United States General Accounting Office

GAO Report to Congressional Requesters

May 1999 RENEWABLE

ENERGY

DOE’s Funding and

Markets for Wind

Energy and Solar Cell

Technologies

GAO/RCED-99-130

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-282303 

May 14, 1999

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

The Honorable F. James Sensenbrenner, Jr.

Chairman, Committee on Science

House of Representatives

For many years, the federal government has supported the research,

development, and deployment of renewable energy technologies. From

fiscal year 1978 through fiscal year 1998, the U.S. Department of Energy

(DOE) was provided nearly $10.3 billion for research and development

(R&D) of renewable energy through programs now managed by its Office of

Energy Efficiency and Renewable Energy. Although DOE funds research on

many forms of renewable energy, it has provided a large portion of its

money to technologies that convert wind or sunlight into electricity.1

 Wind

is converted into electricity through the use of wind turbines, while

sunlight can be converted into electricity through the use of solar cell

technology, known as photovoltaics. These technologies are still

developing with various forms of government assistance, but they are also

manufactured and sold today in the marketplace.

As requested, we are providing you with information on wind and

photovoltaic technologies.2

 Specifically, for wind energy technologies, we

answered the following questions: (1) How much has DOE spent on R&D and

how have DOE’s objectives for its programs changed over time? and

(2) what are the characteristics of the markets for these technologies? We

also answered the same questions for photovoltaic energy technologies. As

agreed with your offices, we reviewed DOE’s funding and objectives for

fiscal years 1978 through 1999.3

 On January 7, 1999, we briefed you on the

results of our work and agreed to provide you with this report.

1

About $7.3 billion of DOE’s funding supported other renewable energy technologies, such as

geothermal, solar thermal, and biofuels.

2

In this report, “photovoltaic technologies” include the basic photovoltaic cell that converts sunlight

into electricity as well as the combining of cells into photovoltaic panels or systems.

3

DOE was created in 1977. Prior to passage of the Government Performance and Results Act (GRPA)

in 1993, DOE referred to the overall purposes of its wind and photovoltaic programs using several

terms, including “goals,” “objectives,” “purposes,” and “outcomes.” Since the passage of GPRA,

DOE now refers to these purposes as “goals.” For consistency with your request, in this report we

refer to all of these purposes as objectives.

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Results in Brief Since fiscal year 1978, DOE has been provided more than $3 billion to

develop wind and photovoltaic technologies. Since the 1970s, the

objectives of the wind and photovoltaic programs have expanded from

fundamental research to include larger market shares for U.S. wind

turbine companies and increased domestic and international sales by U.S.

photovoltaic companies. The markets for wind and photovoltaic

technologies have grown rapidly in recent years and now extend

internationally.

Wind Energy Technologies During fiscal years 1978 through 1998, DOE was provided $967 million for

wind energy technologies, and it was provided $34.8 million to fund such

programs for fiscal year 1999.4

 In the 1970s, the objectives for DOE’s wind

program emphasized fundamental research on wind, including wind

turbine dynamics. In its fiscal year 2000 budget request, DOE’s objectives

included improving the world market shares of U.S. companies that sell

wind energy technologies and increasing the production of wind generated

electricity in the United States.

The world market for wind energy technologies has grown dramatically in

recent years, is increasingly dominated by international companies and

markets, and uses public subsidies to promote sales. Industry sales

increased by 29 percent a year from 1994 through 1997 and reached

$1.5 billion in 1997.5

 Sales for wind turbines have shifted from the United

States to overseas. Over time, the industry has consolidated, and a small

number of European companies currently dominate production of wind

turbines. Despite significant reductions in cost, wind turbines currently

generate electricity at costs that are higher than the costs of traditional

generating sources such as natural gas or coal. According to industry

representatives, although wind power may be economical in some

markets, tax credits and incentive programs are important to increasing

wind turbine sales in the United States and internationally.

Photovoltaic Energy

Technologies

During fiscal years 1978 through 1998, DOE was provided about $2 billion

for photovoltaic technologies, and it was provided $72.2 million to fund

such programs for fiscal year 1999. DOE’s original objectives were to

develop the technology and reduce the cost of generating electricity with

photovoltaic cells to levels that are comparable to traditional sources of

generation, such as natural gas or coal. In its fiscal year 2000 budget

4

All DOE’s funding totals from fiscal years 1978 through 1998 are in 1998 constant dollars.

5

The most recent data publicly available at the time of our review.

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request, DOE’s objectives include increasing the efficiency of photovoltaic

panels, reducing costs of production, lengthening the service lives of

photovoltaic technologies, and boosting sales by U.S. companies of

photovoltaics by more than three-fold.

The market for photovoltaic energy systems is characterized by significant

increases in international sales, a dominance of manufacturers owned by

large multinational corporations, and the emergence of two distinct types

of uses. World sales of photovoltaic technologies increased 16 percent

annually from 1985 through 1997 and exceeded $1 billion in 1997.

Currently, large multinational companies that produce photovoltaic cells

through subsidiaries account for more than half of the world market. The

market for photovoltaic technologies is now divided into two types of

uses: those that are connected to local electrical powerlines and those that

are not connected to the local electrical powerlines. Currently,

photovoltaic cells produce electricity at higher costs than traditional

electricity delivered through local powerlines. As a result, for uses

connected to local electrical powerlines, such as photovoltaic power

plants, government subsidies in the United States and other countries are

important to promoting sales. In contrast, for uses not connected to

powerlines, such as navigation buoys or communication towers,

photovoltaic cells can produce electricity at lower costs than what it

would cost to connect to the local electric system or generate electricity

on-site. Several representatives of the photovoltaic industry stated that

these markets would continue without federal R&D funding or other

assistance.

Wind Energy

Technologies

From 1978 through 1998, DOE was provided over $967 million for R&D on

wind energy technologies.6 DOE’s objectives have expanded from an initial

emphasis on developing the technology to a current emphasis on

increasing the market share of U.S. wind turbine companies. The world

market for wind energy technologies has grown significantly in recent

years and extends internationally.

Wind Energy

Technologies—DOE’s

Funding and Objectives

From fiscal years 1978 through 1998, direct federal funding for wind

energy R&D totaled over $967 million, and the objectives of the wind energy

programs have evolved over time. Federal funding has experienced

significant variation over these years, and fiscal year 1999 funding has

been provided $34.8 million. Early objectives of the wind energy program

6

All figures are in 1998 constant dollars.

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focused on developing a viable energy supply option and included

fundamental research, while the most recent objectives include expanding

the market share of U.S. wind turbine companies.

Funding for Wind Energy

Technologies Exceeds $967

Million

Since fiscal year 1978, DOE has been provided over $967 million for R&D of

wind energy technologies. As shown in figure 1, federal funding for wind

energy has been uneven from fiscal year 1978 through fiscal year 1998.

Funding over this period peaked during fiscal year 1981, reaching just

under $135 million. Since reaching a low of $10.6 million during fiscal year

1990, funding has increased to about $30 million annually for each of the

past 3 years.

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Figure 1: DOE’s Funding for Wind Energy Systems, Fiscal Years 1978 Through 1998

Note: Fiscal year 1978-92 figures represent actual spending. Fiscal year 1993-98 figures

represent adjusted or actual appropriations.

Source: Developed by GAO from data provided by DOE.

During fiscal year 1999, DOE has been provided $34.8 million in funding for

R&D of wind energy systems and directed these funds towards three

specific program areas (see fig. 2). Cooperative Research and Testing

($7.7 million) supports industrial research and federal testing of wind

energy technologies. Applied Research ($10.7 million) examines

fundamental engineering issues related to component design,

manufacturing techniques, and component development (for advanced

generators, for instance) and technology improvements. Turbine Research

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($16.4 million) works with industry to support the research and testing of

large wind turbines that are targeted to current and near-term markets as

well as the R&D of small wind turbines. The program is also funding DOE’s

Next Generation Wind Turbine project, which is attempting to develop a

new large-capacity wind turbine.7

Figure 2: Planned Funding for Wind

Energy Systems, Fiscal Year 1999

Source: Developed by GAO from data provided by DOE.

Objectives of DOE’s Wind

Energy Program Have

Changed

In the 1970s, federal research objectives included wind research and other

research that DOE believed industry was unlikely to undertake. In the first

5-year plan, issued in January 1985, DOE characterized the program

objectives as improving technology and examining wind energy as a

potential energy supply option. Since that time, DOE has expanded the

objectives of the wind energy program to include the expansion of the

domestic wind industry in the domestic and international markets. More

specifically, DOE’s current program objectives include (1) enabling U.S.

industry to capture 25 percent of worldwide markets for wind-generating

7

Capacity reflects the amount of electricity an electric generator can produce based on its design.

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capacity and (2) achieving 10,000 megawatts (MW)8 of wind-generating

capacity in the United States by 2010.9

The Next Generation Wind

Turbine Project

As one example of its efforts to reach these objectives, DOE has funded R&D

undertaken by two U.S. companies through the Next Generation Wind

Turbine project. This project seeks to improve the international

competitiveness of the U.S. wind turbine industry. Started in 1997, this

project planned to distribute about $30 million over 5 years to develop

large utility-scale wind turbines that are capable of lower-cost operation

than current turbines manufactured in the United States.

The objectives of the Next Generation Wind Turbine project are to

increase the generating capacity and lower the cost of electricity produced

by U.S.-manufactured wind turbines. This project is targeted at helping the

domestic industry increase the scale of existing turbines from their current

range of producing approximately 600-750 kilowatts (kW) to about 1

megawatt (MW). According to DOE and industry representatives, these

larger turbines are likely to be become the industry standard. In addition

to the objective of developing larger turbines, the Next Generation Wind

Turbine project attempts to lower the cost of electricity generated by

them. DOE estimates that the cost of generating electricity from current

turbines ranges from $0.03 to $0.06 per kWh.10 The objective of the Next

Generation Wind Turbine project is to lower the cost of generating

electricity for these new turbines to $0.025 per kWh, in moderate winds.

According to DOE officials, at $0.025 per kWh, the cost of electricity

generated by wind turbines would be competitive with traditional energy

sources, such as coal and natural gas.11

The Next Generation Wind Turbine project has awarded contracts to two

companies: Zond Energy Systems and The Wind Turbine Company. As

shown in figure 3, the first company, Zond Energy Systems, a subsidiary of

8

A watt is the basic unit used to measure electric power. A kilowatt equals 1,000 watts, and a megawatt

equals 1 million watts.

9

10,000 MW is approximately equivalent to 5 to10 typical coal or nuclear powerplants. Currently, the

United States has installed approximately 2,000 MW of wind turbines.

10The range of $0.03 to $0.06 per kWh (in 1996 dollars) represents DOE’s estimated average costs for

current technology wind turbines that, among other things, operate in moderate-to-high-wind areas

and are favorably financed.

11Some representatives of the energy and financial industries maintain that, even at a comparable cost

of production, wind turbines may not compete with traditional generating resources because

wind-generated electricity is not always available on demand at any time.

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the Enron Corporation,12 is scheduled to receive about $14.6 million over

the next 5 years. Zond is the sole domestic manufacturer of large

utility-scale wind turbines. Using DOE funds, Zond is developing a 1 MW

turbine that has a design similar to the 750 kW turbines it currently sells.13

12The Enron Corporation is a U.S. energy company active in the oil, natural gas, electric distribution,

electricity generation, and electricity marketing businesses. During 1997, Enron Corporation reported

revenues of $20.2 billion.

13After we completed the interviews and research for this review, DOE stated that Zond had changed

its design. However, DOE would not explain the nature of the new design or how it differed from the

existing Zond turbine.

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Other companies have already fielded turbines larger than 1 MW.14 Zond

has agreed to spend $6.3 million of its own funds to develop its 1 MW Next

Generation turbine design. According to DOE, developing this larger

turbine is a financial risk beyond the likely scope of Zond’s planned R&D

efforts but is required for Zond to remain a viable economic competitor in

the industry. Officials at Zond stated that they were not likely to pursue

the larger turbine design at this time without DOE’s assistance.

Figure 3: Planned Funding for Next

Generation Wind Turbine Project, 1997

Through 2003

Source: Developed by GAO from data provided by DOE.

The second company, The Wind Turbine Company, which DOE refers to as

“a start-up company,” is scheduled to receive $14.9 million from DOE over

the next 5 years. The Wind Turbine Company has also agreed to share the

development cost of its planned turbine with $7.3 million of non-DOE

funds. The Wind Turbine Company’s planned turbine is an untested, new

design. According to DOE, this turbine has a promising technological design

14Tacke Windenergie, another subsidiary of Enron, and NEG Micon each currently sell a 1.5 MW wind

turbine.

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that will feature a more flexible blade and components that can move in

several directions. In choosing to fund The Wind Turbine Company, DOE

determined that it was necessary to create at least two other U.S.

manufacturers to compete in international markets and help ensure a

presence by U.S. companies in the consolidating international wind

turbine industry.

Wind Energy

Technologies—

Characteristics of the

Market

Since DOE began R&D in wind energy, the market for wind turbines has

grown significantly, and the industry has changed. The current market for

wind turbines is large, and sales extend internationally. European

companies currently produce most wind turbines, and the international

industry has consolidated during recent years. Although the industry has

made significant reductions in costs, the cost of wind-generated electricity

in most cases remains higher than traditional sources of generating

electricity, such as coal and natural gas. Industry representatives state that

public support programs are important to the market for wind turbines.

Sales of Wind Turbines Are

Growing Rapidly and Are

Concentrated in Europe

Sales of wind turbines have increased dramatically since the beginning of

the first federally funded wind energy research. During the early 1970s,

sales of wind turbines were limited to small stand-alone systems. In 1973,

there were only a few companies selling wind turbines. By 1997,

international sales of large-scale wind turbines reached 1,542 MW of

capacity and approximately $1.5 billion, and the industry included over 15

manufacturers. From 1994 through 1997, the generating capacity of wind

turbines installed worldwide grew at an average rate of 29 percent per

year. More recently, the Assistant Secretary for Energy Efficiency and

Renewable Energy stated, in his testimony to the Subcommittee on Energy

and Water Development, House Committee on Appropriations, that

worldwide sales of wind turbines during 1998 exceeded $2 billion.

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Figure 4: Installed Capacity of Wind Turbines, 1981 Through 1998

Source: Figure provided by DOE.

Wind turbine purchases have shifted from North America (mostly in the

United States) to Europe. Through the mid-1980s, purchases of wind

turbines were largely concentrated in the U.S. By 1987, wind turbine

generating capacity installed in the United States exceeded 1,300 MW and

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accounted for approximately 90 percent of world capacity.15 European

countries rapidly added generating capacity and exceeded North American

installed capacity in 1995 (see fig. 4).

From 1995 through 1997, four countries installed the majority of wind

turbine capacity (see fig. 5). For example, in 1997, Germany, Denmark,

Spain, and India made over 77 percent of purchases. In contrast,

purchases in the United States during that same period were significantly

lower. As a result, total generating capacity from wind turbines in the

United States is now second in the world to Germany, and both Denmark

and India are quickly approaching the level of generating capacity in the

United States.

Although worldwide sales of wind turbines have increased significantly,

wind-generated electricity contributes only a small share of overall

electricity. For example, according to the Energy Information

Administration (EIA), wind-generated electricity in the United States

accounted for approximately 3.39 billion kWh, or about 0.1 percent of total

U.S. electricity in 1997. However, during 1997, wind accounted for

approximately 2.3 percent of the total electricity generated in California,

where most of the wind turbines are installed in the United States.

Recently completed, announced, and planned wind turbine electricity

generation includes large capacity additions in California, Iowa,

Minnesota, and Texas.

15World capacity represents documented electric generation turbines larger than 50 kW.

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Figure 5: Annual Capacity Additions in 10 Largest Markets for Wind Turbines, 1995 Through 1997

Note: Data based on capacity installations in 1997.

Source: Developed by GAO from data provided by BTM Consult ApS.

Europeans Dominate the

Consolidating Wind Turbine

Manufacturing Industry

During 1997, European companies dominated the wind turbine

manufacturing industry. Figure 6 illustrates that European companies

accounted for approximately 90 percent of worldwide sales in 1997. As

shown in figure 7, of these, the four largest companies accounted for

two-thirds of total worldwide sales during the year.

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Figure 6: International Sales of Wind

Turbines, by Country, 1997

Source: Developed by GAO from data provided by BTM Consult ApS.

Page 14 GAO/RCED-99-130 Renewable Energy
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Figure 7: Sales of Wind Turbines for 10

Largest Companies (With Headquarters’

Country), 1997

Notes: Companies ranked by total 1997 sales in megawatts.

Data for NEG Micon reflect combined sales for two companies, NEG and Micon, that merged.

Data for ENRON Wind reflects combined sales for two companies, Zond Energy and Tacke

Windenergie, that Enron purchased.

Source: Developed by GAO from data provided by BTM Consult ApS.

Over the past several years, the wind turbine manufacturing industry has

consolidated. Some European companies have merged, acquired a

competitor, or filed for bankruptcy. In the United States, the largest

domestic wind turbine manufacturer at the time, Kenetech Corporation,

filed for bankruptcy protection in 1996 and its assets were ultimately sold.

In 1997, another domestic manufacturer, FloWind, filed for bankruptcy

protection. As a result of consolidation in the United States, Zond Energy

Systems is now the largest domestic wind turbine manufacturer and the

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only U.S. company currently manufacturing large-capacity machines,

those typically installed by electric-generating companies.

Cost of Production Declining,

but Remains High

Since the 1970s, the cost of electricity generated by wind turbines has

decreased dramatically. According to DOE officials, costs have decreased

from approximately $0.20 to $0.40 per kWh in 1980 to approximately $0.03

to $0.06 per kWh in 1998 (see fig. 8).16

Figure 8: Historical Cost of

Wind-Generated Electricity, 1981

Through 1998 (Constant 1996 Dollars)

Source: Figure provided by DOE.

16The actual cost of electricity from a wind turbine depends on the abundance of usable wind (defined

as steady and frequent). The more usable wind available, the more electricity the turbine can generate.

This allows the fixed costs of the turbine to be spread across a larger amount of electricity generation,

thus lowering the cost of generating per kWh.

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As a result of these cost reductions, the cost of wind-generated electricity

is more competitive in some markets,17 but remains more expensive than

the 2.5 to 4 cents per kWh cost to generate electricity for some new power

plants in the United States.18 According to industry representatives,

greater opportunities exist for wind-generated electricity in some Asian,

South American, and African markets.These are typically markets where

new electric generation sources are needed quickly and access to fossil

fuels is limited. In Europe, although higher costs for electricity make

wind-generated electricity more competitive than in the United States,

many countries use public initiatives to boost renewable energy. These

public initiatives have included publicly funded wind turbine R&D, laws

that provide higher prices for power produced using wind turbines, and

laws that require power companies to generate a portion of their total

power using renewable resources, such as wind. In the United States,

where the cost of electricity is lower, industry representatives stated that

direct public sector support programs, such as the federal Renewable

Energy Production Incentive and state incentive programs,19 are important

in increasing the demand for wind turbines in the United States.

Photovoltaic Energy

Technologies

During fiscal years 1978 through 1998, DOE was provided about $2 billion

for R&D of photovoltaic energy technologies. DOE’s objectives for this

program have expanded from an initial emphasis on fundamental research

in photovoltaic energy production to explicitly include sales targets for

U.S. industry. The markets for photovoltaic technologies have grown in

recent years, particularly for uses that are not connected to local electrical

powerlines.

17Industry sources stated that, for the cost of wind-generated electricity to approach parity with that of

traditional generation resources, the turbine must be installed in an area possessing predictable and

strong winds, the turbine must be favorably financed, the electricity must be required in areas without

immediate access to a nearby existing natural gas line or other fuel supply line, and the costs of

connecting the turbine to the local transmission system must not be significant.

18This figure represents the average cost of generation for a combined-cycle natural gas power plant

based on average regional costs of natural gas and existing technology.

19The federal Renewable Energy Production Incentive, which provides a tax credit for electricity

generated by renewable energy sources such as wind turbines, was about 1.7 cents per kWh during

1998.

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Photovoltaic Energy

Technologies—DOE’s

Funding and Objectives

From fiscal year 1978 through fiscal year 1998, federal funding for DOE’s

photovoltaic energy R&D exceeded $2 billion,20 and the objectives of the

photovoltaic energy program have evolved over time. Federal funding of

the program varied significantly over these years, and fiscal year 1999

funding is expected to equal $72.2 million. Early objectives of the

photovoltaic energy program included fundamental research, while the

most recent objectives include the increasing sales of photovoltaics by

U.S. companies.

Historical Funding for

Photovoltaic Energy

Technologies Has Exceeded $2

Billion

During fiscal years 1978 through 1998, DOE was provided over $2 billion for

R&D in photovoltaic energy technologies.21 However, funding has been

uneven over this period. As shown in figure 9, funding peaked during fiscal

year 1980, reaching $286 million, and was followed by several years of

annual decreases. Since reaching a low of $42 million during fiscal year

1990, funding has increased to about $60 million annually during each of

the past 4 years.

20Research on photovoltaic energy has been funded by several federal agencies, including the National

Aeronautical and Space Administration and DOE. This discussion only refers to federal spending

through the DOE’s Office of Energy Efficiency and Renewable Energy.

21Photovoltaic energy systems can consist of solar panels, energy conversion equipment, mounting

equipment, and other specialized components. Typical photovoltaic solar panels consist of several

photovoltaic solar cells, electrically interconnected and mounted within a glass-covered, sealed, and

laminated sheet that is equipped with an electric junction box and placed inside a rigid mounting

frame.

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Figure 9: Federal (DOE’s) Funding for Photovoltaic Energy Systems, Fiscal Years 1978 Through 1998

Source: Developed by GAO from data provided by DOE.

During fiscal year 1999, DOE has been provided $72.2 million in funding for

research in photovoltaic energy. DOE has directed these funds toward three

specific program areas, as figure 10 shows. The Collector Research and

Systems Development program area ($34.2 million) supports activities to

lower the cost of manufacturing photovoltaic panels, enhance the

engineering and field testing of photovoltaic technologies, and develop

innovative applications. The Advanced Materials and Devices program

area ($27 million) is attempting to achieve technological advances that will

enhance the commercial potential of the standard photovoltaic cell

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primarily sold today as well as a more advanced photovoltaic technology22

and products, such as embedding photovoltaic cells into roof shingles. The

Fundamental Research program area ($11 million) includes DOE’s basic

and long-term research programs, unconventional technologies, and

projects examining the fundamental properties of cells and cell materials.

Figure 10: Planned Funding for

Photovoltaic Energy Systems, Fiscal

Year 1999

Note: Total does not equal 100 percent due to independent rounding.

Source: Developed by GAO from data provided by DOE.

Objectives of the Photovoltaic

Energy Program Have Changed

In its early years, the objectives of the federal photovoltaic program

included fundamental research and emphasized research that industry was

unlikely to undertake because of the costs and risks involved. In the first

5-year plan, issued in May 1983, DOE characterized the program’s

objectives as addressing widely applicable technical issues and developing

a technology base from which private U.S. companies could choose to

apply within domestic electricity markets. Since that time, DOE has

22The most commonly sold photovoltaic cell is made from wafers of crystalline silicon. The newer

technology, known as “thin film,” requires fewer steps in the manufacturing process, uses less of the

expensive raw materials, and may offer significantly improved mass production economics than the

silicon wafer technologies. As a result, thin-film technologies may be capable of producing electricity

at a lower average cost than silicon wafer-based photovoltaic technologies.

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expanded the objectives to explicitly include increasing sales in

international markets by U.S. industry. More specifically, DOE’s current

objectives are to (1) increase efficiency of commercial modules;

(2) reduce the retail sales price of modules; (3) increase the lifetime of

photovoltaic systems; and, (4) increase the U.S. and international sales of

photovoltaics made by U.S. industry.

Photovoltaic Energy

Technologies—

Characteristics of the

Markets

The market for photovoltaic technologies is large and growing. World

sales of photovoltaic technologies exceeded $1 billion in 1997 and

increased by 16 percent annually from 1985 through 1997. Large

multinational companies own photovoltaic-manufacturing subsidiaries

that account for a large share of the total world sales. Despite dramatic

reductions, the cost of generating electricity with photovoltaic

technologies that connect to electrical powerlines remains substantially

higher than the cost of traditional generation. However, for many

applications not connected to electrical powerlines, such as

communications towers, navigational buoys, and roadside signage,

photovoltaic technologies can produce electricity at a lower cost than

traditional sources of electricity.

Sales of Photovoltaic

Technologies Are Large and

Growing

The market for photovoltaic technologies has grown dramatically since its

earliest beginnings. Although the market for photovoltaic cells once

consisted almost solely of space applications such as satellites, a

significant market for photovoltaics now exists on earth. In 1975, total

sales of photovoltaic cells were less than 300 kW of generating capacity, or

enough electricity to power approximately 100 houses.23 By 1997,

international sales of photovoltaic technologies had increased 380-fold to

reach 114 MW,24 and sales, according to an industry official, exceeded

approximately $1 billion (see fig.11). 25 From 1985 through 1997,

worldwide installed capacity grew an average of 16 percent per year.26

23The capability of photovoltaic technologies to supply a specific house varies based on the electricity

usage, average annual sun exposure, and a system’s efficiency. This figure is an estimate based on a

home with relatively low electricity demand, location in an area with high annual solar availability, and

assuming current photovoltaic technology.

24Data are reported as shipments of photovoltaic modules. In this report, we refer to them as sales.

25Total revenues from sales did not increase proportionally with sales because, according to a DOE

official, the price of modules decreased significantly as R&D improved the technology.

26For uses connected to powerlines, solar technologies (including photovoltaics) generated 900 million

kWh or approximately 0.0003 percent of total electricity in the United States. For uses not connected

to powerlines, the amount of electricity generated by solar technologies (including photovoltaics) is

unknown due to a lack of data.

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Figure 11: Sales of Photovoltaic

Modules, 1985 Through 1997

Source: Developed by GAO from data provided by Strategies Unlimited.

Large Multinational Companies

Increasingly Dominate the

Photovoltaic Industry

Over time, large multinational companies have entered the photovoltaic

industry and now dominate the manufacturing portion of the business. In

the early 1970s, only a few companies manufactured photovoltaic cells.

Since then, several large multinational companies began to invest in the

photovoltaic industry. As shown in figure 12, several large companies

including Siemens AG, VIAG AG, Kyocera, Enron, and BP Amoco now own

subsidiaries that manufacture photovoltaic cells. In 1997, revenues for

these large companies from all lines of business, including photovoltaic

cells, ranged from about $6 billion (Kyocera) to $108 billion (BP Amoco).

Collectively, the subsidiaries accounted for approximately 55 percent of

the total sales of photovoltaic cells during 1997.

Page 22 GAO/RCED-99-130 Renewable Energy
B-282303 

Figure 12: Major Corporate Ownership of 4 Largest Photovoltaic Companies, With Total Corporate Revenue From All

Sources for Corporate Owners

Notes: Information on corporate ownership represents status reported from company sources as

of April 1, 1999. The 10 largest sellers of photovoltaic technologies also included Photowatt,

Sharp, ASE, Solec International, Astropower, and Sanyo. In total, the 10 largest sellers accounted

for approximately 79 percent of total sales in 1997.

The range of publicly available financial data for 1997 was not consistently reported across all

companies. Revenue was available for BP Amoco and Enron. Siemens AG and VIAG AG reported

sales in Deutsche Marks, which was converted to U.S. dollars. Kyocera reported net sales.

Ownership figures for Siemens Solar Industries do not add to 100 percent due to approximately

3 percent ownership by other entities.

Source: Developed by GAO from data provided by BP Amoco, Enron, Kyocera, Siemens AG,

Strategies Unlimited, and VIAG AG.

Connected or Unconnected:

The Two Markets for

Photovoltaic Technologies

The market for photovoltaic technologies now consists of two distinct

types of uses: those that are connected to the local electricity grid (on-grid

uses), and those that are not connected to the electricity grid (off-grid

uses). Figure 13 shows that in 1997, off-grid applications accounted for

about two-thirds of total sales. For either of these uses, DOE stated that

photovoltaic cells currently produce electricity at about 25 cents per

kWh.27

27Figure represents DOE’s estimate and was not verified by GAO.

Page 23 GAO/RCED-99-130 Renewable Energy
B-282303 

Figure 13: Sales of Photovoltaic

Modules, by End Use, 1997

Source: Developed by GAO from data provided by DOE.

For on-grid uses, such as a photovoltaic powerplant or rooftop system

supplying electricity through powerlines, photovoltaic technologies

produce electricity at costs that are significantly higher than the 5 to 12

cents per kWh retail customers typically paid for electricity in 1998.28

Figure 14—photos provided by the Sacramento Municipal Utility

District—shows that there are many examples of on-grid uses of

photovoltaic energy. To lower consumers’ costs, several countries and

some jurisdictions within the United States provide subsidies to those that

purchase and install on-grid photovoltaic technologies. However, even

with these subsidies, the costs remain above the average cost of power

produced from traditional sources, such as coal and natural gas. As a

result, photovoltaic industry representatives and government officials view

28These figures represent a range of average rates for residential, commercial, and industrial

customers. We chose these rates because photovoltaic systems installed on buildings reduce the

amount of electricity that would have been purchased by these customers at retail rates.

Page 24 GAO/RCED-99-130 Renewable Energy
B-282303 

subsidies as an important way to increase the sales of photovoltaic

technologies for on-grid applications.29

Figure 14: Examples of On-Grid Uses of Photovoltaic Technologies

29However, some industry representatives stated that tax incentives designed to increase the demand

for, or production of, on-grid applications of photovoltaic technologies could increase the price of the

materials used to make photovoltaic cells. This, in turn, could raise the price of cells and reduce the

demand for off-grid applications. DOE officials note that the department’s photovoltaic R&D program

does not directly subsidize on-grid photovoltaic applications.

Page 25 GAO/RCED-99-130 Renewable Energy
B-282303 

For off-grid uses, photovoltaic technologies can provide electricity at a

lower cost than the traditional option of extending an electrical line and

purchasing power from an electric company or relying on remote

generating equipment. These off-grid uses can be located anywhere, even

suburban and urban areas. As shown in figure 15, these applications

include providing electricity for remote monitoring equipment, such as

traffic monitors; roadside signage, such as warning lights; emergency

callboxes; communications towers for cellular phones and other devices;

as well as homes in remote areas. In these applications, photovoltaic

technologies avoid the sometimes substantial costs of extending an

electrical line, installing interconnection equipment (such as an electrical

transformer), and purchasing the electricity delivered to the site or

supporting a remote generator.30 Several representatives of the

photovoltaic industry stated that these markets would continue to grow

without federal R&D funding or other assistance.31

30The cost of supplying electricity to an off-grid use varies significantly depending on a variety of

factors, including access to fuel, proximity to existing electrical lines, and physical characteristics of

the site.

31According to DOE, federal or other public subsidies were not generally available or used to subsidize

off-grid installations of photovoltaic systems.

Page 26 GAO/RCED-99-130 Renewable Energy
B-282303 

Figure 15: Examples of Off-Grid Uses of Photovoltaic Energy

Traffic monitoring station School warning lights/signage

Agency Comments

and Our Evaluation

We provided this report to DOE for its review and comment. We received

comments from the Department, including the Assistant Secretary, Energy

Efficiency and Renewable Energy, and have included these comments in

appendix I. DOE expressed three major concerns about how we

characterized the objectives of its wind energy and photovoltaic programs.

Page 27 GAO/RCED-99-130 Renewable Energy
B-282303 

In its first concern, DOE states that we describe DOE’s objectives for these

programs as promoting sales by the domestic wind energy and

photovoltaics industries rather than conducting R&D. We did not mean to

suggest that DOE is promoting the domestic wind and photovoltaic

industries by marketing or directly selling products. Nor did we mean to

suggest that DOE no longer performs R&D. We explain in our report that

DOE’s recent program objectives include research to support industry by

developing technologies that companies in the United States may apply to

increase sales or shares in the marketplace. We modified the text to

address DOE’s concern by clarifying our characterization of DOE’s support

of industry R&D.

Second, DOE believes our report inaccurately concludes that the objectives

for the wind energy and photovoltaic programs have moved away from the

development of technologies. The Department then describes the research

activities and performance measures that are included in its fiscal year

2000 budget proposals. We did not intend to suggest that DOE no longer

develops technologies or performs R&D. We observe that, since the

inception of the wind and photovoltaic programs, DOE’s objectives have

been expanded to include goals for market shares by wind turbine

companies and sales by U.S. manufacturers of photovoltaics. In

developing this view, we used documents provided by DOE, at our request,

during our review. We maintain that the objectives of the programs, as

specified in DOE’s documentation, have expanded since the late 1970s. We

modified the text to address DOE’s concern by clarifying our

characterization of DOE’s prior and current objectives and by illustrating

that DOE’s objectives have expanded over time to include explicit goals for

U.S. wind companies to attain a 25-percent market share and for U.S.

photovoltaic companies to reach 1,000 MW in sales.32

Third, DOE maintains our assertion that the objectives for these programs

have evolved from fundamental research to supporting U.S. industry is not

reflected in the Department’s fiscal year 2000 budget request. To make its

case, the Department cites its fiscal year 2000 budget request to increase

its funding for fundamental research on photovoltaics to $ 20.3 million. In

response, our report refers to the evolution of DOE’s stated objectives, not

changes in funding allocations for research in photovoltaics. We did not

examine the planned spending proposed in the fiscal year 2000 budget. We

examined funding levels from fiscal year 1978 through fiscal year 1998.

Nevertheless, although DOE’s proposal to allocate $20.3 million for

32DOE officials told us that the goals stated in the fiscal year 2000 budget request are technical

measures of success rather than program goals. However, since the budget request labels them as

goals, we considered them to be goals for our report.

Page 28 GAO/RCED-99-130 Renewable Energy
B-282303 

fundamental research in the photovoltaic program represents a significant

increase in nominal terms, it represents a modest increase (17 percent in

fiscal year 1998 to 22 percent in fiscal year 2000) as a percentage of the

program’s total spending. We made no change in response to this

objection.

In addition, DOE believes that our decision to report DOE’s funding of the

wind energy and photovoltaics programs in constant 1998 dollars is

inappropriate because it inflates the funding values in the initial years of

the programs. We maintain our choice was sound. We chose to express

DOE’s spending in constant dollars because it ensures that a dollar DOE

spent on research in wind energy or photovoltaics in 1978 equals a dollar it

spent on this research in 1998. Economists generally believe this approach

provides a better comparison of spending over time than reporting

expenditures in nominal dollars because it adjusts for the general effects

of inflation. We made no change in response to this comment.

DOE also provided technical and other editorial comments, which we

incorporated as appropriate.

Scope and

Methodology

We conducted this analysis from October 1998 through April 1999 in

accordance with generally accepted government auditing standards. We

reviewed DOE’s budget history and other supporting documents as well as

interviewed DOE officials in Washington, D.C. and at the National

Renewable Energy Laboratory in Colorado. We interviewed

representatives and reviewed documents from the wind and photovoltaic

industries, the energy industry, the financial community, state and local

officials, the wind and solar industry trade associations, as well as industry

consultants. In addition, we also reviewed prior GAO analyses of renewable

energy, and other studies of wind and solar energy.

As agreed with your offices, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 14 days from the

date of this letter. At that time, we will send copies of this report to

Representatives C.W. Bill Young and David R. Obey, Chairman and

Ranking Minority Member, House Committee on Appropriations,

respectively; Representatives Ken Calvert and Jerry F. Costello, Chairman

and Ranking Minority Member, Subcommittee on Energy and

Environment, House Committee on Science, respectively; Representatives

Joe Barton and Ralph M. Hall, Chairman and Ranking Minority Member,

Subcommittee on Energy and Power, House Committee on Commerce,

Page 29 GAO/RCED-99-130 Renewable Energy
B-282303 

respectively; and Representatives Constance A. Morella and James A.

Barcia, Chairwoman and Ranking Minority Member, Subcommittee on

Technology, House Committee on Science, respectively. We will also send

copies of this report to Senators Frank H. Murkowski and Jeff Bingaman,

Chairman and Ranking Minority Member, Senate Committee on Energy

and Natural Resources, respectively; Senators Pete V. Domenici and Frank

R. Lautenberg, Chairman and Ranking Minority Member, Senate

Committee on the Budget, respectively; Senators Fred Thompson and Carl

Levin, Chairman and Ranking Minority Member, Senate Committee on

Governmental Affairs, respectively; and Senators Don Nickles and Bob

Graham, Chairman and Ranking Minority Member, Subcommittee on

Energy Research, Development, Production, and Regulation, Senate

Committee on Energy and Natural Resources, respectively.

If you have any questions or need additional information, please contact

me on (202) 512-3841. Major contributors to the report were Daniel Haas,

Daren Sweeney, Jon Ludwigson, and Michael Gilbert.

Susan D. Kladiva

Associate Director, Energy,

 Resources, and Science Issues

Page 30 GAO/RCED-99-130 Renewable Energy
Page 31 GAO/RCED-99-130 Renewable Energy
Appendix I 

Comments From the Department of Energy

Page 32 GAO/RCED-99-130 Renewable Energy
Appendix I 

Comments From the Department of Energy

Page 33 GAO/RCED-99-130 Renewable Energy
Appendix I 

Comments From the Department of Energy

(141291) Page 34 GAO/RCED-99-130 Renewable Energy
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