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Laurice Avery and Phillipa MacDonald of Kensington Swan Lawyers look at what’s driving the emergence of the solar power energy industry.
By early 2010, more than 100 countries had enacted some form of policy target and/or promotion policy related to renewable energy (up from 55 countries in early 2005). Many of these policies require that a certain percentage, typically 15 to 25 percent of energy be produced from renewable sources by 2020. This article provides a snapshot of this recent market growth in solar power and sets out what is driving this development. A decrease in the cost of generation and solar technology, more favourable government incentive schemes, and a realisation of the benefits of a ‘green corporate image’ have all contributed to the surge in the solar power industry. There are two common solar technologies. The first is solar photovolic (PV) which is the fastest growing power-generation technology in the world. Solar PV is a system which uses solar cells to convert light into electricity. In a grid-connected solar PV system, the power produced is fed directly into an electricity grid. On a global scale, solar PV installations are now almost six times the level that they were at the end of 2004, with analysts expecting an even higher growth rate in the next four to five years. The second solar technology is concentrating solar thermal power (CSP). CSP systems use lenses or mirrors to focus a large area of sunlight onto a small area. Electrical power is produced when the concentrated light is directed onto surfaces or used to heat a transfer fluid for a conventional power plant. Between 2006 and 2009, CSP has grown rapidly. By early 2010, 0.7 GW of CSP was in operation located solely in the Southwest of the United States and Spain. Additionally, solar hot water heating plays an increasingly important role in solar power globally. During 2009, existing solar water and space heating capacity increased by 21 percent reaching about 180 gigawatts-thermal (GWth) globally. China continues to dominate the world market for solar hot water heating capacity. In 2009, China alone added more than 29 GWth and currently holds 80 percent of the existing global capacity. Solar hot water is also likely to have an important part to play in the New Zealand energy market in the next five to ten years, both at a residential level and at a commercial level. Globally, there is a trend towards large-scale (that is, above 200 kilowatt) plants. In 2008 there were 2450 such plants, and the number of large-scale plants increased to 3200 by 2009 – together totalling more than 5.8GW of capacity. In a kind of ‘solar cold war’, states appear to compete against each other to establish the largest and most prestigious solar power stations. What is driving this increase in the use of solar power? Primarily, this increase is due to two factors; governmental incentive schemes and decreasing costs in development. Feed-in tariffs (FITs) are the most widely used policy schemes in the world for accelerating renewable energy deployment. Within the European Union alone, FIT policies have led to the deployment of more than 15,000MW of solar PV grid-connected power between 2000 and 2009. FIT policies typically include three key provisions:
The rapidly declining cost of solar power is also one of the key factors driving its rapid development over the last five years. The decrease in cost of solar power technology is partly due to increasing competition from panel makers in China, and also because higher volumes of solar power have resulted in economies of scale. Solar PV system costs have fallen steadily for decades and are projected to fall further over the next 10 years. However, the uptake of large-scale solar power developments here has been very slow. This is despite the fact that we have good solar radiation levels in many locations. For example, radiation levels in Invercargill are roughly as high as in Germany where household solar panels are commonly used. New Zealand’s large electricity players have generally kept their distance from domestic solar projects. This conscious decision is largely due to the comparatively high cost of solar projects, and the lack of solar industry knowledge within the local market. Although domestic solar power development has been slow, Meridian Energy recently announced plans to spend more than $400 million on wind and solar projects in Australia, the US and the Pacific. While Meridian Energy has sought to expand its wind portfolio within New Zealand, its solar programme remains focused on participation in viable offshore solar markets with a view to building capability and bringing it home to New Zealand when commercially feasible. Meridian Energy’s move into solar technology was seen for the first time in May this year when Meridian Energy commissioned its first solar power plant, a 5MW solar PV farm in Mendota, California called CALRenew-1 (featured on page 22). This may mean that we will begin to see more utilisation of solar energy technologies here once this experience is brought back to our market. Assisted by the decreasing cost of solar technology and favourable government incentive schemes, the global solar energy industry will continue to grow in the coming years. Advancements in technology are not only driving the cost of solar power down, but are also making solar energy production more efficient. In New Zealand, we are likely to see the country’s favourable solar resources utilised to a much higher degree over the next five to ten years, especially in the space of solar hot water, as Meridian Energy gains experience in solar energy in overseas markets that it can bring and apply here.
Energy NZ Vol.4 No.6 November-December 2010 |
Renewable energy now comprises 25 percent of global power capacity, with 18 percent of global electricity being supplied by renewable sources in 2009.