Cheap Solar Energy: The United States’s 21st Century Moon Shot

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Staff Blogger at SAIS Washington

If you’ve been paying attention to recent trends in the energy world, then you know that renewable energy technologies—solar PV in particular—have grown significantly in recent years. As governments worldwide have extended support for the development and commercialization of such technology, costs have come down dramatically and deployment has increased exponentially.

Last week Bloomberg New Energy Finance forecasted that 36.7 GW of new solar PV capacity—equal to more than one-third of current installed cumulative capacity worldwide—will be added globally in 2013. For the first time ever, solar capacity additions will be larger than those from wind energy. The increasing scale-up in the sector has coincided with sharp reductions in the price of solar modules, a key component of PV systems, from $7/watt two decades ago to less than $1/watt today.

Notwithstanding these significant cost declines, electricity generated from solar PV remains more expensive than competing electricity sources and is likely to remain so absent further technological innovation. On an unsubsidized basis the levelized cost of electricity (LCOE) from solar PV ranges from $0.18/kWh for large utility-scale systems to $0.22/kWh for smaller residential systems. According to the U.S. Department of Energy, the unsubsidized cost of solar electricity must come down by 75% from its 2010 level in order to compete with currently operating energy sources. In a world of cheap and abundant fossil fuel-generated electricity, accelerating innovation to spur technological advances and attendant cost declines is essential to supercharge the global solar energy industry.

In 2011, the Department of Energy (DOE) established a new program, the SunShot Initiative, to do just this. The SunShot Initiative aims to make solar energy cost-competitive on an unsubsidized basis with conventional energy generation. Achieving this goal would, according to the program, enable dramatic growth in solar from 0.05% of current U.S. electricity supply to 17% by 2030 and 29% by 2050.

SunShot is unique in that it recognizes explicitly that innovation advances not simply through research and development, but rather by integrating R&D advances with the technology pipeline’s later stages: prototypes, pilot demonstration, manufacturing systems and market acceleration.

SunShot’s Incubator program provides competitive grants to start-up companies to shorten the time between laboratory-scale proof of concept and full-scale manufacture. By helping to bridge the technology “valley of death”—the critical funding gap that plagues innovators at a time when they require capital to develop, test and refine their technologies—the DOE is increasing the probability that innovative, efficient and cost-competitive solar technologies will be commercialized.

Apart from strategic funding across the solar value chain, SunShot facilitates coordination between industry, academia and government around a single goal: better and cheaper solar PV. In consultation with experts in the private and public sectors, it has also constructed an integrated vision—a roadmap—for how solar energy technologies can advance in the coming decades. This road map includes not only continued advances in materials and hardware, but also strategies to reduce the “soft costs” of solar systems, such as permitting, customer acquisition, and installation, costs which have become a larger share of overall system costs as the price of modules has declined.

Only time will tell if the SunShot initiative is successful in catalyzing revolutionary advances in solar PV that will allow the technology to compete with fossil fuel energy sources. In a global energy market valued at $6 trillion annually and poised to double by mid-century, the opportunity for U.S. firms is clearly enormous. Through its own institutional innovations, the Department of Energy is helping them seize it.

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