Who makes business with solar energy ?

The attempt to answer this question leads us to understand the development level achieved by this technology and exposes the dark side of the energy matrix in, except isolated cases, most countries.

We must take 2 points of view:

1) Distributed Solar Generation (Intelligent Network)

Distributed Solar generation is business for the consumer and for the country’s economy.

On the consumers’ side, it allows them to generate their own energy and to buy energy from distributors only if their demand exceeds their energy generation capacity.

For the country’s economy, because it increases their energy sovereignty and promotes job creation (professionals, installers, equipment suppliers and related sectors).

2) Centralized Solar Generation (Conventional Network)

Centralized Solar generation is business for energy generating and distributing companies and for political parties.

For generation and distribution companies, because they continue controlling the energy business.

For political parties, because they get funding and returns from generating companies and energy distributors and because it is much easier to “cut deals” with just a few than doing serious long-term work, creating a regulatory framework that truly encourages distributed generation and that benefits both citizens and the country’s economy.

Solar energy’s competitive advantage is that it can be generated in the place where it is consumed, making distribution unnecessary and eliminating all energy losses that its transport causes.

Efforts should focus on distributed systems installation and solar energy integration in urban environments, developing residential, secondary and tertiary markets.

The ups and downs suffered in European countries (the most representative case is the photovoltaic sector in Spain) that have given prominence to large-scale projects, indicate that that is not the right way and that it only benefits a few.

The future of a solid and consistent solar energy sector clearly entails:

1) A limited number of specific centralized generation projects on soil that has no other purpose and in areas with very high levels of solar radiation (e.g. semi-desert areas).

2) Encouraging installations on individuals’ and companies’ roofs.

3) Distributed generation’s development due to energetic efficiency and continuity in supply (catastrophes, terrorist attacks, warfare).

Political parties and energy generating and distribution companies have been throwing spanners in the works and the latest trick they have pulled out of their hat is charging very high “access fees” to those who have a solar generator connected to network.

This has caused surreal situations in which fines on those who generate their own power are applied or that make it more profitable to continue with the centralized generation and distribution’s “status quo” rather than investing in solar energy.

The real paradox is that most of the infrastructures exploited currently by energy generation and distribution companies were originally State assets.

Private or private with state participation companies that currently operate these infrastructures they received have well amortized them already.

They have done little to modernize them and are reluctant to invest in modern transmission networks and interconnected bidirectional measurement equipment.

What should be clear is that the future of the energy sector is the energetic efficiency, the distributed generation and the renewable energies incorporation.

These should be the 3 objectives to pursue.

While new players, technologies, situations and settings will appear; regulations or policy should encourage progress towards these 3 objectives or they will not be doing their job.

Regulation should be implemented “ex ante” and must be updated “ex post” according to the energy sector’s development, distributed generation growth and renewable energies incorporation degree.

For countries that want to seriously work for their citizens and their economy there are vast examples of regulatory frameworks that can be taken as a starting point and adapt to each country’s reality.

For example, the Spanish CTE (Technical Building Code) in case of solar thermal energy and several US states’ legislation in case of solar photovoltaic energy.

Solar PV Latin America

Latin America generates about 7% of the world’s electricity and non-traditional sources account only for 6% of the energy mix.

It is expected that by 2050 over 20% of the electricity generated in the region will come from non-hydro renewables.

May the contribution of photovoltaics be significant?

This technology has great potential in the region, but is still marginalized to the background among the countries’ energy choices and many times what is done about it is just to “stand” and very little is accomplished.

Compared to the rest of the world, the rate of solar photovoltaic energy implementation in Latin America is very low.

Annually the installation of about 100 GW of solar photovoltaic energy is expected worldwide and usually only 1% corresponds to this region.

However, the fact of not having been one of the pioneer regions where the development of this technology began will allow learning from other regions or countries mistakes.

We must distinguish between solar industrial development (manufacturing of modules and other components) and solar energy (solar electricity).

Solar industrial development in the region has difficulties with the sharp drop in solar modules’ prices.

In contrast, solar electricity production is favored by the fall in modules prices and makes solar photovoltaic energy more competitive.

The average cost of 1 W of installed solar PV has dramatically dropped in recent years and most projections indicate that this trend will continue. The underlying costs associated with solar photovoltaic energy will also continue to decline.

PV installed capacity of Latin American countries has always been oriented to isolated applications to meet the needs of rural populations without access to electricity network.

Only after 2014 solar photovoltaic projects began to attract capital.

Latin America has 51 solar photovoltaic plants in operation and 625 MW of installed PV in 2014, compared to 133 MW in 2013. They have announced 23 GW projects, 5,2 GW in contracts, 1,1 GW under construction and 722 MW in operation.

From GTM Research consultancy recent studies show that the installed capacity in MW has increased 370% in 2014 and is expected to rise 237% in 2015.

This figure could be revised downwards following the price collapse that has rocked the oil industry and the commodity sector in recent months.

Today, in Latin American countries with good levels of radiation and without large subsidies in the energy market, the model of solar PV is self-sustaining.

In some cities in Mexico, Brazil, Chile and Peru, the solar PV cost is situated very close to grid parity.

Countries like Costa Rica, Guatemala, Mexico, Panama, Dominican Republic and Uruguay already have national laws and regulations in place for connecting photovoltaic generators under the net metering system.

The most suitable places to locate large plants are the deserts near the Pacific coast and northeastern Brazil.

Over the next 20 years it is expected that the investment in solar photovoltaic energy per year will reach about U$S 100.000 million worldwide.

A forecasted development of 3,5 GW is estimated in Latin America by 2016.

Could this be possible?

To know it, we are going to do a country-by-country analysis because there are very different realities.

Solar Thermal Latin America

Solar thermal energy for domestic applications is a mature technology that has been successfully developed in many countries for over 30 years.

It is not well understood why its underdeveloped compared with photovoltaics while almost double its performance.

It is a relatively simple technology that already has small and medium manufacturers in countries of the region such as Argentina, Uruguay and Brazil. However, there is still no certification at regional level as in Europe.

In the Caribbean nation of Barbados 80% – 90% of households have solar energy equipment on their roofs. This country ranks in the top 5 global installed capacity per capita.

There are no reliable data concerning the installed capacity in Latin America.

The most recent global estimate dating from 2012 and informs an installed capacity of 234 GWth. Brazil is among the top 7 countries with about 4 GWth (2%).

The Latin American regional market is slowly developing.

In parallel, there is an emerging incipient regulatory framework for certifications that are mainly based on regulatory frameworks of Europe and the US. COPANT is working on the unification of the regional framework of standards and certifications.

One of the main barriers to the development of solar thermal energy are important subsidies that some countries in the region granted to conventional energy.

Professionals and companies in the solar energy industry of Latin America and the Caribbean met recently in San Jose, Costa Rica, to promote the development of this technology in the region.

The meeting was made by IRENA (International Renewable Energy Agency), OLADE (Latin American Energy Organization), ICE (Instituto Costarricense de Electricidad) and the German Metrology Institute (PTB).

According to the Innovation and Technology Department of IRENA, currently the region only takes advantage of 3% of its solar thermal potential.

The most important conclusión we arrived is that the region has great potential for development of solar energy in residential and commercial areas, but experience shows that to achieve this, we must build confidence in this technology.

How is this achieved ?

Proposals were:

1) Develop mechanisms to ensure the quality of the facilities (standards and inspections)

2) Encourage best practices among professionals and companies (testing and certification)

3) Implement government policies that promote genuine development of this technology

The global analysis of the development programs of solar thermal energy estimates a worldwide installed capacity of 1,600 GWth in 2030 and 3,500 in 2050 GWth.

Will be Latin America an important player in this global installed capacity growing ?

To know that, in next deliveries we will discuss solar thermal sector of each country in the region.

Solar Energy in Latin America

Before evaluating the solar potential of the region, we will expose some macro variables.

Latin America includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic, Uruguay and Venezuela.

It has 22.222.000 km2 (approximately 13.5% of the planet’s land surface) and more than 600 million inhabitants.

The region has a remarkable political and economic diversity and is unstable because of the continued monetary policy focus shift.

Currently, in Latin America 3 types of economic systems are recognized.

The capitalists, with open economies that rely on the free market and free trade agreements. Some of these countries are Peru, Chile, Mexico, Colombia, Panama and Costa Rica.

Countries that, even though argue having an open structure to the world, are clearly protectionists, with a social market or mixed economy. Some of these countries are Argentina, Uruguay, Brazil, Ecuador, Bolivia and Paraguay.

Finally there are a few countries that maintain closed economies with little regard for free market and with a clear tendency to Marxist models. This is the case of Cuba, Venezuela and Nicaragua.

The largest economies by GDP are Brazil, Mexico, Argentina, Colombia and Venezuela.

The most developed in terms of GDP per capita are Chile, Argentina and Uruguay’s economies.

Let us analyze the solar resource available in the region.

Solar energy is evenly distributed, since much of the region lies within the so called ‘Sun Belt’ region presenting the highest solar radiation; with the exception of specific sites, it is a predictable and reliable resource.

What is the main advantage of solar energy over other renewable energies?

Solar energy has a higher degree of integration into the urban environment.

Roof facilities take advantage of idle surfaces to generate clean energy. The country that manages to focus its efforts on such facilities’ development will have the key to its own, and its inhabitants’, energy sovereignty.

Another important factor is that solar installations can be performed by local workers, reducing dependency on technology developers and equipment suppliers (mostly manufactured outside the region). This eliminates the link between the equipment’s sale, installation, commissioning, operation and maintenance; unlike it happens with other renewables.

With some of the best solar resources in the world, Latin America has great opportunities.

Some reasons to be optimistic:

1. Good levels of solar radiation in the region

2. Sustained downward trend in solar systems components’ prices

3. Technology with high potential for generating local employment

4. Increasing public environmental awareness

5. Convenience for many countries to reduce dependence on oil and its derivatives

6. Political will is evidenced by governments of some countries in the region

And some outstanding issues:

1- Investment in modern interconnected transmission networks infrastructure and bidirectional measurement equipment

2- A larger financial market to support solar technology long-term development with loans

3- Legal uncertainty and economic instability in some countries of the region

In upcoming deliveries we will analyze the thermal and photovoltaic solar energy domestic applications’ situation in the region.