One sunny day in June of 1979, President Jimmy Carter installed solar water heaters on the roof of the White House. This symbolic act would mark the height of a mini-boom in solar energy in the U.S. It was accompanied by the creation of the Solar Energy Research Institute (now the National Renewable Energy Laboratory), the introduction of incentives and subsidies for renewable energy, and a major call for energy independence -- what Carter called "the moral equivalent of war."
But the heyday was to be short-lived: The technology was young, immature and unreliable. And the massive subsidies put in place by the Carter administration led to the creation of a number of fly-by-night solar enterprises whose only interest was in getting their hands on a bit of government money. When the technology failed, these companies folded and many people lost faith in solar power. To this day, a reputation for unreliability haunts the solar energy industry.
To make matters worse, in 1980 a new President was elected, one who didn't share his predecessor's interest in solar power. In fact, shortly after taking office, Ronald Reagan had the White House solar heaters taken down (ostensibly because the roof needed repairing) and they were never replaced. The symbolism was unmistakable: The new government cared little for renewable energy.
The Reagan White House then slashed the budget for the Solar Energy Research Institute, pushed out its independent-minded director, and dismantled most of the Carter-era renewable energy programs. When the oil embargo ended, the price of fossil fuels declined, and with it, interest in energy issues. Solar energy was once again outside most political radar screens.
But this might soon change. Although the country still derives a fraction of 1 percent of its energy directly from the sun -- and despite the fact that the U.S. now imports more oil from abroad than it ever did before -- the seeds of a solar resurgence are beginning to sprout. With a new kind of energy crisis rearing its head in California, with the collapse of Enron, and with the U.S. waging a series of wars indirectly related to overseas oil interests, energy is once again taking the political center-stage. In the coming days Congress is set to debate a series of competing energy plans put forward by the White House and others.
Solar energy, meanwhile, has matured considerably. New technologies now make it possible to produce solar energy more cheaply and efficiently than ever before. Solar cells are now even being built into tinted windows and roofing tiles making them smart materials options for new constructions. Some even speculate that in a not-too-distant future, many of the windows on a city's buildings will actually double as mini electrical generators.
And the leaders in the industry are no longer fly-by-night operations, but rather large multinational corporations, household names such as British Petroleum, Kyocera, Sharp, Siemens, and Shell. Reliability, too, has increased. Most solar panels now carry full warranties of 25 years and, having no moving parts, their manufacturers expect them to work for twice as long. Finally, the price of solar energy has gone into freefall, going from almost $60 a Watt in 1970 to a low of about $5 a Watt today.
All this means that the industry is growing at a breakneck pace. Allan Barnett, the CEO of AstroPower, a U.S.-based producer of solar energy, says that the industry's growth rate has been nothing short of spectacular: "Demand for solar worldwide has been growing at between 30 and 40 percent a year," he says. "This is a booming business."
The U.S. National Center for Photovoltaics says the industry worldwide generated some $2 billion in 2001. And the European Photovoltaic Industry Association predicts that by 2040, solar energy will provide 26 percent of the world's annual demand for electricity. That is more than the total combined demand for electricity of Europe and the U.S. in 1998. By 2020, they say, solar energy will be a business worth $75 billion dollars employing more than 2 million people worldwide.
"No one is saying that solar will one day provide all of our energy needs," says Bo Harmon, spokesperson for BP Solar, one of the world's leading producers of solar energy. "But it will undoubtedly be an important part of the overall energy mix." He explains that the key to solar is its reliability and its ability to produce energy at exactly the times when the demand is greatest. "Today's reality in countries like the U.S. is that energy demand is driven by the use of air conditioners: it is highest at mid-day in the hottest days of the summer. That is exactly the time when solar energy systems are their most productive. We build power plants to meet this peak demand, so it is likely that solar energy will one day help reduce the need for some of these plants." Howard Wenger, Vice-President at Astropower, puts it another way: "The sun creates the problem, it can also help resolve it."
In addition to helping address peak energy demands, solar is also a renewable and environmentally benign form of energy that makes it a fuel of choice in these environmentally conscious times. And it is a distributed form of energy, which means that it can provide reliable energy at the point of use. This makes it ideal as a back-up source of power for computer and Internet businesses that lose millions of dollars for every second that their systems go off-line. And it makes it a highly secure source of energy at a time when people are increasingly concerned with international terrorism: It is easier to bomb one large nuclear plant than it is to take out a million solar roofs.
Losing the Race
That is the good news. The bad news is that the U.S., a veritable solar Saudi Arabia, is losing (some say it has already lost) its leadership in this vibrant new high-tech business. Today, as solar energy becomes increasingly profitable, the world's largest producers (and consumers) of solar energy are to be found in Japan and Europe, not the US. Of the top 10 producers of solar energy today, only one -- Astropower -- is an American company, the rest are either Japanese or European. It is as if the U.S. had given up on the Internet in the 1980s, and let Silicon Valley be built in Europe or Japan.
"A better metaphor," says Sam Vanderhoof, President of Schott Applied Power Corporation, the U.S.-based solar energy subsidiary of a German glass company, " is what happened in the automobile industry." Vanderhoof explains:
U.S. companies were the leading manufacturers and sellers of cars for so long that when the Germans and Japanese started to break into the market, the U.S. was blind to this change until it was too late. It would be a shame if we let the same thing happen on solar energy. This is an important high-tech industry of the future that was invented in the U.S. (by Bell Laboratories in 1954). The U.S. should not let it slip away.
The growth of solar energy production and consumption in Europe and Japan is no accident. It is the result of strong government support for these technologies. In Germany and Spain, for instance, residential customers that install solar cells on their homes can sell power back to the grid for a guaranteed price of between 30 and 45 cents a kilowatt hour. By way of comparison, the most Californians paid for power, even at the height of the energy crisis, was around 30 cents a kilowatt/hour.
In addition, most European countries and Japan -- unlike the U.S. -- have signed onto a global convention on climate change and are exceedingly concerned with pollution and the environment. This will ultimately serve to make solar energy -- a clean and renewable alternative -- that much more competitive.
"It is not just that the Germans and the Japanese have been strongly supporting the deployment of solar energy," says Tom Surek, Technology Manager for Photovoltaics at the U.S. National Renewable Energy Laboratory (NREL) in Colorado, "they have also been heavily subsidizing the manufacture and production of solar cells. In some countries the government provides as much as 50 percent of the costs of building a new photovoltaic manufacturing facility. In Japan alone they put in around half a billion dollars a year in subsidies and incentives to the solar industry. Here in the U.S. the solar budget of the Department of Energy is around $75 million, and there is talk of cutting that down even further."
BP Solar, a wholly-owned subsidiary of British Petroleum, is a perfect example of the trend away from the U.S. This British-owned company was created in 1998 when BP bought out Solarex, a U.S. company that was one of the world's largest producers of solar energy at the time. The company is still headquartered in Maryland, but it has production plants in Australia, Spain, India, the U.K., and France. Currently its biggest manufacturing plant is the one in Maryland, but by 2003 this will be overtaken by a huge manufacturing facility the company is building in Spain.
"Solar cell manufacturing," says BP Solar's Harmon, "will naturally go to where the markets are. These are large products that are expensive to ship so it makes sense to manufacture them as close as possible to the end user." As goes the market, so too goes manufacturing, jobs and, maybe one day, the technology.
NREL's Surek says the U.S. is still clinging to its technological leadership, but he does not rule out the possibility that competitors in Europe or Japan could one day usurp this advantage. Vanderhoof, however, thinks this has already happened:
Technological leadership in solar energy is not just about creating the next generation of solar cells -- these are still being developed in the U.S. -- it is also about how the cells are made. It is about automation and manufacturing technologies. In these I think the Germans and the Japanese may have already surpassed the U.S.
"It is in the U.S. interest," says Harmon, "to keep this booming, high-tech industry -- and the jobs, brainpower, and technologies that go along with it -- in the U.S. Otherwise it will one day find itself playing catch-up."
California: The Real Sunshine State
In this regard, one ray of hope may well be the land of sunshine and black-outs: California. As a result of the energy crisis -- and some of the most aggressive support programs for renewable energy anywhere in the world -- the market for solar energy in California has been booming. All the large solar energy producers -- BP Solar, Astropower, Siemens -- either have or are building major manufacturing and R & D facilities in California.
Already the state of California will refund as much as half the price of installing solar energy on residential properties, and this past November (in a move that is likely to be copied by cities across the state) voters in San Francisco approved a measure that would allow city government to borrow $100 million from capital markets to install huge solar arrays on city property. When completed, this will constitute the single largest purchase of solar energy in the country; it will double the amount of solar energy connected to the grid in California; and it will instantly turn San Francisco into the solar energy capital of the U.S. Just as people once flocked to the Bay area chasing visions of Internet gold, they may once again come to California seeking another golden fortune -- one that is also based on silicon but that might prove more enduring than the dot.com boom: solar energy.
But a solar Silicon Valley in California is, by itself, not enough to keep the U.S. ahead of its Japanese and European competitors. States can only do so much to step into the breach left by the federal government. Washington needs to do its part. It needs to take solar energy seriously.
Dim Prospects in Washington
So far the signs aren't promising: The energy policy put forward by the White House downplays the potential importance of solar energy in favor of traditional fossil fuels and nuclear energy. And, while there are a number of pro-solar bills in Congress, there is also discussion of decreasing the budget for solar energy research within the Department of Energy. At the same time, the U.S. refuses to sign onto the Kyoto Protocol on global warming and continues to provide hefty subsidies to fossil fuels, all of which makes solar energy less competitive.
In other words, if Congress and the Bush administration are serious -- as they claim to be -- about avoiding future energy crises, achieving energy independence, protecting the environment, and achieving energy security, then they should not underestimate the potential of solar energy. They need to follow the German and Japanese leads by supporting the development of a U.S. market for solar energy (for instance, they could easily encourage federal and state governments to look into the viability of using solar energy on all new government buildings); they need to increase, not cut, funding for research on solar energy; and they need to pass national guidelines that would make it easy for producers of solar energy to sell electricity back into the grid.
And who knows, as a symbolic gesture they might even consider installing solar panels on the roofs of the White House or the Capitol. The more things change...
Copyright 2002, The American Prospect