Heading for New Dimensions

Long-term investment with low risk

The Lieberose Solar Park near Cottbus (Germany): Covering an area of 660,000 m2, the current second largest solar park in the world boasts 900,000 thin-film modules and a capacity of 71 MW.
Photo: BELECTRIC Trading GmbH

While ground-mounted photovoltaic systems have to date predominantly generated medium-scale outputs of between 500 kilowatts (kW) and 100 MW, they are now reaching dimensions similar to those of large-scale power plants. For example, a solar park with a rated output of 290 MW was connected to the grid in Arizona in 2012 and the world’s largest solar power plant, which boasts an output of 579 MW, is expected to be fully operational by 2015. The outputs of photovoltaic power plants are thus achieving scales equal to those of conventional coal-fired power stations, and in Asia, there is even talk of gigawatt power plants, which have so far been the preserve of the nuclear industry.

According to data from the European Photovoltaic Industry Association (EPIA), 31.1 GW of solar power were connected to the grid in 2012, which amounts to slightly more than the previous year (2011: 30.4 GW), cf. fig. 1. With the exception of Europe and Japan, where numerous small and medium-sized PV plants are also being installed, this rapid expansion of capacity is predominantly being achieved through large solar power stations with mega watt-scale outputs. In fall 2012, the cumulative capacity of all photovoltaic plants installed worldwide exceeded the 100 GW mark, and despite some countries reporting setbacks in market growth, the rapid increase in additional capacity added is set to continue worldwide throughout 2013 and 2014.

EPIA predicts that the utility-scale market (2.5 MW and above) could quadruple from 9 GW in 2012 to 37 GW in 2017, if adequate support mechanisms are accompanied by a strong political will to establish PV as a major power.

There are a variety of reasons for the increasing importance of large photovoltaic plants. Rising efficiencies, both in solar cells made from crystalline wafers and in thin-film modules, are juxtaposed with rapidly plummeting system prices. It is chiefly solar modules that have become noticeably cheaper.

Module prices are expected to stabilize during the course of 2013 as a result of existing overcapacities disappearing from the market. The price of other important components, such as inverters and sub structures, is also falling, a development that is fuelling the worldwide boom in large-scale solar power plants and small roof-mounted systems alike. On the other end of the spectrum, the fuel costs of conventional power plants are increasing, causing power generation costs to rise with them. This is making the solar park market segment progressively more lucrative for financially strong investors – even in the face of tumbling feed-in tariffs.

Deciding factor economic viability

Ground-mounted photovoltaic power plant in Templin (Germany): With 1.5 million thin-film modules, 114 central inverters and a capacity of 128 MW, the power plant plays an important role in supplying the wider Berlin area with electricity.
Photo: juwi AG

Project planning and management, installation and the operation of ever larger PV power plants present new challenges to planners, investors and bankers alike. The larger the plant, the more likely it is that the proposed solar plant’s profitability, rather than the client’s credit standing, will be the deciding factor that determines whether or not the bank will finance the project. The profitability of the installation plays a decisive role in terms of project financing, while the investor’s credit standing hardly comes into question at all.

We must also bear in mind that countries such as Germany and Italy are slashing government incentives for solar power that are provided in the form of a legally guaranteed feed-in tariff. As a result, the photovoltaics power plant market is increasingly playing by the economic rules of the power generation market and it is no longer the level of the feed-in tariff but rather the levelized cost of electricity (LCOE) that decides whether or not investing in solar power plants will pay off. The LCOE is stated in either euros or US dollars per kilowatt hour (kWh) and takes into account the total cost of generating power, including investment costs for the plant itself, operating and maintenance costs, and other variable costs for the entire lifetime of the photovoltaic system.

At present, photovoltaics is obliged to compete with peak load power generation from gas power plants. Peak load occurs worldwide around midday when factories are working at full steam and the amount of power required for cooling is at its highest. This is when gas-fired and pumped-storage power plants are generally started up, as electricity prices are particularly high at this time of day. In Germany and several regions in the USA, up to 40 percent of the peak load power is provided by photovoltaics on some sunny days. At the European Energy Exchange in Leipzig, the falling procurement costs for solar power are striking, because its yield curve correlates closely to peak demand. Solar power curbs the cost of peak power and if the weather conditions cause a surplus of solar and wind power, this may even result in “negative” electricity prices being reached.

Solar power generation is already economically viable in southern countries such as Spain, Italy and Greece. Installation costs are falling steadily and, despite a lack of feed-in tariffs, investing in photovoltaics is becoming lucrative in many places – particularly in installations where grid parity has become tangibly close to being met or has even been exceeded. This trend was observed worldwide during 2012 and is likely to continue in 2013. By the end of 2012 it was possible to install a 770 kW solar generator for one million euros. Protecting such investments is of critical significance. Precise analysis and evaluation of all technical, financial, tax-related and legal details is therefore required to ensure the success of a solar project.

Speed matters

Size is not the only thing that counts, however – speed plays a big role, too: Power plants with large outputs of 100 MW and above can be planned and installed in a matter of months when using photovoltaics. No other technology is able to match this. Thanks to standardization and high quality levels, solar power plants are becoming ever more financially feasible and are yielding respectable returns – even with falling feed-in tariffs. In order to cover the worldwide electricity demand of around 12,000 GW with photovoltaics and other renewable energy sources over the coming years, the annual amount of newly installed solar power plants must reach around 300 GW. However, the markets are still far from achieving this target. In Germany alone, solar generators with a capacity of around 200 gigawatts peak (GWp) are required to ensure that – when working in combination with wind energy, hydropower and biomass – the power supply is fully covered by renewable sources.

Better integration into the power grids

With a rated output of 37.8 MWp, the large-scale solar power plant in Reckahn (Brandenburg, Germany), which has a surface area greater than 98 ha, prevents the production of more than 28,000 t of CO2 each year.
Photo: Tom Baerwald/Belectric Trading GmbH

Generating solar power locally requires restructuring the existing centralized power grid so that it contains decentralized facilities. Grid connection, especially in terms of large-scale ground-mounted solar power plants, presents a particular challenge, since the dramatic expansion of photovoltaics is increasingly creating bottlenecks in the power grids. If solar power plants are to succeed in making substantial contributions to the power supply, they must also play a greater role in maintaining grid stability. Technological progress in power electronics has resulted in solar inverters being able to feed reactive power as well as real power into the grids, freeing up additional grid capacity and easing expenditure on new, expensive power lines. Solar inverters are able to stabilize the grid because when combined with batteries, they can substitute the inertia of the rotating masses found in common power stations. According to plans made by the European Network of Transmission System Operators for Electricity (ENTSO-E), all large-scale solar power plants must be able to perform such a function from 2017.

Increasing attention is being paid to hybrid power plants, which generate both solar and wind power in close proximity to one another and are able to use the same grid feed-in point. Here, the costs of purchasing and developing the land are only incurred once, as are those for the medium-voltage switchgear (transformers, feed-in point). Solar power is generated throughout the day between sunrise and sunset, during which time it evens out the volatile feed-in curves of the wind turbines. In contrast, these turbines primarily produce energy in the evening, morning and overnight. Because both systems operate together at partial load for most of the time, better use is made of the feed-in point. Taken together, solar parks and wind power plants only exceed the maximum grid capacity locally available to them during very short and rarely occurring periods of the year, meaning that very little, if anything at all, needs to be spent on grid expansion.

With the success of renewable energy increasing the risk of overloading the grids – due to sun and wind providing fluctuating energy that does not always follow patterns of consumption – storage systems can be used to relieve the pressure on the public power grid in the long term.

It remains to be seen if mechanical, electrochemical or electrical energy storage will predominate in large-scale PV plants in the future. Coupled with an intelligent energy management system, storage systems will, in any case, pave the way for the large-scale integration of photovoltaic power into the grid. Inverters will serve as flexible interfaces, taking over associated system management tasks.

Photovoltaic power plants have also been proven to be extraordinarily capable of withstanding natural disasters. As Superstorm Sandy hit the highly populated east coast of the USA, the area’s large-scale power plants lost their connection to the grid. However, while it took a considerable number of hours for the conventional large-scale power plants to be started up again, the solar parks on Long Island were immediately able to feed power into the grid once the storm had passed.

Rising demand

In Lüptitz (Saxony, Germany), private individuals made investments in order to construct and operate a joint, citizen-funded solar power plant. The 4 MW installation was connected to the grid in September 2011.
Photo: Tom Baerwald

In the spring of 2012, the German government made drastic cuts to the feed-in tariff for large-scale power plants. From April 1, 2012, plants with outputs of between 1 and 10 MW received only 13.5 euro cents per kWh. Meanwhile, the feed-in tariff (for newly installed installations) has continued to sink monthly, meaning that by the end of 2013 it will only stand at around ten euro cents per kWh, and solar plants with a rated output of over 10 MW will receive no statutorily regulated remuneration whatsoever. While the latter may continue to be built, they must market the solar power they produce themselves. Countries such as Italy, France, Great Britain and Spain are following suit by supporting large-scale PV plants with statutorily regulated remuneration less and less. On the other hand, a growing number of communities and companies want to gain independence from the rising electricity prices charged by conventional suppliers. They can stabilize their power procurement costs by using large industrial roofs or communal areas to generate (their own) solar power.

Even without any additional stimuli from the state, demand is growing – particularly in Asia and the USA. For example, economic mechanisms are already driving forward the expansion of photovoltaics in the USA, where PV power plants are financed using Power Purchase Agreements (PPA). In this system, solar power is sold to regional grid operators at a fixed price. In Canada, too, photovoltaics is increasingly becoming first choice for building new peak load power plants, and in China, Thailand and India, governments and major utility companies are currently inviting tenders for a range of new projects. In Africa and South America, solar power vies for precedence with power from distributed diesel engine power stations, meaning that rising fuel prices are giving solar power new economic momentum here, too – even without legally guaranteed feed-in tariffs.

In regions with high levels of insolation such as Spain, the Middle East and North Africa, the southern States of the USA, India and parts of China, modern solar generators are already able to produce electricity at a price lower than conventional sources (a phenomenon known as grid parity). Even in Germany, the feed-in tariffs for solar power were below the end consumer prices for power from the grid in 2012. Grid parity is also increasingly a matter of consideration for decision makers working on the power generation side. Of course, to be permanently competitive in this market, the costs will certainly have to drop a great deal further.

Tables and charts

Fig. 1: Evolution of PV capacity

Fig. 2: Top 15 markets 2012 worldwide

Fig. 3: Global cumulative installed capacity