Experts Look at PV Industry's FITness
Feed-in tariffs are keeping the PV industry going across the world, but more work is required to maintain the momentum.
Alexander E. Braun, Senior Editor -- PV Society, 1/27/2010
SEMI's PV Group's webinar, "Feed-in Tariffs Critical to Drive Global PV Demand," featured a stable of distinguished speakers who addressed the global state of feed-in tariffs (FITs).
FITs are a government (local, regional or national) policy tool aimed at encouraging the development and application of renewable energy sources such as photovoltaics, wind, hydroelectric, biomass and others. In general terms, it obligates electric utilities to buy electricity from renewable sources, theoretically enabling the further development of those sources and providing a reasonable return to those who have invested in the technologies.
The first speaker, Gerhard Stryi-Hipp, head of energy policy and group leader of thermal collectors and applications at the Fraunhofer Institute for Solar Systems (ISE, Freiburg, Germany), noted that the principal challenge was the continued support of PV markets across the world, until the technology becomes cost-competitive with other energy sources. "Today PV is often the most expensive way to produce electricity," he noted, adding that nonetheless the technology had the highest cost reduction potential. According to Stryi-Hipp, a solution is to increase PV production so that the economy derived from large volumes kicks in. He stressed that this had to be an ongoing effort to ensure that there will be sufficient PV capacity at a competitive price when it is needed.
Worldwide PV market perspective to the year 2020. (Source: Fraunhofer Institute)
Stryi-Hipp indicated that, in Germany, grid parity is expected by 2015, and that this seems attainable because the government has granted priority connection for all PV systems, with utilities obligated to buy all the electricity so produced, and a fixed FIT payment over 20 years. "In Germany, the goal is to double the share of electricity from renewable sources from 15% to 30% by 2020," he said.
In his presentation, "FIT for Life," Mark Fulton, global head of Climate Change Investment Research at DB (Deustsche Bank Group) Climate Change Advisors (New York), stated that renewable scale-up can satisfy policy and economic goals, as well as provide a means to achieve emission targets, obtain energy security, and stimulate job and industry creation. He indicated that investors expect what he described as "TLC" (transparency, longevity and certainty), which would deploy capital in scale while minimizing risks. "TLC at the ‘right price' can be achieved through efficient policy design and balancing public and private sector interests, resulting in a net benefit to everyone." Fulton observed that FIT policies work to generate a volume response and create jobs, and he criticized the United States' renewable energy policy framework. "It is complex, fragmented and lacks many TLC elements, and there have been many stops and starts." He pointed to fragmented electricity markets, regulatory structures, disparate interconnect capabilities and a wide variation in natural resource abundance. "In contrast to Europe, electricity markets disaggregated at the state and local level," he said.
Timeline and incentive structure for a technology to achieve commercial grid parity. (Source: DB Climate Change Investment Research)
Fulton noted that in Europe FITs are part of national energy policies, giving as an example the fact that Germany, Spain, France and the Netherlands have advanced these policies, attracting capital, and creating work and scaled renewable deployment. "The core elements to this have been mandates and targets," he said, "standard offer, longevity of payment terms interconnection and adaptability." He added that when evaluating the costs and benefits of renewable payments to achieve scale, some of the factors to be considered are how much renewable power, as a percentage of the total supply, has been delivered; how many jobs have resulted; and the cost to the taxpayer resulting from incentive and public spending programs.
Wilson Rickerson, executive vice president of the Meister Consultants Group (Boston), gave a "Global FIT Update," in which he reviewed international FIT policies, giving the average PV energy producing prices, and contrasting the results with conditions in the United States, noting that FIT activity is fragmented — often at the regional and state levels — and not as active as it could be.
Average prices for PV power in Europe. (Source: Meister Consultants Group)
U.S. renewable energy subsidies by state. (Source: Meister Consultants Group)
Although there was a general agreement on the speakers' part that FITs are an effective public policy instrument to encourage the development and deployment of PV power, it must be noted that the PV industry still depends heavily on subsidies to survive. An example of this is Germany, which has been in the lead adopting solar power; however, the government's recent announcement that these subsidies might be cut due to the state of the economy filled everyone in the PV supply chain with consternation. Spain did cut its subsidies, and there is presently little activity in this area. This should change as PV systems increase in efficiency, and as traditional forms of power generation, such as oil and coal, become more expensive or are more restricted due to their possible environmental impact, helping PV technology to attain the Holy Grail of grid parity.
More than 80% of 2008’s PV demand originated from FIT-supported markets. (Source: SEMI)
