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Blazinghand
United States25557 Posts
Megan McArdle wrote an article for The Atlantic on solar power, either as a blog post or as a dedicated article that was also published up online. This article addressed the theme of affordability of solar power and its viability in the energy market. There's been a great deal of speculation about the changing price of solar panels, solar energy, and what that means for fossil fuels and a sustainable future for energy production. I'm writing this in response, and also to shed some light on the solar energy industry with some economics knowledge.
The basic question goes something like this:
Given that solar energy prices are falling and will continue to fall, eventually ending up below the price of fossil fuel energy production, why aren't more people investing? "If solar energy is really close to dropping below the cost of conventional energy, why isn't it showing up in markets? How come solar companies (and not just thin film firms like Solyndra) getting hammered, while things at good old fossil fuels are getting better?"
This question is more critical than it may at first seem. One might think "oh, people just don't see the potential on solar, etc etc" but really, there are hella people who are literally paid to make a career out of looking for stuff like this. It's almost impossible that something so huge as a major structural change to the energy industry in the mid-to-short run to happen without drastic changes in markets and prices ahead of time. If we were really on the cusp of a new energy paradigm (in any predictable fashion), people would be flipping the hell out. FLIPPING, I tell you.
So, why aren't people flipping out? Here are some possibilities:
- People are flipping out.
- People should be flipping out, but aren't, because they are ignorant OR the future is obfuscated.
- People aren't flipping out because solar tech won't change anything in the near term.
I would out-of-hand dismiss #1 just because we'd see the enormous shift in stock prices as people, well, flipped out. There would be more manufacturing investment and people would be working harder on building up capital in related sectors, such as shipping and production of parts for solar panels, etc-- all this would be reflected in stock prices, startup investments, etc. I don't think #2 is likely, either. I don't think investors are ignorant, despite all the evidence to the contrary. There are people who make good money by not screwing up, and if there really was writing on the wall, people would be seeing it and making hella money.
"But wait!" you protest, "banks and stuff were dumb. I remember this. It totally happened!"
Okay, reader. That's fair. On the other hand, identifying that mortgage-backed securities made up from mezzanine tranches of subprime ARM blocks carried systemic risk blah blah blah insurance blah blah was not easy-- the writing may have been on the wall, but then the wall got painted. And then wallpaper got put on it. And anyone who DIDN'T look for the writing on the wall had the opportunity to make some money safely.
So I will hold open the possibility of some obfuscated energy revolution waiting to happen, unknown either due to some enormous incompetence I haven't heard of, or because technology is weird and sometimes shit just happens. This is how things go, sometimes-- the tech industry sometimes trots and sometimes lurches forward, and it's hard to tell how it's going to go ahead of time.
What I want to address is #3, and how many people are also addressing it. McArdle begins by addressing this graph:
This graph is used by proponents of solar energy. It has data on the cost of producing energy via solar tech up through 2010, and draws a trendline of cost decreases, and compares this trendline to the current average energy cost. The trendline falls below the current average energy cost by 2020, indicated that in 10 years, solar power will be as cheap or cheaper than conventional energy McArdle notes a variety of flaws in this reasoning, and I'd like to address a particular criticism of this graph.
McArdle raises valuable points regarding the price of solar energy and its components (including labor, cabling, etc that are unrelated to the actual panel tech) and the viability of energy production that only works during the day, and continues to address other cost-related issues for solar energy. In effect McArdle says "I question the accuracy of this extrapolation" and provides convincing arguments.
I agree with McArdle, but I think that we have stopped too early. There's another trendline here that has been entirely unquestioned-- the average energy price trendline. It strikes me as horrifically unrealistic. Over the course of the past 15 years, the average energy price from an energy-only provider in the continental US has risen by 80%-- and I don't think this trend will stop.[1] Despite a recent decline in fossil fuel prices, driven by a staggering dropoff in international demand during this recession, we can expect higher energy prices in the future.
Overall, I agree with the idea that Solar Energy, in the near term, is unlikely to revolutionize the energy industry. It seems highly unlikely that such a thing would be likely AND nobody would see it coming, as the case is now. I wouldn't draw so close to my chest the idea that Solar is dead, though. Solar energy doesn't need to immediately be more profitable than fossil fuels or nuclear energy production in order to succeed-- a questioning eye turned to that graph will realize the red dotted line need to curve upwards as the low-hanging fruit of our fossil fuel natural resources begin to run low.
Where will solar go? I don't know. It might not be even viable in my lifetime. But it's not a matter of if, it's a matter of when. It doesn't expend fuel like other forms of energy production do, and although its use is sharply limited by daylight, I'm sure we'll see more of it before we're done. I just thought I'd make this point, though-- if you're going to question something, make sure you question the other obvious things. I think both of the trendlines on that graph are probably wrong in their own ways, but the one that's just straight-up a flat line with 2009 energy prices? That one's definitely wrong.
For a parting note: I was partly inspired by the graffiti on the inside of a public restroom. Someone had scratched into the wall next to the toilet in shaky block letters:
"Question Everything"
Written beneath it, by someone who clearly thought himself very clever:
"Why?"
[1] US Energy Information Administration - Detailed Average Price by State by Provider, Back to 1990 (Form EIA-861): http://eia.gov/cneaf/electricity/epa/average_price_state.xls
 
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That was a nice informative afternoon read.
My knowledge in solar power is limited to a single environmental engineering course in my 4th year, plus some random articles here and there... and this is pretty much in line with the opinion I had so far. I believe it's not financially viable at this time, and maybe not in the near future, but I do hope that the world's energy market will shift towards more sustainable methods in the future.
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Great write up. Its nice to see a well written piece by someone with a good grasp on their field. It is interesting to see something such as energy production discussed from an economic standpoint instead of from the environmental standpoint I'm used to seeing. 5/5
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That plot is so irrelevant. It amortizes fixed costs or does not indicate solar panel lifespan, and its extrapolation is statistically insignificant. It's basically treating 10yr as a short run w/o allowing competing energy sources to emerge or adapt.
I know people who use solar panels and there is a major fixed cost. You probably will not recoup your losses for about a decade if you buy today for domestic power supplement. If you have that kind of a budget, it is a good long-term investment, but it is prohibitively expensive for ubiquitous adoption until recent technological advances make it to market and the industry scales up.
That said, I wouldn't care if taxpayer dollars went to subsidizing solar panels as opposed to all the shit we currently spend our money on.
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Blazinghand
United States25557 Posts
On November 18 2011 07:38 mmp wrote:
That plot is so irrelevant. It amortizes fixed costs or does not indicate solar panel lifespan, and its extrapolation is statistically insignificant. It's basically treating 10yr as a short run w/o allowing competing energy sources to emerge or adapt.
I think you misread the graph. Y-axis is average cost per kWh over the total lifespan of a solar panel, with factors of cost including installation and recycling. Although it does not directly indicate solar panel lifespan, and fixed costs such as installation, those values ARE included in calculating the average cost per kWh. The "solar panel costs more up front, long run will save you money" statement remains accurate here-- if in fact in the long run, the solar panel will save you money, that means that it's lifetime average cost her kWh will be lower than the average cost per kWh you get from purchasing the energy from another provider.
Just because currently the average cost per kWh of a modern solar panel is greater than the average cost per kWh of energy in the US doesn't mean it's never a good decision to install solar panels in your home. The government bears some of the cost in your stead in the forms of subsidies and tax breaks. The total energy output of the panel is higher in some states. The cost of energy from energy companies is also higher in some states. If you live in Los Angeles, you can get access to the Federal and State tax breaks on these panels, and thanks to your sunny climes, this is a good move-- you'll save money, since your average cost per kWh over the panel's lifetime would be cheaper than otherwise.
However, on average, not everyone lives on Los Angeles, where energy is expensive, weather is nice, and panels are heavily subsidized.
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its because no one wants to "invest" their money now when there will be no sign of returns for 10+ years
you dont wanna have your bankroll sitting around doing nothing for 10 years do you
even if you'll get a "slightly better" rate of return on that particular investment if you invest now. the opportunity cost overall outweighs that.
you wanna get in right before the boom and in the meantime be using your money in other ways
plus the big companies who would invest in this have the power to jump in and take over everything "when the time comes" in 10 years anyway.
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The biggest huddle for any alternative energy is the slow development in energy storage technologies.
With the exception of geothermal, viable only in several regions of the world like the Netherlands, every alternative energy technology are intermittent. Solar can produce for a few hours a day and most places of the world limited days in a year. So to build a solar plant, you also need to build a fossil fuel plant of corresponding generating capacity to supplement night-time generation. Needing to build two instead of one, it's easy to see why it's almost always costier to build an alternative generation scheme than a traditional one.
There are no cheap way to store excess Solar energy for night-time use either. Battery technology sucks. There's a reason why we're still using the same AA and AAA form-factor invented decades ago. To give an idea how difficult the the issue of energy storage is, some of the current designs call for exotic ideas like molten salt as thermal reservoir or water-lifting as a potential energy one.
For some areas of the world (like Los Angeles you mentioned), advances in semiconductor technology has already made panel generation cheaper than fossil fuel, but consistent capacity and storage issue will always plague implementation until those technologies catch up. There's no conspiracy, our science is just not there yet.
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Personally the reason why I see Photo Voltaic systems being invested in, is because of the 2020 mark. Why buy something now that will just be cheaper later?
I am all for green energy, but it is just human nature.
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Solar panels could destroy U.S. utilities, according to U.S. utilities
Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model, which has remained virtually unchanged for a century, to the ground.
That is not wild-eyed hippie talk. It is the assessment of the utilities themselves.
Back in January, the Edison Electric Institute — the (typically stodgy and backward-looking) trade group of U.S. investor-owned utilities — released a report [PDF] that, as far as I can tell, went almost entirely without notice in the press. That’s a shame. It is one of the most prescient and brutally frank things I’ve ever read about the power sector. It is a rare thing to hear an industry tell the tale of its own incipient obsolescence.
The story continues:
http://grist.org/article/solar-panels-could-destroy-u-s-utilities-according-to-u-s-utilities/
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On April 15 2013 13:53 fight_or_flight wrote:Show nested quote +Solar panels could destroy U.S. utilities, according to U.S. utilities
Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model, which has remained virtually unchanged for a century, to the ground.
That is not wild-eyed hippie talk. It is the assessment of the utilities themselves.
Back in January, the Edison Electric Institute — the (typically stodgy and backward-looking) trade group of U.S. investor-owned utilities — released a report [PDF] that, as far as I can tell, went almost entirely without notice in the press. That’s a shame. It is one of the most prescient and brutally frank things I’ve ever read about the power sector. It is a rare thing to hear an industry tell the tale of its own incipient obsolescence. The story continues: http://grist.org/article/solar-panels-could-destroy-u-s-utilities-according-to-u-s-utilities/
* Growing Pains *
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United Kingdom10443 Posts
Considering how fucked the economy will be by climate change any "economic" forecasting is really shortsighted. alternative energy sources need to be adopted immediately along with many other changes globally.
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EPT![[image loading]](http://i.imgur.com/AS88n.jpg)
