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

by Daniel Yergin

  Then, over a dim sum lunch in Sydney, he heard from a friend visiting from China that things were changing in his homeland. China was opening up to entrepreneurial business. In 2000 Shi went back to see for himself. Overwhelmed by how fast things were moving, he sat down and, in a matter of days, wrote a 200-page business plan for a China-based solar cell company. But it took him ten months to find the money. Finally, he managed to raise $6 million from a local government. With that he was able to found a company, which he named Suntech. The firm began operations in 2001, the same year as Q-Cells.

  “I never thought I’d come back to China,” said Shi. “I never thought I could be a businessman. I thought my career path was very clear. I would become a professor.”

  But now as a businessman, Shi kept his focus on “low-cost expansion” and driving down manufacturing costs. He bought used equipment and looked for the cheapest supplies. And, when it made sense, he took a step backward. He “de-automated” parts of the business, realizing that some processes would be cheaper if done by low-cost Chinese workers rather than expensive machines. “The only barrier to renewable energy is cost,” he said. “To get the costs down for renewable energy is the most important thing. It is the most urgent thing. Thirty percent is technology, but 70 percent is manufacturing efficiency.”

  Just four years after Shi launched Suntech, he took his company public on the New York Stock Exchange. In 2010, sales were over $3 billion.

  Shi’s success can also be attributed to the globalization of the renewable business. For the company owed its growth not to the market in China, but to feed-in tariffs in Europe and subsidies in Japan, which created business that Suntech and other Chinese companies captured thanks to their low costs. Shi is particularly grateful to the German feed-in tariff. “I was very lucky,” he said. “In 2004 Germany created the world market.” Today about 95 percent of the total revenues of Suntech and Yingli Green Energy, another Chinese solar company, are derived from markets outside of China.

  “There’s great momentum in China,” Shi said. “We used to pursue the American dream. Now everybody is pursuing the Chinese dream. And now Suntech has a host of competitors in China. The world is very competitive. If I’m not careful, I will be left behind. We have to keep innovating.”19

  China’s advantages extend beyond low-cost manufacturing. Chinese incentives are aimed not just at stimulating domestic market demand, as in the United States, Europe, and Japan, but at promoting manufacturing and exports. In consequence, non-Chinese manufacturers are shifting a growing part of their manufacturing to China in order to stay competitive. Meanwhile, the degree of support provided by Beijing and by local Chinese governments for solar manufacturing has emerged as a new trade issue between China and the West.

  THIN FILM

  Despite the striking shift of the solar cell industry east to China, one of the world’s largest—and lowest cost—manufacturers of solar panels is a U.S. company based in Arizona, First Solar. John T. Walton—a son of Walmart’s founder, Sam Walton, and an heir to the Walton fortune—was the major early backer in the late 1990s.

  First Solar is able to produce solar cells at such a low cost because of an innovative manufacturing process based on thin-film technology, which it has refined over the years. Crystalline silicon, going back to Solarex, is the manufacturing technology that is most favored on an industrywide basis. Thin-film production is a mass-manufacturing process that uses nonsilicon materials. In general, thin-film cells are less efficient than crystalline silicon cells, but they can also be significantly cheaper to produce.

  Indeed, First Solar has been able to drive costs so far down as to make it more competitive with some kinds of conventional generation. Reflecting the increasingly global nature of PV demand, First Solar runs production lines in factories on three continents: the original, near Toledo, Ohio; another in Germany; and the largest, in Malaysia.

  First Solar has been expanding from its core business of making PVs into the business of developing solar projects. In 2009 First Solar signed a contract to undertake construction of what it has said will be the world’s largest solar plant with a massive 2-gigawatt solar farm in China’s Inner Mongolia Province, with a surface area of about twenty-five square miles (slightly larger than the area of Manhattan). “This is nuclear power–size scale,” said Michael Ahearn, CEO of First Solar at the time of the announcement. First Solar is expected to build a factory in China to help supply solar cells for the project, which is scheduled to be completed by 2019.20

  THE SOLAR MENU

  It has been more than a century since Albert Einstein, in those weeks in the patent office in Zurich, laid out the principle of photovoltaics. But it was not until the twenty-first century that photovoltaics really began to move beyond remote locations for their viability.

  With declining costs, greater capacity, and government subsidies, the annual PV market has grown from 0.6 gigawatts in 2003 to 20 gigawatts in 2010. By 2010 about 40 gigawatts of solar cells have been installed, with most of this coming in just in the last few years. In 2010, $75 billion was invested in the solar photovoltaic business worldwide. Future growth depends both on the extent of government support and the rate at which PV costs are brought down further.21 Yet the industry’s growth has been volatile, even more than other corners of the renewables sector. Sentiment of panel makers and investors, among others, has swung rapidly—in large part propelled by the introduction (or amendment or phase out) of incentives.

  As the solar cell industry has grown, so too has the interest of venture capitalists in investing in it, and funding has increased dramatically. Today there is a fierce race among companies—both established companies and new VC-funded start-ups—riding a host of competing technologies, to bring down costs and improve efficiencies.22

  The menu of technologies for PV is extensive. There are trade-offs to each of these technologies, which can be summarized as cost versus efficiency. Some types of PV are cheaper to make than others but are less efficient at converting sunlight into energy. Others are more expensive to make but do a better job at creating energy.

  The menu includes solar cells in which the semiconductors are made from silicon in crystal form, or crystalline silicon. Monocrystalline and polycrystalline, the two primary types of manufacturing processes that produce this type of PV, are similar to those developed first by Solarex.

  Then there are solar cells in which the semiconductor is made using a thin-film manufacturing process, in which just a very thin layer of photovoltaic material is employed. These have the potential, at least, to achieve much lower costs. One approach uses amorphous silicon, which does not need the same processing as crystalline silicon processes. However, efficiencies are low compared with other approaches. Another key thin-film technology does not use silicon at all, but rather cadmium-telluride. This process involves coating a sheet of glass with a thin film of cadmium-telluride to produce the photovoltaic effect. This is the technology that First Solar uses to make PVs. A third thin-film technology that is attracting a good deal of investment are CIGS, for Copper, Indium, Gallium di-Selinide. They can be produced in flexible materials that can, more easily, be integrated into building materials.

  Scientists are working on still other innovative processes for making solar cells. Some are trying to apply nanotechnology to perfect more efficient materials that can be applied almost like an ink or a dye. One major focus of research is to develop systems that allow photovoltaics to be incorporated into roofing material and even into walls—“Building Integrated PV.”

  Indeed, it is a horse race among companies and technologies, all seeking the same goal. “The objective is higher efficiencies with lower costs,” said David Carlson, who is the chief scientist at BP Solar. “That’s what the whole game is all about.” Carlson brings a unique perspective to these questions, for he actually invented amorphous thin-film silicon at RCA Labs in 1974. “I’ve been there when we thought that things would go especially fast. But it takes time
to build the base. It’s not like computers and integrated circuits where speed doubles every eighteen months because of Moore’s Law,” Carlson said. “Photovoltaics are more chaotic. There are more efficient ways to take advantage of sunlight, but there are many different approaches, and no clear winner. People underestimate how long entirely new approaches take. You have to build the scientific foundation, and then the engineering basis, and then the whole infrastructure.”23

  Given the stakes and intensity of the competition, the scientists and engineers working on the various approaches are competitive, convinced of the virtues of their process and disbelieving of the competitors. One venture capitalist recounted how, in a spirit of détente, he had brought together the CEOs of two of his portfolio companies, each a champion of a competing PV technology. The meeting was superficially amiable, but afterward each privately conveyed his deep conviction to their common capitalist that the other was going down a fruitless path and was surely doomed to fail.

  CONCENTRATING THE SUN

  Photovoltaics are not the only avenue for solar. Effort and money are also flowing into other forms of solar energy—most notably what is called concentrated solar. This process is closer to conventional electricity production. Think of these as generation plants, but where the input is not coal or natural gas or uranium, but sunlight. Concentrated solar captures light with large mirrors of various kinds and then focuses it. The heat, now much more intense, brings a fluid inside the pipes to a very high temperature, which in turn is used to vaporize water that drives a turbine and produces electricity. The first concentrated solar plant, based on an Israeli design with parabolic mirrors, went up in the Mojave Desert in 1984. But just around that time energy prices plummeted, particularly natural gas prices. The technology, and the interest, languished.

  However, concentrated solar has come back to life, with a number of different new designs, including trough designs, where large banks of trough-shaped mirrors are used to concentrate energy in fluid-filled pipes; power towers, on which sunlight is focused to bring the fluid to its superhigh temperatures; and stirling engine systems, where sunlight is reflected off a dish to run a small stirling engine at the dish’s center. There is also a hybrid approach to concentrated solar as well. That is to use a concentrated facility to capture the sunlight and then focus it, in much more intense form, on large arrays of photovoltaic cells. Those concentrated plants that heat a liquid have an advantage over solar cells: storage. That is, they can store the heat in molten salt and continue to operate—and generate electricity—so as to match up with peak loads.

  Meanwhile, a concentrated solar project on a much grander scale has been envisioned for North Africa. The project, called Desertec, is far from generating any electricity. Yet the idea is to build huge solar farms in the Sahara Desert and transmit the power produced across the Mediterranean Sea to markets in Europe. The ambitions are huge. So is the price tag. Financing such a vast project is a major hurdle, so is the fact that concentrated solar still costs much more to produce than traditional forms of power. Uncertain politics will also be a very big hurdle.

  In general, concentrated solar plants face key constraints: land, access, transmission—and cost. They can be used only in hot sunny areas. The typical design can also use substantial amounts of water, which can be a problem when the places most suited to concentrated solar projects are hot and arid.

  Nonetheless, recent years have seen a land rush in the California desert for sites to build either concentrated solar plants or utility-scale arrays of solar panels. These expansive solar plants have run into what might strike some as a surprising obstacle: the opposition of environmental groups that are determined to protect the sparsely settled desert regions against development.24

  GRID PARITY?

  What many believe is now in sight, whatever the technology, is the prospect of grid parity. The concept emerged around 2000–2001. It holds that solar will eventually be able to compete head to head with electricity from the local utility and come out cheaper, or at least equal. Yet calculating grid parity is not easy, since it’s not really a one-to-one comparison. Indeed, it’s not altogether clear how one ought to compare a one-time investment—with free electrons thereafter—to a monthly bill from the local utility.

  Calculating grid parity is complicated because the math has to account for the cost of manufacturing the solar cells, installation costs, and present and future power prices. And, of course, of critical importance is the issue of sunlight: that is, how much sunlight is delivered to that particular region in the various seasons and, thus, how many hours a year can the solar panel operate. Italy has about twice as many hours of sunlight a year as Germany, and this factor alone will affect grid parity.

  There is another complication: PV are not dispatchable power that one can count on, as is the case with electricity dispatched from a power plant. Like wind, PV are intermittent. They do not generate much electricity on cloudy days or any at night. The advantage that they have over wind, however, is that they can deliver on hot, sunny days when electricity demand spikes upward, and thus can offset utilities’ need to build peak capacity that is used only at times of heaviest demand.

  This intermittency affects the investment requirements. A gigawatt of installed PV capacity is not the same as a gigawatt of coal or nuclear capacity because the PV installation does not operate at night or when the sun is not shining. That is why, when talking about PV, as with wind, one must distinguish between installed capacity and electricity actually generated. Tower-based concentrated solar, however, does hold out the promise of dispatchability.

  Some express concern that the concept of grid parity looks only at the direct costs for the consumer and not at the total cost to the entire system—the additional investment in backup power and additional transmission investment necessitated by intermittency, as well as subsidies and incentives. The result is to add another layer of cost and complexity to the power system. The fuel—the sun (or wind)—may be free, but the full cost in some way “must be covered by the market and ultimately ratepayers,” according to one study.

  Grid parity is linked to another concept: net metering. This allows a power customer to deduct the amount of electricity it puts into the grid, owing to its solar generation, from the amount it receives from the grid. In some markets, where electricity prices are high, grid parity, at least looking at it from the viewpoint of the consumer, may be near, but it has not yet arrived. “All gridconnected markets are subsidized,” observed Paul Maycock, who ran the government’s solar program under President Carter. “If you are getting this subsidy, the market is not yet real.”25

  ALL THE ROOFS?

  Hans Ziegler was the passionate proponent of photovoltaics who in 1958 championed the solar cells aboard the Vanguard satellite. When, half a century ago, he enunciated his vision that the “roofs of all of our buildings in cities and towns” would be equipped with photovoltaics, it was not only very early but also, frankly, pretty far-fetched. A half century later, that prospect, or some fraction of it, is something on which a lot of significant bets are being placed—in the United States, in Europe, and in Asia. Some of the estimates for growth, and future installed capacity, are very high. Some believe that they could be providing a substantial part of the world’s electricity by the middle of the twenty-first century.

  Photovoltaics may appear to offer the alchemy of shining light—turning light into electricity. But they are not magic, not when one considers the scale of the world’s electric power system and the current costs of solar. Somewhat cautious, strangely enough, is one of the leading longtime advocates of solar cells. Paul Maycock is as experienced as anyone in the world with the development of photovoltaics. As he says, he has “lived, eaten, and drunk solar cells” for more than forty years, and he has been an advocate over all those years. “All of the projects we worked on in the Department of Energy in the 1970s are coming true,” he says. “Just several decades later.” Yet he says that he is
“scared” that “people will decide that PV are the green option when they are really one of eight or nine green options.

  “If we reach ten percent of total electricity from PVs by 2050, that will be a great achievement,” Maycock added. “Theoretically we may be able to eventually get to 15 or 20 percent without a breakthrough in storage technology. But 15 percent of the world’s electricity is a very big number. To reach 15 percent will require trillions of dollars of investment. For a business that is now doing sixty billion dollars a year, that is a very nice mountain to be challenged by.”26

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  MYSTERY OF WIND

  Experience had taught Philip Marlowe to pay close attention to the winds that blew in from the desert into the Los Angeles Basin.

  “There was a desert wind blowing that night,” he said of one particular evening. “It was one of those hot, dry Santa Anas that came down through the mountain passes and curl your hair and make your nerves jump and your skin itch. When the Santa Anas blow,” added Marlowe, “anything can happen.”1

  But it probably would never have occurred to the fictional detective, nor to his creator, Raymond Chandler, that one thing that would happen was that California’s winds could help jump-start a global industry.

  Yet the state’s gales were key to wind becoming the largest and the fastest growing source of renewable energy in the world today. In the United States, wind power has increased tenfold in ten years. In Germany, wind accounts for about 60 percent of the total renewable capacity added over the past decade.