The Future of Solar Energy

Solar power is one of the fastest-growing sources of renewable energy worldwide. Many nations, concerned about the environmental impacts of electricity generation from fossil fuels or from large-scale hydroelectric plants, have been turning to solar power as an environmentally benign alternative. Two solar power technologies—solar photovoltaic and solar thermal—are widely employed today, and their use is likely to increase in the future.

At present, the cost of electricity produced from solar photovolatics generally is too high to compete with wholesale electricity. In sunny locations, however, the cost can be as low as 23 cents per kilowatthour,a which may be competitive with the delivered price of electricity to retail customers in areas where electricity prices are high, as they are in California, Southern Spain, and Italy. On the basis of installed cost per megawatt, solar photovoltaic installations are relatively costly, because the panel components are expensive and the conversion of solar energy to electricity in the cells still is inefficient. From conversion efficiencies of 5 to 6 percent for the first solar cells built in the 1950s, there has been an improvement to efficiencies of 12 to 18 percent for modern commercial wafer-silicon cells.

Efficiency gains, coupled with other technological advances, have reduced the cost of solar photovoltaic capacity from approximately $300 per watt in 1956d to less than $5 per watt in 2009. EIA’s Annual Energy Outlook 2009 projects that, by 2030, overnight capacity costs for new generating plants using solar photovoltaics will be 37 percent lower than the 2009 costs. In addition, the efficiency of solar photovoltaic applications is expected to improve as the technology continues to be developed. As a result, U.S. solar photovoltaic generating capacity is projected to increase from 30 megawatts in 2006 to 381 megawatts in 2030.

Although prices for electricity from photovoltaics may not become widely competitive with wholesale prices for electricity from conventional generating technologies within the next 25 years, they may be competitive with high retail electricity prices in sunny regions. Already, photovoltaic technology is gaining market share in countries where declining prices and government- backed financial incentives have led to increased usage.