|Eco-restructuring: Implications for sustainable development (UNU, 1998, 417 pages)|
|Part I: Restructuring resource use|
In many energy "future" studies it has been assumed that PV will be competitive with other energy sources only if or when the long-term module price goal of US$1/Wp is reached. At that price, 15 per cent efficient PV modules in a sunny area could provide electricity for around US$0.10/kWh (Kelly 1993).10 However, if US$1/Wp is the "break-through" point for buse load electricity production, there are other market segments in which PV could become competitive at an earlier developmental stage, because the actual cost of conventional electricity for these applications is substantially higher than average electricity prices.
Following this approach, the International Energy Agency (IEA) has developed a PV market diffusion strategy. This approach envisages PV entering and diffusing through a series of six expanding markets, namely remote customer applications, remote communities and islands, grid connected building-integrated systems, local utility grid support, peak power supply, and (lastly) bulk power supply.
Two competitiveness parameters are defined, namely the "entry price" and the "deployment price." The "entry price" is the lowest price at which PV is likely to find "niche" opportunities to enter the market. As soon as PV reaches the "deployment price," it is fully competitive in the market and large-scale diffusion will begin to occur. For completeness of information, both system and module prices are indicated in figure 7.5.
The resulting market diffusion strategy for six different PV system applications is summarized in figure 7.6.
PV systems have already proved to be cost effective for a wide range of small applications to power remote communications, safety, and control devices (in the range of 10W to 10 kW).
Remote communities and islands
PV systems are also cost effective, or at least very close to competitiveness, when supplying power for local grids in remote villages and small islands (10 kW to 1 MW power range). Both applications have been successfully demonstrated in industrialized countries and have an enormous application potential in developing countries because of missing or incomplete electricity supply and distribution infrastructures in those regions. PV is one of the most appropriate technologies to meet the increasing demand for rural electrification. In fact, there has been a very high recent growth in remote solar home systems in India. Indonesia is already a proven market for these stand-alone systems. The potential for this kind of application is also very high in China, Central Asia, southern Africa, and the Maghreb region. Hybrid diesel-PV systems for supplying villages have recently been successfully applied in Brazil and have proved to be cost effective. The overall potential of a decentralized PV systems market in developing countries has been estimated to be up to 140 GW (Vigotti 1994a). This huge market potential could certainly have a positive impact on the development of PV technology, and also on grid-connected applications in industrialized countries.
Grid-connected, building-integrated systems
In the short term, PV could be competitive in building-integrated grid connected systems. In certain cases (for instance, in sunny places and when expensive building cladding materials are replaced by PV modules), such systems have entered the market already. This is the fastest-growing market sector for PV in Europe. The IEA estimates that further substantial system cost reductions down to US$4/Wp will be necessary for PV building integrated systems to be fully competitive and become widespread. However, the IEA model does concentrate only on electricity production. It does not take into account the possibility of recovering useful heat from PV panels, or the possibility of PV-energy-saving coupling measures (e.g. using PV panels as sun-shading systems, PV integration into bioclimatic architecture design, or using PV as a means of promoting demand-side management). As a consequence, PV competitiveness as a wider "energy-service supply technology" in the building sector could actually be greater than it appears at first glance.
This has significant general implications. In the first place, the share in energy final use of the building sector is quite high. In Europe, it accounts for almost 40 per cent of total energy consumption. Second, direct solar energy conversion technologies (both active and passive) are the only renewable energy technologies that can be used in urban areas. This very simple consideration is relevant for both industrialized and developing countries. For the latter, electrification as a means of increasing the quality of life in rural areas remains a top-priority issue, but urban pollution in developing countries' megalopolises raises strong environmental concerns as well. Moreover, integration of PV into buildings greatly increases the potential applicability of PV in areas of high population density and substantially reduces the main environmental obstacle to the diffusion of PV, namely land requirements. The theoretical potential of PV on rooftops is impressive indeed. Although there has been no systematic detailed assessment of the potential as yet, a rough estimate of 2,800 km2 and 8,400 km2 of "available" rooftops has been reported for European and OECD countries, respectively (van Brummelen and Alsema 1994). Assuming a (future) module efficiency of 20 per cent, this would correspond to an installed capacity of 560 GWp and 1,680 GWp, respectively. Consequent annual electricity production would be, at an overall 15 per cent system efficiency, around 475 TWh and 1,950 TWh, corresponding to around 27 per cent and 29 per cent of Europe's and OECD countries' 1990 electricity production, respectively (CEC 1993).
A very detailed study on rooftop PV potential in Puglia, a southern Italian region, has shown that PV on roofs could cover 27 per cent of the current total electricity demand of the region, corresponding to 94 per cent of demand in the residential sector (Vigotti 1994b).
Local utility grid support and peak power supply
At a system cost of US$3/Wp, PV would be a cost-effective option for electricity utilities for both local utility distribution grid support and peak power supply. At this cost, the more than 80 electricity utilities that have formed the Utility Photovoltaic Group (UPVG) estimate a short-term 7,500 MWp PV potential in this market sector in the United States (Moore 1994). The IEA estimates that PV will be competitive in this sector by 2005.
Bulk power supply
Once the most promising market sectors have been at least partially exploited, scale economies would further reduce module and system costs down to the target US$1/Wp threshold, making PV fully competitive in the bulk power sector as well. This is not likely to occur before 2010, but is very likely to come about soon after that.
The IEA diffusion strategy is only one of the possible paths - albeit a plausible one - along which PV could become a significant option in the energy market. The previously mentioned strategy of Enron Corporation for cheap baseload electricity production is an example of another possible parallel path. However, the IEA model clearly emphasizes the diversification of the actual energy system. Carefully taking into account the local realities of actual energy system infrastructures, it certainly opens more opportunities for PV diffusion.