Europe's solar industry is slowly but surely overcoming the challenges of recent years
Europe’s solar industry is slowly but surely overcoming the challenges of recent years
Credit: LG Solar
Sven Armbrecht  
There are several obstacles the solar PV industry must overcome on its way to grid parity, but Sven Armbrecht is upbeat on the sector’s prospects
Sven Armbrecht

Solar technology is at the heart of the renewable energy market and has been a key source of new electricity generation in Europe for the last few years.

Private households and businesses are looking at ways to take more control over energy production for several reasons. For homeowners, there is a sense of environmental responsibility.

For businesses, there is a real need to mitigate the risk of relying entirely upon external energy providers. And both residential and industrial energy consumers want to invest in solar to have more control over their future energy bills.

According to solar market research and analysis company NPD Solarbuzz, the worldwide demand for new solar photovoltaics (PV) increased by more than 9 GW in the first quarter of 2014.

This equates to an increase of more than 35 per cent compared to the previous first quarter record in 2013. The rise in demand in the last few months was mainly driven by two markets, the UK and Japan, accounting for more than one third of the overall solar PV demand.

In the UK, more than 1031 MW of projects were installed in 2013 under the feed-in tariffs (FiT) and ROCs system. Further support programmes in the UK such as the Renewable Heat Incentive (RHI) and the Green Deal are set to increase this number even further.

For example, the RHI pays participants who generate heat for their buildings using renewable energy, providing businesses and homeowners with a financial incentive to install solar technology.

However, the findings also show that the lead in the solar market might be short-lived, as Germany is expected to lead the rankings again by the end of 2014. Last year, more than 3300 MW of new PV capacity was installed in Germany, bringing the total number of installed systems up to 1.4 million. Already, an estimated 65 per cent of solar photovoltaic components are exported from the country, with the exported quota expected to grow by a further 18 per cent until 2020.

The above examples in the UK show that the European solar industry is slowly but surely overcoming the challenges of recent years. After the economic downturn and anti-dumping disputes, the market is set not only to stabilize but to grow.

With German electricity costs the highest across Europe and almost all countries facing steep rises in energy bills, alternative ways to generate energy are becoming ever more popular. With solar energy, users can expect to potentially compensate their increased demand in energy from the grid with excess electricity they generate during the summer months. The German Solar Industry Association (BSW) found that solar power already covers the annual electricity demand of over 8.5 million households.

So, photovoltaic energy is enjoying a rising share of the energy market – but what is holding it back?

Two of the most prominent obstacles in the energy market are a high level of uncertainty among potential customers and the persistent belief that PV energy is expensive.

On the contrary, over the last few years solar panels have become much more efficient, providing an improved price-to-value ratio which has almost closed the gap with grid prices. Previously, breaking even financially took years and only made minimal, if any, difference to energy bill costs.

And, the sourcing and production of solar PV modules and systems has evolved, allowing for a steady price decrease over the years. According to the BSW, in Germany alone the average end-customer price for installed roof-mounted systems has plunged from €5100/kWp in 2006 to just €1640/kWp in the first quarter of 2014.

Bi-facial cells, for example, capture the light reflected from the back sheet onto the cell back side. Double anti-reflective coating and the use of anti-reflective glass increases efficiency even further. These high-performance cells increase not only the solar energy yield but also the financial return for the user.

The second obstacle, uncertainty, is mainly caused by the differing political environments across Europe. Governments have rolled back support for renewable energies in general and the PV industry in particular. The varying speed and extent of change across the markets in Europe is a particular source of uncertainty. Whereas Germany reduced its support for the industry by 30 per cent, Spain has stopped its financial support altogether.

While the British government too has reduced its FiT subsidy, this does not mean confidence in the solar industry is waning. Rather this development should be seen as a sign that the industry is now robust enough to need less and less government support to survive. The stability of the UK market allows the industry to grow steadily, instilling much-needed confidence in investors.

Over the last few years, more PV modules have been installed than even the most optimistic predicted. People understand the necessity to shift from fossil fuels to renewable energy sources, the future of power supply. It is a beneficial situation for both wallet and environment after all.

Competition will be an important factor fuelling innovation and development
Competition will be an important factor fuelling innovation and development
Credit: LG Solar

What does the future hold?

The growth of the market has been extraordinary. Solar power has been the biggest source of new electricity generation for two consecutive years and further growth is on the horizon. This shows that the market is in good shape already. With the growing markets, we can expect further consolidation resulting in more competitive prices and, ultimately, cheaper solar panels.

The cost of modules and installation will continue to decrease. As mentioned previously, the average end-customer price for installed roof-mounted systems has fallen in Germany and the UK has also followed suit – the average cost for a UK household to install panels is now around £7000 (US$12,000).

In addition to lower installation costs, homeowners can achieve some of the highest benefits from investing in solar energy. Supported by FiTs for up to 20 years, customers can get as much as an 8 per cent return on their investment, further supported by reduced energy bills. Modern solar systems already produce enough energy to power most home appliances, like refrigerators and heat pumps. With electrically powered cars on the horizon, benefits will be even higher – in both monetary and environmental terms.

Competition is also going to be an important factor fuelling innovation and development in the sector. While we will see further consolidation in the market, cost-competitiveness will become a key element in the solar market of the future. Firstly, companies will have to offer competitive prices for their products and services to stay ahead of the competition. Secondly, by producing higher-efficiency products in larger batches, prices will continue to decrease, eventually reaching parity with retail electricity prices.

With more affordable systems, higher return on investment and innovative products shaping the photovoltaic future, power storage will become increasingly important. Taking it one step further, power storage systems will allow customers to achieve true independence from the grid. Solar electricity storage systems enable consumers to use their solar power exactly when needed and are an important step towards another innovative development in the world: smart homes.

In the most current study, Recent facts about photovoltaics in Germany, by the renowned Fraunhofer Institute, stationary storage batteries already allow the on-site consumption of PV power to continue into the evening. Also, by using grid-optimized feed-in strategies in combination with storage systems, more PV modules can be installed. Even electric vehicles that are not immmediately used can serve as electricity storage devices.

For decentralized storage, presently in the form of pumped storage, research is looking into so-called adiabatic compressed air energy storage systems (CAES). This means that solar power is being stored in the form of gas, which opens up a whole new range of options in terms of energy storage. For example, the conversion of power into gas would have the potential to replace fossil fuels in vehicles.

According to the Energy Post, solar energy storage units and smart PV systems will be some of the biggest selling products of the future. In combination with an ‘electronic brain’, the new systems will be able to decide whether they want to function independently from the grid or get connected. This means the new systems can either use self-generated power in a closed circuit or, if needed, connect to the grid to buy or sell electricity.

The German government is one of the pioneers in the energy storage market and has kick-started a new subsidy to drive the adoption of solar energy storage systems. The hybrid system enables users to store and use solar energy as and when they need it. In the US, California has also started a similar scheme to subsidize residential energy storage and reduce prices for storage systems. Research firm IHS predicts that the new storage solutions will enable consumers to increase their energy self-supply from 30 per cent to almost 60 per cent.

New market boost

Even though there is still a need for subsidies in some of the markets, the photovoltaic industry is fast becoming independent from financial support and its impressive pace of growth shows that it is robust enough to survive in the future. Further consolidation, price competition and innovation will lead to higher-efficiency products that are more affordable than ever for businesses and homeowners, thus overcoming one of the most challenging obstacles at the moment – the persistent belief that solar modules are expensive – and allowing the market to continue to thrive.

The combination of solar modules with an ‘electronic brain’ is going to create the truly ‘smart’ home, offering more exciting opportunities. But, before that, solar energy storage solutions must, and will, become an essential part of the photovoltaic industry of the future. The fact that in Germany more than 1100 applications for such storage solutions have already been approved shows that solar is not only close to grid parity, but close to becoming independent from the grid. The future is already here.

Sven Armbrecht is Area Sales Manager at the LG European Solar Business Group, the solar business unit of LG Electronics Inc.

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