Even though solar energy generation still only represents a small fraction of total energy consumption, markets for solar technologies are growing rapidly.

Solar energy is abundant and offers significant potential for near-term (2020) and long-term (2050) climate change mitigation. There are a wide variety of solar technologies of varying maturities that can, in most regions of the world, contribute to a suite of energy services.

Even though solar energy generation still only represents a small fraction of total energy consumption, markets for solar technologies are growing rapidly. Much of the desirability of solar technology is its inherently smaller environmental burden and the opportunity it offers for positive social impacts.

The cost of solar technologies has been reduced significantly over the past 30 years and technical advances and supportive public policies continue to offer the potential for additional cost reductions. Potential deployment scenarios range widely—from a marginal role of direct solar energy in 2050 to one of the major sources of energy supply.

The actual deployment achieved will depend on the degree of continued innovation, cost reductions and supportive public policies. Solar energy is the most abundant of all energy resources. Indeed, the rate at which solar energy is intercepted by the Earth is about 10,000 times greater than the rate at which humankind consumes energy.

Although not all countries are equally endowed with solar energy, a significant contribution to the energy mix from direct solar energy is possible for almost every country. Currently, there is no evidence indicating a substantial impact of climate change on regional solar resources.

Solar energy conversion consists of a large family of different technologies capable of meeting a variety of energy service needs. Solar technologies can deliver heat, cooling, natural lighting, electricity, and fuels for a host of applications. Conversion of solar energy to heat (i.e., thermal conversion) is comparatively straightforward, because any material object placed in the sun will absorb thermal energy.

However, maximizing that absorbed energy and stopping it from escaping to the surroundings can take specialized techniques and devices such as evacuated spaces, optical coatings and mirrors. Which technique is used depends on the application and temperature at which the heat is to be delivered. This can range from 25°C (e.g., for swimming pool heating) to 1,000°C (e.g., for dish/Stirling concentrating solar power), and even up to 3,000°C in solar furnaces.

Passive solar heating is a technique for maintaining comfortable conditions in buildings by exploiting the solar irradiance incident on the buildings through the use of glazing (windows, sun spaces, conservatories) and other transparent materials and managing heat gain and loss in the structure without the dominant use of pumps or fans.

Solar cooling for buildings can also be achieved, for example, by using solar-derived heat to drive thermodynamic refrigeration absorption or adsorption cycles. Solar energy for lighting actually requires no conversion since solar lighting occurs naturally in buildings through windows. However, maximizing the effect requires specialized engineering and architectural design.

Generation of electricity can be achieved in two ways. In the first, solar energy is converted directly into electricity in a device called a photovoltaic (PV) cell. In the second, solar thermal energy is used in a concentrating solar power (CSP) plant to produce high-temperature heat, which is then converted to electricity via a heat engine and generator. Both approaches are currently in use.

Furthermore, solar driven systems can deliver process heat and cooling, and other solar technologies are being developed that will deliver energy carriers such as hydrogen or hydrocarbon fuels—known as solar fuels. The various solar technologies have differing maturities, and their applicability depends on local conditions and government policies to support their adoption.

Some technologies are already competitive with market prices in certain locations, and in general, the overall viability of solar technologies is improving. Solar thermal can be used for a wide variety of applications, such as for domestic hot water, comfort heating of buildings, and industrial process heat. Service hot water heating for domestic and commercial buildings is now a mature technology growing at a rate of about 16% per year and employed in most countries of the world. The world installed capacity of solar thermal systems at the end of 2009 has been estimated to be 180 GWth.

Passive solar and daylighting are conserving energy in buildings at a highly significant rate, but the actual amount is difficult to quantify. Well-designed passive solar systems decrease the need for additional comfort heating requirements by about 15% for existing buildings and about 40% for new buildings.

The generation of electricity using PV panels is also a worldwide phenomenon. Assisted by supportive pricing policies, the compound annual growth rate for PV production from 2003 to 2009 was more than 50%—making it one of the fastest-growing energy technologies in percentage terms. As of the end of 2009, the installed capacity for PV power production was about 22 GW. Estimates
for 2010 give a consensus value of about 13 GW of newly added capacity. Most of those installations are roof-mounted and grid-connected.

The production of electricity from CSP installations has seen a large increase in planned capacity in the last few years, with several countries beginning to experience significant new installations. Integration of solar energy into broader energy systems involves both challenges andopportunities.

Energy provided by PV panels and solar domestic water haters can be especially valuable because the energy production often occurs at times of peak loads on the grid, as in cases where there is a large summer daytime load associated with air conditioning. PV and solar domestic water heaters also fit well with the needs of many countries because they are modular, quick to install, and can sometimes delay the need for costly construction or expansion of the transmission grid. At the same time, solar energy typically has a variable production profile with some degree of unpredictability that must be managed, and central-station solar electricity plants may require new transmission infrastructure.

Because CSP can be readily coupled with thermal storage, the production profile can be controlled to limit production variability and enable dispatch capability. Solar technologies offer opportunities for positive social impacts, and their environmental burden is small.

Solar technologies have low lifecycle greenhouse gas emissions, and quantification of external costs has yielded favourable values compared to fossil fuel-based energy. Potential areas of concern include recycling and use of toxic materials in manufacturing for PV, water usage for CSP, and energy payback and land requirements for both.

An important social benefit of solar technologies is their potential to improve the health and livelihood opportunities for many of the world’s poorest populations—addressing some of the gap in availability of modern energy services for the roughly 1.4 billion people who do not have access to electricity and the 2.7 billion people who rely on traditional biomass for home cooking and heating needs.

On the downside, some solar projects have faced public concerns regarding land requirements for centralized CSP and PV plants, perceptions regarding visual impacts, and for CSP, cooling water requirements. Land use impacts can be minimized by selecting areas with low population density and low environmental sensitivity. Similarly, water usage for CSP could be significantly reduced by using dry cooling approaches. Studies to date suggest that none of these issues presents a barrier against the widespread use of solar technologies.

Over the last 30 years, solar technologies have seen very substantial cost reductions. The current levelized costs of energy (electricity and heat) from solar technologies vary widely depending on the upfront technology cost, available solar irradiation as well as the applied discount rates.

The levelized costs for solar thermal energy at a 7% discount rate range between less than USD2005 10 and slightly more than USD2005 20/GJ for solar hot water generation with a high degree of utilization in China to more than USD2005 130/GJ for space heating applications in Organisation for Economic Co-operation and Development (OECD) countries with relative low irradiation levels of 800 kWh/m2/yr.

Electricity generation costs for utility-scale PV in regions of high solar irradiance in Europe and the USA are in the range of approximately 1.5 to 4 US cents2005 /kWh at a 7% discount rate, but may be lower or higher depending on the available resource and on other framework conditions.

Current cost data are limited for CSP and are highly dependent on other system factors such as storage. In 2009, the levelized costs of energy for large solar troughs with six hours of thermal storage ranged from below 20 to approximately 30 US cents2005 /kWh. Technological improvements and cost reductions are expected, but the learning curves and subsequent cost reductions of solar technologies depend on production volume, research and development (R&D), and other factors such as access to capital, and not on the mere passage of time.

Private capital is flowing into all the technologies, but government support and stable political conditions can lessen the risk of private investment and help ensure faster deployment. Potential deployment scenarios for solar energy range widely—from a marginal role of direct solar energy in 2050 to one of the major sources of global energy supply.

Although it is true that direct solar energy provides only a very small fraction of global energy supply today, it has the largest technical potential of all energy sources. In concert with technical improvements and resulting cost reductions, it could see dramatically expanded use in the decades to come. Achieving continued cost reductions is the central challenge that will influence the future deployment of solar energy.

Moreover, as with some other forms of renewable energy, issues of variable production profiles and energy market integration as well as the possible need for new transmission infrastructure will influence the magnitude, type and cost of solar energy deployment.  Finally, the regulatory and legal framework in place can also foster or hinder the uptake of direct solar energy applications.