A Fresh Jolt : Falling Prices for Photovoltaic Cells Give New Life to Solar Industry

As recently as last fall, the photovoltaic energy industry was in danger of being snuffed out by the hostile winds of electricity deregulation blowing into California’s power market.

Why the gloom? Photovoltaic, a form of solar power, is more than twice as expensive to produce as power generated with natural gas, the benchmark. And the state-mandated contracts that over the last 15 years have forced utilities to buy solar and other kinds of alternative power at above market rates are slowly dying off.

But photovoltaic’s improving technology, rapidly falling costs, lure of state rebates and consumers’ emerging but clear preference for clean energy is sparking new interest among manufacturers and utilities.

That interest was highlighted by British Petroleum’s announcement last week that it will build a $20-million photovoltaic-cell-manufacturing plant in the San Francisco Bay Area. The same day, the Sacramento Municipal Utility District confirmed plans to equip as many as 1,000 homes with state-of-the-art “thin film” photovoltaic panels over the next five years.

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Independent Energy Producers, a Sacramento-based trade group, is predicting that photovoltaic’s statewide capacity will double to 40 megawatts by 2002, enough to light 40,000 homes.

Even that kind of growth would leave photovoltaic--which uses garage-door-size panels like big batteries to convert light to direct current--with only a tiny fraction of the 45,000 megawatts of power generated statewide. And it would amount to only a tenth as much as the power generated by solar thermal energy, a process using mirrors in a heat-transfer process.

But the rosier prognosis for photovoltaic is heartening news to “green power” proponents who feared that the clean technology might be extinguished just as it was coming into its own.

Of course, it didn’t hurt when $540 million for solar, wind and other renewable-energy sources was written into the state power deregulation bill signed into law in September. Part of the money is to be parceled out in rebates to energy system buyers.

But the main cause of optimism is photovoltaic’s declining costs. The Energy Department expects the cost of the thin-film panels to fall by nearly half over the next five years. That’s not that much of a stretch: The cost of producing the panels has been falling an average 9% a year, said Wayne Gould, a solar expert at Southern California Edison.

Prices of photovoltaic panels are “coming down in price because of advances in research and development and because they are starting to get economies of scale as they come down the manufacturing learning curve,” said Joseph Romm, acting assistant U.S. energy secretary for energy efficiency and renewables.

In fact, a New Jersey company called Energy Photovoltaics is promising the Sacramento utility that it will deliver panels by 2002 at half the cost they sell for now. That could bring down the delivered cost of photovoltaic power to less than 10 cents per kilowatt-hour, within striking distance of projected retail electric rates, said Jan Schori, general manager for the utility.

In the meantime, the utility is confident it can find 1,000 residents willing to pay it an extra $4 a month for the privilege of putting utility-owned photovoltaic panels on their roofs and getting clean renewable energy, said Don Osborn, solar program director for the utility.

Within five years, lower-cost panels combined with expected rebates and credits should lower costs to the point where customers will want to buy and own their systems, Osborn said. The advantage of getting on board the program now is that consumers dedicated to green power “can do the right thing sooner rather than later,” he said.