While at the Swiss patent office in Bern in the summer of 1905, Albert Einstein wrote several transformative papers. In one, he explained that energy was interchangeable with matter according to the formula e=mc2. In another, he hypothesized the existence of the photoelectric effect — the notion that light could be turned into energy.
The idea that sunlight could be transformed directly into energy holds the promise of producing cheap, clean and secure energy for future generations. The sun is, after all, the ultimate source of energy for our planet. Sunlight falls everywhere. Its energy is found in all living matter. What better way to harness it than without having to wait a few hundred million years for organic matter to first fossilize? For this bright idea, Einstein won the 1921 Nobel prize.
Photovoltaics (PV or solar cells), the devices that turn sunlight into electricity based on Einstein’s theory, can be installed almost anywhere, have no moving parts, need little maintenance, and do not pollute the atmosphere. True, the energy produced is intermittent and variable — Southern Italy gets twice the sunshine as Germany, and in neither does the sun shine at night. Still, with parallel advances in energy storage and distribution systems, PV could produce as much as 10% of the world’s energy by 2050.
Getting there will take trillions of dollars of investment and many years. It took six decades of investment in competing technologies to drive the cost from $ 250 per watt for the first solar cells, invented in 1953 at Bell Labs, down to today’s $ 1 per watt. There still is no clear “winning” technology and grid parity — the point at which solar can compete with utility power from coal, gas, nuclear, etc. — will not be reached until sometime between 2015 – 2020.
For all these reasons, emergent technologies, like PV, require decades of investment in pure research without the prospect of a commercial return. Only governments can bear such big risks and long investment time-frames. Venture capitalists, for example, typically seek to exit their investments within 5 years. As such, technological development of PV depends largely on government subsidies and incentives.
The history of those subsidies and incentives is as follows:
The US government first developed solar cells for use in satellites in 1958, in a bid to beat the Soviets in the “space race”.
In the early 1980s Japan took the lead in solar development over the US. MITI had become alarmed by the country’s energy dependence on middle eastern oil during the 1973 and 1979 oil crises. Then, it was afraid Japan’s “economic miracle” might be derailed, as Japan must import almost all its energy from abroad. MITI responded by setting up the Sunshine Project in 1974 and NEDO (the New Energy and Industrial Technology Development Organization) in 1980 to develop alternative energy sources. Kyocera, Sharp and Sanyo became the world’s leading solar manufacturers, as Japanese homeowners installed solar rooftop systems on the back of government subsidies.
In 2004 Germany leapfrogged Japan to become the market leader in solar. Germany had signed the Kyoto Protocol along with 37 industrialized nations on 11 December 1997 and then raised feed-in tariffs by up to 5 times the cost of grid electricity to meet its new emission reduction obligations. This caused solar to boom.
Germany was later eclipsed by China in the late 2000s. China had become concerned about the country’s growing dependence on oil imports and pollution. In response, it passed the 2005 Renewable Energy Law and the 2007 Medium and Long-Term Development Plan for Renewable Energy. China became the low-cost global PV manufacturer, as cheap financing from state-owned banks flowed into Chinese solar firms.
China’s dominance in PV, however, depended almost entirely on export sales. Shi Zhengrong, CEO and founder of the Chinese company, Suntech Power, the world’s largest producer of solar panels, said, “In 2004, Germany created the world market.” Even today, 95% of Chinese PV manufacturers’ sales are derived from exports to countries like Germany.
With solar in Germany and much of Europe booming, Japan’s installed PV generative capacity began to lag. This chart compares Japan with the combined countries of Germany and Italy (in a fictitious nation called “Gertalia”). Gertalia has about the same number of citizens as does Japan and consumes about the same amount of electricity too. Between 2006 – 2011, Gertalia surpassed Japan in adding new PV generative capacity. By the end of 2011, Japan only generated 2.2% of its energy from renewable sources (excluding hydropower) compared to Gertalia’s 13.5%.
As for the future, Japan may once again become a dominant force in solar. Fiscal austerity in Europe has recently caused most European countries to cut back or remove feed-in tariffs. China has over invested in solar manufacturing capacity and is now cutting back. Japan, on the other hand, introduced new feed-in tariffs this July in response to the March 2011 Fukushima Dai-ichi nuclear disaster. This, in turn, has triggered a mad dash of new investment into Japan’s solar industry.
For more information about the solar industry within the wider context of global energy, read “The Quest: Energy, Security, and the Remaking of the Modern World by Daniel Yergin.”