The dark side of solar power & the looming waste crisisHarvard Business Review, 18 June 2021
By Atalay Atasu, Serasu Duran, and Luk N. Van Wassenhove,
The solar industry’s current circular capacity is woefully unprepared for the deluge of waste that is likely to come. The economics of solar would darken quickly if the industry sinks under the weight of its own trash.
It’s sunny times for solar power. In the U.S., home installations of solar panels have fully rebounded from the Covid slump, with analysts predicting more than 19 gigawatts of total capacity installed, compared to 13 gigawatts at the close of 2019. Over the next 10 years, that number may quadruple, according to industry research data. And that’s not even taking into consideration the further impact of possible new regulations and incentives launched by the green-friendly Biden administration.
Solar’s pandemic-proof performance is due in large part to the Solar Investment Tax Credit, which defrays 26% of solar-related expenses for all residential and commercial customers (just down from 30% during 2006-2019). After 2023, the tax credit will step down to a permanent 10% for commercial installers and will disappear entirely for home buyers. Therefore, sales of solar will probably burn even hotter in the coming months, as buyers race to cash in while they still can.
Tax subsidies are not the only reason for the solar explosion. The conversion efficiency of panels has improved by as much as 0.5% each year for the last 10 years, even as production costs (and thus prices) have sharply declined, thanks to several waves of manufacturing innovation mostly driven by industry-dominant Chinese panel producers. For the end consumer, this amounts to far lower up-front costs per kilowatt of energy generated.
This is all great news, not just for the industry but also for anyone who acknowledges the need to transition from fossil fuels to renewable energy for the sake of our planet’s future. But there’s a massive caveat that very few are talking about. […]
The High Cost of Solar Trash
The industry’s current circular capacity is woefully unprepared for the deluge of waste that is likely to come. The financial incentive to invest in recycling has never been very strong in solar. While panels contain small amounts of valuable materials such as silver, they are mostly made of glass, an extremely low-value material. The long lifespan of solar panels also serves to disincentivize innovation in this area.
As a result, solar’s production boom has left its recycling infrastructure in the dust. To give you some indication, First Solar is the sole U.S. panel manufacturer we know of with an up-and-running recycling initiative, which only applies to the company’s own products at a global capacity of two million panels per year. With the current capacity, it costs an estimated $20-30 to recycle one panel. Sending that same panel to a landfill would cost a mere $1-2.
The direct cost of recycling is only part of the end-of-life burden, however. Panels are delicate, bulky pieces of equipment usually installed on rooftops in the residential context. Specialized labor is required to detach and remove them, lest they shatter to smithereens before they make it onto the truck. In addition, some governments may classify solar panels as hazardous waste, due to the small amounts of heavy metals (cadmium, lead, etc.) they contain. This classification carries with it a string of expensive restrictions — hazardous waste can only be transported at designated times and via select routes, etc.
The totality of these unforeseen costs could crush industry competitiveness. If we plot future installations according to a logistic growth curve capped at 700 GW by 2050 (NREL’s estimated ceiling for the U.S. residential market) alongside the early replacement curve, we see the volume of waste surpassing that of new installations by the year 2031. By 2035, discarded panels would outweigh new units sold by 2.56 times. In turn, this would catapult the LCOE (levelized cost of energy, a measure of the overall cost of an energy-producing asset over its lifetime) to four times the current projection. The economics of solar — so bright-seeming from the vantage point of 2021 — would darken quickly as the industry sinks under the weight of its own trash.
The rapid rise in prices for raw materials has reversed a decades-long decline in the cost of solar energy, denting investor interest in the sector following a record rally in 2020.
Shares in solar companies have fallen by 18 per cent this year, after more than tripling in 2020, according to the MAC Global Solar Energy Index, as companies face higher steel, polysilicon and freight costs.
The supply chain pressures are limiting the potential for further reductions in the costs of solar installations, just as governments pledge to focus on a “green recovery” from the pandemic.
The cost of solar energy fell by 80 per cent between 2010 and 2020, but those dramatic decreases have come to an end, according to S&P Platts.
“The narrative in the solar industry has shifted,” Bruno Brunetti, an analyst at S&P Platts, said. “We have seen steep declines in costs over the past decade, but we are seeing that stabilise now and even increase in some cases.”
The US price of hot-dipped galvanised steel coils, which are used in solar panel frames and structures, has more than doubled from early 2020 to record levels, according to S&P Platts. At the same time, prices for monocrystalline silicon cells, modules that allow for the conversion of light into power, have risen by a quarter from this time last year, BloombergNEF data show.
In addition, freight rates in China have also jumped by 41 per cent this year, according to the Shanghai Containerized Freight Index, which reflects rates for the export of containers from Shanghai.
John Martin, chief executive of the US Solar Fund, said higher raw material prices will probably increase the costs of installing new solar power by 20 per cent — putting solar costs back to the levels they were two years ago. “Decarbonisation costs will come down, but it’s not going to be free — capital will be required,” he said.
The US Solar Energy Industries Association said this week that “compounding cost increases across all materials are just beginning to affect installers”.
via climate science
June 22, 2021