Thursday, March 15, 2012

Is solar a bigger deal than people realize?

In November, Tyler Cowen had this gloomy prediction about solar power:
If a solar breakthrough is now likely, in which market prices do we see it reflected?  It is true that fossil fuel prices took a steep tumble in the last few months, but I’ve never heard anyone suggest that price plunge had to do with a forthcoming solar revolution...For better or worse, those shale oil and natural gas discoveries — which by the way will create lots of jobs — will further raise the bar against solar power, and it’s not just the Republicans who will promote them...Is there any reason, based in industry-wide market prices, to be optimistic about the near-term or even medium-term future of solar power?  I don’t see it.
However, the numbers are in, and solar power installation only continues to grow:

Last year seemed like a dark one for the solar industry: stiff competition from China drove American manufacturers to layoffs and even bankruptcy, while the low price of natural gas and the loss of a critical government subsidy weakened incentives for new solar developments. And then there was the long shadow of Solyndra, whose bankruptcy after receiving federal loans cast a pall over other green-energy endeavors. 
And yet, by the numbers, 2011 was a banner year for all those sparkling blue modules, according to a report published on Wednesday by the Solar Energy Industries Association and GTM Research. About 1,855 megawatts of new photovoltaic capacity was installed, more than double the 887 megawatts of the year before. The number of large-scale installations grew as well, to 28 from just 2 in 2009. 
Globally, the United States represents only 7 percent of all photovoltaic capacity, the report found, but that’s up from 5 percent in 2010... 
System prices fell 20 percent because of cheaper components (the average price of a panel dropped 50 percent), more options for financing, better installation methods and the shift to larger arrays. In addition, with the expiration of the Treasury Department’s 1603 tax grant program, many developers rushed to get their projects going before the end of the year. 
Elsehwere, the Wall Street Journal reports that more than 15% of new U.S. power generation capacity in 2012 is expected to come from renewables other than wind and hydropower - in other words, solar (weird that they don't identify solar by name, eh?). This is twice as much as coal, and more than three times as much as nuclear - and keep in mind, these are percentages of total new U.S. electricity generation, not percentage growth rates. Solar is booming!

Two caveats here. The first - as solar energy's detractors are quick to point out - is that the industry survives on government subsidies. That is true. Keep in mid, though, that the cost gap with fossil fuels - which needs to go well below zero in order for solar to take over - is less than it appears, since fossil fuel energy receives government subsidies as well.

The second caveat is that even as the U.S. has installed lots more solar power, the U.S. solar manufacturing industry has shed jobs and suffered bankruptcies. That is very true. And it is a good reason to be wary of buying the stock of U.S. solar manufacturers.

But the U.S. industry's troubles were a function not of stagnating solar technology, but of plummeting prices for their final products, brought about in large part by Chinese competition. Basically, China threw its industrial might (and government subsidies) into building up its solar industry, causing a global glut that made it hard for U.S. manufacturers to compete. But while that is bad news for U.S. companies, it's good news for solar energy technology, since it will lead to large permanent cost reductions in solar manufacturing.

Remember, the disappearance of the U.S. textile industry doesn't mean you're in danger of going without pants. Quite the opposite, in fact.

Basically, there is lots of good news for solar as a technology. Solar costs have been falling exponentially, and with new cost-reducing technologies on the horizon there is no reason to believe that this process is flattening out. And keep in mind, the deck is stacked against fossil fuel energy; technological improvements that reduce fossil fuel costs (e.g. fracking or horizontal drilling) are fighting against a mighty tide, because extraction costs tend to rise as easily accessible deposits are exhausted. Cost reductions in solar, on the other hand, are essentially permanent.

Proponents of a "Great Stagnation" hypothesis should take another look at solar. The area in which human progress has most stagnated over the past half century has been energy; nuclear power has been a bust, and fossil fuels have gotten more expensive. Barring a miracle technology like nuclear fusion, solar is our best long-term hope to reverse that stagnation. For now, fortunately, solar is booming. Let's hope it continues.

Update: As I now recall, Paul Krugman was very optimistic about solar back in November. The new numbers appear to bear his predictions out. Score another one for the Krug-man, I suppose. Is it just me, or does the issue of energy technology seem bizarrely politicized? Optimism and pessimism about solar seem to break down almost exclusively along ideological lines (here's National Review trashing Krugman's optimism; here's Cato blogger Arnold Kling being pessimistic). Is there a reason that conservatives should want to be pessimistic about new energy technology? I mean, besides the fact that many conservative outlets are funded by a certain pair of fossil fuel barons. That can't be all of it, can it? If I were a conservative, I'd take a second look at solar and ask myself very carefully if its success would be a good thing for them or a bad thing. I think on balance it would be a good thing.


  1. I think virtually all futurist think that unless something happens with low energy nuclear, solar is the dominant tech going forward.

    The question is how soon? Solar on the scale to actually reduce coal-fired installations in the next 15 to 20 years looks unlikely.

    And, of course for transportation there is the issue of energy density.

    However, it does look that if trends continue it will become unprofitable to extract much of our fossil fuel resources soon.

    This indeed is one reason not to price them now.

  2. The question is how soon? Solar on the scale to actually reduce coal-fired installations in the next 15 to 20 years looks unlikely.

    Did oil reduce coal use when it came into use? No, but it slowed its growth! I don't think absolute coal usage is the right metric to measure solar's dominance.

  3. Anonymous11:43 PM

    Is there a reason that conservatives should want to be pessimistic about new energy technology?

    Yes. Tribalism is a core feature of the modern conservative mindset. "Today's conservatism is the opposite of what liberals want today: updated daily." -cleek

    If a solar breakthrough is now likely, in which market prices do we see it reflected? It is true that fossil fuel prices took a steep tumble in the last few months, but I’ve never heard anyone suggest that price plunge had to do with a forthcoming solar revolution...

    That's an idiotic comment by Cowen. No matter how much hype is floating about, it only takes about 30 seconds of thinking to realize that a low intensity distributed electrical generating technology is by its very nature not going to produce any kind of collapse in markets for fossil fuels even if a substantially improved technology or manufacturing method is announced. And it's a direct competitor for only one of the three anyway.

  4. Shouldn't we use a better measure than installations? By your count, beans babies were a smashing success.

  5. Anonymous12:18 AM

    Probably for the same reason I once heard a fellow brag that he had killed an endangered and protected species of fox in gleeful and defiant tones.

  6. "keep in mind, these are percentages of total new U.S. electricity generation, not percentage growth rates"

    I think that's misleading. By only looking at "new" production they are in effect measuring the growth of electricity generation. We also don't know how large "new" electricity is compared to existing production. If we produced another 10% of electricity production, solar's share increased by about 1.5%. If we produced another 1%, solar only increased by 0.15%.

    If you look at total existing electricity production, solar doesn't look nearly as big. Here's what I've found from the EIA:

    From table 1.1 and 1.1A, you can calculate that for 2011, solar accounted for about 0.04% of total net generation.(1,814/4,105,734)"Other renewables" which includes wind only accounts for about 5% of generation. Also, other renewable also includes wood, geothermal and biomass which produce more than solar.

  7. what a great idea! really like this post and your blog!

  8. Solar power, along with wind power and other sources, could have received a major boost if President Obama actually had a serious interest in infrastructure as part of fiscal stimulus.

    Electricity is the future in energy, in my humble opinion, regardless of the source. President Obama could have upgraded, extended, and made fault-tolerant the electrical grid around the USA. The grid could have been extended to remote areas where almost nobody lives, but where there's plenty of wind or solar power.

    Dismissal of infrastructure work was but one of President Obama's betrayals in the economic crisis.

  9. Heather9:13 AM

    Some voices on the left against pushing solar power when it isn't cost efficient:

    George Monbiot is very left and against solar power subsidies in the UK.

    Borenstein of UC Berkeley is not as left as Monbiot, but is concerned about climate change. He doesn't find solar power cost effective in California with the current technology

    Tad Patzek is another solar pessimist..

  10. Solar Panels are only good for about 8 hours of power out of a 24 hour day.

    The reason for the big increase in solar is: 1) a 40% investment tax credit (I spend $100 and get $40 off my taxes); and 2) massive subsidies in places like NJ which allow solar plants to get 10x the normal rate for power (about 600/Megawatt-hour vs $60 for normal peak power).

    Right now, production solar panels are about 13% efficient (meaning they produce power 13% just of the hours in the year, so a 1 Kw application will produce 1Kw*.13*8760 *1000W/Kw) Watts annually.

    For my house, it works out to about .25c/Kw installed (compared my cost of .10c/Kw to the electric company). So we have a looong way to go.

    To get them to grid parity with a 10 yr payoff, you need the really efficient ones (which are twice as efficient) to be cheaper than the current technology.

    There just are not enough batteries to store the power. coal and gas are not going away.

    In addition, wind and solar are intermitttent. When the clouds come by or the wind starts/stops you still need a hot gas plant ready to provide electricity, or you end up with blackouts like TX has struggled with.

    Wind is just awful because a) it does not match peak demand (summer hot AC); it is far more variable (meaning for every MW of wind you need .3 MW of gas running just in case); its not any cheaper after 30 years of building it (its a turbine generator on some blades, the technology has not changed much in 30 years and is not likely to change, except to make them bigger).

    Solar has the advantage that on a hot sunny day the power supply matches demand (~50% of the capacity in pennsylvania-NJ-MD area is idel during evenings of oct and Apr, it only exists for peak summer AC demand).

    But even that ignores the fact that solar panels are manufactured with coal-fired power in China with little environmental regs.

    So instead of making the mess here we make it over there.

    as for distributed generate, well we have plenty of natural gas for that. solar and wind at the residential level have the same problems as at the grid level- intermittency. Small gas-fired generators are almost as efficient as big ones, but i dont see how that helps

  11. ... and for anyone who wants to tell me solar is the "dominate technology"

    look at the kinds of numbers we are actually talking about (table b-5, this is just for pjm area which is mid-atlantic).

    158.603 GW peak summer Jul (look at the third to last column) vs 109.216 GW in Oct. In Oct, solar is pretty crappy in this area.

  12. "crappy in this area"->in October.

  13. Brian G10:41 AM

    And the costs of solar pollution are what??? Also who could forget that windspill in Illinois last year. Also one should never underestimate the baser emotions of the American People. No I don't mean their lack of understanding that the U.S. oil industry isn't really nationalized as they wrongly think. I speak of the prejudice that arises from sending all their hard earned money to the Middle East.

  14. Andrew Clearfield12:57 PM

    I don't understand why you say that Chinese solar has created a global glut that has driven down prices. Solar energy in the US doesn't compete with Chinese solar energy very closely (it competes much more closely with US wind and coal).

    The price received for a unit of solar energy in most US markets is determined by a bidding process whereby the last accepted bid sets the price for all the generation. In other words, if the market needs 100 units of electricity, it works like this: solar bids $0 for 20 units; wind bids $0 for 20 units (because renewables always bid $0) and then, say, coal bids $20 for the last 60 units. In this case, the price paid for every unit of electricity in that market will be that last bid ($20). Again, not sure why Chinese solar production would play much of a role in determining the price of that last bid.

  15. And the costs of solar pollution are what??? Also who could forget that windspill in Illinois last year.

    thats highly misleading. Solar and wind are intermittent, meaning when the sun goes behind the clouds, it rains, or the wind gusts electricity generation changes. The grid needs to be regulated to within a certain frequency and volatage (i.e. when the wind stops blowing something needs to immediately replace it otherwise you get blackouts TX had).

    so, you need gas plants hot and spinning for that eventuality (and by hot and spinning, from an engineering standpoint, at about 95% of its operating temp).

    so while the wind is blowing, gas power plants are burning gas as a backup.

    until someone invents a GW-size battery (thats not molten sodium- oh the fire hazard there!), this will always be the case.

    Quiz: say i wanted to store energy for my house using water and gravity. how many of gallons to i need (lifting the water, say 30 feet). assume an electric motor pumps the water up and then (running in reverse) also generates the electricity, and each direction is 70% efficient. Assume I need to store about 500 Kwh.

    to manage the PJM grid for a day lets say i need .. what about a billion Kwh for a day?

    yeah thats a lot!!

  16. I'll risk a prediction: solar is a smaller deal than people realize. It would have to be significantly cheaper than the alternative to overcome the difficulties of being:

    1. Unreliable -- requiring gas fired back-ups for example.

    2. In the wrong places -- requiring long transmission.

    3. Unsightly -- when people see what large solar farms look like they will not be happy.

    4. Unnecessary -- because global warming has been over-hyped, as is gradually becoming clearer.

  17. I don't understand why you say that Chinese solar has created a global glut that has driven down prices. Solar energy in the US doesn't compete with Chinese solar energy very closely (it competes much more closely with US wind and coal).

    He's not talking about energy in that paragraph. He's talking about the hardware and technology that produces energy. That is, panels and other associated equipment. China has been producing a lot of equipment, and that equipment is sold on the global market, dropping prices (again, the price of the hardware, not the price of the energy produced by the hardware).

  18. incidentally, that article you link to ("costs are dropping exponentially") says costs are dropping about 7% a year (my own experience is more like 9-10, so lets take the more optimistic estimate).

    grid parity requires about a 60% drop in costs, unsubsidized (even if the silicon were free there are install and other costs so really you need efficiency improvements).

    thats still about 10 years away. and even then we only get solar 8 hours a day.

    still better than wind.

  19. Heather3:22 PM

    And the costs of solar pollution are what???
    There are costs.

  20. Anonymous4:36 PM it that conservatives are hard headed? Or is it that solar pessimism has been vindicated consistently for more than 30 years?

    Trick's the Kochs!

    But, this time it's different, and the right-thinking caretakers of the earth will win, and we'll see once and for all how wrong those meanies were! You know, they only believe things for ulterior reasons. You can tell, because they are wrong almost half the time, and in the future they are wrong 100% of the time. Paul Krugman says so.

  21. But, this time it's different, and the right-thinking caretakers of the earth will win, and we'll see once and for all how wrong those meanies were! You know, they only believe things for ulterior reasons. You can tell, because they are wrong almost half the time, and in the future they are wrong 100% of the time. Paul Krugman says so.

    This is what I'm talking about!

  22. Anonymous5:40 PM

    Noah, your last comment strikes me as very ironic. I'm sure you'll disagree.
    My point was that your posts like yours have been made for decades, and for decades they've been wrong. So, you say that, now, finally, solar's usefulness is imminent. And, you speculate that people who have been skeptical of that proposition for 30 years, and have been right for 30 years, must just be being stubborn.
    You may be right. It doesn't matter if you're right. Nobody who has been right for 30 years changes their mind without a ton of evidence in the bag. You don't need to concoct nefarious or psychological motives for it. They're not being stubborn - you're being stubborn for expecting public opinion to change because you've happened upon an idea that people have been pushing for decades. If you are right, then the conservatives you are talking about won't come around to it until it is obvious - and that is a perfectly reasonable position for them to take, given the history of hope surrounding this technology.
    And, you think my comment was a good example of what you're talking about.
    As Tyler Cowen says, if you make a good vs evil story, you might as well hit a button that cuts your IQ by 15. The helpful thing to do would be to imagine the most reasonable position of your detractors.

  23. Solar power may provide some of our electricity but in the medium and long term modular nuclear (think the power plant from a nuclear submarine, mass-produced) is probably going to be the winner.

  24. George Mason University in your first paragraph and its funders in your update paragraph. Fossil tentacles pretty much wherever you look when energy or greenhouse is the issue.

  25. Anon:

    But "making a good vs. evil story" is exactly what I'm talking about when I say "politicization". And that's what I'm saying people shouldn't do. The rational thing to do is just watch the technology and see how it develops.

    Now, on to the merits of the case...I haven't been following this issue for 30 years, so I don't know what kind of arguments have been made in the past. But according to this article, costs have been falling exponentially for 30 years. That looks to me like a pretty good track record of success for solar technology! I mean, how much better could solar technology really be expected to do?

    Since costs started from a high base, someone in 1982 who predicted imminent widespread adoption of solar would have been ridiculously optimistic (since that would have required much faster than exponential cost drops). But someone who predicted that costs would continue to fall steadily would have been spot on.

    Now we find ourselves in 2012. If solar cost continues to fall at about the same exponential rate as over the last 30 years, it'll reach grid parity in about one decade, and in maybe 15-20 years it'll be cheap enough that it'll be worth it to start replacing fossil fuel infrastructure on a large scale. I call that an "optimistic" prediction, but it also seems like a very realistic one, given past cost trends and the existence of new technologies in the pipeline.

    Someone who says in 2012 that solar will never be adopted just because it hasn't been adopted before is, in my estimation, being very pessimistic. Now maybe they have good reasons for being pessimistic! Or maybe the over-politicization of the issue has temporarily blinded them to the facts on the ground. If it's the latter, they should try to see beyond the politics of the issue and just think about the technology. The same goes for people who are extremely optimistic (i.e. who think that solar will start replacing fossil fuels on a large scale this decade).

  26. A very interesting and possibly important aspect of solar is its unique investment and personal finance properties.

    In some ways it's a rare super low risk investment.

    A cornerstone of finance is the risk-expected return tradeoff. The lower the risk of an investment, the lower an expected return it makes sense to settle for. And if the asset is negative risk, like insurance, then it can even make sense to accept a negative expected return. And people do that all the time when they buy fire insurance. A great example, too, though too few even economists seem to realize it, is global warming insurance: .

    With solar, you have an investment that can really lower a family's risk. And today's America is amazingly risky for most families (see Yale political scientist Jacob Hacker's, The Great Risk Shift). A job loss can all too quickly and easily lead to ruin for a family, as unemployment insurance pays very little. A great defense is to have your house paid in full, and I usually advise a 15 year mortgage (when it does makes sense to buy). And even then, paying it off faster. But you still have utilities, property taxes, insurance, etc.

    If you solar up your house, especially in a state like my home, Arizona, this means (about) no utility bill, and eventually the panels may generate enough electricity to also mean no gasoline bill (with an electric car), and no property tax bill (It's already common in Arizona to have backwards running meters to sell back excess power from solar panels), etc. – Throw in a roof antenna, a Roku, and a magic jack, and you can slice your cable bill to very little too!

    Elizabeth Warren has what I think is the best personal finance book today, "All Your Worth". In it she really stresses, above all else, the importance of keeping your "Must-Haves" (fixed expenses) low in today's risky world. Solar is a very nice addition in this respect. From what I've read, the panels are usually guaranteed for 25 years, and may last much longer. And there are potential advancements that can expand lifespan, maybe greatly.

    Of course, you could just take the money you were going to put into solar and put it into a TIPS, but: (1) The TIPS market can be funny and maybe illiquid, with TIPS real returns recently going negative. (2) If you have the money in solar panels instead, it may not be touchable in bankruptcy or by creditors or litigants in general. Many states protect your home (homestead exemption) up to a large, or unlimited, amount. (3) The solar return can be really good. From what I've heard a 5-7 year payback is not that rare already in Arizona (It depends on how southern facing your home is, whether you have a run-in-reverse meter, so you can sell back power, and other factors).

    In 20 years, if Obamacare survives for try-and-see to decimate the disinformation, it could be common for people to always have health insurance, power, and fuel for their cars, that they can never lose. This would certainly be a welcome huge step forward in families' security.

    As a side note, I think in 20 years Arizona could be really hot (popular). Panels could really make it cheap to live there, with free utilities and fuel. And with selling the excess back to the grid, free property taxes and homeowners insurance, and maybe more the way the power generation of these panels keeps increasing. I always tell my wife I want to turn our backyard into a solar factory (gazebos with panels on top)! She's not thrilled with the idea.

  27. You have to be fair when comparing solar power to other sources. Coal, oil, natural gas and nuclear have all been given massive government subsidies in the form of direct cash grants, land grants, research subsidies, military interventions and so on. The railroads alone, which were essential for coal technology, cost tens of billions, nominal, in the 19th century.

  28. Many of the comments on this post are pretty disappointing, showing a lack of appreciation of energy markets. For the individual, many parts of tne nation are already at retail cost grid parity. See this article for an informed study, with much National Renewable Energy Lab data.
    In certain of the sand states, there is a dispatch efficiency between solar power that puts nukes to shame as electricity peaks are driven by air conditioning and as NREL puts it, such installations, which are unloved by utilities as they make much of their profit at peak load times, can stabilize prices and prevent gaming the distribution.

    There's no single 'flip the switch' overnight solution. Absent a meaningful national energy policy to manage a gradual shift to renewables, as with the Swedish govt and others who are using natural gas as a bridge source, our future will continue to be held hostage by the political influence of the extractive technologies and their use of rapidly depleting, polluting, and global warming resources. o

    John H.

  29. Noah,

    The reason that support for solar power is ideologically divided is that corporate political contributions aren't uniform. The money to political parties and think tanks is specific to the industries that provide it and the orgs involved act accordingly. Fossil fuel industries are the biggest contributors to the Republicans and to conservative think tanks. The general picture is that potential losers - fossil fuels, defense - give to conservatives, leading industries - computers, electronics - to liberals and the car companies to both. The explanation really is that simple.

  30. well it was very interesting too read about such interesting reviews and comments. thanks for sharing and will be looking up for more updates.

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