The United States is already installing as many solar panels as it did before the pandemic. Analysts expect the total plant capacity to soon exceed 19 GW, up from 13 GW at the end of 2019. According to industry studies, over the next 10 years, the total capacity of facilities could grow 4 times. The industry’s resilience through the pandemic is driven by the Solar Investment Tax Credit, which covers 26% of solar costs for all residential and commercial customers. After 2023, the tax credit will drop to 10% for commercial vehicle operators and will not apply to home buyers. As such, solar panel sales are likely to rise further in the coming months as buyers chase the discount while it’s still there.
All this is good news not only for the industry, but for everyone who understands the need to transition from fossil fuels to renewable energy sources. However, there is a serious snag that few people mention.
Paintings, paintings, paintings everywhere
Economic initiatives aim to encourage customers to quickly replace existing panels with newer, cheaper and more efficient designs. In an industry where recycling and recycling solutions are still largely inadequate, the sheer volume of discarded slabs will soon create a menace of devastating proportions.
According to the official forecasts of the International Renewable Energy Agency (IRENA), “by the beginning of the 30s. It is expected that a large amount of waste will accumulate annually, “by 2050 it could reach 78 million tons. But because we have many years to prepare, the paper presents this as a multibillion-dollar opportunity to reuse valuable materials, rather than as a dire threat. The threat lies in the fact that IRENA’s projections are based on the assumption that customers will not change their plates over the entire 30-year cycle. Do not take into account the possibility of large-scale replacement of panels at an early stage of use.
In our study, we took this factor into account. Using data from the United States, we modeled initiatives that influence a consumer’s decision to replace panels. We hypothesized that three variables were particularly important when deciding to replace the panels: installation cost, level of compensation (ie, the current rate of solar energy sold to the grid), and modular efficiency. If the replacement cost is low enough, and the efficiency and compensation rate is high enough, we believe that rational customers will replace whether their current boards have lasted 30 years.
For example, consider a hypothetical consumer (let’s call her Mrs. Brown) who lives in California and installed solar panels in her home in 2011. Theoretically, she could use these panels for 30 years. At the time of installation, the total cost of the panels was $40,800, 30% of which is tax-deductible due to the solar investment tax credit. In 2011, Ms. Brown expected her installation to produce 12,000 kilowatts of power annually, the equivalent of $2,100 in electricity. Each subsequent year, the efficiency of the panels should predictably decrease by about 1% due to unit degradation.
By 2026, the global solar energy market will grow at 20.5% annually, Research and Markets.com analysts predict.
Now imagine that in 2026, in the middle of the equipment’s life cycle, Mrs. Brown got back to thinking about changing her solar installation. I heard that the latest generation of motherboards are cheaper and more efficient. Based on current projections, by 2026, Ms. Brown will find that costs associated with the purchase and installation of solar panels have been reduced by 70% compared to 2011. Moreover, the next generation panels will generate annual revenue of US$2,800, which is more than US$700 . Current installation in the first year of use. It turns out that if the panels were upgraded now, instead of 15 years ago, the net present value (NPV) of the solar installation would increase by more than $3,000 in dollar purchasing power in 2011. If Ms. Brown was a rational consumer, she would choose the option with an early replacement.
If the panels are replaced early in the life cycle, the amount of waste in four years could be 50 times higher than IRENA’s forecast. This figure corresponds to about 315,000 metric tons of waste based on an estimated mass-to-energy ratio of 90 tons/MW.
What will it cost
Solar debris The industry’s ability to recycle and recycle does not allow for such an influx of waste. The amount of financial incentives to invest in the processing of secondary raw materials for solar energy is low. Although the plates contain small amounts of valuable materials such as silver, they are mostly made of glass, which is a very cheap material. The long life of solar panels also hinders innovation in this area.
As a result, waste management infrastructure has not kept pace with the rapid growth in solar energy production. First Solar is the only American panel manufacturer that we know only recycles its own products, with a global capacity of 2 million panels annually. Current capabilities allow processing one panel for $20-30. Sending the same painting to the landfill will only cost 1-2 dollars.
However, direct processing costs are only part of the problem. Panels are fragile and bulky equipment that is usually installed on the roofs of residential buildings. To carefully remove them, specially trained craftsmen are required. In addition, some countries may consider solar panels a hazardous waste due to the small amount of heavy metals (cadmium, lead, etc.) they contain. This classification entails a number of costly restrictions: Hazardous waste can only be transported at certain times on special roads.
A combination of unexpected costs can undermine the competitiveness of an industry. According to our estimates, by 2035, the number of scrap panels will exceed the number of units sold by 2.5 times. In turn, this will increase the flat cost of electricity by 4 times compared to the current forecast. The solar economy, which was so bright in 2021, will quickly turn dark as the industry simply sinks into its own garbage.
Who will have to
to pay the bills? Most likely, the state will decide who will bear the costs of waste disposal. For example, the European Union has adopted the Waste Electrical and Electronic Equipment (WEEE) Directive, which provides the legal basis for the recycling and disposal of electronic waste in EU member states. The responsibility for recycling this waste, as per the directive, is distributed among the producers on the basis of their market share.
However, first and foremost, it is necessary to increase the capacity to process and adapt solar panels into a comprehensive waste recycling infrastructure. Companies may not have enough time to handle this task alone. Government subsidies are perhaps the only way to rapidly develop refining capacity commensurate with the scale of the problem looming. Corporate lobbyists can make a compelling case for government intervention by arguing that waste is a negative externality for rapid innovation. The cost of building the infrastructure for solar panel recycling is an integral part of the research and development package that accompanies clean energy development.
This does not only apply to solar energy
The same problem hangs over other technological fields associated with the use of renewable energy sources. For example, experts predict that barring a significant increase in recycling capacity, 720,000 tons of giant wind turbine blades will end up in US landfills over the next 20 years. By most estimates, only 5% of electric car batteries are currently recycled.
None of the above calls into question the need for renewable energy sources in the future. The science is relentless: if we continue to rely on fossil fuels, future generations will end up with a deeply traumatized, if not dying, planet. But in reality, this lofty goal does not make it easier for us to switch to renewable energy sources. Of all the sectors, the clean tech industry is the least able to tolerate short-sightedness about the waste it generates. It is essential to develop a strategy for entering the circular economy – and the sooner the better. –
Atalay Atasu is Professor of Technology and Operations Management and Head of Environmental Sustainability at INSEAD.
Cerasu Doran is a Professor at the Haskin School of Business at the University of Calgary, Alberta.
Luc Van Wassenhove – Professor Emeritus, Department of Production. Henry Ford at INSEAD, chairs the Humanitarian Research Group and Sustainability Initiative
The article was first published in Harvard Business Review Russia. The original article is here