13th July 2012

While the global use of fossil fuels continues to grow by up to a few percentage points a year, solar photovoltaic (PV) capacity is exploding, driven partly by government policies but also by rapidly falling costs.

Data presented in BP’s Statistical Review of World Energy 2012 show just how spectacular the rise of solar PV capacity has been. The growth rate of solar PV installations worldwide has averaged 45% over the past decade, but accelerated to over 70% in 2010 and 2011.

Germany leads the race with 24 820 MW of cumulative installed capacity by the end of 2011 – some 36% of the global total. Italy is rapidly catching up, having added an astounding 9 280 MW in 2011 alone. Italy is now in second place with 12 782 MW, representing an 18.4% share of world PV capacity. Japan is ranked third with 4 914 MW, followed closely by the US with 4 389 MW. China posted the fastest growth last year at 275%, increasing its capacity from 800 MW to 3 000 MW.

Globally, solar PV accounted for almost 30% of new renewable electricity capacity and nearly 15% of the total new power generation capacity from all energy sources added in 2011.

But, thus far, solar PV capacity has been confined to a select group of countries. By the end of last year, Europe accounted for almost three-quarters of global PV capacity, while use of solar energy in much of the world – including Africa and South America – is negligible.

Of course, the spectacular growth rates for solar are coming off a very low base. To put solar PV capacity into perspective – it represented just 1.3% of total world electricity generation capacity last year, and solar energy consumption accounted for only 0.25% of generated electricity.

Nevertheless, leading countries are showing what is possible. In May, Germany – which is not the sunniest of countries – generated 20% of its electricity from solar PV. Such was the glut of solar power in the middle of the day that electricity prices fell to close to zero.

Global solar capacity can probably continue to grow at fast rates for the rest of this decade – barring a major economic depression – but growth rates of around 50% cannot be sustained indefinitely.

The United Nations Environment Programme’s (Unep’s) yearly report, titled ‘Global Trends in Renewable Energy Investment 2012’, shows that investment in solar power ramped up by 52% to $147- billion last year, nearly double the amount invested in wind energy.

This huge increase in investment has two main drivers: policy and price.

A confluence of factors – notably, energy security and climate mitigation targets – is motivating some governments to actively support solar power development.

In Germany, the rapid growth in renewables is being driven partly by Chancellor Angela Merkel’s decision to phase out nuclear power by 2022 after Japan’s Fukushima disaster. Also, Germany has practically no indigenous gas or oil reserves, and a large portion of its coal reserves are mined out. This renders Germany dependent on fossil fuel imports, notably from Russia.

The policy tool of choice in most solar leaders has been feed-in tariffs, which allow households and businesses to sell electricity to the grid at premium prices. But these subsidies have helped to kick-start PV manufacturing industries and create jobs.

The second major driver of growing solar PV capacity has been falling cost. A combination of improving technologies and increasing econo- mies of scale in production – that is, falling average costs, thanks to mass production – has led to a dramatic reduction in the prices of solar panels.

According to a US Department of Energy report, the global average cost per watt of PV capacity fell from $22 in 1980 to less than $2 in 2010. Last year, PV module prices fell by nearly 50%, according to the Unep report. This dramatic drop in panel prices was spurred in large part by China’s aggressive entry into the PV manufacturing business.

Nonetheless, solar PV still suffers from several significant drawbacks, compared with other power sources.

Firstly, in many areas, for now, it remains more expensive than traditional fuels like coal and gas – although the external costs of these fuels on human health and the environment are not factored in.

Secondly, the intermittency of solar energy means it needs careful balancing on electricity grids with backup sources of power. For solar PV to become the backbone of our electricity grids, we need much better and cheaper electricity storage technologies and smart grids.

Thirdly, most current PV technologies include components made of scarce minerals, such as rare-earth metals, which are mined and processed using fossil fuels.

Despite its limitations, solar PV is the world’s fastest-growing and most abundant energy source. Improving technologies and falling costs are rapidly propelling the world towards a tipping point for the widespread adoption of solar power.