Theodor (Ted) Scheidegger is the CEO of Solar & Hydro Division of Siemens Energy. The newly created division bundles Siemens’ activities in the growth markets of solar energy and hydropower and is also pursuing R&D of storage technologies. Prior to his current role, Scheidegger held executive positions in various companies, most recently as CEO of Sovello, one of the leading integrated suppliers of solar wafers, and solar cells and modules. He spoke to Anoop K Menon at the sidelines of the World Future Energy Summit (WFES) 2011 in Abu Dhabi answering questions on the market status of different solar technologies, their role in driving the overall renewable energy market, the areas where Middle East can learn from the European experience, trends and plans for the region.
From your perch, how do you see the role of solar in the renewable energy mix? Could you also tell us something about the broad trends within the solar market?
In my view, the share of renewable energy in the global energy mix will continue to grow. Solar will be the fastest growing segment within the renewable energy sector, accounting for nearly 10% of the total capacity added in the power generation market in the medium term. Within solar, the race is between Photovoltaic (PV) and Concentrated Solar Plants (CSP) technologies; within PV, competition is now heating up between crystalline silicon and thin film technologies. I feel that the significant cost reductions achieved by crystalline silicon industry poses a strong challenge to the thin film industry. Moreover, silicon-based technologies have a very strong track record in terms of proven performance, and with these cost reductions, I don’t see thin film growing its share of the PV market to the extent projected.
In terms of emerging technologies that could capture a significant share but aren’t on the radar yet, I see a lot of opportunity in the CSP space. Siemens has a minority share in a company that has been able to achieve a world record in aperture efficiency. That’s an area that I see as a technology best and poised to take a very interesting position. Of course, within the overall technology play, CSP hasn’t been able to demonstrate significant cost decreases like PV. However, in terms of the application environment, CSP is suited to areas where you can use the technology to boost other thermal-based applications such as combined cycle power plants; where you have the demand for energy storage directly linked with the generating facility, CSP can deliver energy storage solutions based on thermal power plants. So there will always be an application space for CSP. I can also see from our own operations that there is further cost down potential in CSP.
Do you feel that different solar technologies will develop their own niches?
I would re-phrase that because PV is already a mainstream technology. Some technologies will remain niche before they manage to break into the mainstream. But I see coexistence of various technologies as each has its particular area of application. Crystalline silicon has a stable performance track record and is a technology we use on a lot of our jobs.
From an efficiency standpoint, what can we look forward to?
At the PV system level, we have seen significant cost reductions over the past two years. In rough numbers, if you go back three years to Germany, which is the world’s largest PV market and where you were also achieving best in class costs due to economies of scale, experience, we have seen costs fall from € 3,300 – 3,500/kWp to €1,500 -1,800/kWp today depending on the size of the system. Thus, costs have more or less halved.
In my opinion, we will continue to see cost reductions but not longer at that gradient. Going forward, I see cost reduction of 8-10% at the system level and cost reductions that reflect the long term experience curve. We had a bit of an irrational market pricing behaviour due to the over capacity situation on the PV side. On the CSP side, cost reductions haven’t been as significant or rapid as in PV because there is a lot of civil works involved and aspects like balance of plants need to be considered. But I see gradual and consistent cost reductions in CSP too going forward. A key technology driver for CSP is more efficient receivers, in terms of high absorption and low emissivity, aspects that Siemens is also working very hard to improve. Of course, we won’t be seeing great leaps; rather, we will see ongoing improvements and technology migrations. A potential game changer could be Concentrated Photovoltaic (CPV), which could take us forward in terms of cost per watt.
Has solar power reached a stage where it can compete with conventional power generation?
We can address this issue from two perspectives – from a consumer perspective, which is retail grid parity and from a generation perspective, which is generation grid parity. In Germany, retail grid parity has nearly been achieved. But this is of questionable value because you are not taking into account things like dispatchability, availability of power and the whole grid cost. In terms of generation, some markets are coming close to achieving generation grid parity.
At Siemens, we are confident that in the mid-term, PV will achieve generation grid parity in certain markets where the energy infrastructure is based on less efficient, fossil-fuel based power generation. In countries in the sun-belt, where you have high solar radiation, and where you also have high share of, for example, oil-based power generation, PV can be quite competitive. This depends on environmental factors as well, but again, you have to address the challenge of dispatchability. The grid aspect is already taken care of because you are looking at central power plants.
What can emerging markets like the Middle East learn from Europe’s experience in building up a substantial renewable energy sector? Could you also comment the feed-in-tariff aspect which has lately been in the news?
A stable and predictable regulatory environment is extremely important because energy assets are long term assets built to run for decades. So the owner requires an environment where conditions are stable, predictable and transparent. Second, it is important to have a grid infrastructure that allows the integration of renewable energy including a significantly growing share of decentralised power generation. At Siemens, we have smart grid offerings of the components we generally supply, like for example, switchgears capable of handling bi-directional flow of energy. We also support network operators in upgrading their grids. Creating solutions to integrate decentralised generating assets is a core competence of Siemens. We have a platform for distributed control, smart components and smart grid capabilities.
Regarding the feed in tariffs schemes in Europe, the story has positive as well as negative sides to it. There are interesting elements in the feed-in-tariff schemes rolled out in France, Germany and Ontario that, in my opinion, could serve as useful models for the Middle East too. But there are other topics that need to be fine tuned as well.
Have you come across examples where solar power plants are being developed without much hand-holding from the government or even independently?
The US solar power purchase agreement (PPA) market is a good example. In some countries in South Europe, we are seeing PV systems being sold solely on the merit of grid parity. In Italy, for example, you can size the system to your consumption. What will change is that in the past, the sizing of the system was for maximisation; but in the future, it will be for optimisation. This change from maximisation to optimisation will be a paradigm change.
What are your plans for the Middle East? What are the announcements in the pipeline from your division this year?
We have the capability to roll out small and large scale PV and CSP plants in the Middle East. We are actively seeking and developing project opportunities. In addition to developing our existing customer relationships with utilities in the region, we are looking to work more closely with project developers.
You can expect announcements from us on CPV technology, on additional areas of activity like hybrid CSPs where we combine CSP plants with combined cycle power plants, something particularly relevant to the Middle East market. We are also currently working with partners on Integrated Solar Combined Cycle (ISCC) plants in the region.
At Siemens, we strongly believe that energy landscape of the future will need to be balanced. So PV plants will have to be balanced with other generating assets to provide, balance and manage power supply across the grid. In coming years, you will see announcements regarding the successful completion of such sites.
Could you also update us on your plans for energy storage?
Storage is an important part of the renewable energy solution. We have, in our portfolio, pumped water storage through our joint venture Voith Hydro. While we see a cost leadership position here, the application is somewhat limited because of the severe restrictions on the size. But we are looking at innovative solutions for energy storage outside of the hydro area in electrical, chemical and thermal areas.