natural Gas Market Changing; Recent Discoveries Raise Production, Lower Prices

Figure 11—Electricity Rates, Selected Countries, 2008

Figure 12—Steep Growth in Global Cumulative Installed PV Power, Few Players

Figure 13—California Leads in Cumulative Grid-Tied Solar Capacity, as of 2009

Figure 14—California Electric Generation: So Far Small Role for Solar and Other Renewables

Figure 15—Water Intensity of Electricity by Fuel and Generation Technology

Figure 16—Lifecycle CO2 Emissions Low for Solar in Electricity Generation

List of Tables

Table 1—Major Operational PV Solar Projects

Table 2—Major Operational Solar Thermal Projects

Table 3—Fast-Tracked PV and Solar Thermal Projects

Table 4—Cumulative Installed Photovoltaic (PV) Power, by Country

Table 5—Summary of Existing and Announced Large Solar Projects

Table 6—Fast-Tracked Solar Projects and Threatened Species

29

List of Maps

Map 1—Major U.S. Solar Thermal and PV Projects Cluster in Few Regions, Mainly Southwest

Map 2—California’s Major Electric Transmission Lines

Map 3—Water Constraint Index

30

References

BP Statistical Review of World Energy (2010). Black and Veatch Corporation (2008). Renewable Energy Transmission Initiative, RETI Phase 1B. Resource Report. Draft. August. Black and Veatch Corporation (2010). Renewable Energy Transmission Initiative Renewable Energy Transmission Initiative. RETI Phase 2B. Final Report Number 149148. May. Blackburn, John O. and Sam Cunningham (2010). Solar and Nuclear Costs—The Historic Crossover, Solar Energy is Now the Better Buy. NC WARN: Durham, North Carolina. July. Bradford, Travis (2006). Solar Revolution, The Economic Transformation of the Global Energy Industry. MIT Press: Cambridge, Mass., and London England. Borenstein, Severin (2008). The Market Value and Cost of Solar Photovoltaic Electricity Production. University of California Energy Institute: Berkeley. February. California Energy Commission website: http://www.energy.ca.gov/ Carter, Nicole T. and Richard J. Campbell (2009). Water Issues of Concentrating Solar Power (CSP) Electricity in the U.S. Southwest¸ Congressional Research Service Rept., R40631. June 8. Casselman, Ben (2009). U.S. Gas Fields Go From Bust to Boom. Wall Street Journal. April 30. Coughlin, Jason and Karlynn Cory (2009). Solar Photovoltaic Financing: Residential Sector Deployment. National Renewable Energy Laboratory. Technical Report NREL/TP-6A2-44854. March. Department of Minerals and Energy, Republic of South Africa (2003). White paper on Renewable Energy. November. Electric Power Research Institute (2009). Solar Photovoltaics: Status, Costs, and Trends, An EPRI White Paper. Palo Alto, California. December.

31

Electric Power Research Institute (2007). Solar Photovoltaics Expanding Electric Generation Options. An EPRI Technology Innovation White Paper. December 2007. page 13. Lovins , Amory B (1977). Soft Energy Paths: Toward a Durable Peace. Penguin Books. National Academy of Sciences, National Academy of Engineering, and National Research Council (2009). Committee on America's Energy Future. America's Energy Future: Technology and Transformation. Washington DC. Office of Senator Jon Kyl (2010). Water Policy Considerations. Deploying Solar Power in the

State of Arizona: A Brief Overview of the Solar-Water Nexus. May.

Solar Electric Power Association (2010). Executive Summary. PV Technology Characterization Review. Washington DC, September. Sovacool, Benjamin K. (2008). “Valuing the Greenhouse Gas Emissions From Nuclear Power: A Critical Survey.” Energy Policy, vol. 36. Elsevier: Amsterdam. U.S. Department of Energy, Energy Information Administration (2010). Renewable Energy Consumption and Electricity, Preliminary Statistics 2009. Washington, D.C. August http://www.eia.doe.gov/cneaf/alternate/page/renew_energy_consump/pretrends09.pdf U.S. Department of Energy, Energy Information Administration (2010). Non-renewable Energy: Monthly Energy Review. Washington DC, March.

Wesoff, Eric (2010). Can the U.S. or California Institute a Feed-In Tariff? The “Renewable

Portfolio Standard in California has failed.” The way to grow the PV market in the U.S. is

with a Feed-in Tariff, according to the FIT Coalition. April 15. Article in:

http://www.greentechmedia.com/articles/read/can-the-u.s.-or-california-institute-a-feed-

in-tariff/

Wiser, Ryan, Galen Barbose, and Carla Peterman (2009). Tracking the Sun, The Installed Cost of Photovoltaics in the U.S. from 1998-2007. LBNL-1516E. Lawrence Berkeley National Laboratory. February. World Bank, Commodity Price Data.

Zweibel, Ken, James Mason and Vasilis Fthenakis (2007). A Solar Grand Plan. Scientific

American. December 16.

Solarbuzz website (2010).

32

End Notes

1 Research Institute for Sustainable Energy (RISE); http://www.rise.org.au/info/Applic/Array/index.html 2 http://www.thegreentechnologyblog.com/2009/solar-thermal-generated-electricity-future-dominating-technology 3 SustainableBusiness.com News (2009). DOI Designates Solar Energy Zones http://www.sustainablebusiness.com/index.cfm/go/news.display/id/18475. June 30. 4 Website for Solar Energy Development Programmatic EIS, Information Center. http://solareis.anl.gov/documents/maps/studyareas/Solar_Study_Area_CA_Ltt_7-09.pdf 5 Farrell, John, (2010). Distributed, Small-Scale Solar Competes with Large-Scale PV. Renewable Energy World.Com, http://www.renewableenergyworld.com/rea/blog/post/2010/11/distributed-small-scale-solar-competes-with-large-scale-pv. November 10. 6 U.S. Energy Information Administration (2010). Electric Power Monthly (http://www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html). November 15. 7 Hoff , Thomas E., Richard Perez, Gerry Braun, Michael Kuhn, and Benjamin Norris (2006). The Value of Distributed Photovoltaics to Austin Energy and the City of Austin, Study to Determine Value of Solar Electric Generation To Austin Energy. Clean Power Research, L.L.C. March 17. 8 Balchunas, Michael (2010). Permit Fees: A Hot Issue for Owners of Solar Power. The Solar Home & Business Journal. http://solarhbj.com/2010/01/solar-permit-fees-hot-issue-000050.php. January 15. 9 Solar Energy Industries Association web site http://www.seia.org/cs/federal_issues/treasury_grant_program 10 Wesoff, Eric (2010). Can the U.S. or California Institute a Feed-In Tariff? The “Renewable Portfolio

Standard in California has failed. The way to grow the PV market in the U.S. is with a Feed-in Tariff,” according

to the FIT Coalition. April 15. Article appears in: http://www.greentechmedia.com/articles/read/can-the-

u.s.-or-california-institute-a-feed-in-tariff/

11 Electric Power Research Institute (2009). Solar Photovoltaics: Status, Costs, and Trends, An EPRI White Paper. Palo Alto, California. December. 12 Pew Center on Global Climate Change web site: Renewable & Alternative Energy Portfolio Standards. http://www.pewclimate.org/what_s_being_done/in_the_states/rps.cfm 13 BP energy database 14 Lesser, Jonathan and Nicolas Puga (2008). PV vs. Solar Thermal, Distributed solar modules are gaining ground on concentrated solar thermal plants. Public Utilities Fortnightly. JULY www.fortnightly.com

33

15 Katie Fehrenbacher (2008). Pros & Cons: Distributed Rooftop Solar vs. Desert Solar Thermal

http://gigaom.com/cleantech/pros-cons-distributed-rooftop-solar-vs-desert-solar-thermal/

16 Woods Institute for the Environment, Stanford University (2010). Distributed vs. Centralized Power Generation. Large-Scale Solar Technology and Policy Forum. April 8-9.

17 Balchunas, Michael (2010). Imperial Valley Solar Project Dealt Setback by Federal Judge. The Solar Home and

Business Journal. Dec. 13. http://solarhbj.com/news/imperial-valley-solar-project-dealt-setback-by-federal-judge-

01223

18 California Energy Commission (2009). California Energy Demand 2010-2020, Adopted Forecast. CEC-200-2009-012-CMF. December. 19 Maki, Sally and Ryan Pletka (2010). California's Transmission Future. RenewableEnergyWorld.com August 25.

20 Streater, Scott (2010). RENEWABLE ENERGY: Developer proposes 30,000 solar dishes in Calif. desert. E&E

Publishing LLC. February 18. http://www.eenews.net/public/Landletter/2010/02/18/1

21 http://www.solardave.com/index.php/ppa-power-purchase-agreements-video/

34

Figures 1-16

Figure 1--The Cost of Electricity from Various Energy Sources

0

5

10

15

20

25

30

35These cost ranges are for centralized power

production, including the solar options.

Transmission and distribution costs are not

included in the estimates. When PV is

installed at the point of energy use, such as

on a residential rooftop, it may have a

more competitive cost from the point of

view of the consumer. All costs are in 2007

dollars. The dashed horizontal line was the

average cost of electricity production in

2007, 5.7 cents per KWh.

NGCC--Natural gas combined cycle

CCS--Carbon capture and storage

CSP--Concentrating solar power

“High” and “Low” refer to high and low

natural gas price scenarios.

2007 Cents per kilowatt-hour

Source: National Academy of Sciences, National Academy of Engineering, and National Research Council (2009). America's Energy Future:Technology and Transformation. Committee on America's Energy Future; Washington DC. Figure 2.10.

35

Figure 2—Solar’s Miniscule Role in US Electric Power Generation, 2008-09

Renew-ables

4%

Nuclear20%

Hydro7%

Petroleum based

1%

Natural gas23%

Coal45%

Other 1%

Total production =3,950 Billion KWh

37.3 36.2

17.718.1

1515.2

0.9

0.8

55.470.8

2008 2009

Wind

Solar thermal, PV

Geothermal

Other biomass

Wood and wood-derived

Source: Energy Information Administration

Percent of “renewables” category

Crystalline silicon cells Thin film cells

mono poly CdTe2CIS/CIGS1Thin film silicon

Hybrid HIT cells

MicrocrystallineAmorphous

Micromorphous (tandem cells)

1—Combination of copper, indium, gallium, sulfur, selenium2—Cadmium telluride

Figure 3—Two Major Types of Solar Cells

Source: Adapted from Solarpraxis AG.

36

Parabolic trough. Linear Fresnel Reflector

Photos from Department of Energy and http://www.thegreentechnologyblog.com/2009/solar-thermal-generated-electricity-future-dominating-technology

Parabolic dish system. Each dish has own heat engine to generate electricity.

Power tower

Figure 4--Types of Solar Thermal Systems

Figure 5--Comparative Costs of Different Energy Technologies

37

Figure 6--U.S. Electricity Rates by Region, 2010

New England

Middle Atlantic

East North Central

West North Central

South Atlantic

East South Central

Mountain

Pacific Contiguous

California

Alaska and Hawaii

U.S. Total

0 5 10 15 20 25

15.1

13.7

9.0

7.9

9.6

8.1

8.7

11.4

13.8

21.1

9.9

Cents per Kilowatthour, Including Taxes

Source: Energy Information Administrationhttp://www.eia.doe.gov/electricity/epm/table5_6_b.html

38

Figure 7--Peak-Load Pricing Will Make Solar More Competitive

Bradford, Travis (2006). Solar Revolution, The EconomicTransformation of the Global Energy Industry. The MIT Press:Boston, Mass. and Cambridge, England.

Figure 8--U.S. Average Real Electricity Rates Rising in Last Decade

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100

2

4

6

8

10

12

Cents per kilowatt hour, including taxes

Nominal Real

Source: Energy Information Administration

39

Figure 8--U.S. Average Real Electricity Rates Rising in Last Decade

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100

2

4

6

8

10

12

Cents per kilowatt hour, including taxes

Nominal Real

Source: Energy Information Administration

Figure 9--Real Energy Prices: Steady Upward Rise in 2000s Except for Natural Gas

Real prices for coal and oilabove early 1980s’ levels

Natural gas pricedeclines on new U.S. discoveries

40

Source: World BankNote: US natural gas ,West Texas Intermediate oil, And Australian coal.

Figure 10—U.S. Natural Gas Market Changing; Recent Discoveries Raise Production, Lower Prices

Figure 11--Electricity Rates, Selected Countries, 2008

Denmark

Italy

Ireland

Germany*

UK

Spain

Japan

Poland

Singapore

France

Turkey

New Zealand

Norway

Peru

Mexico

Thailand

South Korea

Taiwan

Canada**

Indonesia

US

0 10 20 30 40 50

39.6

30.5

26.7

26.3

23.1

21.8

20.6

19.3

19.0

16.9

16.5

16.4

16.4

13.4

9.6

9.4

8.9

8.6

7.8

6.1

11.3

Cents per Kilowatthour, Including Taxes

Source: Energy Information Administration*--2007

**--2006

41

Figure 12--Steep Growth in Global Cumulative Installed PV Power, Few Players

0

2

4

6

8

10

12

Germany

Spain

Japan

US

US7%

Germany

42% Spain 15%

Japan13%

Other24%

Giga watts

Country shares in 2009

Source: BP Statistical Review of World Energy, June 2010

Figure 13—California Leads in Cumulative Grid-Tied Solar Capacity, as of 2009

Cumulative Capacity in 2009

Calif. 1,102 N.J. 128 Nev. 100 Colo. 59 Ariz. 50 Fla. 39 N.Y. 34 Hawaii 27 Conn. 20 Mass. 18 Others 78

Total 1,653 MW

Calif67%

NJ8%

Nev.6%

Colo.3%

Other16%

Grid -Tied Capacity

Two-thirds in California.Source: Solar Energy Industries Association (2010). US Solar Industry, Year in Review 2009. April 15. p.5.

42

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009**

50

100

150

200

250

300

350

0.20

0.22

0.24

0.26

0.28

0.30

0.32

0.34

1000 GWh Share (%) of total electric generation

Electric generation Solar share

Figure 14--California Electric Generation: So Far Small Role for Solar and Other Renewables

Nuclear10.6%

In-state Coal1.3%

Other 0.3%

Gas39.3%

Hydroelectric9.8%

Geothermal4.3%

Biomass1.9%

Wind1.7%

Solar0.3%

Specified Coal Imports

4.6%

Other Imports26.1%

Energy sources for electrical generation in California

Source: California Energy Commission website

Solar share very small but rising since 2006.

Figure 15--Water Intensity of Electricity by Fuel and Generation Technology

Carter, Nicole T. and Richard J. Campbell (2009). Water Issues of Concentrating Solar Power (CSP) Electricity in the U.S. Southwest¸ Congressional Research Service Rept., R40631. June 8.

43

0 500 1000 1500

Wind

Hydroelectric (reservoir)

Wind

Biogas

Hydroelectric (run-of-river)

Solar thermal

Biomass (1)

Biomass (2)

Biomass (3)

Biomass (4)

Biomass (5)

Solar PV

Biomass (6)

Geothermal

Biomass (7)

Nuclear

Natural gas

Fuel cell

Diesel

Heavy oil

Coal

Coal

Technology Capacity/configuration/fuel Estimate (gCO2e/kWh)

Coal Various generator types without scrubbing 1050

Coal Various generator types with scrubbing 960

Heavy oil Technology 778

Diesel Various generator types and turbine types 778

Fuel cell Hydrogen from gas reforming 664

Natural gas Various combined cycle turbines 443

Nuclear Various reactor types 66

Biomass (7) Short rotation forestry reciprocating engine 41

Geothermal 80 MW, hot dry rock 38

Biomass (6) Short rotation forestry steam turbine 35

Solar Photovoltaic Polycrystalline silicon 32

Biomass (5) Waste wood, steam turbine 31

Biomass (4) Forest wood, reciprocating engine 27

Biomass (3) Short rotation forestry co-combustion with hard coal 23

Biomass (2) Forest wood steam turbine 22

Biomass (1) Forest wood co-combustion with hard coal 14

Solar thermal 80 MW, parabolic trough 13

Hydroelectric 300 kW, run-of-river 13

Biogas Anerobic digestion 11

Wind 1.5 MW, onshore 10

Hydroelectric 3.1 MW, reservoir 10

Wind 2.5 MW, offshore 9

Figure 16--Lifecycle CO2 Emissions Low for Solarin Electricity Generation

Source: Benjamin K. Sovacool (2008). “Valuing the Greenhouse Gas Emissions From Nuclear Power: A Critical Survey.” Energy Policy, vol. 36. Elsevier: Amsterdam. Page 2950.

gCO2 /kWh

44

45

46

47

48

49

Map 1--Major U.S. Solar Thermal and PV ProjectsCluster in Few Regions, Mainly Southwest

Source: Tables 1-3

PV operational

PV planned

Thermal planned

Thermal operational

1-9

9 M

W>

100

MW

50

Map 2

Areas of high solarradiation, less denselyserved by transmission lines

51

Map 3--Water Constraint Index

Source: Office of Senator Jon Kyl (2010). Water Policy Considerations. Deploying Solar Power in the State of Arizona: A Brief Overview of the Solar-Water Nexus. May. Page 11.