• Martin Green

07 August 2006By following Germany’s lead, Australia could enhance its strong position in solar power research and development, argues Martin Green

LOST in the current debate on Australia’s nuclear industry has been our prominent role in the development of what is clearly a more desirable option, electricity generation using solar cells. Solar or photovoltaic cells have powered small systems in the outback since the 1970s, following pioneering work by Telecom Australia. For a long time, though, larger scale use was hampered by high costs.

That situation is changing. Two factors - the recent explosive growth in the industry and escalating business interest - have given the first convincing indications that this technology can play a large role in the future. With world production doubling every two years, the annual additions to solar photovoltaic capacity will overtake those to nuclear in either 2007 or 2008.

Reflecting the booming business interest, global photovoltaic sector revenues are expected to be $25 billion in 2006, increasing to $100 billion by 2010. The largest technology float worldwide during 2005 was reportedly that of the Sino-Australian solar company Suntech Power. Founded in 2001, the company is growing quickly, with 2006 revenues expected to surpass $700 million - already well clear of total Australian uranium sales of $475 million in 2004-05. Suntech was not the only photovoltaic company to attract market interest. The combined market capitalisation of the four companies that floated in late 2005 was close to $20 billion by early 2006.

What has triggered this startling growth? It is almost entirely due to the Renewable Energy Law enacted in Germany in 2000 and updated in 2004. This law guarantees the price for each unit of electricity produced over the first twenty years of the life of new photovoltaic systems. As a result, literally hundreds of thousands of individuals and small companies across Germany have installed photovoltaic systems, usually on the roof of their offices, homes or barns.

The guaranteed price paid for solar electricity supplied to the power grid is around €0.50/unit. (The unit is a kilowatt-hour, enough energy to run a small bar heater for an hour, a standard 100W light bulb for ten hours, or a 10W compact fluorescent for 100 hours.) This is well above present German prices for electricity supplied from the grid - about €0.19 /unit - but well below the record German spot market price of €1.41/unit paid recently, at around noon on 26 July 2006. Ironically, this record price was due to nuclear plants being unable to meet rated power when it was most needed. With demand increasing as the day warmed up, the output from nuclear plants had to be cut back to stop their cooling water effluent from heating waterways above the regulated limit (a tepid 28 degrees Celsius). At the same time, the country’s photovoltaic systems were working close to full capacity, not unexpected at noon on a hot summer day.

Such paradoxes are not limited to Germany. Japan habitually has a much higher demand for electricity on summer afternoons than in the evenings or winter. It also has the most expensive electricity in the developed world, three times pricier than in Australia, generating about a third from nuclear. Since nuclear is not suited to meeting peak loads, Japan complements its nuclear plant with huge amounts of storage. Its nuclear plants are backed up to about half of nuclear capacity by pumped hydroelectric systems. The nuclear plants keep running through the night, with their excess power used to pump water uphill. This primes the hydroelectric system for use during the daytime peak. In this environment, installing solar systems, which Japanese citizens are now doing in large numbers, actually decreases the amount of storage required.

Despite mediocre sunshine, Japan’s high electricity prices and low mortgage rates make it the market where photovoltaics are most competitive at present. Last year 60,000 Japanese households installed roof-mounted photovoltaic systems. Two-thirds benefited from a 5 per cent subsidy in the final stage of a ten-year Japanese program, while the subsequent third were unsubsidised. This took the total to close to 300,000 Japanese solar powered homes, more than one in every 100 households. The aim is to increase this to one in 25 by 2010 and one in four by 2020.

With even less sunshine, lower electricity prices and higher interest rates, the situation in Germany is less competitive. Hence the guaranteed tariff. The extra cost of the scheme is distributed among all electricity users, adding less than 0.1 cents per unit. It has stimulated a booming local photovoltaic industry, with over 10,000 Germans now working in solar. The clear success in Germany has encouraged other countries, initially Spain but more recently Italy, France, Greece and Canada, to introduce almost identical schemes. The United States is an awakening giant, with several states, notably California, introducing their own types of incentives. China is also actively promoting photovoltaic development. This growing diversity of initiatives is one reason for the growing confidence of the industry and its investors.

Technology is evolving quickly as a result of the industry’s increased vitality. Most of the cost is in the silicon wafers used as substrates for present cells. All companies are working on using thinner wafers, which is not as trivial a factor as it might seem. Earlier this year, Suntech announced the introduction of new manufacturing technology by year-end. This reduces costs by increasing the power from each cell, using an approach developed jointly with the University of New South Wales. An even more important Australian-led initiative for the long-term might be that of CSG Solar, a University of NSW spin-off. CSG has eliminated wafers completely by depositing silicon directly onto glass. The resulting layers are over 100 times thinner than the thinnest wafers. The first product from the company’s manufacturing plant in Germany was shipped this July.

With such technological evolution and rapidly increasing production volumes, costs will continue to decline. Already they are ten times lower than in the 1980s and can eventually be reduced by a further factor of ten. Decreasing solar costs are likely to meet the increasing costs from conventional energy sources mid-way. The price of the lowest-cost baseload electricity on the European Energy Exchange has doubled since 2003, stimulated by increases in the costs of coal, gas and uranium.

A glimpse into what might be possible with a more coordinated international effort is given in the 2003 report of the Germany Advisory Council on Climate Change, World in Transition: Towards Sustainable Energy Systems. The council developed an “exemplary scenario” for energy production until 2100, taking into account a wide range of issues, including climate, pollution, land use, river and marine ecology as well as as constraints on growth rates and ultimate penetration, access to and cost of energy, developmental opportunities, disease and risk. The option of expanding nuclear beyond what is presently planned was rejected due to unresolved risks associated with accidents, waste disposal, weapons proliferation and terrorism.

Solar electricity was the clear winner when all factors were considered, with 25 per cent of all primary energy production by 2050 and 64 per cent by 2100 considered technically feasible. To achieve this result, solar must increase its contribution to energy production ten-fold for each decade until 2040. Encouragingly, this contribution has increased thirty-fold over the last decade and the rate of increase shows no sign of abating.

The demand for more energy over this century is likely to come increasingly from what are now the poorer and less-developed countries. These countries are unlikely to have the resources to develop indigenous energy technology and will likely be dependent on solutions developed elsewhere. The same countries are the least well-equipped, not only in terms of resources but also, in many cases, in terms of political stability, to handle the challenges nuclear technology has presented in the past and will present in various ways in the future. Nuclear weapons proliferation also becomes close to a certainty if nuclear is the technological fix handed by affluent countries to the poor. The only solution seriously being considered to deal with the risk of proliferation is to permanently entrench present privileged positions - despite the clear flaws in this approach, even from the Australian government’s perspective.

Affluent countries like Australia are enjoying the most prosperous period in their histories. Instead of squandering this affluence, it would seem sensible to take the opportunity to develop sustainable energy options. These could then be used to meet the growing energy needs of the less affluent more prudently than at present. Ultimately, this is in our own interests, since we will all share in the consequences of not having alternatives fully developed. In the case of Australia, adopting a tariff model similar to Germany’s would seem a sensible and very affordable contribution to the required development. In this way, Australia could carry its share of the load in the commercialisation of sustainable technology while enhancing its position in an industry where it already is a leader. •

Martin Green is the Scientia Professor in the ARC Photovoltaics Centre of Excellence at the University of New South Wales.

Photo: Scott Cressman/iStockphoto.com