PG&E mega solar deal sparks industry

The single largest 800 megawatt photovoltaic commitment just announced by California utility Pacific Gas & Electric sets a major milestone and sends a strong message from the burgeoning solar industry.

Because industry self-congratulations aside, PG&E’s move signals technology and policy hurdles that still loom ahead, say insiders.

"It represents the pinnacle in a series of large and innovative U.S. electric utility solar projects that have been announced in the last six months,” said Julia Hamm, SEPA executive director in a released statement.

And analysts and vendors also concur the two deals affirm the continued demand for both thin film and crystalline panels as utility-grade PV solutions.

“There is still less than one tenth of one percent solar which means there’s plenty of room for growth,” David Miller, a spokesperson for Applied Materials, told Cleantech Group. “So there’s going to be a need for both thin film and silicon PV.”

Both large solar projects are contingent upon the extension of the federal investment tax credit, which is set to expire at the end of 2008. The United States Congress is being urged by the solar industry to extend the 30 percent solar energy investment tax credit (ITC) for another eight years.

Analysts note that the large scale utility solar plant deals hinge on photovoltaic power-purchasing contracts like the underlying the PG&E deal.

Those PPCs pave the way for financing that makes these big solar plants possible. There are still several hurdles for these big solar providers to overcome in terms of ramping up manufacturing and hitting price points. And part of hitting those price points involves tax credits.

“Right now, Applied Materials is ramping up eight new manufacturing plants, four of which are doing thin film solar,” said Applied Materials' Miller. “It is a new scale especially in the U.S. ... now if we could get some tax credits it would be great.”

The specific terms of PG&E's new deal calls for a 250 megawatt facility built by SunPower using crystalline panels, to start generating power in 2010, reaching full capacity in 2012.

The second deal calls for a 550 megawatt thin film plant built by OptiSolar, another large scale validation of the applicability of thin film PV to large utility scale installations.

There’s been a push to bring new large thin film solar manufacturing plants online. One of the most notable recent deals was the $15 billion Masdar Initiative and its ambitious plan for thin film solar to help power its zero-carbon city (see Masdar getting into thin film solar business).

Abu Dhabi Future Energy Co., heading up the Masdar Initiative, has contracted Applied Materials to purchase three SunFab thin film lines for producing solar modules with a targeted capacity of up to 210 megawatts (MW).

Challenges remain ahead for the thin film and crystalline suppliers striving to lower costs, especially in the ramping up of large manufacturing operations.

The driving cost in solar energy is the production cost. Applied said its objective is to drive down the numerator (processing costs) in the solar energy equation, which is divided by the energy per unit area. One of the ways it intends to do that is in the actual size of the panels, which are 5.7 meters square in size, four times larger than the typical industry size.

Another large benefit of thin film is that, unlike other semiconductor production facilities that use vacuum processes, thin film facilities don't all require the ultra high tech clean rooms required for producing semiconductor components.

Industry observers note that solar is still young and faces several big challenges ahead, especially as global installed solar capacity by 2020 will be 20-40 times its currently level, according to a recent report from the management consulting firm McKinsey.

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