Solar Power Rises In 2011

With the growth in the number of plants being built and the increasing cost competitiveness, 2011 looks like solar energy could start to come into its own in the U.S.

Even with the entrance of a Republican-controlled Congress, some see a reasonably bright future for solar in the U.S., as many of the subsidies are baked in to existing programs, many of which are at the state level, says Joel Silverman of Arete Research Services. State-level programs are less vulnerable to changes in Congress.

The big swing factor, he says, isn't going to be direct subsidies to the industry as much as the growth rates of installations. In Germany, he says, the growth of photovoltaic installed capacity was far more than anyone expected - and more than policymakers really wanted. There could be a crippling oversupply there, he said.

But even with the dangers of a small-scale asset bubble, there are a number of companies that have shown they can do well. He cites that First Solar as one that built a business model that kept costs down, as it sells to solar project developers.

In its earnings forecast, the company said it expects 2011 sales ranging from $3.7 billion to $3.9 billion and earnings of $8.75 to $9.50 a share. First Solar also agreed to sell a 290-megawatt solar farm it plans to build in Arizona to NRG Energy Inc.

Adam Krop, analyst at Ardour Capital Investments, says that in 2010 there was 900 megawatts of installed solar power capacity - largely photovoltaics - in the U.S. he estimates that will double in 2011. It's still a small part of the total power market - renewables of any kind were only 4.2 percent of the generation capacity, according to the U.S. Energy Information Administration, and solar would account for less than that. Even with the small capacity, though, the growth is healthy, Krop says, and that bodes well for solar's longer-term future.

According to data from the Solar Electric Power Association, an industry group, of the top 25 solar photovoltaic projects, 13 were completed in 2010. That includes the largest currently running plant to date, the Copper Mountain Solar Facility in Colorado. That adds up to 141.6 megawatts. In 2009, only four of the top 25 were completed.

There are currently seven solar plants that will be in the hundreds of megawatts planned in the United States. The 200-megawatt California Valley Solar Ranch (CVSR), which will sell power to Pacific Gas & Electric, is the only one that is planned for completion in 2011. But there are several smaller projects in the under-100 megawatt range that should start generating power by the beginning of 2012.

Right now the biggest potential obstacle is cost. The price for the CVSR is about $1 billion, or about $5 per watt. According to the Solar Energy Industries Association, in 2010 the costs fell below $6 per watt for the first time and looks as though it may drop further.

According to data from the EIA, the capital cost of solar photovoltaic is projected to drop 25% in 2011, to below $5 per watt. By comparison, the cost of nuclear power is projected to rise by 37%, even though the cost per watt is currently less - just under $4. That still means solar is more expensive than the two cheapest energy options, which are coal and natural gas. Even though both are scheduled to get more expensive, they will still come in under $3. But it shows that it is becoming more competitive.

Outside the U.S., solar power is sometimes cheaper. This can happen in developing countries where people use generators, such as India. Krop says using small, diesel powered generators can get very expensive, up to 25 to 30 cents per kilowatt-hour. That is well above the 15 cents per kilowatt-hour that would be considered a relatively high price in the U.S. (the average is about 10 cents). Maybe in three years India will be a 25-30 gigawatt market, he says.