RE needs to get bigger

Blogger Jim Fraser summarizes the stats on the use of renewable energy in the US:

in 2007 total solar (including solar thermal) represented less than 1% of the total of all renewable energy [including biomass (53%), hydroelectric (36%), geothermal (5%) and wind (5%)] which in turn represented just 7% of total energy consumption in the U.S.

His article today focuses on thin film solar (particularly First Solar)

Thin film solar is becoming an increasingly important segment of the solar industry. Thin-film solar cells consist of layers of active materials about 10 µm thick compared with 200- to 300-µm layers for crystalline-silicon cells. Some sixty companies have announced to start thin film production by 2010, and EuPD Research estimates that by then, the production output will amount to 3.5 GW. According to the EIA, in 2006 thin film represented a 30% share of the of the 337,268 Wp of photovoltaic cells shipped by the U.S. solar industry, as compared to 12% in 2004.

From my research for my PV teaching case, it’s clear that the solar power industry is highly fragmented. What’s not clear is that among the various solutions — e.g. crystalline solar, thin film solar, concentrated PV, or solar thermal — which of these will take the lead in terms of installed capacity and electricity output.

My hunch is that even once solar power rises to 10% of RE — say 1% of overall US energy consumption — it will still be a highly fragmented industry. Perhaps when the solar LCOE reaches parity, one technology will have a dramatic cost advantage and will take off.

Another scenario would be that even once grid parity becomes economically possible, we will still be facing production capital (and thus manufacturing capacity) shortages for a decade, keeping prices high and adoption relatively low. The market should auto-correct — with high demand bringing high investment — but if investors are cautious (or the IPO market remains closed) it would continue to be a seller’s market for PV equipment.

Perhaps also the recent drop in oil prices will stretch out demand for PV capacity, allowing a more gentle and realistic ramp-up. Such a stretch-out would not be a good thing for cleantech VCs. A lot obviously depends on how quickly the economy recovers.