Photovoltaic Applications and Policy Initiatives

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Courtesy of Atlantis Technologies LLC

Issue: The world photovoltaic (PV) market has grown significantly in recent years. Although this trend is expected to continue in the future, estimates cannot be given with any real certainty.
Relevance: In this context the question that arises is the role that public and private funding plays in market development and how this funding should be used to ensure the best results. Although current EU energy policy favours PVs and renewables in general, additional measures oriented towards facilitating further market penetration could complement energy policy.


Photovoltaic (PV) technology, as an alternative option for generating electricity (directly from sunlight), has undergone rapid progress and development in recent years. The unquestionable advantages of PV systems as an emission-free (environmentally friendly) and reliable means of power generation, relying on an unlimited energy source (abundance), off grid, in small or large scale applications (versatility), etc., attracted the interest of investors and policy makers early on.

As a result, despite the high cost of PV modules, there has been considerable investment (mainly in the developed countries) in research and development in the PV sector. At the same time the spread of PV applications has been supported through direct or indirect funding via national or international programmes. The world PV market has grown at an annual average rate of 24% over the last 5 years (National Center for Photovoltaics, 1998). In 1997, specifically, growth reached 40% and sales of PV modules reached 125MWp (MegaWatt peak) capacity worldwide (Hill, 98). At the same time considerable reductions in module cost have been achieved (up to 25% over the last 5 years).

The main guidelines for the current policy promoting the spread of PV applications, are expected to remain virtually the same in the future, while a continuous decrease in the cost of PV modules may enable PV technology to become competitive for large, price-sensitive markets. Currently, the PV sector is passing through a transitional stage where improvements in PV cell cost and efficiency justify predictions that PVs may become competitive with conventional power generation. Optimistic estimates place this period at the end of the first decade of the 21st century.

Current Technological Achievements

Today, R&D mostly focuses on optimizing the efficiency of PV cells, developing new materials for cell manufacture and investing in more efficient production lines. The general aim is to produce PV cells on an industrial scale in order to achieve both higher efficiency and low cost. The efficiency of cells is increasing gradually through process optimization, while the cost of cells depends on efficiency, size, production yields and throughput, together with the cost of raw materials.

Semiconductor materials used at present, for manufacturing PV modules can be divided into two main categories: (i) crystalline (mono and polycrystalline silicon) and (ii) amorphous materials used as thin films (amorphous silicon, Cadmium Telluride, CIGS - CuInGaSe2). Crystalline silicon modules represent around the 80% of the market and achieve better efficiency (commercial cells have an efficiency of around 12-17%) compared to modules made from amorphous materials (efficiency around 6-8%), but are more expensive (Hill, 98). Their relatively low price makes thin film modules more attractive for applications where high efficiency is not the top priority. Also, the fact that there is a significant margin for further reducing the production cost of thin film modules, efforts are being concentrated on optimizing thin film technology. It is estimated that for plants with an annual production of CIGS modules of 200 MWp, the cost could be around ECU 0.5/Wp (Hill, 98).

 New materials are also being developed at research level, but their production cost is, at present, too high for commercial applications. In addition, a variety of design-oriented PV modules of different colours and shapes has been developed to encourage wider introduction and prevalence of PV systems, particularly in applications where the external appearance of the system is important (Ishikawa, 98).

Key Issues & Strategic Considerations for the Diffusion of PV Applications

Although the cost of PV systems is currently relatively high, it is falling gradually and it can be further reduced via increasing scales of manufacturing. It is estimated that a growth of the PV market by a factor of 20 to 30 will lead to production plant of the scale needed to achieve costs of around 1ECU/Wp without the need for any technical breakthroughs (Hill, 98). By the year 2000 yearly production capacity, in Europe alone, may attain 150MWp, representing a tenfold increase on 1996 (Palz, 1998).

Nevertheless, unless the rise in the production capacity is followed by a proportional increase in demand for PV systems, sustainable market growth can not be guaranteed. Should demand remain at considerably lower levels compared to production rates, it is possible that the positive climate will be reversed.

Strategic initiatives integrated with existing policies could support suitable investments not only for further developing the PV market and technology, but also for ensuring a continuous and sufficient market growth.

Construction of PV Plants – Technology Transfer

Currently, over 90 per cent of the world annual production of PV modules is concentrated in the USA, Europe, and Japan (Singh, 98). New manufacturing plants are already under construction (mainly in developed countries such as the USA, Germany and Japan) and their operation is expected to play an important role in the reduction of PV module production costs.

However, it is equally important that market leaders should turn to the construction of more but relatively smaller PV plants in other countries (decentralization of PV industry), where there is a considerable potential for PV market expansion (e.g. favourable climatic conditions), so as to stimulate local demand and subsidies. These plants may use PV cells (or even modules) as raw material to produce end products, in order to satisfy mainly local or regional demand by customizing products to the specific characteristics of the local markets. Local investors can participate in such schemes and additionally local subcontractors can be used.

In this way, mechanisms for technology transfer will be created, leading to more efficient technology diffusion and dissemination. Simultaneously, the required capital investment will be divided between the developed economies (technology holders) and local investors. The decentralization of the PV industry will result in the transfer of state-of-the-art technology and contribute to job creation.

Strategic partnerships, such as joint ventures and franchising, can be widely used as tools for the decentralization of the PV industry as well as for technology transfer. Both models can combine the organization and resources of a big corporation and the flexibility and motivation of the relatively small entrepreneur.

Specifically, encouraging technology diffusion among local companies which are indirectly involved in PV applications can prove to be crucial. Such examples are construction companies, utilities and generally industries which are involved in the building sector (e.g. companies producing facades, windows etc.). These companies can integrate PV systems into their products and services. They have access to a large clientele and they can influence PV market accordingly.

 Moreover, such companies can apply PV technologies when they design, produce and/or supply product systems incorporating these technologies, thus playing the role of the product developer by producing customized products adjusted to the local market peculiarities. For instance a company which produces external doors, windows and facades made from aluminium is a potential product developer for a PV system integrated into a building. In this and similar cases franchising can offer a new market driving force for PVs with relatively small investment requirements.

In this context companies with a shared interest in the growth of PV sector can form a local cooperative network whose goal is to improve PV technology uptake. This network can create ‘One Stop Shop’ companies where the customer interested in buying a PV system will be able to approach a single company able both to deliver a turnkey installation and provide after-sales technical assistance. These companies can organize campaigns to increase public awareness so that small-scale systems are seen on a par with ordinary appliances such as air-conditioning units and not as an extraordinary ‘space-age’ technology.

As an example -and perhaps also a stimulus for further research beyond the scope of this article- it is worth mentioning the case of Greek solar collector’s market. The manufacturers of solar collectors in Greece have set up an association and have agreed on a common marketing policy. The campaign in favour of the installation of home solar collectors was accompanied by a tax credit introduced by the government. As a result the Greek market has recently experienced a tremendous growth: the Greek home solar collectors’ market accounts for almost the 50 per cent of the European total. Financial incentives, in conjunction with strategic collaboration among manufacturers, have stimulated demand. Although PV systems and solar collectors are quite different systems, this case is a striking example of the extent to which networking can influence market growth.

Oriented Market Growth

The promotion of specific promising PV applications has also been identified as an important factor for PV market development. Such applications may include Solar Home Systems (SHS) and Building Integrated Photovoltaic (BIPV) systems:

SHS are small PV systems designed for off-grid applications providing power for a single household. SHS are modular and simple PV systems, intended mainly for developing countries as the least-cost option for rural electrification of large areas where population is dispersed and electricity demand is low. In 2010 this market segment is forecast to absorb around a fourth of overall shipments of PV modules.
The two major barriers to SHS expansion are the affordability of electricity to rural customers and access to credit (Ciscar, 97). Utilities can play an intermediate role in the spread of SHS by taking over responsibility for installing and operating the SHS through setting up the necessary infrastructure. Thus, failures caused in the past by the mistaken belief that PV systems require little or no support, can be avoided (Fitzgerald, 98). Moreover, utilities would avoid the high cost that an extension in the electricity network would require. Economies of scale can be achieved via the development of standardized SHS kits, adjusted to the particularities of local conditions. Utility companies may offer financial credit to the customers (schemes such Third Party Finance (TPF) may be introduced), while they can also receive public funding for implementing programmes for the electrification of rural areas, and training local technicians in the installation and maintenance of SHS. Further research could examine the willingness of utilities to undertake such efforts and the incentives for them to do so.

BIPV systems are PV systems which are integrated into the structure of buildings. With buildings accounting for 40% of the total primary energy requirement in the EU (EUREC, 98), BIPV seem to be an attractive solution in satisfying part of their electricity demand, while buildings offer an excellent location for PVs. Incorporating solar energy into the building complements the overall energy efficiency of the design.
Apart from clean electricity generation, the main advantage of BIPV systems is the capital cost reduction that can be achieved by the substitution of conventional cladding elements. On the other hand, it is clear that in order to obtain the best results, the integration of PV systems should be studied and planned when designing the buildings. Indeed, significant efforts have been made worldwide by architects and building engineers to integrate PV systems into buildings and other structures. However, a lot of work has to be done in the areas of training and information dissemination.

For these reasons, BIPVs(1)have become a popular application of PV systems and they have been installed in a wide range of buildings, both new and old. In order to exploit the full potential of the BIPV market, close cooperation at local level among PV manufacturers, construction companies and utilities, architects and building engineers is crucial.

As regards BIPV systems and grid-connected PV installations in general, public intervention is important in order to form an appropriate framework, for example through new building regulations and the restructuring of the legal framework governing power generation. A key issue is the rate which utilities should apply per kWh bought from the owners of grid-connected PV systems. Flexibility in tariffs and financing of grid-connected PV systems may be considered a prerequisite for substantial market growth. Net metering, green-pricing, tax credits, Third Party Finance are some of the financial instruments that can be used.

Funding – Support Programmes

The continuous growth of the PV market shows that funding programmes are headed in the right direction. However, as mentioned above, the PV market needs to expand by a factor of between 20 and 30 in order to achieve significant economies of scale and become competitive in larger markets.

Once policy has chosen to promote PV growth actively (whilst not disregarding other promising renewable-energy technologies), the next question raised concerns the actions that should be subsidized to achieve the desired result. The table bellow summarizes a number of possible actions or measures.

PV support programmes can be designed to encourage technology transfer and diffusion and the involvement of companies interested in the PV field -mainly as users and installers- thus enhancing market penetration of PV applications. Utility companies are a useful example. Technology transfer to these companies can accelerate PV market expansion, while utilities could be encouraged to offer TPF so that the end user need not be burdened with the high capital cost of a PV system. Alternatively, net metering can offer a simple, inexpensive mechanism for encouraging installation of small-scale, grid connected systems. By adapting net metering, utilities benefit by avoiding the administrative and accounting costs of metering and purchasing the small amounts of excess electricity produced by these small-scale installations.

PV funding programmes can equally support and encourage training and the establishment of the necessary infrastructure/appropriate framework in local markets, complementing the existing measures financing R&D projects and/or the installation of PV systems for demonstration purposes. In this way a versatile diffusion of PV technology can be successfully achieved, whilst also expanding the PV market. Simultaneously, a rigid infrastructure would be created to provide integrated services and support to PV end users. Within this context training has to be seen as a necessary component for successful market development, and one which can ensure that the best available technology applied in each case and that PV systems are operated efficiently and reliably.


Current technological achievements and financial support bode well for the future of the PV industry. However, we hope to have shown that there are areas in which further initiatives can play a useful role. The aim in the first case discussed is the further development of local PV markets through the construction of new production plants and technology transfer at local level.

The second case identifies SHS and BIPV as two very promising PV applications (this list is of course not exhaustive), the role of which is expected to affect the future of the PV market. In both cases significant market growth can be induced by encouraging changes in the existing legal and financial framework, and through training and public awareness schemes. Also, funding demonstration projects in the case of SHS and demonstration and dissemination projects in the case of BIPV systems will remain an important factor for the future of these applications.

As an extension to the first and second areas, in the third we have listed supporting actions and underlined the importance of supporting the establishment of appropriate for the further development of the PV market.

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