A Brighter Future: Top Innovations in Solar Power

Over the past five years, no renewable energy source grew as quickly as solar power. Innovations in solar power, coupled with government mandates to incorporate more renewables into the energy supply, have contributed to exponential growth in installed solar capacity. At the same time, costs for solar power have plummeted. Given the current trajectory and momentum, it seems likely that solar power will continue making inroads into the power mix.

Two Types of Solar Power

Photovoltaics (PV) and concentrating solar power (CSP) are the primary solar technologies. The familiar solar panels on many homes are an example of solar PV. Certain materials, such as various types of silicon or cadmium telluride, are capable of producing electricity when struck by solar radiation. Solar PV cells are produced using materials that are susceptible to this photoelectric effect. Most commercial solar PV cells convert solar radiation into electricity at efficiencies ranging from 10–15 percent.

CSP uses lenses or mirrors to concentrate the sun's rays similarly to a magnifying glass. Parabolic trough and tower technologies are both used commercially. The concentrated sunlight may be used to generate steam that can then be passed through a turbine to produce electricity. The heat may also be used to produce molten salt, which retains heat when the sun doesn't shine and can enable CSP plants to run 24 hours a day.

Exponential Growth

According to the Renewable Energy Policy Network for the 21st Century (REN21), the two fastest growing renewable energy technologies from 2011–2015 were solar PV and CSP with respective average annual growth rates of 42 and 35 percent. REN21 published a Renewables 2016 Global Status Report that found that global solar PV capacity increased by 50 gigawatts (GW) in 2015, bringing the total to a record 227 GW. Global solar capacity has increased by an order of magnitude since 2009, when it totaled 23 GW. China added the most PV capacity of any country in 2015 with an increase of 15.2 GW over 2014. China surpassed Germany in the process to become the global solar leader with a total of 44 GW of installed PV capacity. Japan was third behind Germany, and the U.S. was in fourth place with 26 GW of capacity.

While fossil fuels and nuclear power still provide the majority of the world's electricity, solar is making progress. The REN21 report also stated that approximately 22 countries had enough solar PV capacity to meet over 1 percent of their electricity demand in 2015, and several countries accomplished far more than this. Italy, Greece, and Germany met 7.8, 6.5, and 6.4 percent of demand in 2015 with solar PV, respectively.

The 4.8 GW of installed global CSP capacity is far behind that of solar PV and is dominated by Spain (2.3 GW) and the U.S. (1.7 GW). The 250-megawatt (MW) Solana Generating Station in Arizona was the world's largest parabolic trough plant when it was built in 2013 by Abengoa Solar of Spain. It was also the first CSP plant in the U.S. with thermal energy storage. However, the plant has suffered from operational issues, according to the Phoenix New Times, and it has been hit with $1.5 million in air-quality fines, according to The Arizona Republic.

Brightsource Energy's 377 MW Ivanpah plant started up in California in 2014 and became the largest operating solar thermal electric facility of any type in the world. The same technology used by Brightsource Energy is also being used in Israel to create the world's tallest solar tower. The solar tower is part of the 121 MW Ashalim Project in Israel's Negev Desert. The tower itself will be 250 meters tall with 50,000 heliostat mirror panels.

Innovations in Project Financing

Innovations in solar power haven't been limited to technology. In 2013, NRG Energy broke new ground by offering up a new investment vehicle that came to be known as a yieldco, according to the National Renewable Energy Laboratory (NREL). The yieldco was designed to be the renewable energy analog of the Master Limited Partnership (MLP), which is a tax-shielded investment vehicle that is used predominantly to finance fossil fuel projects such as pipelines.

Yieldcos, spin off income-generating assets like utility-scale solar power plants, provide a predictable tax-deferred yield in exchange for cheap equity capital. Accelerated depreciation provisions of the tax code and other renewable power tax breaks mean that yieldcos are able to report net losses for five years or more while paying out positive cash flow to investors via dividends that will be classified as a return of capital, according to Investing Daily.

NRG Energy became the first company to spin off a yieldco subsidiary holding solar generating assets, according to Investing Daily, but several companies followed. TerraForm Power was spun off from the now bankrupt SunEdison. Abengoa Yield (now Atlantica Yield) was formed by Abengoa. First Solar and SunPower jointly launched 8point3 Energy Partners.

Many of the yieldco parent companies have suffered from financial difficulties, including bankruptcies. Most yieldcos have fallen well short of financial expectations. Thus, the jury is still out as to whether this innovation will have the kind of long-term staying power of the MLP structure.

The past decade has seen global solar power consumption increase by more than a factor of 50. According to the BP Statistical Review of World Energy, more solar PV capacity was added in 2014 and 2015 than in the previous six years combined. Although the global growth rate in 2015 for both solar PV and CSP fell below their respective 5-year averages, it seems certain that strong growth for both will continue for the foreseeable future.