What is Slowing Down The Growth of Solar Energy Industry?
As more emphasis is put on using clean energy, changes in the global energy system are indicating that the world is slowly overcoming the effects of climate change. In general, the renewable energy industry is growing rapidly. Almost all industry stakeholders remain optimistic that a full transition from fossil fuels to renewables is on course.
However, there are some challenges that reduce the speed of this transition. This article particularly describes the challenges facing the solar energy sector.
Over the last 10 years, the solar energy sector has experienced a 68 per cent growth. This growth can be attributed to a number of factors including rising global energy demands, decline in coal use, and the falling cost of solar energy generation. But there are a few unique challenges that have been slowing down the rate of growth of this industry over the last few years. If you are considering investing in solar stocks, this information might help you to make a prudent investment decision.
What is holding back the solar energy sector?
1. Inefficiency of solar panels
Analysts point out that even though the cost of solar power generation has significantly gone down over the last decade, solar power is still expensive from an investment point of view. The inefficiency of solar panels is the main reason for this. Most solar panels in use today have a capacity factor (measure of efficiency) of between 10 and 22 percent. This means that the solar panels don’t capture most of the energy from the sun’s rays. Almost all of solar panels are usually stationary, thus they fail to meet the sun’s direct rays most of the time.
When compared to other energy sources, solar power seems uncompetitive. A coal power, for instance, runs at a capacity between 70 and 80 percent. Since an investor would rationally invest in the more competitive investment, solar power projects are missing many funding opportunities due to their relative uncompetitiveness.
2. Variances in solar intensity
Solar intensity variances over time and across geographies are probably the most inevitable challenge facing widespread solar power adoption. For one, it cannot be predicted when a cloud will come and cover the sun. Secondly, some areas receive far much more solar intensity than others. Compare desert areas with the areas around the Pacific, for example. A solar panel in the desert produces significantly more power than it would in cooler areas. Correspondingly, a solar power investment in a region that experiences lesser solar intensity takes much longer to repay itself than a similar project in regions with more solar intensity.
Solar power’s intermittent nature and lack of predictability also makes the management of power supply and demand more challenging. There are definitely times when the solar power output outdoes demand while at other times it doesn’t meet demand levels. This is the source of an ongoing debate on the necessity of solar batteries in every solar power generation unit. The issue of solar batteries will be discussed shortly.
3. Existing power grid infrastructure
Despite all the excitement about the growth of renewable energy sources, power grids in most countries have remained largely unchanged. In the US, particularly, American households are really trying to go green but the US grid cannot handle surplus clean power. The grid was originally built to handle fairly consistent levels of power. Thus, it can’t cope with the variability of solar power effectively.
When solar power surplus exceeds the demand, energy is wasted. Bearing in mind that there is a cost of producing surplus energy, the producer loses a chance to make money because the grid cannot hold the surplus power. Viewing this from a broader perspective, the lost money could have been used to expand solar coverage further.
4. High cost of solar batteries limit the scalability of solar power storage
2018 was a good year for the renewable energy industry. The production cost of generating energy from renewables fell below that of harnessing power from fossil fuels. According to Business Insider, the cost of producing 1 megawatt-hour of electricity for solar power fell to $50. This is slightly less than half of $102, the cost of generating 1 megawatt-hour of electricity from coal.
However, while the cost of production has gone down significantly, storage costs are still too high. Solar power storage is mostly done through batteries. These batteries are very expensive and this is potentially limiting the growth of the sector. In the US, particularly, some states are ending net metering. The use of solar batteries for storage of excess power is catching the interest of many, but analysts say this is quite an expensive proposition.
Governments are being encouraged to continue offering rebates and tax incentives for investment in solar energy. The sector’s prospects are high but the type of solutions for these challenges as well as when they will be implemented will determine how quickly and sustainable the sector grows.