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Now US says solar PV to be cheaper than fossil fuelsby 2020

By Giles Parkinson on 5 March 2012

The sharp slump in solar PV prices has caused a dramatic re-evaluation of the technology cost andpotential for solar by the worlds largest energy consumers the US, China, and India over the lastthree months.

The latest update came from US Energy secretary Stephen Chu, who suggested in a keynotespeech late last week that the US governments sunshot program launched in 2020 with the goalof making solar cheaper than fossil fuels by the end of the decade was no longer just aspirational,but a growing reality.

Chu began by making several observations about the US energy industry as it now stands. Onshorewind is already cheaper than new coal-fired energy, although gas is cheaper than both at around5.5c/KWh, thanks to the boom in shale gas exploitation. Solar PV comes in at around 15c-24c/KWh. But Chu said the goal is to get solar down to 6.5c/KWh by the end of this decade(remember, Australias white energy paper absurdly predicts solar PV at 34c/KWh by 2035! Whichis why you wont hear a Chu-style speech from any current Australian energy minister).

Chu noted that utility-scale solar had already gone from $8 a watt in 2005 to $3.80 a watt in 2010,when the cost of the module was $1.70/watt. To get the cost of utility-scale solar down to $1/watt, itneeds the cost of modules (which accounts for half of the total cost) to fall to 50c/watt. What makes

him more optimistic than ever that the US will get there is the fact that in less than two years, it isalready down to 93c/watt for silicon-based panels and below 80c/watt for cadmium telluride. Weremore than half way there on module costs already, he told the ARPA-E conference. Now wevegot to do the same on the balance of system costs, and we are working hard on that.

Once the total system cost gets to $1 a watt, utility-scale solar will have a long-term cost of energy of6.5c/KWh. At that point, Chu says, it will be the same price as natural gas, without the need for anysolar subsidies.

Chus predictions mean that the governments of the worlds three biggest energy users China, theUS and India each believe that the cost of utility-scale solar will be cheaper than fossil fuels by

2020 at the latest. In India, because they have to import so much and have lousy transportinfrastructure, that cost curve is expected to intersect with five years.

These three countries are predicted by the International Energy Agency to account for half of allenergy demand in 2035. In the next biggest market, Europe, wind energy is already cheaper thanfossil fuels in most countries. The Middle East, which will be the next biggest market, has alreadyrecognised that solar is cheaper than the oil-fired plants it currently uses.

So, what happens next? Most people can possibly guess, but for those who think it might not meanmuch, or that the transition will be slow, Chu used the example of the transport industry, and theintroduction of the automobile, to illustrate just how quickly an industrial sector can be transformed.

Up to the mid 1890s, the US transport industry was dominated by the horse and cart, he noted. Bythe early 1920s, it was almost all automobiles and trucks.

It was, says Chu, one of the most rapid transformations in the history of industrialisation particularly if you considered the infrastructure that had to go with it, such as manufacturing and fueldistribution.

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And, like solar and the energy industry, the transport industry was driven not just by better andcheaper technology, but by environmental factors too. In New York in the 1890s, there were160,000 horses dropping 3-4 million pounds of manure each day, he noted. It had reached itssaturation point . pollution hastened the transition, he said.

And, of course, there were naysayers. The president of the Michigan Savings Bank told HenryFords lawyer, Horace Rackham, that the horse was here to stay and the automobile was just afad. Rackham ignored him and turned a $5,000 investment in the Ford Motor Co into a stake worth$15 million. In 1909, the magazine Scientific American said that the automobile had reached thelimit of its development.

Little wonder that the vested interests, those with trillions of dollars invested in the current energyinfrastructure and energy sources, and the prospect that their unearthed resources will continue tobe exploited, are pushing back so fiercely. Any delay in funding programs for R&D and deploymentis a win for the fossil fuel industry.

And Congress and the popular media has become a bear-pit of abuse and criticism, where anygovernment program for clean energy support is pilloried; from the loans to solar energy

companies, to $14 million grants to algae fuels (which earned Obama the unwanted sobriquet ofpond scum czar), and most recently, a vitriolic campaign against electric vehicles. In short,anything that threatens the primacy of oil, coal and gas is considered fair game. Sadly, and in ashocking blight against Australian conservative politics, that rhetoric is now making its way acrossthe Pacific.

Chu responded to this and the continuing witch-hunt over the failure of Solyndra solar company by drawing on the example of aviation. In 1903, Samuel Langley, with the support of a $50,000government grant, and another $20,000 from the Smithsonian Institute, made two attempts to makethe worlds first piloted flight, and failed. Nine days after Langley gave up, the Wright Brothers(another beneficiary of government grants) made their first flight about 50 years before their

previous predictions. Members of Congress were outraged, Chu quipped. Government cant pickwinners!

What happened next was instructive. The US actually lost its lead in the aviation industry because13 other countries, including Germany, France, the UK and Russia, but also the likes of Chile,Spain, Brazil and Bulgaria, invested more government funds into the industry. It wasnt until after theUS passed the Kelly Air Act in the mid 1920s, and allowed private carriers to freight US mail, thusgiving the industry a market, that the US regained its leadership.

That is Chus inspiration today. The game-changers, he says, will come from both new technologyand new manufacturing processes. In response to Scientific Americans conclusion that the car

could not evolve, he pointed to Umpqua Energy, a recent winner of the Next Top InnovatorsChallenge, which has found a way of turning some fuel into hydrogen, cutting emissions by at least85 per cent, and obtaining a staggering increase in performance of between 40 per cent 100 percent.

He points to new materials, such as carbon fibre, and titanium, that could revolutionise theenvironmental and operating performance of a whole host of transport options, mostly throughdevelopments in manufacturing. This would occur just as it had in the aluminium sector. What wasregarded as a precious metal in the early 1980s, and was produced at $2 an ounce (when gold cost$20/oz), is now produced at 6c/oz, when gold costs nearly $1700/oz.

This, says Chu, will surely be the experience of the energy sector too, particularly in solar. HenryFord didnt invent the internal combustion engine, or the automobile, or even the assembly line. Heimproved the assembly line. His idea was that to build cars at the lowest cost and highest qualitywas the way to success. That, he says, is the goal of the sunshot ambition. New materials andmanufacturing methods can change the landscape of energy solutions. We have the possibility to

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create a second industrial revolution that will give us clean energy and a path to a sustainableworld.

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