The Future of Solar Energy in the us: a technological, Political and Financial Enquiry

Brandon Garcia

Arvind Iyengar

Hannah Kenagy

Cara LoPiano

Madhav Seth

Brian Yan
Table of Contents

I. Abstract 2

II. Introduction 3

III. Solar Technology Analysis 6

IV. Political Economy of Solar Energy 20

V. Financing of Utility-Scale Solar 37

VI. Solar Energy Economic Model 50

VII. Conclusion 57

VIII: References 58

Abstract

Solar energy is one of the highest-potential sources of renewable energy, yet so far, its contribution to the US energy mix has barely reached 1%. Solar faces immense technical (increasing efficiencies and developing a method of storage), political (downward pressure from conventional energy power companies) and financing (optimal mix of public and private sources) challenges. In the backdrop of these challenges, we provide a review of the existing technologies in the solar industry as well as an analysis of the most promising technologies going forward. We then look at the political-economic framework within which these challenges must be addressed, finding that any analysis of the future of solar policy must center on energy lobbies. We look at the financing options that are currently available for solar companies, and provide a recommendation of what the best financing options are.

Solar energy has garnered significant interest in the United States due to the potential for substantial economic, environmental, and social benefits that can be realized with widespread adoption. Although there are several competing renewable energy sources (predominantly hydropower, wind, and geothermal) vying for a larger share of the U.S. electricity market, solar holds the greatest promise due to the abundance of solar radiation and technological advancement thus far. Certain estimated economic benefits include lower electricity prices, temporary and permanent job creation within the solar industry, and positive externalities from solar investment in the form of technological progress. The estimated environmental benefits are also significant, including reduced reliance on nonrenewable energy sources (fossil fuels, coal, timber, etc.) and a curtailment in the emission of pollutants. The social benefits of solar energy are closely intertwined the economic and environmental, including job creation, energy empowerment, and a cleaner environment. However, several barriers exist that provide a substantial challenge towards the widespread implementation of solar energy. By taking into account these current significant challenges, it is possible to approach the issue of solar energy through a Technological, Political, Financial, and Economics lens in order to develop a cost-effective economic model that accurately predicts the use of sustainable solar energy in the upcoming years and that assists in the implementation of solar energy for the United States.

There are major technological and economic obstacles that hinder the rapid development of solar energy in the United States. Solar panels are expensive and have long payback periods for consumers that are looking to cut electricity costs in the near future. Although progress has been rapid in solar energy technology, levels of efficiency comparable with traditional electricity-generating alternatives have not been achieved. Major issues including outdated grid capacity, inefficient power distribution networks, and inadequate storage technology all reduce the potential for solar to be efficient on a large scale. From an economic perspective, utility-scale solar infrastructure projects, whether photovoltaic or concentrating, are capital intensive and require an intricate network of sponsors, investors, creditors and developers at different stages to bring the project to fruition. Government loan guarantees and subsidies have helped to reduce the number of previously cost-prohibitive projects, however, financing challenges still remain. Given that many solar projects would not be possible without substantial government assistance, another economic concern is reducing the costs associated with solar energy technologies to reduce market distortions and ease the transition to commercial viability for developed projects.

Additionally, social and political opposition to solar investment and funding challenge the long-term development of the industry. Grassroots political movements and solar lobbies directly oppose government subsidies, tax-breaks, and incentives for the development of rooftop and utility-scale solar projects. Environmentalist concerns over ecosystem disruptions from large solar utility projects hinder available space and distribution networks. However, there are numerous pro-solar lobbying groups and environmental organizations that strongly support solar energy investment and development, reducing the negative sociopolitical opposition impact.

Although there are barriers that challenge the future implementation of solar, the advances in the Technological, Financial, Political, and Economic fields has made it feasible to conduct analysis to estimate the development of solar energy in the United States. These different, yet closely related fields are able to converge together to form an economic model, which utilizes a growth function to provide a US regional electricity generation coupled with a levelized cost of energy for projecting a cost-effective US solar energy use in the upcoming decades.

Plenty has been written about the solar industry, though the bulk of it has focused on single aspects of the solar industry (for example either technological or economic). Zhao et al. (1998) have written about the technological challenges the industry faces going forward. Beck (2009) has looked at some of the economic challenges. In one of the few cross-disciplinary studies we could find, Fthenakis et al. (2009) have provided a technical, geographic and economic feasibility study of solar energy in the US¹. We find our paper to be unique because it helps fill the cross disciplinary gap within the solar energy literature by addressing the political and financing elements to the solar puzzle as well as the technological aspects. In addition to detailing the political, financing, and technological considerations regarding the future of solar energy in the US, we illustrate the implications of each of these variables using an economic model. We use the perspective of electricity distributors making profit maximization decisions to analyze the comparative statics of the growth rate of solar capacity up to the year 2040. Our model incorporates technological efficiency, government subsidy, and given projections of cost and electricity prices. Ultimately, we use our model to understand how different ranges of these variables affect the growth rate of total solar capacity in the US from the optimality decisions of our representative firm.

Every hour and half, the Earth is struck by 4.8 * 10^20 Joules of energy, more than the entire human population uses each year (4.6 * 10^20 Joules) ². Estimates suggest, however, that the Earth’s recoverable sources of fossil fuels will only be able to provide 1.7 * 10^22 Joules of energy, a finite source equivalent to the amount of radiation from the sun that strikes the Earth every 1.5 days ³.

Moreover, the Intergovernmental Panel on Climate Change has assessed that letting average global temperatures rise more than two degrees Celsius above pre-industrial levels would result in dangerously disruptive climate impacts. However, to have a 50% chance of maintaining global average temperatures below this level, only 1,100 gigatonnes of carbon dioxide can be emitted between 2011 and 2050⁴. Burning all of the known recoverable fossil fuels, though, would result in three times this level of carbon emissions. Therefore, burning all of the known fossil fuels would likely lead to far greater than two degrees Celsius of warming.

McGlade and Ekins estimate that one third of oil reserves, half of gas reserves, and more than 80% of coal reserves must remain unused through 2050 in order to keep global warming under two degrees. Thus, in order to maintain close to current levels of energy use and prevent dangerously disruptive climate impacts, alternative energy sources are needed. Solar is one such energy source, which has the potential to provide energy without the dangers of greenhouse gas emissions.

Solar is also a much safer energy source than many conventional sources. According to a Forbes study, the global deathprint of coal is 170,000 deaths per trillion kWh, of oil is 36,000, of natural gas is 4,000 and of biofuels are 24,000 deaths per trillion kWh. Solar energy, on the other hand, has a deathprint of only 440 deaths per trillion kWh of electricity production. Thus, solar causes three orders of magnitude fewer deaths than coal, two less than oil and biofuels, and one less than natural gas per unit of electricity production.

1.2.0. Basic explanation of how PVs work

Photovoltaics, the primary technology for transforming solar energy into electricity, are made of light-absorbing semi-conductors. If incoming photons of sunlight are of sufficiently high energy, they will ionize the semiconductor. Each photon will create an electron-hole pair: a free electron and a mobile hole, which acts like a free electron, but has a positive charge.

When an electric field is applied to the material, electrons are separated from the holes, creating a potential difference. If recombination of the electrons and holes occurs in an external circuit wire, a flow of current is created.

The electric field is created by dissolving a small amount of impurities in different areas of the semiconductor. Donors are put in what is called the negatively charged n-type region. Acceptors, on the other hand, are put in the positively charged p-type region. The area between the p-type region and the n-type region is known as the p-n junction.

The efficiency of a photovoltaic is calculated as the percentage of the incoming solar energy that is successfully converted into electricity. In other words, the energy conversion efficiency (η) of a photovoltaic solar cell can be represented by:

No PV cells, unfortunately, operate near 100% efficiency due to a number of factors. First, most materials do not absorb all of the incident light. This incomplete absorption is usually a result of reflection. Additionally, if the photogenerated carriers (the freed electrons and the mobile holes) recombine in an area of the PV cell where they do not contribute to production of a current flow, the efficiency of the cell will decrease. Moreover, series resistance between where the photo-induced ionization occurs and the external current-carrying circuit will cause a voltage drop, leading to decreased efficiency.

Our discussion will now turn to the varieties of technologies and strategies that are being implemented to harness solar radiation for electric energy. Each technology will be described, along with a basic description of how each works. Then, each will be evaluated based on its laboratory efficiency, practicality and its environmental impact in production, maintenance and disposal. Through a comprehensive analysis, this section seeks to identify top technologies to consider for the expansion of solar power in the American power grid.

First-generation photovoltaic cells became possible following the work of Chapin, Fuller and Pearson in the 1950’s. Their work led to a patent filed in 1954 for the creation of a P-N junction, an innovation key to the development of photovoltaic technology⁷. The P-N junction made the channeling of electrons, a key to silicon based solar power, possible. As previously described, P-N junctions work reliably when there is available solar energy. Though early P-N junction had very low experimental efficiencies, design changes and optimizations have made solar more feasible.

The original silicon PV cell has undergone a number of modifications before becoming the economically viable typical photovoltaic cell that is most closely associated with solar power today. The first two types of cells that will be discussed are silicon based cells, namely monocrystalline and multicrystalline. Multicrystalline photovoltaic cells, a common type of cell used, are formed with a honeycomb texture, which reduces loss of energy through reflection and allows the cells utilize insolation in wavelengths near but outside the visible spectrum⁸. Though the output of multi-crystalline solar cells is lower than the measured capacity of mono-crystalline solar cells, 20.8% to 25.6% respectively⁹, differences in production and quality of silicon required to produce the cells has caused multicrystalline cells to be more considered and researched for wide scale implementation. The production of a photovoltaic cell is also dependent on the manufacturing of quartz into a workable form of silicon, as elemental silicon is not common enough to be considered a viable source for the production of photovoltaic cells. Instead, two routes have been created to convert quartz, a highly abundant compound containing silicon, into workable elemental silicon to be used in the construction of cells. A.F.B. Braga and colleagues conducted a literature review that investigated the processes by which various large corporations were producing silicon that could be made into photovoltaic cells. They highlighted two particular processes, a chemical production of silicon and a metallurgical route. The researchers note that these production methodologies are suited for the creation of multicrystalline cells, as the quality and purity of silicon may not be sufficient for a monocrystalline structure.

An issue with the processes that arose in the Braga research, and persists for our purpose, is the toxic byproducts created in the metallurgical process and energy intensive nature of the chemical process¹⁰. Despite the ‘eco-friendly’ motivation behind much of the development in the solar energy industry, the process through which the silicon cells are produced can have dangerous by-products. Some large corporations involved in the production have taken measures to explore better methods of silicon production, but the training and care needed to handle the dangerous by-products of manufacturing pose a challenge to increasing the production of solar capacity. While it is not necessarily prohibitive, it requires careful oversight to ensure that there is no contamination or other major hazard posed by the process.

Thin film PV cells are considered the second generation of solar cells. They have a relatively simple production and thereby low production cost, but they also have fairly low efficiencies¹¹. Electricity production from thin films crossed under $1.00 W^-1 in 2008, and estimates suggest that the cost will drop to $0.50-0.70 W^-1 by 2020. Thus, the cost of thin films is a factor of 2 lower than that of multi-crystalline Si-based PV cells¹².

Thin film solar cells do, however, require more surface area than many other PV cells. Nevertheless, a thin film PV plant uses less land than does a coal plant during their respective lifetimes¹³. Thin film PVs also have advantages for distributed power generation, as they are particularly suited for rooftop install. They currently make up 2/3 of the rooftop solar market¹⁴.

Manufacture of thin films involves both rare and hazardous materials¹⁵. The metals used in thin films include tellurium (Te), indium (In), germanium (Ge), cadmium (Cd), and selenium (Se). All of these are generated as the minor byproducts of extraction of copper, zinc, and lead. Thus, the generation of the metals needed for thin film manufacture are innately tied to the production of the base metal, which can limit their availability.

There are also concerns about greenhouse gas and toxic air pollution production during reactor and cleaning operations of thin films. For example, cadmium-telluride (CdTe) thin films emit about 20 g CO₂/kWh, although this is more than a magnitude less than the 500-1000 g CO₂/kWh produced by fossil fuel burning plants. During their lifetimes, CdTe thin films also release sulfur dioxide, various nitrogen dioxides, and particulate matter, all of which are air pollutants hazardous to human health. However, these are produced at levels equal to 2-4% of the levels produced by fossil fuel burning¹⁶. Some concerns have also arisen regarding leaks of Cd from CdTe thin films, but CdTe thin films release about 0.02 g Cd per GWh of electricity produced, whereas coal burning releases 2 g Cd per GWh of electricity produced¹⁷. Thus, electricity production with CdTe solar cells decreases the release of Cd by two orders of magnitude. However, it is important that recycling efforts take place for these cells at their end of life to prevent further release of toxic heavy metals.

1.3.3. Multijunction

Multijunction photovoltaics have the highest efficiencies of all PVs¹⁸. Multijunction PVs are made of layers of different materials, each of which absorb a different range of wavelengths of light. By maximizing the absorbable wavelengths of light, multijunction PVs are able to achieve very high efficiencies. Their high efficiency coincides with lower land usage requirements, as each unit of land occupied by a multijunction PV cell can produce more electricity than an equal area occupied by any of its less efficient counterparts. Yastrebova et al.¹⁹ estimate that, if combined with concentrators, will become cost-competitive with other PV technologies, assuming improvements in manufacture.

Perovskite PVs first emerged in 2012. By 2013 they reached efficiencies of 16.2%, and by 2014 they reached efficiencies of 17.9%²¹. Perovskite cells are particularly attractive for their relative ease and simplicity of fabrication, low processing costs, strong solar absorption, and low non-radiative carrier recombination rates, particularly considering the simplicity of their structure²².

Green et al.²³ note that there is still a significant amount of diversity in the creation of perovskite cells, indicating that there is still a lot of room for improvement. They suggest this may lead to lowered processing costs. Additionally, this diversity may allow perovskite cells to be more easily integrated with other technologies to create high-performance tandem type cells²⁴.

In terms of cost, perovskite cells compete primarily with CdTe thin films, but are simpler to manufacture. By 2017, their manufacturing cost in the United States is estimated at $0.38 – 0.41 W^-125.

However, all reasonably high-performing perovskite cells to date have involved lead (Pb). Since lead is an environmentally hazardous heavy metal, this raises concerns about toxicity during all aspects of the PV cell’s lifetime: during its manufacture, its deployment, and its disposal. CdTe PV cells have similar toxicity issues, but it has not been a major hindrance for them. Additionally, Cd or Pb are used in some CIGS and Si modules at similar levels to those in perovskite cells.

1.3.5 Newer Developments: Biohybrids and Photoelectrochemical PV Cells

In addition to these implemented technologies, there are many pioneering technologies that utilize the mechanisms comparable to photosynthesis and other alternative methods to utilize solar energy. There is a suite of bio-hybrids still in stages of research. Experimenters are looking to design a replacement for the dyes used to move electrons using the same vesicle systems used in photosynthetic processes²⁶. While they have relatively low efficiency currently, researchers hope for increased efficiency and the ability to be commercialized.

Photoelectrochemical PV cells have also been proposed as a way to generate hydrogen fuels. These function through the photolysis of water into molecular hydrogen gas (H₂) and oxygen gas (O₂) as follows:

These are also still fairly early in the development process, however.

Source: National Academy of Sciences

In addition to the work done to improve silicon cells, there are many other devices that convert solar energy into electric current. Thermoelectric generation using solar energy is a highly versatile technology. In this essay, the focus will remain on the production of commercial energy, though a compelling utilization of this technology is in refrigeration. Thermoelectric generation is based on similar principles to silicon based cells, counting on a heat gradient and the conductivity of the elemental metal or alloy. This technology is also often used in conjunction with solar concentrators. Concentrators use the heating power of solar energy to generate electricity by heating a fluid using metal concentrators that have a trough shape. Each of these technologies have undergone extensive testing for the optimization. The results of this and other solar technology optimizations strive to bring commercially implemented solar technologies up to laboratory efficiencies and make the energy cheaper per watt generated.

A considerable disadvantage to the use of thermoelectric solar energy generation is the usage of toxic materials. Like the processing of silicon, the creation of green technology is not always as simple and green as desired. Optimized thermoelectric systems can involve the use of cadmium and telluride to best create a heat gradient and generate electricity. In addition to issues of toxicity in production, this technology needs to be recycled. This opens interesting questions regarding the regulation of the production and recycling of solar technologies. As of this writing, many sources have indicated that companies utilizing these technologies have been proactive in having recycling programs for their products.