Solar energy’s growing
by Alyssa A. Lappen
Forbes | Aug. 15, 1983
Vol. 132, No. 15, 1983
Solar cells are 3-inch silicon discs that make electricity from sunlight. Since February 108 16-foot-long arrays of these cells have been tracking the desert sun over 20 acres of Hesperia, Calif., quietly manufacturing a megawatt of electricity. Built in nine months by Atlantic Richfield’s Arco Solar subsidiary, the facility now sells enough power to Southern California Edison to service 400 homes and is the largest such plant in the world.
This may be only the beginning. Arco Solar is already at work on a 16-megawatt facility for Pacific Gas & Electric in San Luis Obispo County, Calif. The Sacramento Municipal Utility District has broken ground for a $12 million 1-megawatt photovoltaic station at Rancho Seco, Calif. and plans another 99 megawatts over the next ten years. Foster City, Calif.-based United Energy Corp. has sold a megawatt of photovoltaic generators to third-party investors in Davis, Calif. and is also building a station with over 5 megawatts of power at Borrego Springs, Calif.
Worldwide, the photovoltaics industry has nearly tripled in size since 1980, to about $100 million last year, and the 9.2 megawatts of solar cells produced worldwide in 1982 was double 1981’s production. And here’s good news: The U.S. has 60% of the world market. Nearly 40 companies, 17 of them in the U.S., sell solar cells worldwide.
It is good news, too, that the oil glut hasn’t squelched this intant industry even though the price for solar generating plants is extraordinary and the power they supply is but a drop in the ocean. “It costs $1 to $2 a watt right now for coal or unclear, and photovoltaics is about $10 a watt,’ says Paul Maycock, a top photovoltaics consultant in Alexandria, Va. What’s keeping solar energy alive? The fact that it lends itself to smallscale generating plants, for one thing. “The electric utility industry must move away from the tradition of large, capital-intensive, baseload plants,’ says William Gould, chairman of Southern California Edison. Why so? Because demand for electricity is growing at historic lows and so expansion in small increments has become desirable.
That probably will not mean an increase in the rooftop solar systems first envisaged by the “small is beautiful’ crowd, except in remote locations. Rather, says Andrew Krantz, head of the Department of Energy’s photovoltaic systems research branch, it means the construction of solar generating plants as a supplement to larger, conventional power plants. “Our calculations show that you begin to arrive at economies of scale in solar power at about 20 megawatts a year of production,’ he says. At that level, the price of solar panels would fall to $3 or $3.50 a watt. That’s a long way from the current $10 figure, but Krantz believes Arco should reach the 20-megawatt point in early 1985.
Spurring the solar market onward are generous tax breaks. “The great thing is that tax credits are stimulating large central facilities ten years before they are going to be economic,’ says Maycock. The federal government gives businesses a 15% tax credit for photovoltaic investment, in addition to the usual 10% investment tax credit, and there are state solar tax credits.
Such tax credits have encouraged photovoltaic tax shelters. United Energy’s projects, sold last year, were among the first. Solarex, the number two solar cell manufacturer, with perhaps $20 million in sales, is negotiating to set up third-party-financed photovoltaic facilities for several major utilities. Arco Solar also plans to use third-party funds for part of its Pacific Gas & Electric facility.
As in other areas technological, Japan is potentially a big player. The Japanese photovoltaics industry is still small. Maycock says it produced only 700 kilowatts of cells last year, mostly through the rather inefficient amorphous silicon method.
Those solar cells sold for between $25 and $30 a watt, he says, and went into watches, calculators, battery chargers and a few solar panels, for $20 million in manufacturer-level sales. But Japan’s fledgling industry, led by Sharp, Sanyo and Fuji, is already making a profit, while the U.S. industry overall is not. And Maycock thinks the Japanese will gain a 35% share of the world photovoltaics market by 1990.
Not surprisingly, the U.S. industry uses those projections as an argument for continuing the tax breaks. But Uncle Sam and the states may grow tired of extending those liberal credits. The federal credits are due to expire in 1985, and state credits are under siege in California and Massachusetts. A sure case of penny wise, pound foolish.
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