Rows of photovoltaic cells which make up
Jean-pierre Clatot  /  AFP - Getty Images file
Rows of photovoltaic cells which make up the solar panels at the largest solar energy site in Francein Chambery.
By John W. Schoen Senior producer
msnbc.com
updated 8/4/2005 4:51:18 PM ET 2005-08-04T20:51:18

At 7,100 feet up in the Rocky Mountains, where the temperatures can hit 40 below, Amory Lovins has built a home that shows just how powerful solar energy can be. He says the house is 99 percent passive-solar heated, saves 99 percent of its water-heating energy, and consumes about $5 a month worth of electricity. The house is so toasty, Lovins says, he grows bananas indoors; he’s harvested 28 crops over the years.

“The extra cost of all those efficiencies paid for itself in ten months, 20 years ago,” he said. “But you can do better now.”

Lovins is no ordinary homeowner. As CEO of the Rocky Mountain Institute, a think tank and consulting group, he’s been working on ways to improve energy efficiency for more than 20 years. About two-thirds of the organization’s revenues come from advising major corporations.

Sunshine, in its broadest terms, is the ultimate source of most every form of energy used by man (with the exception of nuclear power). Fossil fuels like coal, oil and natural gas are the organic byproduct of plants and animals that derived their energy millions of year ago from the sun. Wind and hydro power rely on the motion of air and water created by the sun’s impact on the earth’s climate.

Direct solar energy is also useful in various forms: passive-solar building techniques can dramatically reduce energy consumption by cutting heating costs in winter and cooling costs in summer. Solar hot water installations can reduce or replace other forms of energy used to heat a building or make hot water.

But only relatively recently has the conversion of solar energy to electricity allowed it to be put to a variety of other uses, including powering vehicles, that could replace large quantities of oil.

The physics of turning sunlight into electricity has been known for over 100 years. But it wasn’t until the 1950s that researchers developed the first commercially viable solar cells -- a type of semiconductor that converts light into electricity. During the 1960s, the space program drove further advances in boosting the capacity and reducing the cost of making solar panels. More recently, thanks to advances in semiconductor manufacturing, the cost of producing solar cells continues to fall.

The appeal of solar energy –- especially as a source of free, plentiful, pollution-free electricity wherever and whenever the sun is shining -– is hard to beat. Butthe promise of solar energy as a major power source remains largely unfulfilled. Though it is increasingly finding its way into “off-grid” applications in remote locations, high costs have prevented it from replacing utility-generated electricity in most parts of the world. And despite ongoing technological breakthroughs, it will likely be decades before solar satisfies a significant share of the world’s energy demand.

“The bottom line is we need pretty substantial technical breakthroughs in solar to move it from a technology that’s growing rapidly -- but is probably going to be a pretty niche technology -- to a technology that can really contribute substantial fractions of our energy supply,” said Ryan Wiser, a scientist at the Lawrence Berkeley National Laboratory who specializes in the economics of renewable energy.

Like most alternative energy sources used to generate electricity, solar still has a hard time competing with power generated by burning coal or natural gas. Despite decades of improvements, electricity made from photovoltaic cells can’t yet compete economically with the average watt produced by the power gird. Where the average retail customer is paying roughly 7.5 cents per kilowatt-hour in the U.S., solar-generated power costs five times that, according to Solarbuzz, Inc., a private firm that tracks solar power prices

That’s why, to date, solar-generated electricity has been attractive primarily for so-called “off grid” applications, providing power to areas where transmission costs are high or in remote locations not supplied by the power grid.

To help overcome the solar power’s economic handicap, federal, state and local governments have provided hundreds of separate programsoffering financial incentives for the past 20 years. Many of these include tax credits or direct grants for homeowners and business that install solar power systems.

That’s why most of the growth in solar is expected to come from small installations at homes and businesses rather than large-scale, solar power plants. (Installing solar power were it is consumed also eliminates transmission costs.) By 2025, central-station photovoltaics will increase 10-fold to roughly 400 megawatts, while grid-connected equipment installed on site will increase 30-fold to 1,800 megawatts, according to U.S. Energy Information Administration forecasts. But that’s still a tiny fraction of the 5.2 million megawatts expected to be consumed in 2025, according to the EIA.

“The industry is growing very dramatically,” said Steve Westwell, CEO of BP Solar. “But the industry is still insignificant in respect to energy supply in the global context -– you know, it probably doesn’t get to the third decimal place.”

Last year, Westwell said, the global solar power industry installed about a 1,000 megawatts of new electrical generating capacity -– roughly the equivalent of two new, natural gas-fired power plants. But companies like BP are betting big that the pattern of the past two decades, in which the cost of solar has dropped by about six-fold, will continue.

Solar hot spots
The adoption of solar power has also been uneven because of big variations in the local cost of power from one state to another in the U.S. and from one country to the next around the world. In Wyoming, the average power bill for all customers came to about 5 cents a kilowatt-hour. Hawaiians pay nearly triple that amount.

In Japan, where electricity prices of over 20 cents a kilowatt-hour are among the highest among the developed nations, the high cost of power lead to the adoption in the 1990s of one of the most aggressive government solar incentive programs in the world. When those incentives expires next year, BP’s Westhill said, “it looks like solar electricity installed in the residential market in Japan will be competitive without incentives with grid-supplied electrify.”

Solar power is also seeing rapid growth in Germany, which has set a target of generating at least 50 percent of its energy consumption with renewables by 2050. Germany currently accounts for about a third of global demand for photovoltaics.

But despite these aggressive programs, solar is still contributing a small fraction these country’s power needs. And solar is still a long way from competing with the cost of coal or gas fired power in most of the rest of the world: the economics are still heavily reliant on government subsidies.

To cut those costs, makers of solar modules are hoping to wring further savings by ramping up production. Every time sales of solar equipment doubles, the cost drops by about 20 percent, said Westwell. BP plans to more than double its manufacturing capacity to some 220 megawatts by early 2006.

As players in the solar industry have ramped up bigger production facilities, the number of companies with the capital to maker those bets has shrunk. Today, the list includes Japanese producers Sharp, Kyocera and Mitsubishi Electric, along with global energy giants like BP and Shell and German manufacturer Solar Wind.

But, depending on the size and location, the cost of solar modules makes up roughly a third of the total cost of a typical installation. Another third goes to cover the cost of inverters, switches, lines and other gear. And the last third typically covers the labor costs of setting up the system. So while breakthroughs in manufacturing solar modules will help, even the most optimistic forecasts call for solar to continue to play a minor role in power generation.

“We probably need to at least halve the cost of solar over the next 15 to 20 years and then at we probably need to halve it again by 2050,” said Westwell. “Solar could well find it self being something like 10-15 percent of the installed electrical capacity in the world by 2050.

One of the key technical problems with solar is storage: sunshine is not available round the clock, seven days a week. For now, the power grid itself is a kind of huge storage system --  excess power generated during daylight can be sent down the grid to other users and power generated from other sources can be drawn back at night.

But improved battery power is helping to provide backup for power users that can’t rely on the grid -– either because they're located too far from it, or because they can’t afford to risk a blackout.

“Rather than talking to the plant operator, we talk to the CFO,” said Robert Stempel, former General Motors CEO who is now head of a small Michigan company called Energy Conversion Devices. “And he usually understands the financial question of downtime versus uninterruptible power.”

Energy Conversion Devices is focusing its efforts and capital on a two-pronged strategy. It’s photovoltaic manufacturing process produces flexible solar cells, allowing them to be built into roofing materials for business or homes. The company’s second major product is a line of batteries make of nickel metal hydride, which can store about two-and-a-half times the power of a conventional lead acid battery

“We have a number of off-grid installations where it’s a totally self-supporting system even on days when the sun does shine or you when have a snowstorm or so on,” said Stempel. “We have enough battery support there that the house or the building can keep on going.”

Metal hydrides provide another important step in the road to replacing or eliminating oil as an energy source. Because they can be charged with hydrogen, metal hydride batteries offer a possible alternative to the high-pressure tanks needed to store pure hydrogen –- the fuel that may one day power the car of the future. These hydrides act like a sponge -– soaking up hydrogen at relatively low pressures and then releasing it when heat is applied. That eliminates one of the biggest hurdles for designers of hydrogen cars: the added weight needed to support a high-pressure hydrogen storage tank.

But much of the technology needed to bring down the cost of solar power, and develop effective ways to store it when the sun isn’t shining, remains to be invented. And that makes it difficult to predict just how big a role solar-generated power will play in the Post-Oil Era.

“I think it’s possible in 30 years that solar is producing 1 percent of the nation’s electricity supply -– but it may be up to 20 percent,” said Wiser. “There’s a big range. Its all depends on technological advances, and that’s very hard to foresee.”

© 2013 msnbc.com Reprints

Discuss:

Discussion comments

,

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.30%
$30K home equity loan FICO 5.10%
$75K home equity loan FICO 4.53%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 10.96%
10.96%
Cash Back Cards 16.45%
16.45%
Rewards Cards 15.99%
15.99%
Source: Bankrate.com