A SunShot In the Arm: How the Energy Department Is Banking On Renewables

Minh Le is the Chief Engineer for Department of Energy’s Efficiency and Renewable Energy SunShot Initiative. This arm of the DOE aims to dramatically decrease the total costs of solar energy systems by 75% before the end of the decade by funding selective research and loan guarantees for risky concepts with high payoffs.

Minh Le

There is a lot of talk domestically and internationally about policies that promote the development and deployment of renewables. From where you sit, which policies are working and which policies aren’t in the United States and elsewhere?

Demand side policies such as feed-in tariffs that have been in place in Germany have successfully created demand for renewables. However as we have seen in Spain and Italy, they can also create large gyrations in the demand when the feed-in tariffs are significantly reduced. The approach that we are taking at SunShot is to work independently of energy policies and to envision a world without subsidies. By fostering solar energy research that can reduce the cost of solar by a factor of 3 to 4 by the end of the decade, solar energy can compete with fossil fuels for electricity without subsidies at which point market forces, rather than policy, will enable an even greater acceleration of solar energy penetration.

But it will take more than just research. We remain the most innovative country in the world—but “Invented in America” is not good enough. We need to ensure that these technologies are invented in America, made in America and sold around the world. That’s how we’ll prosper in the 21st century.

To what extent are renewable portfolio standards (RPS) driving the demand for utility-scale solar installations in the U.S., and what would the market look like without RPS?

RPSs and other incentives at the state and federal levels across the country are helping to generate large-scale solar installations. If enacted properly, RPSs and other policies to encourage deployment of solar energy have been shown to drive economic growth. This can be seen in a rapidly growing solar market, including a remarkable 104% increase in solar installations in 2010 over 2009.

RPSs help drive down the learning curve and reduce solar energy cost in the long run. Best practices for an RPS are to have a gradual, even, and sustained ramp-up of renewable installations; share cost allocations evenly; and have consequences for noncompliance.

How do you see the relationship between the two dominant technologies, PV and CSP, changing in the solar industry over the next five to ten years?

Both are important to the solar industry. PV is more scalable, and is thus better suited to the residential rooftop market. It will be installed in industrial and utility scale settings as well. CSP is better suited for thermal storage technology. In other words, CSP facilities are able to store energy for use at a later time (at night, for instance). This makes CSP more able to fill the role of “baseline generation”, thus making it attractive for grid-friendly, high-penetration deployment in the near future. Both technologies will be vital in achieving sustainable energy independence in the near future.

Many solar industry observers have been surprised at how quickly solar PV has come down the cost curve. Can the industry keep up this rate of change in price? If so, when do you foresee solar power plants becoming cost competitive with more traditional electric power sources?

We are optimistic that purely through technological innovation, and without subsidies, solar energy will be cost competitive with coal generators by the end of the decade. The drops in prices have been precipitous over the past decade, and we expect to see further drastic drops in the coming years until grid parity is reached. This is corroborated by very stable and promising price drops in response to technological innovation.

What possible international accords, potential financing mechanisms, or pending domestic policies do you see on the horizon that could be game changers for solar energy, and the renewable sector at large? How likely do you think these are?

Game-changing policies and projects are being enacted today. There are myriad ARRA-funded solar projects currently under way, includ[ing] $2.5B for renewables R&D, $1.6B for renewable energy bonds, and tax breaks for installing solar energy.

SunShot Initiative projects, similarly, are showing dramatic results in stimulating the solar energy economy. One of our programs, the SunShot Incubator, has created nearly 1300 jobs and raised over $1.2B in private venture capital for solar energy over the past few years, and is currently being re-released to target non-hardware issues as the Incubator for Soft Cost Reductions.  These “soft costs” include everything from acquiring customers and financing to permitting and connecting your system to the electricity grid. Today, these “soft costs” account for up to 40% of a system’s total cost. As panel prices continue to come down, they will account for even more of the cost of the overall cost of a system.

If you had the chance to change or implement one policy regarding solar energy in the United States, what would it be and why?

What is most important is a continuing commitment in the U.S to foster the growth of one of the fastest-growing sectors of our economy and compete in this enormous global market.

Feature photo:  cc/Andreas Lea

Evan Johnson
Evan Johnson is a joint MPP/MBA student with the Harris School of Public Policy & the Booth School of Business. He is interested in the Cleantech industry.

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