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Eicke2022 Chapter Solar Power Generation

The document discusses solar power generation. It provides an introduction to solar power, describing the rapid growth in solar capacity from 2010 to 2017. It then discusses the technical characteristics of solar photovoltaics and concentrated solar power, including common technologies like monocrystalline, polycrystalline, and thin film solar cells. The summary concludes with high-level information about global trends in solar generation.

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31 views14 pages

Eicke2022 Chapter Solar Power Generation

The document discusses solar power generation. It provides an introduction to solar power, describing the rapid growth in solar capacity from 2010 to 2017. It then discusses the technical characteristics of solar photovoltaics and concentrated solar power, including common technologies like monocrystalline, polycrystalline, and thin film solar cells. The summary concludes with high-level information about global trends in solar generation.

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Solar Power Generation

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DOI: 10.1007/978-3-030-86884-0_9

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CHAPTER 9

Solar Power Generation

Laima Eicke, Anselm Eicke, and Manfred Hafner

1   Introduction
In less than two hours, enough sunlight strikes the earth to satisfy the world
economies’ annual energy demand. Despite this abundance of solar energy, the
conversion of sunlight into usable energy forms only represents a tiny fraction
of today’s global energy supply. Yet, the share of solar energy in global energy
supply, especially in the electricity sector, is rising rapidly. Unprecedented
deployment has taken place in the last decade, stimulated by efforts to improve
energy access, security of supply and mitigate climate change. Between 2010
and 2017, the global installed capacity of solar generation increased more than

L. Eicke (*)
Harvard Kennedy School, Harvard University, Boston, MA, USA
Institute for Advanced Sustainability Studies (IASS), Potsdam, Germany
Universität Erfurt, Erfurt, Germany
e-mail: [email protected]
A. Eicke
Hertie School, Berlin, Germany
e-mail: [email protected]
M. Hafner
SciencesPo—Paris School of International Affairs, Paris, France
Johns Hopkins University SAIS Europe, Bologna, Italy
Fondazione Eni Enrico Mattei (FEEM), Milan, Italy
e-mail: [email protected]

© The Author(s) 2022 157


M. Hafner, G. Luciani (eds.), The Palgrave Handbook of International
Energy Economics, https://doi.org/10.1007/978-3-030-86884-0_9
158 L. EICKE ET AL.

250

200
Solar generation in TWh

Asia
Europe
150
North America
Oceania
100
Latin America

50 Africa
Middle East

0
2004
2000
2001
2002
2003

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Fig. 9.1 Power generation from solar energy by region (in TWh). (Authors’ own
elaboration, data from IRENA 2020)

tenfold from 34 GW to 437 GW (IRENA 2020). Steep learning curves and the
economies of scale enabled technological improvements and, in consequence,
have led to massive cost reductions.
Solar photovoltaics (PV), the conversion of light into electricity using semi-
conducting materials, were one of the most expensive electricity-generating
technologies when first employed in astronautics in the late 1950s. By 2020, it
has become an economically viable energy source for many applications. An
alternative technical process to generate electricity from solar radiation is con-
centrated solar power (CSP). Yet, the latter, accounted for less than 3% of all
solar power in global electricity generation in 2017 (IRENA 2020).
PV is the third most important renewable energy source in terms of global
capacity after hydro and wind power. Globally, solar energy is mostly used in Asia,
Europe and North America with the strongest rise in Asia, mostly driven by
China and India (Fig. 9.1). According the World Energy Outlook of the
International Energy Agency, solar PV may become the largest technology in
terms of global installed capacity in the Stated Policies Scenario by 2035 (IEA 2019).

2   Technical Characteristics of Solar Energy


A brief introduction to the technical characteristics of solar energy provides the
necessary background information to better understand its economics.

2.1  Solar PV
The main components of photovoltaic cells are semiconducting materials such
as silicon and germanium. In these materials, sunlight releases charge carriers
(electrons), which create an electrical field. As source of electricity generation,
9 SOLAR POWER GENERATION 159

this field induces a direct electrical current. This process is known as the pho-
tovoltaic effect. Electricity generation exploiting this effect is not only possible
from direct sunlight, but also from its diffuse components, implying that PV
cells also generate electricity with cloudy skies.
Photovoltaic cells are integrated in solar arrays. Inverters (to invert DC cur-
rent from solar panels into AC), transformers, electrical protection devices,
wiring and monitoring equipment are summarized as balance of system (BOS).
In some cases, BOS also includes sun-tracking systems, which increase the yield
by positioning the panels towards the sun.
The three major types of solar PV technology are monocrystalline cells,
polycrystalline cells and thin firm cells, of which the first two make up more
than 95% of global module production (Fraunhofer ISE 2019).
Monocrystalline solar cells have the highest efficiency rates, typically 15–20%
but the highest quality panels can reach up to 23% efficiency. As for all solar
panels, the efficiency of monocrystalline panels depends on ambient tempera-
ture. On average, efficiency declines by about 10% when the ambient tempera-
ture rises by 25 °C (Quaschning 2019). Featuring high efficiencies,
monocrystalline solar panels are space efficient, i.e. they require smaller ground
areas to generate the same amount of electricity compared to other technolo-
gies. They also live the longest with most manufacturers putting a 25-year war-
ranty on monocrystalline solar panels. Their main disadvantage is the high cost,
because manufacturing requires the highest-grade silicon.
Polycrystalline silicon cells are cheaper because of a simpler production pro-
cess and the amount of waste silicon is less compared to monocrystalline cells.
The efficiency of these panels is typically lower (13–16%). They also have a
slightly lower heat tolerance, which means that polycrystalline perform slightly
worse in high temperatures than monocrystalline panels.
Thin film solar cells deposit one or several thin layers of photovoltaic mate-
rial onto a substrate. Most thin-film modules have efficiencies of around 9–11%.
Their mass production makes them cheaper than crystalline based solar cells.
Thin film solar panels are mostly used in applications where panel sizes are not
an issue. Another advantage is that they can be more easily integrated into
facades and roofs.
When comparing efficiencies, it is important to differentiate between effi-
ciencies of single cells, of panels and of the entire installation including con-
verter and transformer. In the last 10 years, the efficiency of average commercial
silicon modules increased from about 12% to 17% (Fraunhofer ISE 2019). Lab
cell efficiencies of close to 50% when concentrating light rays and applying new
materials demonstrate the potential for further efficiency increases at the pro-
duction level (Geisz et al. 2020).

2.2  Concentrated Solar Power


Concentrated solar power (CSP) does not exploit the photovoltaic effect.
Instead, mirrors are used to focus solar rays to heat a fluid. Similar to
160 L. EICKE ET AL.

Fig. 9.2 Concentrated solar power technologies. (Source: Qader and Stückrad 2016)

conventional power plants, the thermal energy then drives a turbine to gener-
ate electricity. A downside of the CSP technology is that direct radiation is
required for the process, because diffuse radiation cannot be focused. CSP
plans are therefore mostly sited in countries with high direct radiation and a
dry climate (see section on solar potential), for example, in northern Africa and
the Middle East.
One major advantage of the CSP technology compared to solar PV is that
heat can be stored at comparatively low cost. Equipped with molten salt vessels
as thermal energy storage, most CSP plants have a steadier generation profile
during the day and extend electricity generation long beyond sunset.
The four main construction types of CSP plants are solar towers, parabolic
troughs, linear Fresnel reflectors and small-scale dish engines (Fig. 9.2).
Parabolic trough and solar tower CSP plants are the most mature CSP tech-
nologies and lead new installations by far (REN21 2019).
CSP technologies can be grouped into point concentration systems (solar
towers and dish engines), and linear concentration systems (parabolic troughs
and linear Fresnel reflectors). Technologies based on point concentration sys-
tems achieve higher temperatures (up to 1200 °C) than linear concentration
technologies (300–550 °C), and thus yield higher thermal efficiencies.
However, focusing a large number of mirrors on a single point is highly com-
plex and leads to high construction and maintenance costs. By contrast, linear
concentration technologies require less land than point concentration systems.
Parabolic troughs and tower systems have first been built commercially in
the 1980s. Whereas learning potentials in well-developed, mature steam
9 SOLAR POWER GENERATION 161

processes, such as steam turbines, condensers and generators have been


exhausted, further technological improvements are expected in other compo-
nents. For example, higher storage potentials could be reached by using new
fluids or particles that enable transfer and storage of sun energy at higher tem-
peratures; enhanced mirror materials could reduce costs and increase reflectiv-
ity; and information technology can be used to detect system failures, reducing
operation and maintenance costs, in particular of complex point concentration
systems; such technological innovations could further improve the technolo-
gy’s efficiency and further reduce costs (Desai and Bandyopadhyay 2017; Islam
et al. 2018).

3   Applications of Solar Energy


Photovoltaic systems have long been used in specialized applications as stand-­
alone installations (island systems). Grid-connected PV systems were first con-
structed in the 1990s. Nowadays, solar energy for electricity generation is
applied on the wide range between small roof-top PV systems and large utility
scale solar parks. In contrast to the modular solar PV, CSP is mostly deployed
in large-scale power plants.
PV and CSP in large-scale solar parks, directly connected to the high voltage
grid, are used to generate electricity on a commercial-scale. The largest solar
power plants around the world are PV parks with installed peak capacities of up
to 2 GW per site, the order of magnitude of a large nuclear power plant. The
largest solar PV parks are located in India, China and the Middle East.
The modularity of solar PV (and dish engine CSP plants) also allows small-­
scale deployment. Roof-top PV systems have increased significantly, fostered
by falling costs and governmental support policies. On a small-scale, roof-top
PV serves self-consumption or supplies local mini-grids. In most countries,
distributed residential systems already have generation costs below (the energy
portion of) retail electricity prices, making the deployment of solar PV for self-­
consumption economically attractive (IEA 2020b). Behind-the-metre business
models, increasingly comprising battery storage, allow to self-consume elec-
tricity generated by roof-top PV. In remote off-grid rural areas, particularly in
developing countries with good solar resources, decentralized solar power
feeding into local mini-grids may provide electricity access in places where a
connection to the national grid is too expensive. In urban areas, roof-top PV
could provide a back-up for an unreliable grid supply. In these applications,
roof-top PV does not compete against large-scale power plants but against
other small-scale generation units such as diesel generators. Often, solar is not
only the most sustainable alternative but also economically viable. This increas-
ing economic attractiveness of small-scale PV systems could lead to rapid
expansion of decentralized PV capacity.
Aside from power generation, CSP can also generate steam, which can be
used in other sectors, for example, in enhanced oil recovery or steam-using
162 L. EICKE ET AL.

industry processes. Thus, CSP technologies could be elements of sector cou-


pling to enable further decarbonization of economies.

4   Costs of Solar Energy


Investment costs are by far the highest cost component of solar energy. Variable
operation costs of solar energy are close to zero because it uses no fuel other
than solar radiation, which is free of charge. This cost structure is structurally
different compared to conventional generation technologies. In this section,
we discuss the development of investment and maintenance costs.

4.1  Declining Investment Costs of Solar Energy


Between 2010 and 2018, the average total installation costs of solar PV declined
by 74% (Fig. 9.3). These exceptional cost reductions were made possible by
extraordinarily high growth rates of PV capacity. The compound annual growth
rate of PV installations was 36.8% between 2010 and 2018 (Fraunhofer ISE
2019). The learning curve (or experience curve) is another indicator of cost
reduction. It describes how prices decline when the number of manufactured
goods increases. Learning curves of solar PV modules were particularly steep:
they have followed a 20–22% cost reduction for each doubling of capacity dur-
ing the last four decades (Fraunhofer ISE 2019). Within the module, PV cells

14000

12000
Total installation costs (USD/kW)

10000

8000

6000

4000

2000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018

5% to 95% range CSP 5% to 95% range PV


Weighted average CSP Weighted average PV

Fig. 9.3 Development of installation costs for solar PV and CSP. (Authors’ own elab-
oration, data from IRENA 2020)
9 SOLAR POWER GENERATION 163

account for the highest cost shares. The three main factors driving the cost
reductions of PV cells were (i) increasing sizes of manufacturing plants (econo-
mies of scale), (ii) improved module efficiency (technological advances), and
(iii) a decline in costs of purified silicon. A high share of the recent cost reduc-
tions can be traced back to the rapid expansion of cell manufacturing in China,
where about 70% of all PV modules are produced (Fraunhofer ISE 2019). Due
to the modularity of PV panels, long distance transportation of the panels is
easier than for most other generation technologies, such as, for example, blades
and towers of wind turbines, which are usually manufactured locally. The mar-
ket for solar panels is therefore a global market, characterized by large-scale
manufacturing sites and high competition with cost-cutting effects.
The decline in balancing of system costs was led by inverter cost reductions.
While PV modules historically had the largest share in total cost, in 2020 the
overall BOS costs account for up to 40–60% of total PV investment costs
(IEA 2020b).
Similar to solar PV, high upfront capital investment costs are also a major
barrier for CSP technologies. They account for almost four fifth of the total
costs. Throughout the past decade, average installation costs of CSP plants
have been falling from 8800 USD/kWh in 2010 to 5,200 USD/kWh in 2018
(Fig. 9.3), albeit less constantly than they have been for solar PV. The uneven
trajectory can be explained by a much lower number of new installations and
an uneven buildout among countries. Until 2013, most capacity additions
occurred in Spain and the United States, incentivized by generous past incen-
tive schemes. But no new capacity has entered commercial operation in Spain
since 2013 and in the United States since 2015. Current capacity extensions
are led by China and Morocco (REN21 2019).

4.2  Operation and Maintenance Costs of Solar Energy


A second relevant cost driver of solar energy is the operation and maintenance
(O&M) costs. To ensure high levels of technical performance of the solar sys-
tem, it is necessary to identify and replace broken modules of a PV plant, or
receivers and mirrors of a CSP plant. Particularly dusty areas (e.g. deserts)
require regular cleaning of mirrors and modules. Both tasks make up for sig-
nificant costs (IRENA 2020). Large-scale solar plants benefit from significant
economies of scale in these O&M costs.
The development of large-scale power plants has increased the demand for
tools for inspection and monitoring. Drones are often used in the solar indus-
try due to their wide range of surveillance and monitoring capabilities. The
formerly manual process of monitoring is increasingly replaced by data driven
monitoring solutions. With sensing elements, drones capture the necessary
data in less time and a more accurate form, which is then digitally processed.
This enables long range inspection and easy control of plants and thereby
reduces operation and maintenance costs significantly.
164 L. EICKE ET AL.

4.3  LCOE of Solar Energy


The levelized cost of electricity (LCOE) combines investment and operation
costs. It is defined as the average cost of electricity per unit of electricity output.
The LCOE is a good metric to measure cost reductions and technological
improvements of a technology. However, this indicator should not be used to
compare different technologies. It is highly sensitive to the number of full load
hours of a technology and it neglects the value of electricity, i.e. how much
electricity is valued at the time when generated (see Chap. 15 on system
integration).
In 2018, the LCOEs of Solar PV ranged from 60 to 210 USD/MWh with
a global average of 85 USD/MWh (IRENA 2019c). Further cost declines are
expected to reach 20–80 USD/MWh in 2030 and 14–50 USD/MWh in 2050
(IRENA 2019a). The LCOEs of CSP technologies have also been falling
throughout the last decade. In the US, the LCOE of CSP halved from 340
USD/MWh in 2010 to 190 USD/MWh in 2018 (IRENA 2019c), and is even
expected to fall to 50 USD by 2030 (US Department of Energy 2020).
LCOEs decline when costs are reduced but also when the electricity output
increases. Such increase is reflected in rising capacity factors (also utilization
rates or load factors), describing the ratio of generated electricity to installed
capacity. A capacity factor of 20% implies that the electricity generation is
equivalent to this generator operating 20% all hours in the year at full capacity.
As we will discuss in the following sections, capacity factors strongly depend on
the location of solar energy installations and the natural resources.

5   Generation Pattern of Solar Energy


Solar generation is highly variable. Power generation with solar energy is lim-
ited to daytime given that the sun does not shine at night. Consequently,
capacity factors of solar power plants (without storage) are lower compared to
other technologies and typically range between 10% and 20% in most regions,
reaching up to 25% at the best spots in desert locations. Since 2010, the global
weighted average capacity factor of utility scale PV systems has been constantly
increasing (Fig. 9.4). Three major drivers explain rising capacity factors
(IRENA 2019c). First, solar PV is increasingly deployed in regions with higher
irradiation levels. Second, tracking systems that follow the movement of the
sun are increasingly employed, which increases the yield. And third, system
losses have been reduced, for example through improvements in the efficiency
of inverters.
Figure 9.4 shows that the capacity factors of CSP experienced a significantly
stronger increase compared to PV. The main reason for this development is the
increasing combination of CSP plants with thermal storage. This helps shifting
generation into hours without sunlight, thereby allowing capacity factors
exceeding 30–40%. Storage and turbine dimensioning allow to theoretically
achieve capacity factors of over 90%, which is however not economical. The
9 SOLAR POWER GENERATION 165

60%

50%
Capacity factor in %

40%

30%

20%

10%
2010 2011 2012 2013 2014 2015 2016 2017 2018

5% to 95% range CSP 5% to 95% range PV


Weighted average CSP Weighted average PV

Fig. 9.4 Capacity factors of solar PV and CSP. (Authors’ own elaboration, data from
IRENA 2020)

high fluid temperatures of solar power CSP plants are best suited for storage.
This technology has therefore the highest realized capacity factors of up to 70%
(IRENA 2020). Due to the extension with thermal storage, generation pat-
terns of CSP plants differ from solar PV. This flexibility provides an additional
value compared to the non-dispatchable solar PV (Pfenninger et al. 2014).
Because of its comparatively low capacity factors, the share of solar energy in
the generation mix of a country is usually lower than its share in terms of total
installed capacity. A second relevant effect resulting from its generation pattern
is the high concentration of solar energy generation in few hours of the day. In
these hours, most PV plants of an area generate electricity. The high simultane-
ous electricity supply of solar generation has a depressing effect on electricity
wholesale prices. In countries with high shares of solar energy, solar market
values are significantly lower than for other technologies, implying that reve-
nues from selling electricity from solar generation are, on average, lower than
average wholesale electricity prices (Hirth 2013). This effect is known as merit
order effect and it applies in particular to solar PV because its generation is
most concentrated in time.

6   Potential of Solar Energy


The potential of solar energy varies strongly across the globe (Fig. 9.5).
Depending on solar irradiance levels, solar capacity factors are highest close to
the equator and decline towards the poles. The highest potential for solar
166 L. EICKE ET AL.

Fig. 9.5 The geographical potential of solar energy. (Source: Global Solar Energy
Atlas 2019)

energy lies in the Atacama Desert in South America, the Sahara region, in the
Middle East, the Gobi desert in western China, Australia and the western part
of the United States. Solar irradiation in these areas is more than twice as
strong as in eastern China and most northern European countries where large
parts of global solar energy installations are located. Consequently, the electric-
ity output, and with it the electricity generation costs, varies by a factor of up
to two depending on the location.
CSP technologies are even more dependent on direct solar radiation than
Solar PV plants and need direct normal irradiance values of at least 1800 kilowatt-­
hours per square meter per year. Their applicability is thus much more limited.
However, well suited conditions can be found on all continents, including
regions in south-western United States, the Middle East and North Africa,
South Africa, Australia, Mexico, Chile and Southern Europe.
In addition to daily patterns, solar generation features seasonal patterns,
especially at higher degrees of latitude, i.e. towards the poles. Close to the
equator, solar irradiance increases but also cloud cover tends to be higher. In
these areas, solar energy output remains relatively stable throughout the year;
the position of the sun varies less and the time of sunrise and sundown remain
similar.
9 SOLAR POWER GENERATION 167

7   Policy Instruments and Support Schemes


The strong increase in solar buildout would not have been possible without
enabling government policies. These include research and development fund-
ing and development policies, which led to the development of a solar industry.
This development was in particular driven by guaranteed feed-in tariffs which
were first implemented in Germany in 2000.
The design of effective support schemes for solar energy needs to take into
account the cost and finance structure of solar generation: as discussed in previ-
ous sections, solar plants are very capital intensive. Most expenses of solar
power generation occur during construction, early in the project’s lifetime.
Higher cost of capital, for example due to high interest rates, strongly affects
the project’s profitability because expenditures in these years are recovered a
decade later. The economic viability of solar therefore strongly declines with
increasing cost of capital. Gas-fired power plants, in comparison, have compara-
tively low construction costs and a significant share of the expenses, fuel costs
and emission costs, are settled when revenues from power generation accrue.
One main target of support schemes is thus to reduce the cost of capital, for
example by lowering risks for project developers. Initially, feed-in tariffs were
the primary support scheme for solar energy, which was mostly built on a small-­
scale by private households. By guaranteeing fixed feed-in tariffs, uncertainty
about future revenues declined. Also, the risk of electricity price variations is
mitigated for investors. With these support schemes, solar projects became
profitable. Starting in 2010, many countries began to determine the level of
feed-in tariffs for large-scale projects in auctions. In these auctions, projects
compete for a predefined amount of supported capacity and only the most
cost-efficient ones get financial support. Since the late 2010s, a shift from sub-
sidy driven development to a competitive pricing model becomes visible in
many markets. This also includes bilateral Power Purchase Agreements (PPA)
between producers and off-takers, such as utilities and industry, absent of gov-
ernmental support.
The less mature CSP technologies are still dependent on policy support in
order to be economically viable. Due to their higher LCOE compared to solar
PV, support schemes would need to reflect better the system benefits provided
by CSP’s dispatchability to foster a further development of CSP technologies.
System stabilizing effects such as the ability to generate electricity during
demand peaks will become increasingly important as energy systems decarbon-
ize and move towards high shares of renewable energy sources.

8   Outlook
Unleashing the huge potential of solar energy will be key to achieve global
climate targets and to limit global warming (IRENA 2019a). Continuous pol-
icy support is thus granted in many countries around the globe. In addition to
support schemes, further cost declines and innovations drive the rapid
168 L. EICKE ET AL.

expansion of solar energy. As in many other markets, digitalization drives cost


reductions in the solar sector. Predictive algorithms based on big data and arti-
ficial intelligence enable an optimized adjustment of solar PV modules and
CSP mirrors to the sun’s position in order to maximize the power output. New
monitoring and control systems reduce maintenance costs. Further improve-
ments in terms of sustainability and cost reductions could be achieved by recy-
cling materials, for example, silicon.
Driven by increasing cost competitiveness and policy support, solar energy
is highly dynamic. Between 2019 and 2024, the IEA predicts solar to be the
fastest growing energy source worldwide with an increase in total installed
capacity of around 700 GW (IEA 2020a), more than doubling the 2018 level
of 490 GW (IRENA 2019b). China, the European Union, the United States,
India and Japan are expected to drive this development (IEA 2020b). By 2050,
IRENA expects the total installed capacity of Solar PV to exceed 8000 GW—
equalling 16 times the 2018 level (IRENA 2019b). The solar industry needs to
prepare for this rising global demand—scaling up investments is therefore key
in the next decade.

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to obtain permission directly from the copyright holder.

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