Solar in the Circular Economy: A New Business Model
- May 19, 2015 6:43 pm GMTJul 7, 2018 9:20 pm GMT
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Solar is great. It is an abundant, free and omnipresent source of energy. We just need to convert it into a form of energy we can use: heat/cool or electricity. The only problem is that in order to convert it, we need to manufacture specific equipment (collectors, panels, inverters, etc.) – and that is costly. This is where our global energy transition is stuck. What we try to do is reduce the cost of this conversion equipment and find clever ways of financing it. But what about changing the industry entirely: into a circular economy, where we just lease the materials we need to convert sunlight into electricity?
- Solar is a technology, not a fuel: the equipment can be reused
- The challenge of financing could be entirely avoided in a circular economy approach
- A community of interest of manufacturers, EPCs and developers/land owners could scale solar up much more rapidly
A couple of years ago, I had the opportunity to visit one of the world’s most advanced space observatories, high up in Chile’s Atacama desert. It is an incredible feat of engineering and innovation. One relatively minor aspect of it, however, struck me in particular: The telescope required a very large amount of Platinum. (I don’t remember what for.) The amount was so much that it would have been far too expensive to purchase. So instead, it was just borrowed. Or, more accurately: leased, at a fee. It was molded into the shape needed for this particular purpose and after 30 years or so, when we might have an even better use for it, it can be returned to the owners (there were many) and again leased out for some other use.
This made me think of the solar industry. Take PV panels, for instance. We use them to convert sunlight into electricity. Both are forms of energy. A panel consists mainly of processed silicon sand (the cells) and aluminum (the frame). To make a panel, we need electric energy. Today the industry is set up in a traditional value chain: ingots, wafers, cells, modules. At each stage, there is a manufacturing margin. At the end, the module is sold on the market to a buyer, who uses it to make electricity and through that, earn or save money.
Now, that solar power has become competitive with socket and grid power prices, the market is no longer limited by the amount the government wants to provide in terms of subsidy. The bottleneck is simply the liquidity of the buyers (and the banks). A module lasts for around 30 years, after which time it is disposed of – ideally recycled. The buyer also has to be interested in owning a product that has a long life, longer than your average car, watch or even house.
What, if we looked at a solar module differently: as materials and energy that can be loaned? The user is only interested in the power generation, not in owning the equipment. A solar panel will generate the same amount of energy it used up in the manufacturing process within one year. The aluminum can be reused afterwards in many industries, such as the manufacturing of airplanes or vehicles. The silicon can be used in transistors, rectifiers, and other solid-state devices, which are used extensively in the electronics and space-age industries.
So, instead of selling a solar panel, manufacturers should lease it out and at the end of it, sell or reuse the materials. The price at which it is leased out should be lower than the levelised cost of solar energy, if there is any innovation in terms of reusing materials. A similar approach might work for inverters, cables, mounting structures and batteries, too. Thus, the entire question of financing of solar becomes irrelevant. The EPC company could join this circular economy by offering to set up and maintain a solar plant in return for a share of the power generation revenues. Everyone: the component manufacturer, the EPC and the developer would then come together in a joint business of generating solar power over the lifetime of the equipment.
Then, all that is needed, is good land in a location that receives a lot of sunlight. Land is the only factor determining the energy input and hence solar electricity output. A landowner will just need to assess whether “growing” electricity is the best use of the land – as opposed to other options, such as agriculture or construction.
Such a circular economy approach is not possible for fossil fuels as they consume energy sources (coal, gas, etc.). It is the simple fact, that solar (and some other renewables, such as wind) is a technology, not a fuel, that makes it possible. The world needs a much more rapid global transition to a less polluting and low emissions energy infrastructure. Re-engineering the solar value chain is perhaps our best bet to achieve that.