Startup general interest

Solar power–a case study in exponential growth

By September 25, 2012 6 Comments

BP recently released a report showing that global solar generating capacity grew 73.3% in 2011, and at 63.4 gigawatts ended 2011 ten times greater than its level of five years previously (graphic below).

73% in one year implies that solar capacity is more than doubling every two years, a growth rate that has been maintained for twenty years now, and shows no signs of slowing, according to futurist Ray Kurzweil.

The Singularity Hub does a good job of analysing what all this means.

Most of all, it’s very exciting. If the trend continues for another two decades then solar will be more than providing for all our energy needs. Once there is a limitless supply of energy process like water desalination and hydroponic farming become affordable and other major issues like food and water shortages become tractable. Humanity’s energy requirements could be satisfied by just 1/10,000 of the sunlight falling on the Earth’s surface harvested by solar panels on an area equal to a few percent of the world’s unused deserts.

There are of course some caveats. Most importantly, solar power has been heavily subsidised, particularly in Europe where much of the growth has come, making it difficult to know what the growth would have been with no market distortions, or will be in the future when the subsidies inevitably disappear. Additionally, as any startup CEO or investor knows, high percentage growth rates come more easily when the numbers are small, and solar power is still in its infancy, at around 0.5% of total capacity in 2011.

However, photovoltaic devices are coming down in cost and increasing in efficiency – technology improvements that should underpin continued growth in the industry, particularly in the face of high fossil fuel costs. The point everyone is aiming for is ‘grid parity’ when solar becomes cost competitive with other energy sources, which is forecast to happen for over 100m Americans in urban centres in the next 6-7 years.

Let’s revisit that for a second – solar grid parity for 100m+ Americans in 6-7 years and free abundant energy for the whole world in twenty years. The first sounds plausible, great, but plausible. The second less so. That is how exponential increases always seem – sensible in the short term, but fantastical over the long term, after the knee of the curve kicks in. But exponential increases do continue over the long term to penetrate markets near 100%. The best recent example is mobile phone penetration where analysts have been scrambling to increase their estimates of device sales has penetration has accelerated towards 100% on a global basis. I could also have picked internet penetration, social media usage or tablet sales as examples.

These changes are coming faster and faster making it more and more important to spot what is coming early and get involved, which is pretty much my job description :).