Tuesday 23 June 2009

Solar lessons from Silicon Valley

By Mike Splinter, chief executive of Applied Materials
Published: June 22 2009 11:03

This year’s summer solstice, when the sun reaches its farthest northerly arc, will see 970 trillion kilowatt hours of energy beamed to earth.
The northern hemisphere’s longest day is a timely reminder of the urgency behind renewable power generation – a topic likely to gain momentum ahead of a United Nations climate change conference this year.
Much has been written in recent months about slowing investment in renewable energy, amid falling prices for conventional energy and volatile demand for solar equipment.
But the short-term impact of the economic slowdown should not be exaggerated on an industry that has enjoyed extraordinary growth in the past five years, and whose “energy dividend” could be measured in generations to come.
The current economic challenge of the solar industry is a familiar theme for anyone in the technology sector: how to navigate short-term volatility – influenced in this case by rollercoaster energy prices – to deliver the long term benefits on next-generation power.
There are lessons for solar among the semi-conductor suppliers of Silicon Valley, some of whom are emerging as leading equipment suppliers for the renewable energy market.
Solar panels and semiconductor chips both use silicon to conduct electricity, are produced by similar types of nanotechnology tools, and are designed to facilitate the efficient travel of electrons. As a result, both solar panels and semiconductor chips are governed by the same rules of economics. The more of them you make, the cheaper they become, and the wider the range of cost-effective new applications.
To anybody who has worked in the chip industry, it is clear that solar will follow a similar innovation curve. Just as Silicon Valley’s ingenuity made it possible to combine a telephone, a camera, a stereo, and a mini-computer into one small device, similar innovation skills are driving down the cost of solar power to a level competitive with fossil fuels.
Hence, the cost of solar equipment and thus access to renewable energy will fall, enhancing its economic attraction against hydrocarbons.
Quite possibly, the industry is nearing an inflection point. We are at the dawn of the era when we move from burning raw materials to meet most of our energy needs, to assembling raw materials to meet our needs. For the first time, high-tech engineering prowess has become relevant to the price of energy. We can manufacture our way out of the energy crisis.
The key question is what the pace of clean energy innovation will be. The answer depends on long-term policy decisions being made in Washington DC, in Brussels, Beijing, and other cities, each likely to be reflected in the Copenhagen agenda later this year.
Policy-makers have the power to hasten the pace of technological change by passing a national law that would require utilities to increase the portion of power they produce from renewable energy sources such as solar, wind, and other sources.
Among the international proposals, one US renewable idea calls for progressively increasing the renewable power requirement to 25 per cent in 2025. This national “Renewable Electricity Standard” (RES) would halve the cost of solar generated power.
The proposal will only work, however, if it is given some “teeth”, in the form of incentives or penalties that will encourage incremental improvement. More important, it would help the US solar industry become the type of success story the domestic semiconductor industry has been, with the potential to create creating hundreds of thousands of jobs in every state.
One of the main benefits of this policy is something that Silicon Valley engineers understand intuitively. The RES would give innovation a faster drumbeat. In the computer industry, this rhythm is supplied by “Moore’s Law”, which suggests the power of computer chips would double about every 18 months. This exponential growth in computing power has made it possible for what would have been $3bn worth of technology in 1974 to fit inside a $250 iPod today.
Moore’s Law happened because people made it happen. While Moore originally offered his “law” as a forecast, it eventually became an urgent standard that engineers pushed tirelessly to achieve. It has not been easy. Silicon Valley runs at a round-the-clock sprint.
Over time, Moore’s Law became a fundamental part of the information economy. Based upon the expectation of a doubling in the power of chips every 18 months, computer manufacturers designed more powerful machines, software companies offered more sophisticated services, and venture capitalists invested in more ambitious businesses.
The computer industry developed a completely new type of management culture – one based upon continuous innovation, rapid adaptation of new technologies, and aggressive exploitation of the benefits of scale.
One of the most powerful arguments for the RES is that it would create a similar sense of urgency for green technology. By requiring companies to meet a constantly escalating external standard for the use of renewable power, it would ramp up the pace of innovation.
While the prosperity created by the “smaller, faster, cheaper” computer chip will continue, clean technology is the growth industry of the future.
Copyright The Financial Times Limited 2009