Last year world solar cell production soared to 395 megawatts (MW), up 37 percent over 2000. This annual growth in output, now comparable in size to a new power plant, is set to take off in the years ahead as production costs fall. Cumulative solar cell or photovoltaic (PV) capacity now exceeds 1,840 MW. (See table.)

The top five producers in 2001 were Sharp, BP Solar, Kyocera, Siemens Solar, and AstroPower, accounting for 64 percent of global output. Japanese manufacturers, with 43 percent of the world total, benefited from government policies to encourage solar cell use. The 70,000 Roofs Program, which initially provided a 50-percent cash subsidy for grid-connected residential systems, has been the primary driver of Japan's PV market expansion. The subsidy declined to 35 percent in 2000 as production increased and solar cell prices dropped. In addition to residential subsidies, government spending of $271 million in fiscal year 2001--on research and development, demonstration programs, and market incentives--was key to the growth.

In contrast to Japan, the U.S. government spent only $60 million on solar programs in 2000. The U.S. share of the global market--24 percent--was surpassed in 2001 by the European Union (EU), which now accounts for 25 percent. Government commitments to renewable energy are more robust in the EU than in the United States. In Germany, the Renewable Energy Act of 2000 offers citizens preferable loan terms for purchasing solar systems, and gives them a guaranteed price when feeding excess energy back into the power grid (known as net metering). As a result of such support, the German PV industry--the most advanced in Europe--is projected to grow from its current installed capacity of 113 MW in 2001 to 438 MW by 2004.

As a result of government policies in Japan, grid-connected residential installations totaling 100 MW dominated sales in 2001. Germany's grid-connected systems accounted for around 75 MW. The 32 MW installed in the United States were divided between grid-connected systems and those in remote areas not linked to a power grid. All of India's 18 MW were for such off-grid installations. The 120-130 MW installed in some 50-60 developing nations were also for off-grid projects.

Both Japan and the United States were net exporters of solar cells. Almost two thirds of U.S. output was exported, while Japan exported 42 percent of its total.

The cost of electricity from solar cells remains higher than from wind or coal-fired power plants for grid-connected customers, but it is falling fast due to economies of scale as rising demand drives industry expansion. Solar cells currently cost around $3.50 per watt for crystalline cells, and $2 per watt for thin-film wafers, which are less efficient but can be integrated into building materials. Industry analysts note that between 1976 and 2000, each doubling of cumulative production resulted in a price drop of 20 percent. Some suggest that prices may fall even more dramatically in the future.

The European Photovoltaic Industry Association suggests that grid-connected rooftop solar systems could account for 16 percent of electricity consumption in the 30 members of the Organisation for Economic Co-operation and Development by 2010. If costs of rooftop PV systems fall to $3 per watt by the middle of this decade, as projections suggest, the market for residential rooftop solar systems will expand. In areas where home mortgages finance PV systems and where net metering laws exist, demand could reach 40 gigawatts, or 100 times global production in 2001.

More than a million homes worldwide, mainly in villages in developing countries, now get their electricity from solar cells. For the 1.7 billion people not connected to an electrical grid, solar cells are typically the cheapest source of electricity. In remote areas, delivering small amounts of electricity through a large grid is cost-prohibitive, so people not close to an electric grid will likely obtain electricity from solar cells. If micro-credit financing is arranged, the monthly payment for photovoltaic systems is often comparable to what a family would spend on candles or kerosene for lamps. After the loan is paid off, typically in two to four years, the family obtains free electricity for the remainder of the system's life.

Photovoltaic systems provide high-quality electric lighting, which can improve educational opportunities, provide access to information, and help families be more productive after sunset. A shift to solar energy also brings health benefits. Solar electricity allows for the refrigeration of vaccines and other essentials, playing a part in improving public health. For many rural residents in remote areas, a shift to solar electricity improves indoor air quality. PV systems benefit outdoor air quality as well. The replacement of a kerosene lamp with a 40-watt solar module eliminates up to 106 kilograms of carbon emissions a year.

In addition to promising applications in the developing world, solar also benefits industrial nations. Even in the UK, a cloudy country, putting modern PV technology on all suitable roofs would generate more electricity than the nation consumes in a year. This would eliminate all greenhouse gas emissions from nationwide electricity generation, removing almost 200 million tons of carbon dioxide annually from the atmosphere.

Recent research surrounding zero-energy homes, where solar panels are integrated into the design and construction of extremely energy-efficient new houses, presents a promising opportunity for increased use of solar cells. Julius Poston, a progressive builder in the southeastern United States, builds homes that use half the energy of typical ones. His company, Certified Living, has constructed two prototype zero-energy homes with integrated solar panels. If eventually adopted on a wide scale, this groundbreaking concept could eliminate the pollution associated with fossil fuel-generated electricity for households.

Continued strong growth suggests that the solar cell market will play a prominent role in providing renewable, non-polluting sources of energy in both developing and industrial countries. A number of policy measures can help ensure the future growth of solar power. Removing distorting subsidies of fossil fuels would allow solar cells to compete in a more equitable marketplace. Expanding net metering laws to other countries and the parts of the United States that currently do not have them will make owning solar home systems more economical by requiring utilities to purchase excess electricity from residential solar systems. Finally, revolving loan funds and other providers of microcredit are essential to the rapid spread of solar cell technologies in developing nations.

Solar cell manufacturers are beginning to sense the enormous growth in the market that lies ahead. Japan-based Sharp Corporation, already the world's leading producer of solar cells, plans to double its capacity in 2002, going from 94 to 200 megawatts. For the industry as a whole, output is expected to increase at 40-50 percent annually over the next few years, bringing the solar age ever closer.

Copyright © 2002 Earth Policy Institute