"I think there is a world market for maybe five computers." -- Thomas Watson, chairman of IBM, 1943.
Solar energy, despite all of the effort to increase its usage, still only accounts for less than one percent of the energy we consume. The amount of solar energy that reaches the Earth's surface every hour is greater than mankind's total demand for energy in a whole year. The total energy stored in the world's supply of fossil fuels is equal to just twenty days of solar energy. By any measure, the sun is a powerful and virtually limitless source of energy and it is imperative that we capitalize on this clean energy source by increasing our use of solar energy and reducing our reliance on fossil fuels.
How do we begin to capitalize on such a rich source of energy? Both distributed and utility-scale solar energy projects are vital to accommodate the world's growing energy needs as they are both suited to harness the extraordinary power of the sun. The underlying technology used by utility and distributed solar is different and understandably, each has its own proponents and detractors. For the most part, utility-scale solar projects use solar collectors to generate enough heat to power a steam turbine that in turn generates electrons. Distributed solar energy derives primarily from the use of photovoltaic panels that capture photons and convert them into electrons. Distributed PV efficiency is improving all the time. Currently, there is a conversion efficiency of approximately 17% for crystalline silicon panels and 10% for thin film panels -- a dramatic improvement from only a few years ago.
In California alone, there are plans for 35 utility-scale projects that would generate approximately 12,000 Megawatts (MW) of energy annually -- an amount of energy comparable to the combined power of ten nuclear power plants. The Mojave Solar Project and the Genesis Solar Energy Project, both located in southern California, are two of the largest projects under consideration and are each aiming to generate 250M watts of energy. These projects are expensive, however, in terms of both dollars and natural resources required. The federal government has promised to help reduce the financial cost by allocating a portion of the stimulus plan for this purpose. Companies that have their plants ready to be opened by the end of this year will receive a portion of the $67 billion of federal money that has been set aside for renewable energy projects (including loan guarantees and grant programs).
Despite these incentives, it is risky to undertake a large-scale enterprise like utility-scale solar power in an uncertain economic climate, as financial institutions are reluctant to be involved in billion-dollar projects. Another issue is the fact that such solar 'farms' require huge tracts of land. The Bureau of Land Management (BLM) has been tasked with finding 24 tracts of public land of three square miles each with good solar exposure, favorable slopes, road and transmission line availability. Additionally, the land set aside for utility-scale solar farms must not disturb native wildlife or endangered species such as the desert tortoise, the desert bighorn sheep, and others. The wildlife issue has proved to be a contentious one. Projects in California have been halted due to the threat caused to endangered species resulting in a backlog of 158 commercial projects with which the BLM is currently contending.
Another challenging issue for utility-scale solar projects is the use of water. Combined, the Genesis and Mojave projects would use 1.24 billion gallons of water per year due to the wet cooling systems involved. One alternative to wet cooling systems, dry cooling, uses 90% less water, but can only handle the full cooling load up to temperatures of 85˚-90˚F. As a result, dry cooling in deserts is not cost efficient. Just as challenging is the fact that to date, there are no affordable storage solutions for utility-scale solar projects. Without the means to capture and store excess electricity produced by solar farms, an enormous inefficiency is created.
An alternative to utility-scale projects is the use of distributed solar energy. There are various types of renewable power technologies in use, but sub-utility scale power photovoltaics (PV's) account for 98% of the distributed solar energy market. Unlike utility-scale projects, distributed energy is solar power on a small scale and entails the installation of solar panels on the roofs of buildings. Toward the end of 2009, the California Public Utilities Commission unanimously voted for the Southern California Edison's Plan. This plan recommended scattering solar panels on rooftops all over the region in an effort to create 500MW of energy. Like utility-scale, the plan benefited from the 30% federal tax credit for renewable energy projects.
Distributed solar power does not involve the legal red tape, the large tracts of land, or the vast quantities of water that utility-scale projects require, and has the ability to generate enough energy for homes, schools and hospitals. Installation is easily addressed and solar panels can last for up to 30 years if well maintained. The price of solar panels has dropped dramatically to approximately $2.40 per watt (price depending on scale of order) for silicon panels and is likely to drop even further in 2011. Furthermore, unlike utility-scale projects, distributed solar projects such as the Southern California Edison's Plan spread capacity evenly, distributing benefits and drawbacks. If a utility-scale project "crashes," it affects a huge area. With distributed energy, only individual units are affected in the case of a power outage.
In many locations and in certain circumstances, distributed solar projects are less expensive than utility-scale solar projects because of the avoidance of both new transmission lines and line losses -- the latter of which typically accounts for approximately 7% of the power shipped over transmission systems. The costs associated with utility-scale solar projects are often not included in the side-by-side economic comparison made between the two forms of solar power development. An additional benefit of distributed solar is its ability, when developed in clusters (i.e., local micro-grids), to alleviate the need to upgrade distribution substations and add local peaking plant capacity.
As mentioned, distributed solar plans have their detractors. Solar certainly is not the cheapest source of electricity and is only effective in areas with a high percentage of sunshine. More than 50 million Americans live in Community Associations where we might expect to see efficient adoption of distributed solar plans. But these locations commonly have policies limiting the use solar equipment due to height restrictions or other specifications regarding roofing materials.
Utility-scale projects may have the capacity to generate enormous amounts of energy but they represent a huge financial risk, irretrievable waste of resources, and threats to endangered species, all of which are problems that may take years to solve. On the other hand, distributed solar power entails a fraction of the risk posed by utility-scale projects and is poised to capitalize on the vast opportunity offered by 140 million residential rooftops in the U.S. alone, not including all of the commercial rooftops available for PV installation. Distributed energy is certainly the way forward in the field of solar energy use.
David Anthony is an experienced entrepreneur, venture capitalist, and educator. Since founding 21Ventures in 2003, the firm has provided seed, growth, and bridge capital of more than $400 million to over 40 technology ventures across the globe focusing mainly in the cleantech arena. David Anthony sits on the board of a number of 21V portfolio companies including (partial list) Advanced Telemetry; BioPetroClean, ETV Motors, and Variable Wind Solutions. David also serves on the board of directors of several publicly traded companies including Axion Power International, Inc. (OTC: AXPW); Clean Power Technologies Inc. (OTC: CPWE) Entech Solar Inc (OTC: ENSL) and ThermoEnergy Corporation (OTC: TMEN).