In previous articles I have discussed the possible change for American society that could come about through an epiphany of solar power onto the landscape of our energy industry. Solar power has several defining characteristics that make it a disruptive technology - a paradigm shift not unlike the move from wood to coal to steam to oil. It rivals the Internet for the kinds of changes it could bring about in an exceedingly short time span.
First of all:
Solar energy is the great leveler (unlike oil, which has been the great divider) between the haves and the have-nots. No one owns the sun. It can't be drilled or mined or tied up in financial derivatives. It is the only energy source in the world that is primarily free at its source and universally available to consumers. And the closer a nation is situated towards the equator - and the bigger their deserts - the better the technology works. (Here comes the Sun, 2/17/2007)
It has very few mechanically moving parts and in some cases (thin films) none. Its substrate is refined polysilicon, or Si, the basis on which the entire semiconductor industry has built its integrated circuits. Giant firms like Samsung, Hitachi (HIT), Intel (NASDAQ:INTC), Emerson (NYSE:EMR), and Sony (NYSE:SNE) rely on silicon to bond infinitesimal data paths (with gold wires) in order to carry billions of instructions per second within TVs, computers, and cell phones. The telecom and electrical industries are entirely dependent on silicon - one of the most abundant elements on earth (in its raw unrefined state) - to create their international hubs of communication and an information-based society which today we call the "modern world". Thirty years ago there were no personal computers, no such networks or cell phones, and TVs were powered by primitive cathode ray tubes. A lot has changed in thirty years, and the pace is accelerating.
In the 21st century the role of refined silicon is going to expand into power generation and lighting. I think the move will be from a centralized view of power production to a de-centralized or "mesh" build out of power. This migration could also transform our ailing automobile and construction industries, which I will explain later in this missive.
Trina Solar (NYSE:TSL) recently made a significant announcement that the end of the chronic polysilicon shortage is probably near at hand. In just three short years, solar power has grown from a small tangential player in the alternative energy field to consuming more silicon than all the world's semiconductor companies combined. Solar companies have signed billions ($) in long-term supply contracts for refined Si. More than a 170 firms are now in the process of building or ramping poly plants. Some of these plants, like the two being built by LDK Solar (NYSE:LDK) in China, are enormous. Solar power has a compound annual growth rate of 40-50% worldwide and yet it is barely a blip on the American power scene. I think all that could change in 2009.
With the new supplies of poly coming on stream, the cost to build solar panels could drop 50% within a year. With oil at $113/bbl, it is highly unlikely that the large U.S. power plants (which utilize oil and natural gas for their generators) are going to charge their utility customers less ($) in the future. With each successive year, the cost of a solar installation drops while the cost of a monthly utility bill rises 6%+.
In real terms, it is getting cheaper to buy a roof top solar installation - or build it into a new home from scratch - than to rent power from your local utility company for ten years. How? By the time you figure in the rebates from the state and Federal government, the tax write off for the project and the tax deduction for the interest on the construction loan, it is cheaper to finance a solar electrical installation for 10 years at 7% than it is to pay your monthly utility bill. And at the end of 10 years you OWN your system, whereas with your local utility company you're merely rented power to the tune of $18,000 in a decade.
When a large supply of poly comes on stream in 2009 and 2010, solar panel prices could quickly drop to parity with the rising cost of fossil fuel power, and that's where the paradigm shift to solar could begin to show its muscle for the first time.
The Chevrolet Volt is designed for commuters who drive 40-80 miles a day. Because I commute to work each day I can see the profound difference in suburban subway traffic when school is in session and when it is not. There are millions of Americans who drive less (locally) than 80 miles a day. If construction companies (it is now law in California) would offer prospective buyers a solar alternative, homeowners could have their cake and eat it too: a higher property value and their own "fuel" source too .
BIPV (built in photovoltaic) construction costs are much less for a new home than a remodel (although Akeena's (AKNS) Andalay panels may change that). A new solar installation can be financed along with the house. The solar unit supplies power to the house during the day - sometimes even running the meter backwards during the peak hours of the day - and at night the car can draw power from the grid to recharge its batteries. 80 miles a day in a gasoline-powered car is $15/day in fuel, so the cost savings is about $300/month.
There is virtually no reason for the automobile industry to continue its tie to a commodity (oil) that is ultra-expensive, dirty and obsolescent (Remember the Kodak camera and film processing?). But there has to be an infrastructure available to support the widespread use of electric cars. This is where residential solar power systems come in. Millions of homes can gently "add" power into the national grid (without over-taxing it) during the day and then draw that power back during the night for use in the home. It is a win-win proposition on a national and personal level, not to mention the carbon footprint. Because the life of a car is normally 15 years, this could begin to become a reality in less than a decade.
The same can be said for commercial installations on large warehouses across the sunbelt of the United States. From a million points of light - from residences and commercial structures across the country - excess power can be generated in bite-sized pieces that will add up to a huge piece of the energy pie over time.
There is also the built-in epigenesis of technology innovation over time which occurs when thousands of minds work on a single idea. Think of the quantum leaps in bandwidth (broadband) and the processing power of PCs in just the last 5 years. There is a new memory standard called PRAM which is 1,000 times more dense than existing flash drives. At any time, a new invention can come along that levels the playing field and provides more service with less raw materials at the same cost as before (or cheaper). The efficiencies of solar panels increase about 6%/yr. Solar panel makers now use less polysilicon and yet achieve greater conversion rates. This constant innovation - which creates a competitive edge between companies - will continue in the future.
The last great innovation will be lighting. 20% of all energy in the United States is consumed by interior and exterior lighting. Light emitting diodes - another silicon product very similar to a semiconductor - consume 1/100 the power of conventional lighting and yet last 10 times longer. They create a better, more pure or refined light stream, and yet are dirt cheap to manufacture (a single bonder can create 50,000/day). To give you an idea of the scale, it is common for large fabs to have dozens (if not hundreds) of bonder machines.
Although it is true that solar energy creates a relatively thin stream of electrical power, the lighting and computing systems of the future will require less and less energy to run. Think of the advances in the last 5 years that have occurred just with your cell phone and imagine what the same cycle of technology improvement will do for solar energy, home insulation, and appliances. In the relentless drive to eliminate costs, home builders have created siding and shingles that never need to be painted, interiors that are so well-insulated that they can be heated by the light of bulbs, and windows that won't allow damaging UV through.
The real kicker would be a national policy, a fervor - not unlike the one we had in the 1960s when the U.S. raced the Russians to the moon - to reach energy independence in 10 years. The 60s "race to the moon" fervor followed 13 years of a brutal Cold War with soviet communism.
Our dependence today on foreign fossil fuels at a $113/bbl, is the height of stupidity. The main contention is theocracy vs. democracy. Those countries have a right to their religious ideals within the framework of their own geography. But we have a right to our democratic ideals too. There is a reason the Western Hemisphere was once called the "New World".
The only way to end our financial relationship with foreign oil is to make a clean break. Thus a plan that utilizes the free source of the sun to lead the way. Our national strength is our creativity and our inventiveness. Surely this is a better, more noble use of our funds than tilting at windmills and attempting to win unwinnable guerrilla wars on foreign fields. There would be new jobs in a national alternative energy policy - in construction, installation, transportation, and lighting - if the country pulled together to change direction and develop the solar industry; just like we did before with the biotechnology, computer, networking and Internet industries. These aforementioned industries have created millions of new jobs for Americans.
- Akeena - the Solar CSCO, December 10, 2007
- Akeena Solar, November 9, 2007
- Here Comes the Sun, February 17 , 2007
Disclosure: I have a long position in solar companies Akeena (AKNS), Trina Solar (TSL), and Suntech Power (NYSE:STP); plus Claymore Global Solar Energy ETF (NYSEARCA:TAN), the new all-solar exchange-traded fund.