Solar Power

Quick Facts

  • Solar power accounted for less than 0.2 percent of energy generation in the United States in 2011. Solar power also accounted for 0.5 percent of global electricity demand in 2011.
  • Total global solar energy generation capacity averaged 40 percent annual growth from 2000 (1.5 GW) to 2011 (69.8 GW). Solar is the fastest growing source of renewable electricity in the world and in the United States, but it is starting from a small base.
  • The average cost per installed watt (system costs including electrical grid connection and other equipment needed for installation) of solar photovoltaics in the United States has dropped from over $7.50/watt in 2009 to $4.44/watt in 2012. In 2011 alone, cost per installed watt declined 17.4 percent.
  • Future challenges for solar include grid integration and storage of power for later use, as well as achieving cost reductions for non-panel equipment, financing, and installation


Solar power harnesses the sun’s energy to produce electricity. Solar energy resources are massive and widespread, and they can be harnessed anywhere that receives sunlight. The amount of solar radiation, also known as insolation, reaching the earth’s surface every hour is more than all the energy currently consumed by all human activities annually.[1] A number of factors, including geographic location, time of day, and current weather conditions, all affect the amount of energy that can be harnessed for electricity production or heating purposes (see Figure 1).

Although solar energy is abundantly available, it is also variable and intermittent. Solar power cannot generate electricity at night without storage mechanisms, and is less effective in overcast or cloudy conditions. For this reason, solar power is often used in conjunction with baseload generation from coal, natural gas, nuclear, and hydro sources of power that can provide reserve generation in times of intermittency.[2]

The two main solar technologies for electricity generation are solar photovoltaics (PV), which use semiconductor materials to convert sunlight into electricity, and concentrating solar power (CSP), which concentrates sunlight on a fluid to produce steam and drive a turbine to produce electricity. CSP is a subset of solar thermal energy, which also encompasses water heaters, driers, cookers, and other applications of solar heating.

Solar power accounted for less than 0.2 percent of energy generation in the United States in 2011.[3]  Solar power also accounted for 0.5 percent of global electricity demand in 2011.[4]

Figure 1: Average Daily Solar Resource for South-facing PV Panels with Latitude Tilt

Source: National Renewable Energy Laboratory (NREL), “Photovoltaic Solar Resource of the United States” From Dynamic Maps, GIS data, and Analysis Tools, accessed August 3, 2012.

Note: This map shows annual average daily total solar resources. The insolation values represent the resource available to a photovoltaic panel oriented and tilted to maximize capture of solar energy. This map displays an annual average; maps for individual months reflect the seasonal variation associated with solar energy.

Solar photovoltaic (PV)

Solar PV is the term used to designate generation that uses the photoelectric effect to produce electricity. Globally, solar PV accounted for 69.8 GW of installed capacity at the end of 2011, and its capacity is expected to increase by about 29.9 GW in 2012.[5] Photovoltaics use semiconductor materials—most frequently silicon but also cadmium telluride and copper indium gallium selenide—to convert sunlight directly into electricity. PV installations can vary substantially in size and are usually divided into three sizes – residential-, commercial-, and utility-scale. The modular nature of solar PV makes it well-suited for distributed generation (small-scale installations close to where the electricity will be used, such as on the roof of a house or business). Concentrated PV, not to be confused with concentrating solar power (defined below), can also be used as utility-scale power plants, known as “solar farms” or “solar plants.”

Wafer photovoltaics

PV modules are produced by slicing ingots into wafers, most of which are silicon-based. These wafers are then electrically connected and packaged into modules, which can then be assembled into arrays. Today’s silicon-based modules have a conversion efficiency of about 13-20 percent (meaning they convert up to 20 percent of the energy they receive from the sun into electricity) though these efficiencies are improving.[6]

Thin-film photovoltaics

Thin-film technologies use very thin layers (only a few microns) of semiconductor material to make PV cells. Though thin-film PV absorbs more light than silicon wafers, thin-film PV is less efficient at converting light into electricity than traditional PV, and thus needs more surface area to produce a given amount of power. Most thin film efficiencies range between 6 and 11 percent, while silicon-wafer efficiencies are between 15 and 20 percent.[7]

However, thin-film PV cells require significantly less material to manufacture (approximately 5 percent of the material required to make a traditional PV cell). Thin film PV cells are commonly manufactured from lower-grade silicon or non-silicon materials such as CIGS (copper-indium-gallium-diselenide) and CdTe (cadmium telluride), which have lower costs compared to silicon-based PVs.[8] The use of less expensive materials or reductions in the amount of material needed brings down costs for thin-film PVs as opposed to silicon-wafer PV. Moreover, thin-film PV can be integrated into buildings or consumer products, for example, by layering them seamlessly onto roof tiles.

Next-generation photovoltaics

Researchers are developing next-generation materials as well as new methods for producing PVs to increase conversion efficiency and lower production costs. Many of these technologies, for example organic solar cells, are not dependent on rare earth minerals; thin film PV modules, on the other hand, are commonly made from rare earths such as tellurium, gallium, and indium.[9] Concentrating PV, not be confused with Concentrating Solar Power (CSP)–using lenses or mirrors to concentrate sunlight onto special PV materials—may prove to be a lower-cost solar power option. Nano-scale materials, such as carbon nanotubes, could also yield breakthrough applications for PV materials.[10] Others believe they can achieve low-cost solar electricity via the use of organic materials, bioengineering, and streamlined manufacturing processes.[11]

Concentrating solar power (CSP) / Solar Thermal

Globally, CSP accounted for 1.76 GW of installed capacity at the end of 2011.[12] Unlike PV, which converts sunlight directly into electricity, CSP uses the sun’s thermal energy to produce electricity. CSP is mainly a utility-scale application of solar power that uses arrays of mirrors to focus sunlight on a fluid to produce steam to spin an electricity-generating turbine. Because coal and gas-fired power plants also generate steam to spin turbines, solar thermal can potentially be integrated with these plants. CSP systems require a significant amount of area and ideal solar conditions.

CSP, similar to solar PV, has difficulty generating electricity when the sun is not shining. However, working fluids in CSP systems, such as molten salt, give up their heat slowly and can continue to produce steam and therefore electricity for several hours even without direct sunshine. In July 2011, a 19.9 MW CSP plant in Spain became the first utility-scale solar installation to generate electricity for 24 hours straight, using molten salt for energy storage.[13]

CSP technologies include parabolic trough, linear Fresnel reflectors, power towers, and Stirling thermal systems. Parabolic trough, which uses parabolic mirrors to focus light onto a linear pipe, is the most popular CSP technology and accounts for over 90 percent of CSP.[14] Other solar thermal applications outside of electricity generation, known as low-temperature or medium-temperature collectors, include HVAC system designs, solar water heating (e.g., hot water heaters for swimming pools) and cooking. Solar water heating accounted for 172.4 thermal GW in 2009; China accounted for 58.9 percent of this capacity.[15] The U.S. solar water heating industry is growing at 6 percent annually in the United States and has significant potential to expand.[16]

Solar power capacity is expressed as Watt-peak (Wp), which is the amount of power generated by a solar panel at standard testing conditions (STC). Standard testing conditions denote 25 degrees Celsius and an irradiance (or insolation at a specific moment in time) of 1000 watts per meter squared, approximating the sun at noon on a clear day in spring or autumn in the continental United States.[17] For PV, Wp incorporates the absorption efficiency of sunlight into the individual cells as well as the conversion efficiency from solar to electricity. However, because of nighttime, weather conditions, and other issues, the capacity factor of solar PV is around 25 percent, meaning average actual electrical generation over the course of a day is only a quarter of Wp.

Environmental Benefit / Emission Reduction Potential

Electricity produced using solar energy emits no greenhouse gases (GHGs) or other pollutants. As with any electricity-generating resource, the production of the PV systems themselves requires energy that may come from sources that emit GHGs and other pollutants. Since solar PV systems have no emissions once in operation, an average traditional PV system will need to operate for an average of four years to recover the energy and emissions associated with its manufacturing. A thin-film system currently requires three years. Technological improvements are anticipated to bring these timeframes down to one or two years. Thus, a residential PV system that can meet half of average household electricity needs is estimated to avoid 100 tons of carbon dioxide (CO2) over a 30-year lifetime.[18]

It is highly uncertain how quickly and to what extent solar will grow into the future. The IEA envisions a scenario in which nearly one-third of the world’s electricity supply could be from solar by 2060 given improved efficiency and a price on carbon, but all else equal. Carbon dioxide emissions from the world’s energy sector would fall from 30 gigatons in 2011 to 3 gigatons.[19] The European Photovoltaic Industry Association estimates that global cumulative solar PV capacity will be between 208 GW and 343 GW by 2016, corresponding to roughly three to five percent of global electricity demand. This percentage is similar to the current solar share of electricity generation in countries with the most solar generation.[20]


For PV, panel prices are usually denoted as cost per Wp. Costs are also sometimes expressed as cost per installed watt, which includes the price of the DC-AC inverter, connection to the grid, and more. All costs besides the module itself are known as balance-of-system costs. Thus, the addition of balance-of-system costs to the cost of the solar module equals the installed watt costs.

The cost of solar PV has fallen substantially over the last few decades, and especially over the past few years. CSP price declines have also been substantial, but not as sharp as PV price declines. The weighted average cost of PV systems across residential, commercial, and utility-scale installations declined from $10.80 dollars per installed watt in 1998 to just above $7.50 per installed watt in 2007.[21] By Q2 2012, costs have fallen to $4.44 per installed watt.[22] The bulk of these discounts is from diminishing module costs, although the root cause of these diminishing costs is unclear; for individual silicon wafer panels, the average selling price dropped from $1.85/watt to $0.97/watt in 2011 alone, nearly a 50 percent price decline.[23] Diminishing module costs have been driven by a variety of factors including vertical integration, scale efficiencies, overproduction of polysilicon (the key raw material in solar), subsidies, and more.[24],[25] In contrast, when the technology was first developed in the 1950s, solar PV cells cost $300 per watt.[26] Although solar PV prices are forecasted to continue to decline, the magnitude and pace of these price declines are uncertain.

CSP prices have also declined but not kept pace with PV price declines, leading to a shift from planned CSP power plants being converted to PV in 2011, including projects by Tessera Solar, Solar Millenium, and Google/Brightsource.[27] To illustrate this shift, CSP in 2008 accounted for about ten times as much installed capacity as solar PV in the United States; in 2011, solar PV accounted for 1.6 as much capacity as CSP.[28] While a rebound in CSP development may eventually come about, PV continues to remain more cost-effective than CSP while equally satisfying various state mandates such as renewable portfolio standards (RPS). However, compared to PV, CSP offers more developed storage potential as well as integration with conventional turbines normally fueled by fossil fuel combustion.

PV project costs may not decrease as quickly in the U.S. as they have in the past two years, and several market factors could affect the prices of PV modules. Low prices on solar panels in 2011 were in part caused by oversupply from Chinese solar manufacturers, which made up 47.8 percent of global solar cell market share in 2012,[29] but U.S. anti-dumping tariffs of thirty percent may soon be imposed on Chinese solar manufacturers. Moreover, cash grants from the U.S. Department of Treasury, which reimbursed solar developers up to thirty percent of project costs, expired in December 2011 and will affect both PV and CSP project development after 2012.[30] Project developers in the U.S. can now only claim tax credits (Investment Tax Credit) instead of upfront cash grants after 2011, which is a barrier to project development because many solar developers do not have a sufficiently large tax appetite, and developers may need upfront cash to finance the project. The Investment Tax Credit itself, which gives a tax credit for 30 percent of any commercial and residential system, is slated to expire at the end of 2016. Although the magnitude of the effects of these events is uncertain, balance-of-system costs, which now comprise more than half of the installed cost of PV systems (solar modules only comprise 35-40 percent of costs), may present opportunities for further price declines.

Solar generation still remains more expensive than other forms of electricity generation in many areas, but solar power may become comparable or even cheaper than conventional electricity in certain regions in the next few years. A study in late 2011 showed that the levelized cost of a thin film PV system ranges from 10 to 14 cents per kilowatt-hour (kWh) for a utility-scale solar power plant, while home and medium-scale solar installations cost between 12 and 30 cents per kWh.[31] These costs, however, depend on a number of assumptions and are highly sensitive to the inclusion of various tax incentives for solar power, especially the Federal Investment Tax Credit.

Solar prices are forecasted to continue to decline. GTM Research forecasts that the average selling price of silicon modules will fall from about $0.97 per watt to $0.61 per watt by 2015.[32] The U.S. Department of Energy SunShot Initiative aims to reduce PV costs to $1/installed Wp by 2020, which would translate to 6 cents per kWh.[33] These price reductions would allow solar to comprise 14 percent of U.S. electricity consumption by 2030, and 27 percent by 2050. Such shares of generation would lead to 8 percent (181 MMT CO2) and 28 percent (760 MMT CO2) reduction in U.S. CO2 emissions in 2030 and 2050 respectively.[34]

Table 1: Solar Technologies at a Glance (as of early 2012)



Solar PV Price

$4.44/installed watt[35]

U.S. Solar PV installed capacity

4.4 GW[36]

Global Solar PV installed capacity

69 GW[37]

CSP (parabolic trough) price

$5.79/installed watt[38]

U.S. CSP installed capacity

0.507 GW[39]

Global CSP installed capacity

1.76 GW[40]

Obstacles to Further Development and Deployment of Solar Power


Electricity generated from solar power remains more expensive than other forms of electricity in many places. Moreover, in recent years, the supply of rare earth minerals commonly used for PV manufacturing has become constrained. China supplies 97 percent of the world’s rare earth minerals and has enacted production and export quotas,[41] driving higher the price of rare earth minerals. The uncertain future of the supply of rare earths is a risk to the U.S. PV manufacturing industry,[42] but efforts are underway to develop a domestic supply of rare earth minerals as well as the use of solar technologies that do not use supply-constrained materials.[43] For the time being, rare earth supply has met the growth of solar in demand, and has not been a limiting factor in the price declines of solar power.


Solar power, especially solar PV, is constrained by intermittency issues because of weather factors and the fact that daylight hours are limited. CSP storage technologies are being developed to alleviate intermittency problems, although integrated storage remains costly. Solar power is also constrained by the uneven geographic distribution of solar resources, which ultimately encumbers integration with the larger electric grid. To achieve its full potential, solar power will rely on a variety of advanced enabling technologies such as demand response and improvements in energy storage. Energy storage technologies would allow electricity generated during peak production hours (i.e., on bright, sunny days) to be stored for use during periods of lower or no generation. The National Renewable Energy Laboratory (NREL) has published a series of studies examining whether intermittent renewable including solar are capable of providing up to 80 percent of electricity demand.[44]


Solar power, specifically utility-scale PV and CSP, is also held back by a lack of transmission infrastructure (necessary to access solar resources in remote areas, such as deserts, and transport the electricity to end users). These areas often have the highest potential for solar generation.

However, solar technologies offer a number of opportunities for “on-site” or “distributed generation” applications in which energy is produced at the point of consumption, including rooftop PV arrays and building-integrated photovoltaic (BIPV) systems. Such systems, known as local PV, can make solar power more cost competitive by avoiding costs associated with transmission and distribution. However, technical problems in regulating the local grid must be solved before local PV reaches its full potential.

Policy Options to Help Promote Solar Power

Price on carbon

A price on carbon, (e.g. under a carbon tax or GHG cap-and-trade program) would raise the cost of coal and natural gas generation, making solar more cost competitive in more parts of the country, especially as technological advancements continue to bring down the cost of solar power.

Renewable portfolio standards

A renewable portfolio standard (or an alternative energy portfolio standard) requires that a certain percentage or absolute amount of a utility’s power plant capacity or generation or sales come from renewable or alternative sources by a given date. As of July 2012, 31 U.S. states and the District of Columbia had adopted a mandatory RPS or AEPS and an additional seven states had set renewable energy goals. Renewable portfolio standards encourage investment in new renewable generation and can guarantee a market for this generation. States and jurisdictions can further encourage investment in specific resources, such as solar power, by including a carve-out or set-aside in an RPS, as is the case in the District of Columbia and 12 states (all of which mandate that a given percentage of their renewable energy requirements be met through new solar generation).

Development of new transmission infrastructure

Policies that promote the buildout of new electricity transmission lines (such as the streamlining of transmission siting procedures) allow access to these resources, thereby providing additional incentives for utilities to invest in them. Lack of transmission can also be addressed by instead incentivizing distributed electricity generation using solar PV, rather than focusing on large, utility-scale systems.

Feed-in tariffs and other financial incentives

Feed-in tariffs (FiTs)promote the deployment of solar power or other renewable electricity generation by guaranteeing electricity generators a fixed price for electricity produced from particular resources (e.g. solar), usually enough above the retail price for electricity to cover the costs of the generation and also provide the generator a profit. Typically, utilities are required to purchase this electricity at the specified price and then spread the additional costs across the utility bills of its customers. This fixed price is usually guaranteed for some specified period of time. (Germany, one of the most high-profile examples of a country employing feed-in tariffs, guarantees the fixed rate for 20 years.) These policies might also direct electrical grid operators to give priority to electricity produced from solar power or other renewables. Federal financial incentives include the Investment Tax Credit, which is valid until 2016, and the payment in lieu of tax credits (PILOT), which expired in 2011.

Other financial incentives to promote solar power can include tax incentives or credits, net metering, and loan programs. These incentives can be offered to utilities or to individual customers installing their own power systems.

Growth in solar power has relied heavily on policy and financial incentives, but price declines may make solar development profitable on its own. Europe had more than 51 GW of installed capacity in 2011, primarily because of FiTs and other incentives. In comparison, the United States only had 4.4 GW and China had 3.1 GW. Solar power in both countries is forecasted to grow quickly.[45]

Related C2ES Resources

Further Reading / Additional Resources

U.S. Department of Energy, Sunshot Vision Study, 2012

International Energy Agency (IEA): Solar Heating and Cooling Programme, Solar Heat Worldwide: Markets and Contribution to the Energy Supply 2009, 2011

International Renewable Energy Agency (IRENA), Renewable Energy Technologies: Cost Analysis Series Volume 1: Power Sector, Issue 2/5 Concentrating Solar Power, 2012

Solar Energy Industries Association (SEIA) and Greentech Media Research, U.S. Solar Market Insight Report: 2011 Year-in-Review, 2012

European Photovoltaic Industry Association (EPIA), Global Market Outlook for Photovoltaics Until 2016, 2012

International Energy Agency (IEA), Energy Technology Perspectives 2012: Scenarios and Strategies to 2050, 2010

U.S. Department of Energy (DOE)

U.S. Energy Information Administration. Annual Energy Outlook, Renewables.

International Energy Agency. Technology Roadmap: Solar Photovoltaic Energy. 2010;

International Energy Agency. Technology Roadmap: Concentrating Solar Power. 2010;

International Energy Agency Solar Power and Chemical Energy Systems (SolarPACE).

[1] Lewis, S. and D. Nocera. “Powering the Planet: Chemical Challenges in Solar Energy Utilization.” August 2006.

[2] Massachusetts Institute of Technology Energy Initiative. The Future of the Electric Grid Chapter 3: Integration of Variable Energy Resources. Cambridge, MA: MIT, 2011.

[3] EIA. Table 1.3 Primary Energy Consumption by Source. May 2012.

[4] European Photovoltaic Industry Association (EPIA). Global Market Outlook for Photovoltaics Until 2016. May 2012.

[5] Ibid.

[6] International Energy Agency (IEA). Renewable Energy Division. Technology Roadmap Solar Photovoltaic Energy. Paris:OECD/IEA, 2010. Web 01 Mar. 2012.;

[7] Quantum Solar Power. “A Comparison of PV Technologies.” Accessed July 19, 2012.

[8] Ibid.

[9] U.S. Department of Energy (U.S. DOE). Critical Materials Strategy. December 2010.

[10] Chandler, D. “All-carbon solar cell harnesses infrared light..” MITnews, 2010. Accessed 21 Jun 2012.

[11] IEA, 2010.

[12] Reve (Revista Eolica y del Vehiculo Electrico).”Global capacity of concentrated solar power rose to 1,760 MW.” 19 June 2012.

[13] Torresol Energy. Gemasolar plant description. Accessed August 2012.

[14] Sawin, L. and E. Martinot. “Renewables Bounced Back in 2010, Finds Ren21 Global Report.” Renewable Energy World Magazine. 29 Septmember 2011.

[15] Weiss, W. and F. Mauthner. Solar Heat Worldwide: Markets and Contribution to the Energy Supply 2009, Edition 2011. Gleisdorf, Austria: AEE Institute for Sustainable Technologies, May 2011.

[16] Trabish, H. K. “Solar Hot Water at Intersolar: Something Old, Something New, Something Borrowed.” Greentech Media, 11 July 2012. Accessed August 2012.

[17] IMTSolar. “Standard Test Conditions (STC) in the Photovoltaic (PV) Industry.” Accessed August 2012.

[18] U.S. Department of Energy National Renewable Energy Laboratory (NREL). “PV FAQs.” December 2004.

[19] International Energy Agency. “Topic: Solar (PV and CSP).” Accessed August 2012.

[20] EPIA, 2012.

[21] Barbose, G., N. Darghouth, R. Wiser, and J. Steel. Tracking the Sun IV: A Historical Summary of the Installed Costs of Photovoltaics in the United States from 1998 to 2010. Lawrence Berkeley National Laboratory, Report No. LNL-5047e, 2011.

[22] U.S. Solar Energy Industry Association (SEIA) and GTM Research. U.S. Solar Market Insight: Q2 2012. SEIA, July 2012

[23] U.S. Solar Energy Industry Association (SEIA) and GTM Research. U.S. Solar Market Insight: 2011 Year-in-Review. SEIA, January 2012

[24] Barbose, et al., 2011.

[25] Panzica, B. “Solar Pricing’s Rapid Decline.” Energy & Capital, 26 September 2011. Accessed August 2012.

[26] Shepherd, William. Energy Studies. London: Imperial College Press, 2003.

[27] Barber, D.A. “Are PVs Pricing-out CSP Projects in the U.S.?” EnergyTrend TrendForce, 8 September 2011. Accessed August 2012.

[28] U.S. Energy Information Administration (EIA). Annual Energy Outlook 2011. Table 120. Accessed August 2011.

[29] Mufson, S. “China’s growing share of the solar market comes at a price.” The Washington Post, 16 December 2011. Accessed August 2012.

[30] SEIA, January 2012.

[31] Branker, K., M. Pathak, and J. Pearce. “A Review of Solar Photovoltaic Levelized Cost of Electricity” Renewable & Sustainable Energy Reviews, 2011: pp. 4470-4482.

[32] Greentech Media Staff. “When will the pain subside? GTM Forecasts 21GW of PV Module Capacity to Retire by 2015.” Greentech Media, 5 July 2012. Accessed August 3012.

[33] U.S. DOE. SunShot Initiative Website: About. U.S. DOE. Accessed August 11, 2011.

[34] U.S. Department of Energy. Sunshot Vision Study. U.S. DOE: 2012.

[35] SEIA, July 2012

[36] Ibid.

[37] Ibid.

[38] International Renewable Energy Agency (IRENA). Renewable Energy Technologies Cost Analysis Series: Concentrating Solar Power. IRENA: June 2012.

[39] U.S. Energy Information Administration (EIA). Annual Energy Outlook 2012. Table 120. Accessed August 2012.

[40] U.S. Energy Information Administration (EIA). Annual Energy Outlook 2012. Table 120. Accessed August 2012.

[41] Stanway, D. and R. Lian. “China Minmetals calls for rare earth production suspension”. Reuters: 3 August 2011. Accessed August 2011.

[42] Finley, B. “China’s control of rare-earth metals poses risk to U.S. solar future.” Denver Post. January 16, 2011. Accessed August 2011.

[43] Scott, J. “Rare Earth Prices Double in Two Weeks as China Seeks to Increase Control.” Bloomberg: 17 June 2011. Accessed August 2011.

[44] NREL. Renewable Electricity Futures Study (RE Futures). NREL, 2010. Accessed August 2012.

[45] EPIA, 2012.