The spectacular global growth of solar PV is one of the big energy stories of today. And it may well become the energy story of the 21st Century. Where did the solar revolution “suddenly”come from? And where will it take us? One of the pioneers of the sector, Peter F. Varadi, co-founder of what was once the biggest solar PV producer in the world, Solarex, has written a unique history of his company and that of solar PV. He also looks ahead to what our solar-powered energy future may look like.
Not a day goes by without some spectacular news about solar power. Just recently, the International Energy Agency (IEA), one of the most authoritative energy think tanks in the world, issued a report claiming that solar PV could be the biggest single source of electricity in 2050. The IEA believes the price of solar PV could become as low as 4 dollarcents per kWh. Significantly, the Paris-based OECD-institution now also says solar power – not coal-fired power plants – should be the “fuel of choice” for populations with no access to the grid.
Quite possibly, the IEA may underestimate the power of solar. Innovation is still forging ahead at breakneck speed. For example, just last week US solar company SunEdison announced that it has found a way to produce polysilicon far cheaper than the current industry standard. “Our latest advance is a leap forward in solar technology”, said SunEdison CEO Ahmad Chatila, “and will enable solar power to become the lowest cost energy solution – not just an alternative to other renewables, but the cost-winner over fossil fuels as well.”
“Our latest advance is a leap forward in solar technology and will enable solar power to become the lowest cost energy solution”
SunEdison said that by 2016, its factory in Korea should be able to produce modules at a cost of $0.40 per Watt peak. Note that until recently a cost price of $1.00/Wp was spoken of as a “tipping point” for the solar industry. So the 4cts/kWh that the IEA speaks of may be closer than they think. Equally importantly, the costs of storage are also coming down rapidly. Another example: in September the CEO of SolarCity, Lyndon Rive, and the company’s Chairman, none other than Elon Musk, the owner of Tesla, said in New York that they would be including battery backup systems with each one of their rooftop solar power systems within 5 to 10 years. Even with those battery backups, said Rive and Musk, a SolarCity installation would cost less than the price of electricity from the grid.
No wonder that more and more people are beginning to be convinced that solar PV-with-battery-backup is about to change our world forever.
It wasn’t always like this. Not so long ago solar power was considered by virtually all experts to be far too expensive ever to be able to compete with traditional forms of electricity generation. So what changed suddenly?
Well, as it happens, the change did not come about as suddenly as it seems. Fortunately, for those who are interested in energy history, we now have a 500-page eyewitness account of the rise of the solar industry written by one of its pioneers: Peter F. Varadi, a Hungarian exile to the United States. In 1973 Varadi founded, with his friend and fellow-refugee Joseph Lindmayer, a company they called Solarex, which in the second half of the 1970s became the largest solar PV producer in the world. In his book, “Sun Above the Horizon”, Varadi describes the history of solar PV in great detail – and he makes it clear why he was convinced, even 50 years ago, that solar power would conquer the world.
In the early 1970’s, Varadi and Lindmayer worked for COMSAT Laboratories, a company created by US Congress in 1962 “with the responsibility for the development of a global satellite communication system”. (p. 7) At that time, solar power already had 20 years of development behind it, but it was used only for space applications. In 1953 researchers at Bell Laboratories had discovered how to produce solar cells that could be used to power objects in space.
Solar’s space age was hardly an insignificant episode in its history: it laid the groundwork for many technological applications that have transformed our lives. As Varadi puts it, “today few people realize that without the [invention of solar power] many important things we are using today such as the global phone service, cell phones, TV, internet, global weather service, the GPS system, manned space stations and machinery exploring the surface of Mars would not be possible”. (p. 2) He devotes a special chapter in the book to the use of solar power in communication and GPS systems. No communication satellite would be in operation today without solar cells, he notes (p. 282). (Although he recounts that in 1964 NASA did launch a satellite with a nuclear reactor: during the launch it broke apart and the radioactive waste was scattered across the globe. p. 279)
“Few people realize that without the [invention of solar power many things we are using today such as cell phones, TV, internet, global weather service, the GPS system, and manned space stations would not be possible”
Nevertheless, to this history of solar power another chapter would be added – which we are still in the middle of today: the use of solar PV for power generation on earth. Varadi notes that the production technology for solar cells then in use was not suited to terrestrial applications. Only small quantities were produced, essentially without regard for costs – after all, compared to the cost of a satellite, the cost of the solar cells was not significant. For the modern-day solar PV revolution to be able to take off, what was needed were new production processes by which solar cells could be produced inexpensively and in large quantities. (p. 8) This is what Lindmayer and Varadi set out to accomplish.
In 1973 they handed in their resignation at COMSAT and founded a company they called Solarex. “We escaped from a Communist country and came here to the center of capitalism”, said Lindmayer. “Therefore we decided to start a company and become capitalists.” (p. ix)
Ironically, however, getting venture capital from the capitalists, proved to be no easy task. Making solar cells for terrestrial purposes was an almost totally new idea. There were two companies in the US – Spectrolab and Centralab – which produced solar cells for satellites and spacecraft and sold rejects for terrestrial use. In Germany, AEG/Telefunken, did the same. Another US company, Solar Power Corporation was founded at about the same time as Solarex, but there was no one else. After having talked to 20 venture capitalists, Varadi concluded that he had been successful at least in one respect: “All 20 managed to learn how to spell the word PHOTOVOLTAICS but we had not received a penny from them.”
Embargoing the sun
The scepticism of the venture capitalists was only part of a larger myopia in society about the possibilities of solar cells, says Varadi. Initially very few people believed solar could be a useful energy source on earth. Then, when the first oil crisis hit, and alternative forms of energy became a serious concern, solar power suddenly entered the spotlights. However, according to Varadi, the R&D program that was then started up by the US government under president Carter was aimed at the development of large-scale solar power systems, to be used by utilities for centralised power generation. The expectation was that it would take from 7 to 14 years to achieve grid parity in this way and that by 1986, solar power could be produced for 6 cts/kWh.
But this project got nowhere, apparently, because, as Varadi puts it, the utilities were not really interested in the proposed centralized PV electric power plants. (102) No doubt the political climate had something to do with it too. When president Carter in June 1979 went up on the roof of the White House to install a solar hot water system, he said, “No one can ever embargo the sun”. But his successor Ronald Reagan dismantled the heater. “This was the beginning of the end of the pioneering role of the US PV industry”, notes Varadi, which at that time produced at least 80% of the world’s PV products. (p. 246)
In any case, Lindmayer and Varadi (as well as a few other entrepreneurs, such as Elliot Berman of Solar Power Corporation and Bill Yerkes of Solar Technology International) were not interested in centralized power systems. They were convinced they could and should produce PV cells and systems that would produce decentralised local power at a reaonable price in a very short time. (p. 36) They realized that it was precisely the possibility of decentralized production that gave solar PV its unique advantage. (p. 104)
In the kitchen
In the end, the two new-born capitalists managed to collect the required startup capital (of $210,000) from friends and acquaintances within two weeks. (p. 20) After nine months, writes Varadi, their company was already turning a profit.
“All 20 venture capitalists managed to learn how to spell the word PHOTOVOLTAICS but we had not received a penny from them”
So how did Varadi and Lindmayer go about making solar cells? First the two partners had to decide what material they would use to make the “terrestrial” solar cells from (p. 12). At the time there were a few companies making very limited numbers of terrestrial solar modules (in the US, as well as the SAT company in France) and they mostly used cadmium sulfide. But Lindmayer and Varadi decided that Solarex would use silicon (Si), because that would be much stronger and longer-lasting (over 20 years). (p. 13) Silicon – “the second most abundant element in the earth’s crust” – is still used in most solar PV today of course (although ironically, not anymore in space systems, where since the 1990s other more complex systems and structures have been used).
Interestingly, Varadi explains that solar cells are quite simple to make: he demonstrates how any one can make one in his own kitchen (not a very good one, and you need to buy the Si wafer, but still). (p. 24)
Next, Solarex (and its competitors, Solar Power Corporation and STI) developed an altogether new production technology (described in chapter 8 of the book), which led to the successful manufacture of rectangular “multicrystalline” Si “wafers” – which are still used today in half of all solar cells.
So they had a product and a manufacturing technology – but not yet a market. As it turned out, that may well have been the most difficult barrier for solar power to overcome. After all, when people get electricity from the grid at a reasonable price, why would they need solar power? There was no climate issue back then, there was no competition in the utility sector, and the availability of oil and gas was no problem in the 1980s.
But Varadi and Lindmayer found their niche: there were many places in the world where grid connections were non-existent or not practical. Think of lighthouses, oil platforms, and the like. Japan had already shown the way in this respect, writes Varadi. In 1961 Japanese company NEC had installed the first PV solar system to power a lighthouse, to be followed by many more lighthouses in the years to come. Varadi followed this example and started selling solar cells for similar applications in the US, for instance for repeater stations in police communication systems.
Then came other products: calculators, digital watches (there is an interesting story in the book about them), navigational aids, and other gadgets, including toys, some of which sold in the tens of thousands. Solarex sold many of these products through mail order catalogs. This had the effect of “educating” people about the possibilities of solar power, writes Varadi. “People have to see it to believe it. They don’t attend conferences”. He notes that “the consumer product PV business was never taken seriously, scientists and solar experts probably did not know about it or if they knew they disregarded its existence. It never came up in any government studies.” (131) Yet Varadi believes that through these market activities a basis was laid for the later success of solar power.
In addition, Solarex looked abroad. There were and are many places in the world where people do not have grid connections. One successful venture was with the French company Leroy-Somer, which supplied solar-powered water pumps to places like the Sahel and the Sahara.
Yet there were other ingredients that had to be added for the solar product to become a hit. One important chapter in the history of solar PV was the development of quality and testing programs – crucial for a product that needed to be reliable for over 20 years. The first quality control program was started by the Jet Propulsion Laboratory in Pasadena. This, writes Varadi, made the failure rate of existing solar cells go down from 45% to 0.1%. Varadi notes that “this was one of the most important and useful government-sponsored PV programs”, for without it “the expected failures would have destroyed the image and usefulness of PV”. (p. 97) Later the World Bank played a “trailblazing” role in developing a global PV quality program.
“The consumer product PV business was never taken seriously. Scientists and solar experts did not know about it. It never came up in any government studies”
Varadi credits both business and government programs with the success of PV. And business includes not only independent entrepreneurs, but even the oil companies! Over time the oil industry has invested quite a bit in solar power, Varadi recounts. Solarex itself was bought in 1983 by Amoco (Varadi and Lindmayer sold it to allow the company to grow faster), which was later taken over by BP, which has now withdrawn from solar power altogether. Solarex’s rival Solar Power Corporation was bought by Exxon, which got out again in 1984. The other rival, STI, was bought by Arco in 1977 and renamed Arco Solar, and then sold to Siemens in 1989. Shell “went in and out of the PV business” many times over the years. Currently, the oil majors are all out of the PV business, with one exception: French company Total has been involved in PV since 1983 and has in recent years enlarged its presence with the acquisition in 2011 of 60% of SunPower Corporation for $1.3 billion. Total is now building a solar power R&D centre in France together with EDF.
Unlike the oil companies, utilities, Varadi notes, were never interested in solar PV. They resisted what they regarded as a form of competition. They are probably still regretting that today.
But the one factor that may have been most responsible for the current stormy growth of solar PV, according to Varadi, was the introduction of the Feed-in Tariff (FIT) in Germany in 2000 (after an initial scheme that had started in 1991). Varadi met – and was highly impressed – by one of the architects of the German program, Hermann Scheer (1944-2010): “He opened a new world for me with the perspectives, connections and possibilities [he sketched]”. (p. (335)
The reason the FIT was so important was that the main barrier for solar power, after cost had been tackled through mass production and technological progress, was the financing. This was the barrier that the FIT scheme helped to overcome. The FIT provided financing for the relatively high-priced solar PV while forcing a gradual price reduction and stimulating investment.
The German program did one have unintended consequence, though: as a result of the spectacular growth in demand, the price of silicon and of solar modules skyrocketed, especially in the period 2003-2007. This is one of the reasons why many market watchers and energy experts are (or were) under the impression that solar PV was so expensive. It was extremely expensive for a while – but that was temporary. When silicon prices went down again, the PV industry, as Varadi puts it, “became unstoppable” (p. 368).
Indeed, for then the Chinese got on board, and the rest, as they say, is history. Or: history in the making, if it is up to the likes of Cheng Kin Ming, the Chinese entrepreneur who has over the past few years invested $20 billion in solar power companies – and recently announced that he is only just starting. Interestingly, Varadi was personally involved in bringing the solar revolution to China. Back in the dark Communist days of 1983, he went to China to explain the Chinese the possibilities of solar power. A bit of technology transfer with far-reaching consequences! Incidentally, the World Bank also helped China actively: its involvement led to the first China Renewable Energy Development Project (REDP) adopted by the Chinese government.
Of course the part of history where solar will change our world forever has mostly still to be written – although the speedy advance of renewable energy is already having a strong impact on the existing energy system. As Varadi discusses in the last part of his book (and wrote about in this article for Energy Post in November 2013), throughout the years utilities have consistently chosen to disregard the solar power industry. Instead of working with the fledgling sector and trying to find win-win solutions, they did all they could to prevent solar power from getting connected to the grid (p. 447). They have now belatedly woken up, and are trying to adjust to the circumstances.
Nevertheless, Varadi believes utilities still have a “window” in which to act. They have certain advantages: an existing customer base, strong brand names which can convince customers that they will be around for a long time, and financial resources to invest in new business models. In particular he mentions one attractive offer from an existing utility, namely RWE’s HomePower solar system. This is a PV array with a battery attached to it – as well as a grid connection (p. 476). Isn’t this what SolarCity also wants to start selling in the United States?