The new sunbathers

by Economist, Apr 16th 2016, http://www.economist.com/news/leaders/21696935-see-how-bright-future-solar-energy-look-developing-world-new-sunbathers?fsrc=scn/tw/te/pe/ed/thenewsunbathers

To see how bright the future of solar energy is, look to the developing world

THE sun is the world’s battery pack. Photosynthesis captured the energy that is burned in fossil fuels. The sun drives the wind and ocean currents. And in an hour and a quarter the amount of sunlight that threads through the clouds to the Earth’s surface could power all the world’s electricity, vehicles, boilers, furnaces and cooking stoves for a year.

Yet solar power produces less than 1% of the world’s commercial energy. For a long time it was dismissed as a luxury only the rich could afford; it spoke volumes that Germany, a place where the sun shines for less than five hours on an average day, used to lead the world in installed solar capacity. Now, however, solar is coming of age (see article).

Solar power garnered $161 billion in new investment in 2015, more than natural gas and coal combined. A trend that began in northern Europe, where electricity demand is stagnant and clouds proliferate, is taking root in countries where power needs are growing fast and the sun shines brighter. For the first time last year, developing countries attracted more investment in renewable energy than rich ones. Poorer countries, from China to Chile, are increasingly getting their electricity from giant solar parks in arid places linked to their national grids. This year America hopes to triple the 3 gigawatts (GW) of solar capacity it added in 2015; China, the new world leader, and India each plan to add about 100GW in the next four and six years respectively.

Lower costs help explain this extraordinary expansion. The price of solar panels, which are produced almost exclusively in China, has fallen by 80% in the past five years. A new business model is proving just as beneficial. Grid providers are offering long-term contracts to private firms to produce large amounts of solar energy, which in turn helps those firms secure cheap finance and cut prices. A recent tender in Mexico will generate electricity at a record low cost of $40 a megawatt per hour—cheaper than natural gas or coal.

That is good news for almost everyone (oil firms may beg to differ). The industry is expanding in hotter climes mostly without lavish subsidies; China is an exception, but it plans to cut its feed-in tariffs in June. The sun provides power when it is needed most, during daylight hours when air-conditioning systems are running at full blast. And by reducing the need to import carbon-burning fossil fuels, solar power helps the planet as well as the balance of payments in such countries.

Flying closer to the sun

When industries sizzle like this, some caution is usually warranted. Bids to provide power may prove to be too ambitious. Two stricken renewable-energy providers, America’s SunEdison and Spain’s Abengoa, provide salutary lessons on the dangers of financial engineering and taking on too much debt in order to expand quickly.

Bottlenecks in energy infrastructure are another problem. Developing countries will need to invest more in building transmission lines to connect the solar power being generated in far-flung deserts with its users. Makers of solar panels should focus not just on slashing their cost but on improving the technology so that more of the sun’s energy is converted into electrical power. The intermittency of the sun will remain an issue. But if storage costs continue to decline, the possibility of combining batteries on land with energy from the giant battery pack in the sky could be unbeatable.