REEEP July Renewables Roundup: Summer of Solar

28-06-2016, Vienna, Austria

The past month has seen the publication of a number of reports concerning renewable energy and energy efficiency. The International Renewable Energy Agency (IRENA) in particular released a number of interesting publications on the current state and the future of solar energy, to coincide with their #summerofsolar campaign. The NewsREEEP Renewables Roundup provides a synthesis of the most exciting findings.

The year 2015 saw a record growth in renewable power capacity as well as a new record in global investment in renewable energy, despite falling fossil fuel prices. As the Renewables 2016 Global Status Report points out, more power capacity is now added annually from renewables than from all fossil fuels combined. The year also saw a number of important agreements and announcements related to renewable energy, most prominent of which the adoption of a Sustainable Development Goal on Sustainable Energy for All and the Paris Agreement. Out of the 189 countries that have submitted Intended Nationally Determined Contributions under this agreement, 147 mentioned renewable energy and 167 mentioned energy efficiency. Besides these new commitments by governments, the role of municipal and local governments has continued to grow, as did the role of private investors involved in renewable energy.

Jobs

IRENA’s 2016 annual review on Renewable Energy and Jobs showed that in 2015, 8.1 million people globally were employed in the renewable energy sector (not including large-scale hydropower). Of these, 2.772 million people were employed in the solar energy sector – an increase of 11% compared to the previous year. Forty-three percent of global jobs in renewable energy are located in China, where more people now work in renewables than in oil and gas.

The growth of renewable energy employment has slowed recently due to increasing labour productivity and automation. Still, the overall number of jobs continues to rise, in contrast to the declining number of jobs in the energy sector in general. Europe has seen a decline in renewable energy jobs as more manufacturing operations shift to Asia. One sector where an exponential growth in jobs is expected in the coming decades is in solar PV recycling, as the panels manufactured in the current boom start to be decommissioned (see below).

Globally, 20-25% of people employed in the entire energy sector are female. In the renewable energy branch this is 35%, though that is still lower than the average in the labour market overall. In the renewable energy sector, a higher percentage of management roles are filled by women than in the general labour market.

The Solar Situation

Worldwide electricity demand is predicted to grow by 50% by 2030, with 95% of this growth occurring in developing countries. According to IRENA's report Letting in the Light: How Solar Photovoltaics Will Revolutionise the Electricity System, a significant part of this extra demand is expected to be met with solar PV power generation, which has seen enormous expansion in the past years. More and more people are starting to recognise the many benefits of solar PV power generation both on a household and on a larger scale, such as that it requires no water, reduces reliance on imported fuels, has very low operating costs and can be installed very quickly. The International Energy Agency recognises these benefits in its Special Report on Energy and Air Pollution, where a Clean Air Scenario for Africa is presented in which the population without access to electricity drops to zero by 2040, while air quality improves. In this scenario, minigrid and off-grid systems account for more than 60% of added capacity.

Between 2010 and 2015, the levelised cost of solar PV electricity (LCOE) fell by 58%. In the same period the global installed solar PV capacity grew from 40 to 222 GW, an increase larger than the total installed power generation capacity of all of Africa. In Latin America and the Caribbean hydropower is still by a very large margin the most important renewable energy resource, but solar is the fastest growing one, with a capacity increase of 166% in 2015 alone. In het same year, 20% of all newly added power generation capacity globally was solar PV and more than half of all investment in renewable energy went to photovoltaics. As the reports conclude, though biomass, hydropower and other renewable energy sources have been able to compete on price with fossil fuels for longer, it is solar (and, to a lesser extent, wind) which is really driving the expansion of renewable power generation globally.

Solar PV is now the most widely owned electricity source in the world in terms of the number of installations. In China in the past two years alone 1 million people gained electricity access through solar PV mini grids and home systems. By 2020 it is predicted that one in three of all off-grid households in the world will have at least 1 solar PV product. The use of solar PV for power generation is estimated to currently result in emissions avoidance of 200 to 300 million tonnes of CO2 annually, equivalent to the total emissions of France.

The Future is Bright – and Affordable

A recurring theme throughout all reports is the importance of solid policy frameworks for the future growth of the renewable energy market. Government policy can directly encourage the expansion of renewable energy generation capacity, such as in India where a goal was set to generate 100 GW in PV solar energy by 2022. More importantly, though, it can provide stability and predictability in the market, which makes investment less high-risk and thus reduces the cost of capital. Currently, differences in capital costs between countries account for between 3 and 20% of the variability in the cost of solar PV installations. As the technology for renewable energy becomes cheaper, the relative weight of other costs will increase, many of which are outside the sphere of influence of manufacturers.

Maintenance costs will become more significant (currently they are at 20-25% of LCOE), which means that education of technicians will become increasingly important, especially since it has been shown that poor installation methods can lead to more than 10% in output variability of a PV system. As many different actors will influence these external costs, cross-sector and international cooperation, knowledge sharing and homogenisation of standards and requirements are crucial.

In the report The Power to Change: Solar and Wind Cost Reduction Potential to 2025, IRENA predicts that the LCOE of solar PV will continue its declining trend, decreasing by as much as 59% between 2015 and 2025. This make solar PV the cheapest available source of electricity. The LCOE of household-scale installations will remain higher than that of commercial-scale plants, but this higher price will be compensated for by savings in grid costs, which on average make up 40% of the price of traditional electricity.

Though some of the cost savings are expected to be made through technological innovations (cheaper production of base materials, new production methods which reduce waste, thinner PV panels and lower ratios of rare metals, among others), the greatest reduction will be achieved in the balance of systems (BoS) costs, i.e. all components of a PV system besides the panels themselves. BoS costs in many cases make up over 50% of total project costs, and the average costs are relatively high compared to best practice, which means that large savings can be made just by adopting already existing more efficient practices.

Another way in which costs will be reduced is through the extension of the lifetime of PV installations – currently most panels come with a 25-year warranty but it is suspected that their true lifetime may be much longer than that.

Finally, the expansion of solar PV capacity in developing countries, where due to latitude and weather patterns the annual yield is up to 3 times higher than in developed countries, will significantly raise the average global efficiency of solar PV installations, and thereby reduce the global average cost.

Recycling

As mentioned above, solar PV recycling will have to become an integral part of the renewable energy industry to keep up with the waste stream consisting of decommissioned solar panels. This will lead to the creation of jobs both in government and general waste management and in technical sectors. In developing countries recycling often takes place in the informal sector, which means that many opportunities are expected to arise there.
           By the end of 2016 the cumulative waste stream of Solar PV panels will measure up to 250,000 metric tonnes, and naturally this waste stream is expected to grow exponentially along with the rest of the sector in the coming decades. If the lifespan of PV panels is 25-30 years, as manufacturers expect, the 2030s will see the beginning of the decommissioning of the panels produced in the current boom. Thankfully, the sector shows great potential for recycling – currently 85% of total c-Si panel mass can be recovered, which by 2030 will translate into a potential cumulative recovery of raw materials worth USD 450 million. IRENA's report on End-of-Life Management of Solar Photovoltaics predicts that by 2050, the photovoltaics recycling industry could be worth USD 15 billion.

Despite the fact that the PV recycling industry is only expected to reach its full potential size decades from now, it is important to start preparing both the technical ability and regulatory frameworks to support this industry now. This will require extensive cross-sector collaboration especially between the energy and waste sectors. At the moment only the European Union has regulations in place for Solar PV recycling, as part of its Waste Electrical and Electronic Equipment directive. IRENA points out that the lessons learned by the EU, which employs the extended-producer-responsibility principle, could be helpful for other regions in establishing their regulatory frameworks.  

Other Challenges Ahead

The expansion of solar PV power generation capacity will bring with it other challenges besides recycling needs. For example, though several countries have proven that generating 10-20% of power through solar is achievable, expansion beyond that requires large changes in the economy and power generation systems. These changes include further electrification of industry and transport, increased capacity for electricity storage and an overhaul of centralised grids to allow for large-scale feed-in of electricity and compensate for variability in solar power availability. In areas where most solar PV installations are on-grid, power companies will also need to design new financing models for grid maintenance as consumers will be using less centrally supplied electricity but still want to stay connected as back-up. Per-kWh distribution charges will no longer cover the costs unless they are raised significantly, which would leave any consumers without solar PV panels to shoulder most of the cost.

Though ambitious plans have been proposed for cross-border electricity networks running east-west (to move solar electricity from areas where it is day to areas where it is night) and north-south (to reduce seasonal variability at higher latitudes), one must assume that the variability issue will not be solved in the foreseeable future, either. Our power supply, then, will not in the coming decades go 100% solar. However, solar PV has a promising and exponentially growing role to play within the renewable energy sector and the energy sector in general, particularly in the developing world.

Participate in IRENA’s Summer of Solar campaign by sharing your organisation’s solar success stories on Twitter using the #summerofsolar hashtag.

Find the full reports here:

REN21 - Renewables 2016 Global Status Report
IRENA - Renewable Energy and Jobs - Annual Review 2016
IRENA - Renewable Energy Statistics 2016 - Latin America and the Caribbean
IRENA - The Power to Change - Solar and Wind Cost Reduction Potential to 2025
IRENA - End-of-Life Management - Solar Photovoltaic Panels
IRENA - Letting in the Light - How Solar Photovoltaics will Revolutionise the Electricity System
IEA - Energy and Air Pollution - World Energy Outlook Special Report