Solar Energy: Technological, Economic, and Political Considerations
By admin February 17, 2016

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Solar Power Plant


The United Nations Climate Change Conference (COP21) that took place in Paris from November 30th to December 12th, 2015, has been widely hailed as securing a landmark agreement among an impressive number of states to help curtail climate change. Naturally, waves of criticisms usually follow any comprehensive international political agreement. Critics usually point to an overall lack of enforceable legal framework and appropriate incentives for governments to implement such ambitious plans. In the US alone, any regulatory framework has to encounter multiple challenges due to its complex and highly interconnected sets of laws. However, the Paris Agreement provides an opportunity to rethink and re-evaluate different influential dimensions of any relevant industry to the agreement, particularly those in the renewable energy sector.


Considering the Paris Agreement for a brief moment, the question is: what dimensions are to be considered if any investor intends to make a huge shift from the traditional to the renewable energy sector? The first set of considerations, of course, is the technological dimension. On an industrial scale, one has to choose between a limited variety of commercial photovoltaic (PV) cells which are on the market. The PV cells are the backbone of any solar energy power plant converting the solar radiations to electricity currents. Commercially speaking, the choice is limited to a range of these cells from single-crystalline silicon PVs to Amorphous-Si or other thin-film technologies. Since the late 2000s, the cost of these PV modules has consistently decreased. The exception to this rule is Japan which, until 2012, experienced a huge rise in PV module prices due to its limitations on solar module trade. Nevertheless, after 2012, Japan also joined the global trend of decreasing PV module prices. In 2014, almost all types of PV modules could be purchased for less than 1 USD/W anywhere in Europe. For utility-scale PV, economy of scale has been consistently improving. For a 100 million W PV power plant, the cost of PV-generated electricity has decreased from around 4 USD/W to less than 2. In addition to the cost of modules and inverters, the installation/maintenance cost form a significant part of the budget. In 2013, for instance, more than half of the budget of building a utility-scale solar plant had to be spent on workforce. Adding to this list, we have to consider PV and CSP land-use considerations. With commercial PV efficiency peaking around 16%-19%, the amount of land used in power plants becomes economically critical. It is estimated that for a utility-scale PV, between 5 to 9 acres/MW land is needed. With the decreasing efficiency of the PV modules, the maintenance fees would also pile up to keep up the required electricity output.


So far, it should be obvious that the efficiency rates of the PV modules have to improve in order to justify the utility-scale shift from the traditional to the renewable energy sector. This might also explain why, after the closure of the previous loan program, and under the new program (known as 1073/Title XVII loans), the Department of Energy (DOE) only finances technology-driven projects which are geared towards improving the efficiency and/or lowering the costs of operations. Hence, in terms of access to federal financial resources and Title XVII loans, investors with entrepreneurial mind-sets would be rewarded with interest rates between 0.375% and 2.000%.


Now, returning to the state of the industry after the Paris Agreement, a stricter carbon taxation at home indirectly incentivizes more expenditures on R&D in renewable energy, and more specifically in solar energy. Technological innovations and the growing size of the renewable industry can attract a bigger pool of private financing in the future. In case of the US, in 2015 alone, 68% of the newly generated electricity came from renewable sources. The overall movement, therefore, is happening at a very slow rate in the US right now –with or without the Paris Agreement. The bottleneck, however, is technological limitation and the uncharted territory of long-term maintenance fees. Private capital will not sufficiently flow in the industry with a high level of uncertainty. In the early stages of this industry, political will as well as sufficient financial incentives for R&D are absolutely necessary to overcome the bottlenecks and promote the continued adoption of renewable energy sources.

Photo by Dennis Schroeder | source:

For more information:

Renewable Energy Doesn’t Need Obama’s Clean Power Plan to Grow

Title XVII Project Eligibility

Solar Market Insight 2015 Q3

Top 6 Things You Didn’t Know About Solar Energy

Thanks for sharing !

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