Solar panel market will rocket

The global market for solar panels will grow 50 per cent faster this year than last, fuelled by a collapse in prices and the opening of vast new sales opportunities, according to the chief executive of Suntech, the world's third-largest solar panel maker. The fall in prices puts photovoltaic panels, which produce electricity straight from sunlight, closer to competing directly with energy from fossil fuels and nuclear reactors.

Suntech Power, China's largest producer of solar panels, has seen its manufacturing costs cut in half as a result of lower prices for silicon, the main raw material used in the technology, said Dr Zhengrong Shi, the firm's chief executive. "This will be a good year for the solar sector," he said. "We believe solar panel prices will drop continuously, but the slope will not be as steep as last year."

Globally, at least 9,000 megawatts of solar power capacity will be added this year, compared with between 5,000mw and 6,000mw last year, he said. More than 13,000mw of capacity was connected to the commercial grid by the end of 2008, the latest year for which statistics are available. Europe will continue to be the largest market because countries there offer strong financial support that favours electricity produced from renewable sources. But Dr Shi expected new policies in Japan, China and the US to all boost demand for the technology.

Markets in the Gulf, including the UAE and Saudi Arabia, need the financial support of governments, which is expected in the near future, he added. Electricity prices in the region are heavily subsidised, meaning solar energy has no chance of competing with conventional energy without hefty subsidies or mandates on utilities to buy renewable energy. "We have these two [countries] having near-term potential," he said. "We need to have some financial model in order for investors to be interested."

In the UAE, Suntech's panels are installed at Masdar City, the carbon neutral development at the edge of the capital, and at the Yas Marina racetrack. Dr Shi said he was eying a larger market at Masdar City, which will eventually generate up to 220mw from renewables, the bulk of it solar. Dr Shi predicted that the cost of electricity from photovoltaics would become competitive with electricity generated by burning fossil fuels in some markets in three to four years. Some of the first to reach "grid parity" will be Italy, France, Greece and Japan, where electricity is already costly, he said.

The next big advances in reducing the panels' cost will come from boosting the technology's efficiency and reducing the cost of other materials besides silicon, he said. "Silicon costs are now about 60 per cent of the total costs," he said. "I think there's still some room to reduce the non-silicon costs." In the Middle East, grid parity will take longer, but Dr Shi said photovoltaics were already competitive with producing electricity from diesel, which is common in the Northern Emirates and other areas where natural gas is in short supply.

Globally, Suntech benefited last year from changing production costs and panel prices, and will continue to perform well against the main rival technology, so-called "thin-film" photovoltaics that are not based on silicon. Thin-film panels remain cheaper than silicon panels, but they are less efficient at converting sunlight into electricity, meaning that a larger area of panels is needed to produce the same amount of power.

The differences between the two technologies are on display at Masdar City, which installed equal amounts of both in an expansive array capable of generating 10mw of electricity. Suntech's silicon-based panels generate 5mw and take up about one third of the area needed for thin-film panels, which are made by the US-based firm First Solar, said Sameer Abu Zaid, the infrastructure manager of power generation at Masdar. The former are more efficient but also more costly, Mr Zaid added.

But he noted the price gap had narrowed in the past year. "The gap between thin-film and crystalline is closing," he said. @Email:cstanton@thenational.ae