Was the Treasury right about cutting support for larger solar installations?

The UK solar PV industry has been griping about the loss of support for installations over 50kW, but the big market changes happening elsewhere in the world suggest that the Treasury may have - albeit accidentally - backed the right horse.

Today's big announcement is the filing for bankruptcy of a California firm, Solyndra, that made photovoltaic modules - despite it having received over half a billion dollars of subsidy from the Obama administration. Republicans are already seizing on this as proof of wasted taxpayers' cash.

Contrarily, there has been a recent trend in the American sunbelt areas for plans for big solar power station developers to switch from using solar thermal technology to PV. At least three gigawatts of PV has been gained this way from solar thermal.

A year ago, my money was on solar thermal to be the favoured renewable technology of the future in these sunbelt areas with their clear, hot skies.

Solar thermal is well understood, and even offers the prospect of cheaper energy storage than the batteries that must be utilised with PV modules - they use molten salt to store the sun's heat for the night-time in order to continue to drive the plant's turbines.

Solar thermal plants have a further advantage - they can be hybrid plants, cogenerating the heat required to power the traditional design of electricity generating turbines with other fuels such as coal or gas.

But, if PV is now in such demand, why is Solyndra closing down, with the loss of 1400 jobs?

It is because prices of solar modules have fallen astonishingly fast.

Prices of PV modules coming out of China have fallen by 30% and are 10 - 20% cheaper than U.S.-made panels.

For three years there has been an oversupply of modules. Factory gate prices are now much cheaper than retail prices. In Europe they average Euros 2.51 per peak watt. Some are available for as little as $1.30 a peak watt.

Cheaper labour forces has led to factories being built in low-cost locations like Mexico, China, Taiwan and Eastern Europe for module production by big Western names such as Q-Cells, BP, SunPower and Evergreen - which filed for chapter 11 restructuring bankruptcy last month due to the competition from the far east.

(It's slightly more complex than this in Solyndra's case - Solyndra invented a solar panel that didn’t use expensive silicon, but since then - fortunately - the price of silicon has plummeted, leaving Solyndra's panels too expensive to compete.)

In America, solar is supported by policies at the federal, state and local levels.

At the federal level, there are Investment Tax Credits (ITC) and Treasury Cash Grants to support investments in the PV industry. At the state level, Renewable Portfolio Standards (RPS) fuel demand from utilities, which is responsible for % of 31% growth in the US market, projected to rise to 60% in 2015 by market analysts Solarbuzz.

It forecasts the US to become the third-largest solar photovoltaic market, behind Germany and Italy in 2011, leaping from 5% of the world PV market to 12% by 2015.

Italy is having a solar renaissance. Today a completion of a 48MW power station is being celebrated in North Italy, built by German firm S.A.G. Solarstrom. It will produce more than 64 million kWh of power per year. The project is the largest so far in the history of S.A.G. Solarstrom AG and its sales process is also going according to plan.

The company's CEO, Dr. Karl Kuhlmann, said that its 2011 forecasts of EUR 280 million sales were on schedule “despite the German market losing a lot of momentum” due to the reduction in feed-in-tariffs in Germany.

Part of the reason for giving a stimulus to a domestic market like feed-in-tariffs is to force down prices by encouraging mass-production. Other countries have had these tariffs for years - and it looks, globally - as if the tactic has been phenomenally successful.

So successful that China is copying it – with a new feed-in-tariff (FIT) incentive programme that will potentially increase installations to reach a total of 2.4GW in 2012.

In 2010, U.S. solar firms achieved a positive trade flow of $1.9 billion globally, (GTM Research and SEIA®’s U.S. Solar Energy Trade Assessment 2011.

It was a record year, with exports of over $5.6 billion, being shipped mostly to China and Germany, and imports of $3.7 billion of mostly already assembled PV modules mainly from China and Mexico.

The trade balance in PV technology with China was positive to America's benefit by $240 million - but mainly in capital equipment and the raw material polysilicon.

China sold the PV modules it made using these back to the U.S. This trend is now only going to increase. China will dominate the solar module supply market, and the world will benefit from lower prices.

Back in the UK, which sadly doesn't get as much sunshine as California or Italy, the amount of electricity you can generate per pound spent on photovoltaics is far less than that you can get by spending it on other renewable energy sources, like wind or biogas.

A feed-in-tariff favouring householders may be a good way of popularising renewable energy and energy awareness among the general public, but it is not a cost-effective way to generate energy.

With prices at record lows for the modules it will be interesting to see if the UK medium-scale solar installation sector still manages to find good business despite the reduced subsidies, or if developers and land owners like farmers realise it makes more financial sense to invest in other technologies.