The Quest: Energy, Security, and the Remaking of the Modern World

by Daniel Yergin

  From then on, solar cells became standard on satellites, which was their first major market. Hans Ziegler’s ambitions for the technology were still grander. He saw it as “an important source of electrical power” and envisioned “the roofs of all our buildings in cities and towns equipped with solar [cells].” Alas, the cells were still expensive—enormously expensive. And that meant that they were, for the most part, really competitive only in one place: outer space.9

  DOWN TO EARTH

  A key moment in the journey of photovoltaics down to earth can be dated very precisely: August 1, 1973. That was the day that a start-up company called Solarex opened its doors in Rockville, Maryland, outside Washington, D.C. It was founded by two refugees from communist Hungary—Joseph Lindmayer, a brilliant physicist, and Peter Varadi, a very talented chemist. Both had managed to escape from Hungary during the 1956 revolution against Soviet rule.

  Lindmayer and Varadi met twelve years later, in 1968, when both started working at Comsat, the quasi-private company that owned the commercial satellites that the U.S. government put into orbit. Lindmayer ran Comsat’s physics laboratory; Varadi, the chemistry lab. Improving the efficiency and reliability of PVs was one of Lindmayer’s prime objectives. Over espresso coffee (what was then considered an exotic European beverage) the two continentals would talk about photovoltaics and muse on their possible applicability to electric generation on earth. But they recognized that the way in which solar cells were manufactured for space—under vacuum conditions to assure very high performance—made them far too expensive for terrestrial use. Lindmayer began turning the problem over and over in his mind. He also began experimenting with totally different approaches in the basement of his house in Bethesda, Maryland. He started to visualize a pathway, which he and Varadi talked through. There is also a legend that he used Coca-Cola to dope his early solar cells in his kitchen oven.

  They submitted a proposal to Comsat’s management to start producing terrestrial solar cells, for ground use. But the retired air force generals running Comsat turned down the proposal, saying it had nothing to do with their mission, which was in outer space.

  Why not, the two scientists asked each other, start their own company? Not that they had any idea what to do. They knew nothing about business. They were refugees who had secure jobs. “We pondered why well-paid scientists would get into such a hare-brain idea when there is no technology, no product, no market, and we have no money,” Varadi later said.

  Nevertheless, they managed to cobble together funding from friends and family. They also needed a name. Lindmayer did not care what the name was so long as the name ended in X. And thus Solarex was born.

  Two decisive things happened in the first few months of the company’s history. A few weeks after Solarex opened its doors, their former employer, Comsat, sued them for stealing intellectual property. After touring the facility, the Comsat people reluctantly came to the conclusion that Lindmayer had invented an entirely different process. They dropped the suit. Then, eleven weeks after they started the company, the world abruptly changed. The Arab oil embargo ignited the 1973 oil crisis.

  “I could tell you that we foresaw the oil crisis and that was the reason that we planned to open the company,” Varadi later said. “But that would be a lie. We had absolutely no inkling that there would be an oil crisis.” But, he added, “The oil crisis had a very profound effect on us. We realized what an incredible business we got ourselves involved in.”

  The two scientists divided up the work. Lindmayer would run the technology and science. Varadi volunteered that “since as of that time I had not received the Nobel Prize in chemistry, I should get out of chemistry and go into some other field.” That field was running the business. It was not altogether easy. “ We made a business plan, and it was all wrong,” Varadi said. “I didn’t have any business training, but I had common sense, and I have a good memory for numbers.” Having just left the satellite business, he could also say with personal knowledge, “This was not rocket science.” He added, “I had to sell something that people wanted to buy.” And they did. Solarex was profitable within a year. It was the first commercial photovoltaic start-up.

  During the 1970s Solarex faced only two major competitors. Both represented diversifications by the oil industry. One was ARCO Solar, which had announced its intention to become “the General Motors of the photovoltaic industry.” The other was the Solar Power Corporation, which Exxon established in 1975 as part of its new venture company. But it was the process that Lindmayer began developing in his basement in Bethesda that became the basis for most of the PV production around the world today.10

  Yet whatever Lindmayer’s dream of competing with utilities, that was not to be. Solar cells were far too expensive. Nonetheless, there were at least a handful of potential niche markets, all remote locations where people needed electricity but had no access to the electric grid.

  One early market was the U.S. government, including the weather bureau and the Bureau of Land Management, which oversees the far-flung wilderness owned by the federal government. Much of Solarex’s business was in communications—powering, for instance, transmission equipment in remote mountain areas. The Coast Guard put PV on its buoys, supported by small backup batteries.

  Another market was in the oil industry. It was difficult and expensive to get electricity for some purposes on pipelines or on offshore oil platforms. For the pipelines, the PV generated the electric current necessary to prevent corrosion inside the lines. On the platforms, solar cells supplied fail-safe electric current for safety signals and for the horns that warned off ships that might otherwise collide with the platforms.

  A third early market was remote areas in the third world, as well as on small islands. In villages in Africa, photovoltaics provided a good alternative to diesel generators, powering everything from lightbulbs to water pumps, thanks in part to support from the World Bank.

  One market, however, was wholly unanticipated. Sometimes, bizarrely, PV arrays would be stolen from oil and gas pipelines in various parts of the United States and Canada. Because they were a highly specialized commodity, they could not be readily resold without raising suspicion. Thus their value to the thieves was a mystery. Then the Royal Canadian Mounted Police cracked the case: Illegal marijuana growers had figured out that the police could track them down by identifying the big surges in electricity use that came from the lights they installed to nurture marijuana plants indoors. PV enabled the growers to detach themselves from the electric power grid and so keep their surge in electricity use—and thus their heads—down. In the end, pipeline operators were able to prevent such thefts by welding the PV arrays into much more inaccessible settings along their pipeline routes. In the meantime, however, what was known as “clandestine agriculture”—marijuana growing—became one of the big early markets for PV in California.11

  THE RESEARCH PROGRAM

  But these early markets were still very limited. The big obstacles remained cost and efficiency. Could PV costs be brought down sufficiently to make them competitive not just in remote locations, where the competitor was a diesel generator, but also where customers were connected to the grid and the competitor was the local electric utility?

  In the mid-1970s the U.S. government recruited a physicist named Paul Maycock to run the solar program in what became the U.S. Department of Energy (DOE). Maycock had already become enamored with photovoltaics while working at Texas Instruments. He now quickly built up the government’s program, which for the first time funded substantial amounts of solar research. It was Maycock who, out of his DOE budget, paid for the solar water heater that adorned the roof of Jimmy Carter’s White House. But solar cells were the main focus. “It was proved beyond a doubt that PV could be a very reliable, cost-effective, off-grid source of electricity,” recalled Maycock. The challenge was to bring the cost of PV down and the efficiencies up, so that they could compete with the grid. “We put in place a structured program for cost reduction
,” said Maycock. Spurred on by grants, companies large and small charged into the field, exploring different ways to increase efficiency.

  But in the early 1980s, the Reagan administration came into office and sliced the solar budget by two thirds. “I had to cancel contracts all over the place,” said Maycock, who soon enough left the government to devote himself to analyzing what was now a shrinking industry. The dream of a direct conversion of sunlight into electricity for anything other than remote purposes was fading with falling energy prices.12

  As part of its general retrenchment during a time of falling oil prices and in response to the cuts in federal R&D spending, Exxon decided to close down Solar Power Corporation. ARCO had viewed solar as a hedge against high energy prices, and by the end of the 1980s, it was the world’s largest producer of solar photovoltaic panels. But during this time, it also concluded that the PV business was just too small, and too peripheral to its core business of oil, gas, coal, and petrochemicals. The prospects for a solar business did not look good in the United States. In 1996 ARCO sold the business to Siemens of West Germany.

  While Solarex had continued to be profitable during this period, its demand for capital kept growing along with its sales. So in the 1980s, Lindmayer and Varadi sold Solarex to another major U.S. oil company, Amoco. (After the merger of Amoco and BP, it became part of BP Solar, where it still resides today.) The investors made many multiples on their original investment—not a bad return for betting on a company run by two scientists who did not know anything about business.13

  And that left the PV business in the United States where it had been—a small business focused on niche, remote markets—but now one with a lot less optimism about its future.

  SUNSHINE PROJECT

  One country, however, ensured that the prospects for photovoltaics as a scale business would remain alive after the sharp cuts to the U.S. solar program in the early 1980s: Japan. The Japanese contribution was critical. For the Japanese, the energy crisis of the 1970s was something that could not be conquered, only managed. Unlike the United States, Japan, virtually devoid of natural resources, could not even dream of energy independence. Yet dependence on a volatile world oil market made the Japanese people, in the words of a vice minister of the Ministry of International Trade and Industry, “very apprehensive.”

  As if to underline the point, during the second oil shock around the time of the Iranian Revolution, the government ordered the electric lights in the Ginza, famous for its late-hour nightlife, to be dimmed.

  Under Taichi Sakaiya—the author, as described earlier, of the political thriller Yudan!—NEDO, the New Energy and Industrial Technology Development Organization, set out to nurture and develop new alternatives to oil, including the use of oil in electric generation. This was the national initiative that would drive, and subsidize, solar photovoltaic development.14 Japan became the center of global PV development as government resources, under the Sunshine Project, flowed into research. The industry moved forward in a characteristic Japanese way, with major companies coordinating on the national strategic goal, while competing vigorously among themselves.

  Soon cells produced by Japanese companies started showing up everywhere—not as household power sources, but as “batteries” slipped into applications that did not require large volumes of electric current. Electronic watches were one such device, but the best-known application was in another Sharp invention: the increasingly cheap and soon ubiquitous solar-powered calculator.15

  By the 1990s companies like Sharp, Kyocera, and Sanyo were producing rooftop photovoltaic systems that consumers purchased with significant help from government subsidies and what was called the New Sunshine Project. These subsidies—combined with some of the highest electricity rates in the world, falling costs, and efficiencies of scale—propelled Japanese solar manufacturers to the top ranks of global photovoltaic producers. One Japanese solar manufacturer after another claimed the number one spot among global photovoltaics producers. By the end of 2001, there were 77,503 “solar roofs” in Japan.

  EUROPE’S SOLAR POTENTIAL

  Government policy rather than natural endowment turned Germany into Europe’s solar hot spot.

  Source: PVGIS:EC

  Japan had succeeded in expending PV beyond specialized applications and turning it into a real business with at least the beginnings of a mass market. In the late 1990s, an executive from an American PV company visited Japan. He toured Sharp’s highly automated photovoltaic-manufacturing factory. “I was shocked by how advanced it was,” he said. “It seemed as if we were a generation behind the Japanese in manufacturing.” Japan had reached the point where some solar energy in urban areas, even without subsidies, could be considered almost competitive with electricity produced by traditional generation and transmitted over the grid.16

  NORTH AMERICA’S SOLAR POTENTIAL

  The sun-rich Southwest has the greatest solar potential in the United States.

  Source: NREL

  Still, perspective is required. Solar represents just about 1 percent of Japanese electricity. Even if Japan’s target of about 70 percent of new houses being equipped with solar cells on their roofs by 2020 is met, solar cells will still not be a regular source of electricity. As one Japanese official put it, “Solar will be significant, but not substantial.”

  THE GERMAN BOOM

  One thing was indubitably clear: Japan had taken on the solar mantle at the beginning of the 1980s and held on to it right into the first years of the twenty-first century. “They dominated the industry by 2004,” said one veteran solar executive. “What they didn’t realize was that right behind them would be Germany with a much bigger program.”

  What drove the changes in Germany was the aforementioned feed-in tariffs, which had actually begun in the late 1980s to ensure profitability to investments in renewables production. In 1999, the same year that the newly elected coalition of Social Democrats and the Green Party set out to promote renewables and reshape Germany’s energy policy, a German engineer named Reiner Lemoine approached a strategy consultant, Anton Milner, with a business plan for a new solar cell company. Renewables were coming because of pollution concerns and technological innovation, said Lemoine. While no one had made “any real money” in photovoltaics, his plan showed how it could be done—by rapidly seeking scale and aggressively driving down costs. But, added Lemoine, “We’re two scientists and one engineer, and the banks won’t even talk to us,” he lamented. “We don’t have any money and we can’t pay anyone.”

  As Milner read the business plan that evening, he found it, somewhat to his surprise, persuasive. In fact, very persuasive. Instead of becoming a consultant, Milner joined the company and found himself the CEO of what was a very tiny venture. They were able to raise some money at the tail end of the Internet boom, and they got some German government funding by agreeing to build their factory in a depressed part of the former East Germany. By 2001 production had begun and the company was up and running, with a grand total of 19 employees. They called it Q-Cells—for high performance and high “quality.” At that point the only real market in the world was the niche in Japan. But Germany’s new, much strengthened feed-in tariff was going into effect just at that time. And that meant subsidies up to five times the cost of conventional electricity.

  Over the next few years, Q-Cells redesigned processes and automated production, driving down costs by as much as 50 percent. In 2003 and 2004, its business—like that of all the cell manufacturers—took off. By 2007 it was the number one producer of solar photovoltaic cells in the world. “PVs could live very nicely as a subsidized niche product, and you could have a pot of money,” said Milner a couple of years later. “Our job is to change that, to get PVs competitive against mainstream electricity on a nonsubsidized basis. We’re not there yet.”17

  But the more difficult competition proved to be with other PV manufacturers—non-German and lower cost. As a result, Q-Cells’ market share fell. So did its stock market value�
�from $15 billion in 2007 to about $500 million in mid-2011. This new competition was coming from the East.

  CHINA ENTERS

  The global solar industry’s center of gravity had shifted to China, which now accounts for the largest share in the world of solar module manufacturing capacity, and more than half the world’s production of crystalline silicon solar modules, the most popular type of solar module. And few individuals in the country have played a more instrumental role in developing the sector as Shi Zhengrong. Shi became a solar tycoon “by accident,” as he puts it. “In our generation we didn’t have the freedom to choose. We just accepted whatever was given.”18

  Shi was able to go to university in 1979 as the universities, which had been closed during the Cultural Revolution, were starting to reopen. Deng Xiaoping was just beginning his post-Mao reform. A few years later, Shi was overjoyed when he learned that he had won a stipend to do graduate work in the United States. But then he was told that, because of a bureaucratic mistake, he was going to have to go to Australia instead. “I wanted to pursue the American dream,” he recalled. “I was learning American-accented English. I was a little depressed.” He found himself instead at the University of New South Wales, in Sydney.

  Once into his studies, he went to see Professor Martin Green in search of some extra work. Green, a legend in solar cell research, offered Shi a scholarship to work with him. After his doctorate, Shi took a job as research director for a spin-off company from Green’s lab. There he compiled an impressive portfolio of patents. The young Chinese researcher took Australian citizenship and started to buy real estate. Soon enough, with three houses to his name, he assumed that his life would be in Australia.