Solar Economics & Politics In Real Time
-- By James Christopher Desmond (email@example.com) revised April 16, 2015
(Source). That's quite a claim, as is this. Here's a claim that 1% of the world's land covered by solar panels could produce 100% of its needed electricity. (Source). This, too. And this April, 2015 piece claims Solar-generated electricity will, price-wise, best fossil-fuel based electricity prices in many places both now and in the near future.
Same problem, though; even if those claims are true, there's no cost-feasible way to store electricity, and it must be carefully integrated into the national grid at that. And without cost-feasible electricity storage (the "Holy Grail of Solar"), solar power's immediate, history-altering potential is crimped at the starting gate. Too, even the best of today's batteries aren't going to cut it because they don't last long enough and are too expensive (example), which is why (some say) distributed small-gen nukes make the most sense. (Source). Otherwise, this 2015 piece says solar's a net losing bet.
But even without electricity storage, "from January through October 2012 renewable energy installations accounted for 46.22 percent of all newly installed [U.S.] electrical generating capacity." (Source). The U.S. Solar market grew 76% in 2012, 94% in the first half of 2013. And "the global solar-energy industry has increased to $93 billion in 2011 from $17 billion in 2007." (Source). As of 2013, "[o]ne hundred gigawatts of solar PV is installed on the global grid." (Source). Installed prices for PV systems fell 27% during 2012 and at least 13% in each market segment. Nearly 83,000 homes installed solar PV, and cumulative PV installations in the U.S. surpassed 300,000." (Source). 2013-2014 was robust in solar PV growth, (source), with brown power (standard utilities) now starting to express long-term worry about rooftop solar's success (see also this and this, plus this piece on the growth of anti-solar taxes and fees).
In fact, "[b]y the end of 2013, solar power is expected to add more electricity to the U.S. grid than all other power sources except for natural gas. In fact, the planned capacity additions in the U.S. from 2012 to 2015 put solar power at 7,709 MW, trailed by wind power at 7,281 MW and coal at 5,160 MW, according to the U.S. Energy Information Administration. The additional capacity of natural gas is projected to reach 26,462 MW – more than three times the amount of solar." (Source). 220 GW of distributed solar PV electricity generation by 2018, says this source. This source is projecting a boom by 2018, Citi group has now placed solar on its market-disruptive technologies list, and solar-optimists like Tony Seba project solar dominance by 2030. Plus this marketing plan can hyper-accelerate the growth of distributed generation.
How much of that $93 billion that we saw in 2011, and how much of the high growth projected for 2013-14, is real (the product of a free market), as opposed to subsidy-driven? (Ask the same question for the 13 GW of wind power installed in the U.S. in 2012 alone). And why should the solar market be anything but real, rather than driven by subsidies that have “saddled taxpayers with stinkers like Abound Solar, Range Fuels and the infamous Solyndra, [which in 2011] went bust after receiving more than half a billion dollars in federal loans[?]” (Source). Remember that sane folks don't want to invest in artificial, only real (predictable, thus investment-safe) stuff, and a market over-jazzed on unreal (public) investment can become too prone to bubble-bust cycles -- because no clear "market-worthy" fundamentals ever emerge (only politically picked winners and losers) and so money flows into the solar PV politically (a billion here, a billion there), rather than "market-rationally," leading to huge market busts (look at the humongous, top-ten solar PV manufacturers' losses for 2012), and "subsidy-suck" market distortions described here, and the indirect subsidies (via underpriced drilling leases for public minerals) described here.
Noting our 6000-year history in exploiting solar power, this "web-book" focuses primarily on the economics of renewable (primarily Solar PV) power in the USA, where Solar still produces less than 1% of all American electricity (source; this, too) (Germany is only at 2% as of 8/13), and the U.S. as a whole "got only 12.3 percent of its electricity from renewables in 2011," (source), though some say it can figure into a renewable mix powering 100% of the world's energy needs. A dynamic book, it changes as the solar market changes. Collected here, Drudge-style, are research sources to enable research and debate on the free-market driven solarization of the American electricity grid, with this concept in mind:
Based on U.S. Census Bureau data, about 100 million residential units could physically hold rooftop systems one day, generating by one estimate 3.75 trillion kilowatt hours of electricity a year. In 2011, total electrical generation from all sources was about 4 trillion kilowatt hours - 42 percent of that from coal, according to the U.S. Energy Information Administration.
(Source). And "[w]ithin a decade, more than 35 million buildings may be generating their own solar electricity (without subsidies) at prices lower than their utility offers, sufficient to power almost 10% of the country, according to a new report." (Source). See also this global renewable energy atlas, as also noted here, plus this national energy-source chart. Again, (standard utilities) are now starting to express long-term worry about rooftop solar's success, and the Arizona Debate, captured here, underscores that.
At the same time, unsubsidized (hence, free-market generated) renewable energy is now being claimed to match non-renewable in price-competition terms, and some say this explains why U.S. renewable energy production doubled from 2008-2012:
(Source). And one utility executive is now openly worrying how rooftop solar can ultimately harm utilities' bottom line. (Source; see also this Australian analysis) This bank analysis seems pretty rosey. Still, solar's still a long way from making economic sense without being propped up by tax and rate-payer dollars, (source), though it and wind are now being measured and justified by some based on pollution-displacement factors, (source), and must be viewed within the context of this comparative cost analysis (but see this dispiriting piece advocating nukes over renewables, and this piece showing dreadfully high renewable power costs; this, too). And one hyper-subsidized market, Germany, bears the highest electricity rates in Europe. There are seeming insurmountable grid-integration costs to non-hydroelectric renewables like solar and wind. (Source).
Read this book if you want to learn about political, legal and free-market (versus subsidized) forces driving the solar energy market, which itself is dividing into utility-scale solar and "rooftop revolution" (residential, or micro-scale) solar, both of which keep declining in price. Policy arguments are forming over whether to prefer one form to the other, and since that tilt affects all of us both as tax and ratepayers, you want to follow the discussion in this, an area fraught with myths.
A big obstacle to fostering the preferred free-market growth of solar PV is grid-adaptation costs for solar, and who pays for it (more on this below). Another obstacle is just how far present policy can take us. "The U.S. Energy Information Administration (EIA) — the analytic arm of the U.S. Department of Energy — predicts that renewable energy (excluding liquid biofuels like ethanol which are, at present, as carbon-intensive as crude oil) will rise from 8 percent of total U.S. energy consumption today to a grand total of 11 percent in 2040." (Source). And in parts of Europe, this private investment house projects, “up to 18% of electricity demand could be replaced by self-produced solar power," ultimately including 100% unsubsidized solar. (Source). That January 2013 analysis concludes:
Read this web-book also to find practical economic and how-to information for erecting a residential-class (as opposed to utility-scale), grid-tied solar PV system for your home, business or farm (here's mine, by the way, and here's info on tying it to the grid in the state of Georgia). Solar vendors and investors may also find in it help in ascertaining just what is the mass-consumer market for solar PV (see this 7 minute video's claims), and how best might one help generate it. My bottom line is that, just as in the case with 2013-available electric cars (all, as explained here, as of yet make little economic/ecologic sense), "the masses" won't buy into Solar PV until it makes economic sense for them (more on that concept here), and bribing them to buy otherwise unacceptably priced goods (i.e., artificially reducing prices via rebates, tax incentives and inflated feed-in-tariffs that only cost the rest us) makes little economic/ecologic sense in the long run, even though photo-opp chasing politicians can't resist them.
Executive Summary: In the face of uncertainty over America's energy future and electricity prices (see also this), this "web-book" discusses grid-tied, Solar Photovoltaic (PV) power in consumer-economic terms, and whether it makes sense to subsidize it with tax- and rate-payer money. The discussion pivots on this point: Small-scale PV is still too expensive to make it in the free market without subsidies. And, as this article illuminates, those subsidies ("From 2007 to 2010, federal subsidies jumped to $14.7 billion from $5.1 billion"), are drying up. See also this piece and this piece on the debatable impact of subsidies, this essay on how they become encrusted within Congress, this WSJ column urging de-subsidization of all energy sectors (counterpoint here), and this fellow's "reasons to be fearful" for solar.
After the Solyndra, Abound Solar and A123 failures, the question has been sharpened -- whether subsidies are a good idea in the first place. Many advocate for them in light of long-standing "brown power subsidies" (250 kinds, in fact, totaling $72 billion from 2002-08, also click here, here, here, and here) and the fact that subsidies beneficially drove most of the 2011 solar market gains, totaling 1,855 megawatts (MW) of Solar Photovoltaic (PV) capacity for 2011 -- a year that set a record $257 billion in renewables investment. Some say it's all good, even with notorious failures, because subsidies have fostered a critical mass of production and demand. A North Carolina study claims a net gain even for subsidized solar, including reduced electricity prices.
But subsidies also, predictably, helped engender a projected industry-collapse and thus, as noted by the WSJ, "dark times." Helped because there are other causes, including cheap gas-powered electricity -- which perhaps will be Solar PV's biggest nemesis: "Natural-gas-fired electricity now costs about 84 percent less than solar, and it cuts carbon-dioxide emissions compared to conventional coal by 30 percent to 50 percent." And cheap natural gas will be here for a while (see also this analysis, as well as this and this, showing how it all affects the state of Georgia's "electricity politics," and reduced green investment in the U.K., if not the cause of losing hope outright for U.S. green power.). Relatedly, check out how subsidies fostered fracking (read this, too), and how cheap natural gas is lifting the U.S. economy more quickly than previously thought.
Subsidies also engender bubble-bust cycles, waste, fraud and corruption: "[Renewable] subsidies have long distorted the market for new sources of energy by allocating funding to the technologies with the best lobbyists instead of those with the most value to consumers… When the government picks winners and losers, we get unwise and failed investments like Solyndra. We need to let the innovative spirit of the free markets decide which new technologies will most benefit American consumers." (Source). More here, here and here, including the distortive effects of Chinese government subsidies on the world solar panel manufacturing market. In short: "Industry behavior has evolved in a start/stop incentive environment so the basic economic supply/demand principles do not necessarily apply and the resulting market behavior is not orderly." (Source).
Anti-subsidists basically say this: Stop interfering with the free market with our tax dollars. It wastes our money, gives too much to foreign competition, and disorders the orderly market process needed to make Solar PV naturally competitive, which is now being claimed for peak-power utility scale Solar PV in places like Texas and Australia (source). See also this analogous story about GM's artificially boosted profits at our collective expense, the perverse "negative pricing" subsidies cause in the wind-power market, and this "boondoggle car" story.
But see this positive article on subsidies, and this piece summarizing all energy subsidies. Welfare capitalism is a tough subject to nail down, much less debate, especially with the mass-debate tainted by all the energy-interest money flowing into political ads. Falling Solar PV prices factor in, such as with this fellow's call to end state tax credits in Hawaii, which has much to gain from Solar PV. In March, 2013, some in Germany -- the world leader in subsidized solar power growth -- raised doubts about subsidization in the first place. Source ("Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times."). Subsidy-sucking diminishes interest in Research & Development efforts for renewables, people quoted in this source say.
There are other, complicating factors too. Many have raised doubt whether grid-tied Solar PV electricity is attractive enough on the free market for utilities to buy. Some have said utilities don't want it because it's too variable and the cost of reconfiguring the local and long-distance power grid to accommodate that is too much (see, e.g., this effort to cope with variability; see also the "German Solution" and my "variability" page here, plus this debate on solar-gridded-design dynamics). Thus, unless a critical mass of PV is built and successfully blended within a utility's grid, Solar-generated electricity is too unattractive to utilities, even bought at wholesale ("avoided cost"), from random PV producers. This includes the haphazardly located "Solar Subsidy Farms" and other large-scale Solar PV installations criticized here -- and note this L.A. Times article warning of gargantuan costs now emerging with large-scale desert solar transmission costs -- a point ignored in this rebuttal piece. I invite evidentially supported knock-downs to that "variability" argument (is that argument simply "brown-power conspiracy propaganda" or raw bribe-a-pol politics like this guy implies?). Articles like this help little, citing few positive examples but otherwise simply chide utilities to "just make it happen," and damn the details. This is encouraging. This is not ($422 million subsidized rooftop retailer).
For years utilities have only bought Solar PV power from small producers like me because greenies got laws passed forcing them to do so, but otherwise the utilities would simply pass Solar PV producers by. As these gents explain, it's claimed to be enormously complicated/expensive for grid operators to interconnect with these random solar generators that produce variable jolts of power all day (“significant regional transmission upgrades” is the phrase commonly invoked when grid operators must accommodate new power sources) in a system that must always deliver base-load flow and manage peaks.
Indeed, one utility wants to charge solar power producers a special fee for “equipment and maintenance impacts due to reverse power flow, equipment and maintenance impacts due to operational voltage regulation, voltage fluctuations due to intermittent generation export to the system, and distribution system capacity impacts." I've yet to see solar-subsidy cheerleaders like this fellow even acknowledge the problem, and most "envisioned solutions" like this one peg themselves on the hope of cost-feasible "electricity storage." Of course, the market doesn't gamble on hope, but reality-based projected gains that competently integrates what power and grid operators call supply and load factors. Consider:
(Source). To get a feel for how complicated and costly it is to integrate renewable energy into America's grid, read this, and note this study project. Read also this impalement of a 100% renewable energy plan for N.Y. Then read this damning report on a massive Irish wind project -- how the variability cost is routinely hidden if not understated for wind (it packs "variability" adaptation cost similar to Solar PV); also note how the same variability-cost problem is deliberately shirked in this Pakistani wind program). This 12/26/12 WSJ piece dovetails with that, and points out how brown power plants must be run anyway, in the background, to compensate for variability, thus consuming a good chunk of the net environmental gain this renewable resource would otherwise bring:
Nevertheless, there is contra-data such as this, and I don't have enough information to opine either way on that otherwise crucial topic, though the FERC is rulemaking in this area, and the Germans require an elaborate grid-integration certification process, and all that's on top of the grid security risk costs that all must bear. Meanwhile, as projected in 2011, 2012 solar PV prices are down and continuing to fall, another 30% in 2012, while Solar PV exports are rising and domestic demand doubling for 2012, and within a few years PV systems will be "plug and play" simple to install and use (yes, there are even subsidies for that), and plug-and-play has already beach-headed itself in the U.S (including balcony systems). Post-Fukushima, German and Chinese propulsion into renewables to replace nukes will also dramatically alter production/pricing in this area, as projected here, here and here. World electricity demand, in the meantime, may rise so much that it may just not be addressed. And "[t]ogether, unsubsidized residential and commercial solar at price parity [with brown-power] could provide 9% of total U.S. electricity by 2022." (Source).
Under the most optimistic projection, masses of consumers will thus be able to buy solar arrays from a Home Depot "Solar Aisle" and install them on personal residences over a couple of weekends (I did it, see below). They'll also do it for $.70/watt to $1/watt -- which brings us ever closer to "grid parity" -- amid an industry-wide rebound projection for 2015 as driven by falling prices in Germany and the USA (75% drop in solar panel prices in the last 3 years accompanied by a 75% solar bankruptcy rate), and a reordering of centralized power to distributed-power generation (232 GW of distributed renewable electricity by 2017). See also this piece on projected cost-reductions for solar. This, too. And this Dec, 2012 analysis showing Chinese Solar panels being produced at as low as $.58/watt. "An impressive 5.5 gigawatts of solar is already at price parity in 2012, rising to 122 gigawatts in 2022." (Source). Here's a $.65/watt low reported in Jan, 2013, $.42 by 2015, and check out this 2013 cost-trend analysis, and this 2013 "solar parity" projection.
$.70/watt to $1/watt installed cost for a Solar PV array on your home translates into a 7 to 10 year payback cycle (hence, you get your money back in 7-10 years, and after that you get free electricity for the remainder of the 30-year system). If tens of millions of Americans did that -- driven by their own pursuit of personal wealth (free-from-the-sun electricity = saved cash), then perhaps enough "variable" power coming from them could be smoothed out over a smart grid and thus be attractive to utilities (who are now legislatively forced to buy from folks like me -- I operate a 10KW Solar PV system, more on that below). Additionally, net electricity demand would decrease on a substantial scale -- folks will be producing/consuming their own -- and this is consistent with conservation efforts utilities already advocate. That results in less consumption of coal and other brown power sources to generate power -- because the solarized customer base would now demand less of it (how much, I don't know -- readers: please send me any research you may find on this), though lowering fossil-fuel based energy prices may militate against this (Source).
Tremendous economic/ecologic upside, in turn, would then follow, in a world where energy demand is projected to increase by 53% from 2008 - 2035, remains hyper-dependent upon "brown" power (coal, gas, nukes, and oil), but is attempting to be met by over $1 trillion in renewable investment thus far ($257 billion in 2011 alone) and some optimists say we're underestimating renewable power's growth. "A recently released study by the National Renewable Energy Laboratory, estimates that the technical potential of photovoltaic cells and concentrated solar power (CSP) in the United States is as much as 200,000 Gigawatts, enough to generate about 400,000 TWh of energy annually." (Source). Click here for a fairly optimistic solar growth report. This, too, showing solar/wind grid parity numbers. Check out this map on grid-parity pricing, and this April, 2013 update on grid parity for rooftop solar. That's a lot of investment by Joe, and electricity income flowing back into Joe's own pocket via widely dispersed (rather than dangerously centralized) power-sourcing for the grid.
But I used the word perhaps above for a reason -- because so much of what we read today is not only fake, but "sophisticated-fake." My local paper (the Savannah Morning News), for example, about twice a year runs a "solar fantasy" column from the same solar fanboy, who cites only "projected" products and vaporware in the standard-greenie, any-solar's-good-solar, so let's all back endless subsidies mindset that drives most "environmental discussion" these days. Check out my questions here, by the way, to a South Carolina solar panel manufacturer, and here, in response to a call for more (via ratepayers) subsidization in Georgia. "Subsidization-exhaustion" at some points sets in (example: Greece). And check out this fellow's conclusion that it's all one big clusterfudge (though his conclusion presumes no radical price drops like I do -- a 75% drop from 2009-12, as claimed here).
Nevertheless, after much analysis I conclude that it makes sense to reposition energy policy to encourage residential Solar PV, specifically as a personal-wealth generating opportunity, and see where it all goes from there. My reason is simple: America's economy is 70% consumer-spending driven. Why not tap that for personal, "rooftop solar," which some say could supply as much as 20% of America's electricity needs (click here, too), and does not consume valuable open land? And remember, as is being shown right now in Africa at the micro-solar level, one can literally sell a solar PV system to the impoverished on a time-payment plan and rely on the customer himself to capture the money value of free (from the sun) electricity to repay the seller.
Hence, a PV seller can now "exploit" his customer to harness and monetize the free photons raining down from the heavens to put electricity in the customer's home and money in the seller's pocket. A uses B to convert sunshine to money to stream that "sunshine-wealth" back to A, while B gets energy at a reduced cost in the process. Why? Because the fuel source (sunlight) is free. When has such an unmistakable win-win-win deal like that ever happened? As a capitalist, I'm "exploiting" a billion customers to point my technology at the sun, harvest the free energy (converted to usable electricity) flowing from it, monetize it, then stream that money back into my pocket. And every one of those customers thanks me for saving them 50% of their daily energy-cost needs. And the rest of the planet thanks me for drastically cutting kerosene and candle-burning pollution costs. It's literally an award-winning strategy.
Indeed, the off-grid market formula noted above is perhaps the best place to road-test an unsubsidized free market. Over 1 billion live off the grid. And a truly free-market capitalism relies on millions of self-interested consumers to sift and sort the best products, as we see in the home electronics market, thus rationally sorting out winners and losers (smartphones, PCs, etc.). We don't have that in the Western-subsidized, on-grid Solar PV market (who can say right now who makes the best Solar PV panels?). What we do have is a market where Politicians and their Bureaucrats (the Pol-Crats) pick too many winners and losers (Solyndra, Abound Solar, and other boondoggles).
That distortion, in turn, makes securing stable investment (as in, getting people to invest in producing and invest in purchasing Solar PV) difficult because, given all the layers of government entanglement in this market sector, it's difficult for the free market to do its job of sorting and sifting the winners and losers. Again, the Pol-Crats too often make those choices, and that retards the growth of confidence, thus investment, thus smart, rational (as opposed to subsidy-politically-corrupted) free-market growth. We must eliminate the ability to "Solyndra-cize" and corrupt free-market sifting mechanisms (here's the latest round-up on where the market's at by the way, including Germany's own "Solyndra-bust" plus an American firm's subsidy-self-dealing outrage). We must prevent them, too, from foisting unfunded mandates and stealth taxes on ratepayers (FITs and RPS's -- read this fellow's analysis of the real cost of RPS mandates; this, too; and this).
Until then, we will be stuck with subsidy-pandering, photo-opp-seeking politicians (this, too) and their bureaucrats, plus ill-informed greenies "de-rationalizing" the Solar PV market with mandates (Renewable Portfolio Standards, Feed-In-Tarriffs). This renders it too unstable and unreliable (just look at this industry report "wondering" why the PV market is so bubble-busty after noting huge demand-side subsidies; it's noted here, too). Politically directed (hence misfocused and overfocused) money creates supply bubbles that pop, causing price crashes, shake-outs if not industry-collapses, bubble-and-bust cycles (see a short history of that here), and an "industry [that ultimately gets] trapped with too much capacity and too low prices." (Source). Imagine if governments subsidized the Apple vs. Google smartphone competition, or PCs back in the 1980s, or cars in this decade (Oh wait, it has!).
All of that government interference (subsidizing production and consumption of solar power, bureaucrats picking market winners and losers, and legislatures/PSC commissioners commanding/subsidizing purchases of otherwise-unwanted, variable power by utilities), simply drives away investors (click here and here read why investors are reluctant to invest in Solar PV). Why? Because they don't have an efficient winner/loser sorting mechanism (the free market) to tell them what product is worth investing in and what is not. Only savvy insiders, suffused with a "gold rush mentality" (as in feed at the public trough), exploit the government largesse -- not legitimate (hence, rational) long-term investors. Last year (2010-2011) about $66 billion in global subsidies led to a 40% market-value drop (bubble, bust....) in renewable companies -- a sure sign of government's distortive effects on a free market, which is (as of July 2012) taking a predictable drubbing, especially in China, per this 2013 report.
The subsidization (hence, politicization) of solar has led to this sagacious statement: "One day the sun will be the energy source for homes and businesses just like it is now for crops and forest and weather systems -- its a no brainer. Right now solar energy is being used as a front to launder money from taxpayers, and until that changes there will be little advancement in the use and technology of solar." -- Russell Love, March 27, 2012. The laundering itself is greased with political contributions (see also this), in a global economy showing Asia rapidly trumping the U.S. in economic terms.
Re-rationalizing (free it!) the Solar PV market is thus advocated here, with a focus on mass-scale, residential ownership, fomenting the "Third Industrial Revolution" (millions of distributed energy producers) much like that envisioned here. (Read this for a macro-free-market view of renewable energy trumping "brown" energy). Consumers can thus make and consume their own electricity, and that requires no expensive grid-alteration (they simply consume less from the grid, which is consonant with energy efficiency programs). It also moots the forced-purchase laws foisted upon utilities ("there were some 62,000 PV systems connected to the grid in 2011, a 38% increase over 2010." (Source)). Note: All of this analysis changes instantly (i.e. there will be a tidal wave of Solar PV production and prosperity) once someone "cracks the code" -- produces cost-feasible electricity storage. Even then, it will be the free market (and not government bureaucrats) that will ensure that every brownfield and unused, sun-exposed spot will be exploited.
Meanwhile, let Joe Six Pack spend his own money and reap his own rewards; don't take it from him spend it for him, which is what one does when advocating subsidies. This prescription also helps address the concern over whether Germany's "no-nukes" path will be a net step backwards (it must "temporarily" increase brown power to de-nuclearize its grid, until it compensates with solar and other renewables). And lately even some solar industry folks are seeing this light. Click here (money quote: “But many industry insiders say that for true grid parity, solar needs to compete with less government assistance.”) and here (Bill Gates saying the current subsidy scheme makes no sense, here too (in a 2012 video)).
What follows is based on my own Solar PV experience (here's my 10KW system, along with my first-year report on it), and what lessons I've drawn from it. Understand that I'm tapping the greed, not the green chord here, for most Americans don't want to believe in global warning (click here, too), and yes, all that I know are at best "pseudo-green." Also understand that, since I began this web-book in early 2011, “[r]enewable power, excluding large hydro-electric, accounted for 44% of all new generating capacity added worldwide in 2011 (up from 34% in 2010). This accounted for 31% of actual new power generated, due to lower capacity factors for solar and wind capacity." (Source). And "[r]enewable sources have grown to supply 16.7 % of global energy consumption." (Source). Yet, this "Hard Facts" report says that America now has “more combined oil, coal, and natural gas resources than any other country on the planet. We have enough energy resources to provide reliable and affordable energy for decades, even centuries to come. The only real question is whether we will have access to our abundant energy resources, not whether sufficient resources exist.” Hence, solar may only make economic sense at the Joe Six Pack level, explained here.
I. "Cleaned and Pressed"
California's late Chief Justice Roger Traynor once wrote “that there are notions embedded in the law that have never been cleaned and pressed and might disintegrate if they were.” The same must be said for “solar politics.” Pick up virtually any "solar" publication or peruse any solar web site today and nearly 100% advocate subsdizing solar power, "for the good of the environment."
We should fully explore the argument that subsidization may feel good and "right" at the moment, but like any feel-good narcotic it ultimately harms solar power. We should explore different ways with which to bring free-market residential solar power, on a mass-consumer scale, to my home state of Georgia and the United States.
Read that again: free, not subsidized. Residential, not utility-scale (hence, decentralized power generation). And mass-consumer, not "greenie-niche." But not just any kind of solar power. Instead, battery-less, residential grid-tied Solar Photovoltaic systems (hereafter, "Solar PV systems"), as further explained by this commercial vendor, and demonstrated by this video.
Why? Because it packs the highest potential for a tidal wave of economic prosperity, not to mention epic ecological benefit.
It also will blend in with, hopefully someday, 200 "electric-mile" cars that will enable folks like me to drive using free (off my roof's solar array) energy, and thus drive 90% of the time at virtually no financial or environmental cost, and possibly store some of my array's electricity. And, it will form part of a 200 GW base of renewable electrical power.
And, it will rise incrementally, and thus more harmoniously (operationally and politically) blend in with brown-power based utility grids. Further, it will address the flawed premise on which too many renewable energy proponents operate: That wind and solar will lessen America's dependence on foreign oil -- it will not -- and somehow displace brown power, base-load electricity plants -- which also won't happen anytime soon because “[w]e in the United States and Canada, have enough oil to last 200 years. We have enough coal to last longer than 200 years. We have enough natural gas to last for at least 100 years.” (Source).
More importantly, it's do-able. I project that by no later than 2017 (hence, reasonably soon), unsubsidized $1/watt ("grid parity," as also explained here and here) will be achieved (more on this below), and true (not artificially priced) $1/watt will mean, to anyone, "I must have this for my home and farm now."
That "anyone" will be "Joe Six Pack" (hereafter, "Joe," representing the average middle class American), who will drive to his local Home Depot, go down its "Solar Aisle," load up some PV panels into his pick-up truck and, by the end of two weekends (using plug-and-play simple, all-in-one style connections) provide all the power his family will ever use, if not also reap some "reverse-meter" electricity credits on his power bill by selling his excess power to his utility.
Most importantly, he'll do it because it makes economic sense for him to do it -- he'll make and save money, and hey, if there's an environmental benefit well that will just be icing on his cake.
And he won't do it because his government's bribing him to do it with taxpayer money. He'll do it because the free market and his own ingenuity (and that flowing from the crowd-sourced wisdom flowing from DIY sites) will enable him to produce his own (at a minimum, for self-consumption) electricity as cheap if not cheaper than brown-power energy.
He'll also pick Solar PV over CSP, Solar Thermal, Concentrated Solar Thermal (explained here), Concentrated PV (CPV - see also this), Concentrated PV/Thermal, and other alternative energy technologies like wind, which has great market potential, and could even reach "grid parity," but only off Georiga's coast because its mainland is not in a good zone, though that's debatable, even as a global benefit, but see this.
Why will Joe pick Solar PV? Because it will be cheap, makes sense in Georgia's insolation zone, has a one-time-installation cost, can be added to incrementally as he finds more money for it, and will be easy to install and maintain. It has no "negative externalities" while operating, and will be warranted at 90% output for 10 years, and 80% for the next 20 (solar panels degrade at about .25% to 1% a year). Part of a "solar power market [that] grew a record 67% last year, [thus] making it the fastest-growing energy sector," and may skyrocket if Saudi Arabia becomes "the Saudi Arabia of Solar Electricity" and produces 25% of the planet's electricity. Nor will it ever pose a catastrophic risk to entire national economies and environments. Nor will the self-consumed part of the power be subject to as much as 20% in transmission/distribution losses.
And he'll have mostly the Asians, especially the Chinese, who are surging ahead of the rest of the world on Solar PV, and who now get over 25% of their electricity from renewable and nuclear sources, to thank. Millions of Chinese "donating" their under-priced labor and national wealth (via subsidies) have helped bring Solar PV costs down so far so fast that some are now claiming "solar grid parity" (that it costs the same or cheaper to generate electricity from Solar PV than with nuclear or "natural-gas" based electrical power), though I find that claim dubious (see Krugman's analysis here).
You are reading this now, and will keep reading, because I'm not selling anything, not being paid anything (no ads here, either), nor shilling for any corporate or other interests. And I'm betting you won't find any other internet site insisting on free market solar power, and providing useful ideas on how to advance the private-enterprise way to bring that tidal wave of prosperity/ecological benefit to my state (Georgia), the U.S., and the world.
Chapter 1: Why Residential Solar PV?
Why residential Solar PV instead of those massive, utility-scale or even world-scale PV systems that you read about? Because distributed energy generation, in contrast to centralized, utility-scale energy generation, breeds unique benefits:
* It enables distributed energy independence (my refrigerated food won't spoil when the utility company's grid fails). "Distributed" means spread among individual owners (Joe), not monopolistic, concentrated wealth entities that can cop billions in subsidies and spread lobbying cash to politicians who give them turf-protecting legislation.
* It fosters distributed, cross-pollinating intelligence and upward-cascading technological enhancements: Billions of PC users were free to, and in fact developed, countless software/hardware innovations because no central source prevented smart users from innovating/improving PCs, which brought us $500 Billion in prosperity. The same phenomenon will accelerate higher-efficiency innovations with Solar PVs. Once "arrayed," 100 million "Joe Six Packs" will all be financially incentivized to relentlessly tweak their solar arrays to eke even more wealth out of them, especially if reverse-meter rates (more on that below) are kept competitive. Just look at the impact of just one fairly simple re-design of a wood stove will have on 3 billion people. Recall how splendidly fast PCs (and now i-Pads and other "i-minis") developed with hundreds of millions of users using/studying/tweaking them and their counterpart, the internet (just one example: over 350,000 apps written for the i-Phone, which has only existed since 2007).
* As will be further detailed below, it will harmoniously blend with existing utility grids because the average user will want to erect only enough of an array to cover his home's typical power needs, and only marginally bleed over excess energy into the local grid (and cop a reverse-meter credit for it). Compare that to the massive energy influx T. Boone Pickens's wind plan contemplated, which necessitated epic power grid reconfigurations (and he and his investors would control a mass load of power, while what is proposed here is "chicken in every pot" level, homeowner-controlled power). Relatedly, and good news for utility-scale Solar PV if this is true, this investment analysis says even big Solar PV projects can be better blended than wind and Concentrated Solar Thermal. This same concept is discussed for small wind farms, which not only alleviates transmission difficulties arising from large farms, but smooths net electricity flow since "the wind is almost always blowing somewhere."
* It will help form a second blend layer, that of peak load to base load -- it will supply much of the "peak" amount of electricity a community demands, for example, on a hot sunny day, when the power company must buy or supply (at a more costly rate) it over the normal, "base load" demand letter -- as explained here and here. See also this analysis.
* It will generate distributed (not concentrated) wealth. Lots of it. Directly into Joe's pocket. Thousands, millions and then one hundred million Joes pocketing newly created (direct from the sun) wealth (free energy, reverse-meter payments) every day. That's wealth that Joe pockets, not some small group of utility owners/controllers. And unlike most forms of wealth (example: you've got to expend energy and create pollution to extract and burn coal to create electricity, then get money -- wealth -- from it), this is pure, cost-free new wealth (not government-printed money that feeds "economic multiplier" cycles in economists' heads). Rural Joe, for that matter, will likely be part of the first wave.
* It also will deconcentrate electrical power generation, and thus deprive terrorists/tsunamis of targets and monopolists of concentrated-power-wealth manipulability. Indeed, it already is spreading to the 2.0 billion people who live off the grid, including some of the most desperate. As Seba says, "[h]alf a billion people in 500,000 villages in India alone are not connected to the grid. Two billion people around the world get their energy from kerosene or diesel at rates up to 10 times today’s PV cost." That market alone will spur greater economies of scale in Solar PV manufacturing -- to meet that demand.
* The self-consumed part of Solar PV energy obviously suffers no transmission loss, which can reach as high as 20% (hence, transmission alone packs a built-in energy waste). And, distributed "rooftop Solar PV" may well reduce the need for very expensive grid upgrades. It's been said that up to $11 billion in $55 billion in grid upgrading over the next 10 years could be avoided in Australia. Also, central power generation (big coal and nuke plants) loses 20% or more of its electricity just in its transmission to customers. If those same customers generate "distributed" energy and feed their local grid less transmission loss can result. Inverters are now being designed to "smart-grid-integrate" with utility grids for reduce variability issues. (Source).
* It will be pre-positioned to fully exploit economically/ecologically feasible energy storage (envisioned here and discussed here) should anyone ever get around to inventing it.
* It can be arranged, when erected on a mass-commodity level scale (millions of homes), into a horizontal-management smart grid, if not a micro-grid (click here for more on micro-grids) so that if clouds depress electricity generation on one side of town, and high-sun on the other produces intense bursts of electricity, the smart-grid (or so techno-forecasters claim) can smooth the peaks and valleys to ensure a virtual base-load style electrical flow. This will help address the variable power, lack of temporary electrical storage problem that undermines Solar PV today (for more on this concept, click here, then here, and here). Utilities themselves can publish maps to show optimum blending with their grids. The White House is advancing its own smart grid initiative, by the way, and people are now conjuring up hybrid brown/green power combinations to stabilize output and claim base load status. Even vehicle-to-grid (V2G) technologists are charging into this area.
* Because "Joe" will quickly figure out that Solar PV provides him with "free" electricity for his own use, he'll naturally run his appliances and other electricity-consuming activities when the sun is shining, thus self-instituting his own "Time of Use" pricing, obviating utilities' need to do so. And at the commercial level (Wal-Mart rooftops, etc.), private interest will spur "spot-innovation" for demand-side consumption (every store manager aiming for profit-based bonuses will be incentivized to optimize his rooftop array's output and consume it, sparing store-electricity operating expenses and thus building his bottom line). Multiply that by myriad minds all working for more "free-energy-wealth" and geometric innovational increases will ensue.
* It will elevate the Solar PV (sure, subsidy-driven) growth wave, as noted here: "Grid-connected PV installations grew 102 percent in 2010 to reach 878 MW, up from 435 MW in 2009, bringing cumulative installed PV capacity in the U.S. to 2,086 MW." And here, which notes that "[g]lobal clean energy finance and investment grew significantly in 2010 to $243 billion, a 30% increase from the previous year." And here: "While the U.S. GDP grew just 2.8% in 2010, the domestic solar market jumped by 67% last year, according to GTM Research. The GTM/SEIA U.S. Solar Market Insight, 2010 Year in Review holds a lot more good new for the solar sector. For example, grid-connected PV installations rose to 878 MW (megawatts) [in 2010], a 102% increase over 2009. While the pattern of growth was widespread, ten states account for over 60% of all new installations” [Note: most are high-subsidy states, thus exemplifying an obvious concept -- that governments can create market bubbles and thus self-demonstrate the folly of government-driven markets]. Record growth means ramped up production, economies of scale, and ultimately lower Solar PV hardware prices -- including "liquidation" prices when the subsidy-caused bubble bursts and manufacturers/markets collapse (called an "industry shake-out"). Of course, much of the numbers you see here are inflated by utility-scale Solar PV, which the U.S. Government would like to see compete on an unsubsidized basis, but I'm not holding my breath on that one.
* "Nearly half of the electricity in the United States comes from the burning of coal; 30 percent of that coal comes from the Appalachian mountains. Mountaintop removal has destroyed 500 mountains, one million acres of forest and 2,000 miles of streams." (Source). Solar PV power provides electricity, and 100 million Americans making and keeping/selling their own electricity is bound to result in a serious subtraction from the demand that drives the environmental wreckage wreaked by brown power sources like coal. It will also reduce (yeah, who knows by how much) the political demand to tax carbon.
* Note that these points should be viewed in light of these (as of July, 2012) projections: "renewable energy terawatt hours will rise almost 60 percent by 2017, going from 1,160 from 2005-2011 TWh to 1,840 TWh, coming from 710 gigawatts of new renewables. The report also predicts China will contribute 270 gigawatts to the new renewable capacity, as well as 56 gigawatts for the United States, 36gw for India and 32 for Germany." (Source).
Chapter 2: My Own 10KW PV System
To better study the private-enterprise driven residential Solar PV market, I erected a 10KW grid-tied, Solar Photovoltaic (PV) system in Gillis Springs, Georgia (click here or here to see what KW and KWH means). As explained on page 2 here, also here, on pages 1 and 2, it's the largest residential rooftop solar array in the Central Georgia area. Grid-tied means no battery, the system powers my home and feeds all excess energy into the local power grid, and my utility pays me for that ($.08/KWH) via a net metering." I thus use my local utility as a big battery, since I feed my excess power into it and draw back from it at night. Here's my one-year report on it to the solar panel manufacturer.
And you know what? I'm technologically ignorant. All I know how to do is turn a wrench and write checks.
But that's my point. If I can do this, then "Joe" can.
By the time you finish reading this you'll decide that I'm either onto something useful or just a damn fool.
You'll also realize that this discussion is as much about human nature, economics and politics as it is about Solar PV. Even a that, understand that Solar PV is no panacea. Here's the latest projection of how far renewable power will take us (not much) at current growth projections:
Chapter 3: The Case Against Subsidization -- In General
My vision for 100-million-unit/year residential Solar PV sales -- just as the global PC industry created a commodity-scale market for PC sales -- depends on creating a truly free market for it. And that, in turn, means that the entire renewable energy industry must de-addict itself from government and utility-based subsidies.
Why? Because subsidized anything is almost always a net mistake on multiple levels. Imagine if, in the early 1980s when I routinely paid over $2000 for a PC, they were deemed "essential" by our government and thus subsidized via grants, rebates and tax credits. We'd be in even more debt and would not have reaped the innovative, cost-shaving benefits a free market generates, including Moore's Law (this, too), and thus the amazingly more productive PCs we use today for just a fraction of the original PC prices.
Worse, once one government begins subsidizing a producer, competitors get their own governments to subsidize them, until the two pools of taxpayers wind up in a race to the bottom, with money and resources wasted in market bubbles and crashes. Read this postmortem on a heavily subsidized American solar panel manufacturer's (Evergreen Solar's) fall into bankruptcy, in which Evergreen blamed subsidized Chinese competition: "Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry," Evergreen's CEO said. Evergreen itself was heavily subsidized, as that postmortem points out.
Here's another Solar Welfare Queen that sucked $6 million in taxpayer goodies and also bit the dust, citing foreign competitive pressures (read: the Chinese). And another ($535 million federal loan dollars sucked down). The internal message is clear: whoever gets more hand-outs wins, rather than whoever is more quality- and price-efficient in producing a product I'll want to buy. Spain, Portugal and Italy have massively subsidized solar and are all on the brink of sovereign default. Read about Spain's subsidy disaster here. Make sense? Hell no.
Seriously, when has it ever made sense to subsidize any mass-consumer product and thus destroy the natural selection process and comparative advantage benefits that free markets produce? If private capital investors won't risk their money to launch or "evolve" a product, isn't that telling you something? How many half-billion losses should Obama throw down before it dawns on him that investors-buyers-sellers, and politicians are best equipped to make free-market choices? How many hidden deals with forced higher prices on masses of consumers will we stomach?
Look at this 9/1/11 NYT market analysis conclusion: "The United States and the European Union have tried to build demand for solar power by subsidizing the buyers of solar panels. But increasingly those subsidies are being used to buy solar panels from China." Catch that? American taxpayer dollars ultimately subsidizing Chinese jobs. Just plain nuts.
Solar PV, once similarly brought down to an unsubsidized cost and usefulness level that Joe would want to buy, can follow the same route of PCs. Government and well-meaning greenies need to just get out of the way. That includes eliminating government largess for brown power (fossil fuel and nuclear), which artificially lowers brown-power energy prices and thus makes solar power less competitive, as well as green power (this trade-interest group's subsidy approach is just plain wrong; forcing fellow tax and rate-payers, through tax credits and "feed-in-tariffs," to subsidize solar only breeds resentment and anti-big-government sentiment, not to mention insidious corporate welfare, and solar products price inflation).
Just look at the total solar subsidy pig-out this one fellow consumed in Blairsville, Georgia, including 90% of Georgia's entire 2010 state tax credit -- on top of a 30% federal tax credit and inflated KWH-payments from the TVA. Any question it would have never been built without everyone else paying for it? Ditto for this. All four Georgia "subsidy farms" are discussed here. Of course, two wrongs have never made a right, and saying brown's been subsidized so let's subsidize green is still wrong, as explained above.
My qualifications? Well let's just say I'm a serious student of history, economics, commerce, government and law. More importantly, I've put my money where my mouth is -- on 10/2/10, I brought that 10KW system online and thus far it's covered all of my home's power needs (my array has generated over 32,000 KWH of power as of 12/15/12), plus put money in my pocket (reverse-meter credits from my utility). It's not a cutting edge Solar PV array, but it enables me to indulge in technological experimentation on it in "real time" as well as study it as an economic prototype aimed at demonstrating how Joe would see value in it.
How much value? In my solar radiation zone (see also insolation), which is South Central Georgia (see this map), a 10KW system will cover all of a family of fours' power needs plus -- if they live efficiently enough -- perhaps put money in their pocket every month for 30 years.
Other market perversions caused by subsidies include that noted in Jigar Shah’s article, “Are Subsidies Holding Back U.S. Solar Deployment?." There he noted that solar subsidies in the US are manipulated by investors in order to get a higher return on investment. In other words, by claiming that solar systems cost more than they do, investors are able to gain more in tax credits. (Source).
Chapter 4: An Unsubsidized "Super-Green Home"
My Solar P.V. system sits atop another economic prototype for low-income, super-green housing that can be made of 80% recyclable material (metal) which itself can be recycled if ever torn down. My 1600 sq.ft. home, with 1600 sq.ft. of garage/home-business space (hence, 3200 sq.ft, plus over 1000 sq. ft. of concrete wrap-around porch), is not only a "positive energy" home (it produces more electricity than it will ever consume), but it went up at $87.50/sq.ft, including build-out, wrap-around-porch and its 10KW solar array at $35,000 up-front cost (before the $21,000 in tax credits).
Know of anything else like that, anywhere?
Stop and think a moment: All of the "super-green" building you see around the planet has been and remains economically flawed: It's all built (and expected to be built) at above conventional ("stick-built") prices. My design and actual result goes the other way: Super-green at sub-conventional pricing ($175,000 for 3200 sq.ft., though only 1600 is heated/cooled living space, plus 920 sq.ft of concrete wrap-around porch space, plus a 10KW solar array, for $175,000 -- $154,000 if the tax credits are counted. And yes, the Solar Foil Ceiling's included.
And you know what? I'm not selling anything here. I'm not luring anyone in to buy a product, set of plans, or how-to guide. Nor do you see any ads. Nor is this a front for any person or entity that wants to sell you anything. I'm not making any referrals, and I'm not making a dime on any of this.
Instead, I simply want to share what I've done, and maybe learn from others how to do better (crowdsourcing; send me your ideas and comments at firstname.lastname@example.org and I'll post them here), to help foster a free-market for Solar PV, especially for lower-income housing (and not rich greenies).
That's free as in subsidy free, and free of all the corporate-welfare, corrupting politics that come with subsidies.
I want to do for PV what the free market did for the PC.
Just a few more points about my home, since it can be valued by those who think of both Solar PV and housing for Joe, especially "rural Joe" (read: no zoning codes or private covenant or other aesthetics-based barriers), and it will provide perspective on how I view the development of a mass-market for Solar PV: My home is as close to maintenance-free as I could get it: 30 year paint warranty on the exterior metal walls, a 50-year roof, a 30-year solar array with no moving parts; nothing to rot, and no termite issues (virtually all concrete and steel).
Of course, it's not a Better Homes & Gardens candidate. It's for those who think about getting a solid roof over their heads first and aesthetics way second (get the thing up, re-clad and prettify later, as finances permit). It easily stands as a model for Habitat For Humanity, which has ventured into Solar PV, to consider: Stick-built home for low-income folks can quickly rot if no caulking, painting, and termite-protection maintenance is done; those are not issues here. In fact, my home's foundation, stub-in, and shell can be built inside of 15 days -- at 120 mph wind spec -- and it can be made energy self-sufficient (indeed, make money).
All for $87.50/sq. ft, including internal build-out.
In contrast, I'm guessing "W" spent at least triple that for his home, which is bad because it only contributes to the common belief that green is for rich people (hence, 1%, not the other 99% of us, like it should be) and thus not feasible on a mass scale. That winds up having an anti-green effect because only 1% of the populace then winds up even thinking about, much less behaving, green. And it doesn't help that new "green home" building articles like this one, for example, fail to disclose what the home costs.
All of these points tie into the core dynamic behind this blog -- offer something of high value cheap (professional appraisers, by the way, are now formalizing "solar valuation"). Doing that (i.e., going "Greedy Green") will capture that other 99%. What better way to get Joe's attention, and to invest in "Green," than to show him how he'll save a lot of money up front on his housing, plus get extra money in his pocket every month (reverse meter payments), plus be freed from having to pay power bills for 30 years? A triple-win on the money (Greedy Green) versus a presumed net loss Joe presently believes he'd otherwise have to suffer by going "Environmental Green."
That is the way to effect positive environmental change at the billion-unit level. And when billions of humans alter their pollution-causing behavior, sea-change level, positive ecological impact follows.
Focusing on private-sector greed (at the consumer level and the producer level) makes especially good sense in Georgia because it's a fossil-fueled entrenched, red state with no solar power program. It's citizens frankly do not care enough about the environmental upside to clean energy, at least not enough to invest in it, much less make any sacrifices for it (did I mention that the state has no solar power program?). I'm betting most (maybe even me) are skeptics about global warming and a lot of scientific claims.
In fact, as this white paper illustrates, Georgia's legislature has actually written laws aimed at protecting "brown power" turf from green power inroads. It took me a solid year just to get my local power utility to allow me to "grid-tie" my system into it, plus I'm now fighting off a nuisance fee and threat of a reduced reverse-meter credit (hence, passive opposition also awaits solar power).
So greenies should not waste their breath jawboning Georgians to adopt green energy. Besides, a lot of greenies are convinced that solar must cost more and people should just pay that price for the global ecology's sake. That belief, of course, only hurts solar, along with "pro-solar" articles on greenies bragging that they "only" paid $95,000 for their 10KW system. These things hurt solar because they convince Joe that solar's not for him -- that it's "price-inaccessible." Compare this celebrity example ($7.9/watt before rebates; $4.6/watt after rebates/tax-credits), the just-mentioned non-celebrity example ($9.5/watt before rebates, $2.5/watt after laughably and counter-productively huge rebates/credits), and this "greenovationtv" couple's $7/watt before rebates, 8.1KW system). My 10KW system cost $1.4/watt ($14,000 for 10KW), albeit with tax credits (otherwise $3.5/watt).
Chapter 5: My Subsidized Solar PV Array
Again, my Solar PV array cost $35,000 up front ($3.5/watt), net $14,000 ($1.4/watt) after Fed/GA tax credits (there are no utility or other rebates in Georgia). Some claim that net costs down around $1/watt constitutes grid parity (i.e., that the cost of producing green power is the same -- on parity with -- the cost of producing brown power). Like many, I invested in no small part on the thought of helping the environment, and so I felt good about it.
Chapter 6: Swimming Against The Grain
But what if someone went the other way with the concept? What if someone made solar something that people want to do -- because they can make money off it -- and screw the green factor, which gets us all tangled up in endless debate?
That's what this blog is attempting to do: Pave the way for a free market model and help solar P.V. take off, just as desktop computers took off in the early 1980s (when I bought my first PC in 1981, desktops were selling for as high as $5,000; now I can buy one with many times the power for $300; between 1977 and 2009, "the price of computing power had fallen more than 99.8%"). The rest of this blog, then, will focus on creating a free market (free of government over-regulation and subsidies) for the residential solar market -- at the 100-million-unit level.
Right now, of course, solar is heavily subsidized. Hell, I (yes, hypocritically) copped $21,000 in Fed/GA tax credits -- though I'm going to work to get the same (and even lower) net price point for fellow citizens without such credits. Here, by the way, is what I consider an example of a subsidy-crutched market development. Why is that bad? Because it fails to promote (arguably discourages) efficiency and keeps prices high (to absorb the rebates, credits, etc.), thus in no small part amounting to corporate welfare. On top of that, Bloomberg New Energy Finance projects $100 billion in Solar PV investment in the U.S. market by 2020. Solar Industry at 3 (Dec. 2010). But that projection of 44 GW of production is dependent on subsidies for "price stability," lest "investors run for cover." Id.
How silly. A product should sell itself. If no one wants to buy it or invest in it then it's not going to get any better with taxpayer hand-outs. With subsidies, the producer typically winds up spending his time chasing subsidies rather than (like Apple) refining his product into something people will line up the night before just to buy it. This biomass company, for example, is literally farming subsidies from the State of Georgia (the state, through GEFA, which hands out tax dollars to politically entrenched agri-business, not solar) and the federal government. It's located just minutes away from the largest biomass-subsidized failure in the history of Georgia, as further described here. Worse, the company literally extracts royalties from others who replicate its model, and touts government hand-outs as part of profit projections, all in a market sector that many say will never make any economic sense.
Even worse, subsidies artificially ramp up industry-wide production, so that solar industry analysts like Jessica Lillian literally warn of supply-sector collapses once the subsidy rug's pulled out from under. Solar Industry at 3 (Dec. 2010). Why set up such boom and bust cycles directly traceable to fluctuating government-largesse policies rather than just let sane, normal, consumer demand drive production? If you build something I want (PCs since the 1980s, I-Pads and Kindles now) I'll buy it. Don't force me to buy it indirectly through my tax-dollars (hand-outs from my government). That's just crazy, and it also leads to the bribery of politicians (Oh, I'm sorry, "campaign contributions") for more tax goodies, exemptions, and government giveaways (with our money).
True, one can cite benefits to ecology-based subsidies (i.e., they foster new, beneficial industries, and hey, they'll offset the entrenched subsidies brown power already enjoys). But history reveals government entanglement to be a net harm on several levels (bureaucrats can't possibly grasp the myriad choices mass-market consumers make, and thus ever hope to run an efficiency-producing free market for solar; at most we get gross distortion).
Bear in mind, however, that fossil fuel, which is debatably finite, is heavily subsidized, some say to the tune of $70 billion/year (this "Brown Power" fellow claims $90 billion). So, it's not unreasonable to advocate for counter-balancing "green" subsidies (tax credits, rebates, forcing utilities to pay solar producers like me inflated reverse-meter payments, etc., though it's claimed that brown power subsidies are "really depreciation write-offs for investment. Oil companies get a 6 percent deduction from income. Most manufacturing industries get 9 percent. And every company in the economy is eligible for faster investment write-offs." (Source) . For that matter, subsidies have in no small part fomented a growth spurt, as explained here: "The U.S. solar power market grew a record 67% last year, making it the fastest-growing energy sector. . . . Its market share jumped from $3.6 billion in 2009 to $6 billion in 2010, helped by federal tax credits and declining technology costs . . . . In particular, the photovoltaics or solar panel part of the market soared most, more than doubling from 2009."
But see, that spurt likely is just a bubble, which is bound to burst, creating huge amounts of waste and economic headache (ever hear of a "good" bubble? Did we not learn from the housing bubble?). And if you are organically opposed to welfare capitalism, then you'll quickly conclude that two wrongs (hence, also subsidizing green power) don't make a right. Hence, this is a complicated issue. One “solar industry” guy even goes so far as to deem Solar PV to be a fool’s errand. Relatedly, here's another claimed renewable energy waste-fest. This fellow, author of “Power Hungry: The Myths of ‘Green’ Energy and the Real Fuels of the Future,” bemoans the land and net metal costs for solar and wind.
But the USA and much of the world is hurtling down this path (i.e., subsidizing solar), so we must address it rationally, and see if we can veer the momentum into a net economic/environmental plus.
I'm attempting to do that here.
Chapter 7: Luring You In
But first, let me lure more of you in with a brief description of Solar P.V.'s appeal, it's molten emotional core that draws "the masses" into its fold:
* "Money From Heaven": The sun shines, hits my panels, and my net meter registers a number, times $.08, that my utility will pay me (not an inflated tariff, only, per Georgia's reverse-meter statute, the "avoided cost" that my solar power affords to my utility; via net metering). Even better, when I turn on my A-C and cool my home while the sun shines, that energy is free. And one day it'll enable me to drive my $15,000, plug-in electric diesel-hybrid or gas-hybrid car to work and back for "free," because I'll be able to plug my car in at night and recover my rooftop array's power (note: I have no battery storage now, and even if no economically feasible energy storage technology comes along in my lifetime, I'm using the grid as a big battery now, and my net meter ensures that I get to fully exploit all of the 15-60 KWH/day that my system currently produces). So if I can get a plug-in electric with at least a 20-mile range, I'll be able to consume no fossil fuel during my daily commute, and my own solar array can work for me with or without a smart grid.
Think about that: No power bills for my home, no gasoline bills for my car. That is emotionally satisfying to me, and that is why Solar PV will be, with the right marketing of it, so emotionally appealing to Main Street (again, it goes up fast and relatively easy, requires little maintenance, and pays off like a slot machine rigged in my favor for the next 30 years).
* Electricity Bill Liberation: People are stunned, and need a moment to let this statement sink in when I make it - "I'll never pay another power bill for the rest of my life." That's because my 10KW solar array produces way more power than I'll ever consume, month after month, warranted for 30 years. More details on this below.
* Increased Home Value: Any question that someone's going to pay me more for my 10KW-arrayed home than the same one without an array? And because of the design I chose, I in one day can unbolt my system and take all but its wiring with me if someone doesn't want to pay me that premium when I sell my home.
* Energy Price Inflation Protection: With my grid-tied system, I'm spared the retail cost of the electricity I'd otherwise consume from the grid if I had no Solar PV system. So as power prices rise (click here for price-rise data), I constructively save even more, and am obviously protected, to that extent, from electricity price inflation.
* Daytime self-sufficiency: If the electrical power grid goes down you do not (though, most inverters today are designed so that when the grid goes down, you go down -- but there are and will be workarounds for this). If you have a battery system, you can make it through the night. If you have a grid-tied system, you can at least run your appliances during the day, unless it's very-dark-cloudy. Generally, with a 10KW system even on all but the darkest days in Georgia you're pretty much going to be able to get enough juice to run your fridge and limited A-C during the summer, electric heat during the winter. Hope for economically viable, variable-energy storage exists, and that includes using electric-vehicles (EVs) as part of Joe's storage system. Money quote: "Solar panels can be connected directly to vehicle charging equipment to give EV owners the flexibility to determine whether to immediately consume or store solar power. Stored solar power can also provide emergency backup to the building should power go out. Consumers who have installed solar power at their homes can also leverage their investment in an inverter and other equipment to interface with the grid to deliver power stored in vehicle batteries." Side-note: grid-based energy storage is enormously complex but perceived as bearing excellent investment potential by this fellow.
* Reverse-meter Payments: In Georgia, this is determined by the utility's "avoided cost" of purchasing energy elsewhere by buying from you.
* No Foraging Costs: For centuries man foraged for food before he developed farming. Man still forages for energy and disturbs a lot of environment to get it (deep sea drilling, strip mining). Foraging itself consumed energy and creates pollution. And once stored brown (oil, coal, etc.) energy is successfully foraged, enormous pollution flows from its retrieval (energy consumed drilling and pumping oil/coal, then transferring it to you). More energy is consumed, and pollution flows, in its consumption -- smokestack emissions, etc.
Other than the up-front energy/pollution costs to manufacturing PV hardware, none of those negative externalities flow from PV. Just set up your array and you're done. There is thus no energy consumed foraging for it, no energy consumed digging it up and moving it, and no energy consumed in converting it to electricity.
* No Ongoing Pollution Tail: After the up-front pollution cost (claimed to be 1-2 years) of Solar PV, there are no ongoing costs with the electricity it generates. No dollar costs, no labor costs beyond periodic solar-panel "garden-hose-spray" cleaning, and no environmental costs: No appreciable amount of water is used, no emissions of any kind are generated, and yes, I'm banking on 100% solar-panel recycling 30 years from now. Both of my SMA 5000US inverters are mounted inside my garage and thus face no heavy-wear/tear, heat/moisture factors, so I expect them to last beyond their 10-year warranties (my MAGE panels are warranted for 30), and if they fail in 10 years then I expect way-cheaper alternatives to then exist. Compare that to the wasted energy/pollution tail that wags the brown power dog.
* Universal Application and Spin-off Benefits: Read this story about a Kenyan woman who used to travel hours every week and leave her cell phone at a store for days, then pay $.30 -- just to have the phone charged up so she could use it. One $80 solar panel dramatically altered her life. Multiply that result by hundreds of millions and you get this story's conclusion: "[T]hese tiny systems are playing an epic, transformative role."
That one panel did this for her: "Since Ms. Ruto hooked up the system, her teenagers’ grades have improved because they have light for studying. The toddlers no longer risk burns from the smoky kerosene lamp. And each month, she saves $15 in kerosene and battery costs — and the $20 she used to spend on travel. In fact, neighbors now pay her 20 cents to charge their phones, although that business may soon evaporate: 63 families in Kiptusuri have recently installed their own solar power systems." This article discusses how cell phone companies may find it makes sense to enable non-grid (Africa, etc.) customers to get cheap solar -- to thus sell more cell phone services (like Gillette basically giving away its razor so it can make money on its blades). This article projects massive wind/solar energy growth for the remaining 2 billion mobile phone users "in rural areas without reliable power." Remember that 1.6 billion people live off the grid, many in Africa, where this company is creating a new Solar PV market for the lowest economic tier. Here's a projected $150 power-generation model.
The spin-off environmental benefits are significant, too: "The cheap renewable energy systems also allow the rural poor to save money on candles, charcoal, batteries, wood and kerosene. 'So there is an ability to pay and a willingness to pay,' said Mr. Younger of the International Finance Corporation." All those spared candles, charcoal chunks, wood and gallons of kerosene.
Energy, pollution, time, and money saved -- plus economic opportunities created -- all from one solar panel.
* Other Environmental Benefits: All you greenies can fill in the additional environmental benefits in a separate blog that links to this point (again, I'm appealing to man's dark side -- his greed, not his "green," because that's the essence of American capitalism). Understand, though, that you can lose your mind debating net pollution cost/savings with others. Who would've thought that a case could be made for not buying artificial Christmas trees because it's "greener" to buy and toss natural Christmas trees every year?
Too, I'm not advocating that brown power be confiscatorily taxed or otherwise diminished by government fiat -- we're a long way from not needing base load power (Solar PV will always be variable power, though maybe not Concentrated Solar Thermal), and I don't find this fellow's contrary explanation convincing. In fact, as this fellow cogently points out, we need even more (post Japanese disaster) base load power now, not less. Instead, I'm urging smarter folks than I to help find ways for Solar PV to out-compete against brown power, so that the free market will naturally diminish the need for such power, and thus its actual pollution footprint.
Residential Solar PV, for that matter, packs with itself the preeminent benefit of working with brown power (coal plants supply the base load power for my farm, my array supplies both base and some of the peak load). Again, I installed a grid-tied Solar PV system; it is literally integrated into a brown-powered utility grid. All that results when mass numbers of residential PV arrays are constructed is a corresponding need for my utility to build or foment fewer brown-power plants (coal, nuclear, gas). And my utility is an Electric Membership Cooperative (EMC) that is not, by design, a profit-making entity. Its sole purpose is to buy and re-sell power to me on the open market. Well, I am now part of that open market. So if I can produce electricity cheaper than a coal-burning plant, and there are thousands of guys like me, then the equation is altered -- naturally, and through the free market.
My plan -- to get millions of Joes to invest in residential Solar PV -- also dovetails with this fellow's pretty optimistic solar forecast, specifically his "Opportunity Number 7 -- Smart Grid." (Special note on Tony Seba: He's an optimist. I find his projections to be suspiciously rosy. I'd like to see, for example, where he'd find the money for building a "smart grid," which I've read ain't cheap. At least with my proposal Joe can erect enough solar panels to meet his own power needs, and maybe drop some side-feed lines to sell excess power to his next door neighbors -- once regulatory barriers against doing that are lifted. No serious grid alterations are needed with my plan, the utility simply sells Joe less power and thus scales back, builds less power plants, etc. The process steps up as folks figure out how to build community solar systems -- using their own pooled cash and "barn-raising" labor.).
* No Expensive Power Structure Alteration Costs -- Read the above point again. If thousands of homeowners are making their own electricity, and thus drawing less and less electricity from their local EMC's grid, then the EMC simply buys less and less from the brown producers and retrenches itself accordingly. It may have to alter some of its power infrastructure if too much decentralized power is fed into its grid from all over its customer base, but I don't see that as a prohibitive cost. I'd like to hear from anyone who claims otherwise, and cite your evidence, too. From this report there is this: "Most recently, in a May 2010 report, the Western Wind and Solar Integration Study, the US Department of Energy's National Renewable Energy Laboratories (NREL) stated that with the proper mix of tools, different grid operation practices and limited new infrastructure, as much as 35% variable renewable energy generation – 30% wind and 5% solar – could be integrated into the grid in states in the Western US without significantly affecting system reliability."
In any event, decentralized, residential Solar PV also automatically addresses the Big Argument against renewable energy -- transmission costs. Catch this conclusion from an “Industry At Large: System Finance” article in the December 2010 Solar Industry Magazine at 12: “Most of the nation’s renewable resources remain stranded, requiring billions of dollars in transmission investments in order to be successfully integrated into the grid.” The author was talking about utility-scale renewable energy like massive Solar PV plants and gigantic wind farms which produce power in such big bursts and variably so, thus requiring expensive reconfiguration of the electricity grid.
None of that is a concern at the end-user point (Joe’s home). Joe will build enough to cover his home’s needs and probably stop there, and if he overbuilds he’ll feel good copping the “meter gold” showing up on his bill. And if a hundred million of him do the same, then the existing grid should not have to be reconfigured because it won’t happen overnight and thus as early waves of residential Solar PV are brought online the utilities simply build less power plants as net demand diminishes and excess power is thrown into its grid. But it won’t be sudden massive surges as is seen when gigantic Solar PV or Solar Concentrated Thermal fields are built. Thus, utilities can incrementally alter, and thus better cost-manage, their transmission lines when necessitated to by, say, another 20-50 arrays like mine brought online each year.
The residential Solar PV market thus lends itself to harmony with pre-existing electrical grids given my projected growth pattern -- with Joe here and there grid-tying his array in incremental layers, the net cumulation of tens, hundreds, then thousands and millions of PV arrays will be better managed. Transformers and relays and other transformative hardware are thus added in stages as more and more residential systems are brought online.
So the next time you see a TV campaign like that run by T. Boone Pickens's TV (he wanted us taxpayers to drop billions on building the grid that he needed to handle the power envisioned from his massive Midwest wind farm plan), remember that no such mega-investment is necessary if power is made where it is consumed -- at the home. All my EMC had to do is send a guy out to install a reverse meter on my home's power base, and it took him all of 12 minutes -- on a non-smart-grid.
* Residential Grid-Tied Solar PV Seriously Addresses the "Land Cost" Argument: A lot of those opposed to Solar PV argue that, at present efficiencies, it will consume too much land to power our energy needs. I don't know (nor do you) what the "facts" are here, all I can do is report claims made by others, such as: "Solar power . . . would need less than one-tenth (8.1% to be exact) of the land space requirements of the oil and gas industries to generate all our electricity needs." - Tony Seba, Solar Trillions, p. 18. And this from a blurb about Seba's book: “Desert Power: $9 trillion To provide all of America's electricity... today, we would need just 100-by-100-mile square of desert.” Is that true? How about this claim?
I'd sure like to know. Whatever the truth, remember this: Residential Solar PV contemplates the use of rooftops, back yards and nearby farm fields. And you can count on individuals to look out for their own self-interest by not over-consuming land and space, and prudently trimming or removing shade trees to accommodate their solar arrays. For that matter, my roof is 4000 sq.ft. and for 10KW I've only used less than 25% of it. I can easily double my production with plenty of space to spare. Indeed, the panels provide more shade for my roof and thus keep it cooler during the summer. And I cut down 3 oak and 6 pine trees (out of a total of 17,000 trees on my 56-acre farm) to remove shading from my array; those trees are now re-nourishing the earth.
* Net New Wealth/Efficiency Multiplier Effect: Just as violence begets violence (a core human dynamic), net wealth (free or cheap electricity to those who burn stuff just to see at night, or cook) begets more net wealth. Wealth forms in two ways: (1) actual wealth like money, land, or gold -- via luck or labor -- gets into a man's pocket, bank account, or portfolio; or (2) his daily living cost is lowered (Wal-Mart comes along and seriously lowers his food and clothing costs), thus sparing the drain on his pocketbook and his need to gather/accumulate wealth.
Joe, having found a way to cost-effectively install his 10KW Solar PV system, will now reap both wealth-generating effects (he's got power he can sell to his neighbor, and he's now had his daily cost of living reduced).
Solar PV is thus a twin-wealth generator. Again, note the "Kenyan" solar article above, and this article showing that price rules. See also this 2013 German solar (vs. Nuclear) price per KWH analysis.
Now consider this analysis from a 12/19/10 NYT article: "Average worldwide income, at $10,600, is 25 percent higher than it was a decade ago. Thanks to increases in agriculture efficiency, cereal production grew at double the rate of population in the developing world. Vaccine initiatives have helped cut the death rate from common diseases like measles by 60 percent. Child mortality is down 17 percent. One of the many factors behind these improvements was increased telecommunications (especially television) in Africa and Asia: education and better health practices could penetrate communities where illiteracy and geographic isolation long stymied public-health efforts. This resulted in hundreds of millions of people who were better educated, more politically engaged and more aware of social and health issues, creating a virtuous cycle of progress."
Catch that? Increased telecommunications begat better education, better health practices, and higher world income. Each new layer of improvement had a multiplier effect on the next layer. With Solar PV-generated wealth, Joe now has more money in his pocket, and can spend it on improving his standard of living, thus precipitating the economic multiplier effect, which in turn ripples around the world, improving it. And the source of that wealth is not contrived, such as from a "government-printed" debt hole (hand-outs from a broke government), but instead directly from the sun itself.
That's real wealth. Net new real wealth, spread and economically multiplied, with no ongoing pollution costs, incrementally bumping up average worldwide income. (The 12/19/10 article, by the way, was summarizing what’s been said by Charles Kenny, author of “Getting Better,” a book on global development). Consider again the Kenyan solar power article referenced above, and count up the layers of benefits afforded by that one, $80 Solar PV panel. And consider the natural lure of private capital, where Joe can sign a lease and let a company solarize his roof at that company's expense, and Joe pays lease payments that are less than what he'd be paying for the same power coming from the grid. That's a win-win (both Joe and the lessor benefit, and the local utility may win if Joe's new array produces peak-load electricity that enables the utility to have to buy less peak-load (costly) power on the spot market).
Chapter 8: Tapping "The Golden Greed"
Now I'm going to focus more deeply into this blog's core mission -- to foster a free-market for Solar PV, where pure greed for "meter gold" drives 100-million-unit sales of Solar PV and Gigawatts are routinely discussed, not Megawatts. The same kind of greed that drives guys into the woods to grow dope and shine the moon, only this kind is legit and good and gets hundreds of millions, ultimately billions of consumers super-tweaking their "stills" to get a few more gold coins out of each, then crowd-source sharing (for their own economic benefit, if not also X-prizes) each tweak, much like PCs have evolved, spurred not only by smart billionaire-wannabes like Jobs, Wozniak, Gates and Zuckerberg, but also brilliant Indians and Germans and Persians and Chinese and American teenagers hacking away in their basements and garages spurred by two levels of reward: (1) the immediate "mo money" showing up on their reverse-meter credits; and (2) the fast-billion sale of an innovation that seriously steps-up Solar PV output efficiency.
Go back and re-read that paragraph. Catch the animating concept? Greed. Immediate reward. The flip side of that feeling millions get when they pull up to a gas pump to fill up their vehicle and see a big sign in blood-red letters saying $4.00/gallon gas. All of them want to scream. Now what if those millions went to their power meter every day and watched reverse-spin numbers spinning by representing dollars flowing into their pocket every day for 30 or more years? Want to bet they'll like that and want to spin the meter faster? Super-tweak their systems and optimize energy conservation?
Chapter 9: How do we get there?
A. Eliminate Disinformation
How do we get to mass-commodity level Solar PV? Well first, understand that a lot of what you read is dated and just plain wrong, and yet it's dissuaded mass consumption of the solar market because it's got masses of consumers believing solar's too costly to fool with. In fact, I'm betting some of you have Googled around and have dismissed this whole discussion because solar PV is just too expensive to be worth anyone's time to consider it, much less on a free-market, unsubsidized basis. There's this from a 2006 Georgia government group's report: "Even with a free supply of sun, electricity produced by photovoltaic panels costs three to 10 times the electricity produced from coal or nuclear power plants (Solarbuzz, Photovoltaic Industry, 2006; Georgia Power, Avoided Cost Projections, 2005)." And Georgia Power, which "just so happens" to be heavily invested in brown power (coal, nukes) sourcing, says this on its "green" website: "Installing a solar electric system averages between $7,000 and $10,000 per kW. Therefore, the average homeowner would have to make an initial equipment investment of $84,000 to $120,000 for a system."
Catch that? It’s saying that Solar PV costs as much as $10,000 per KW, which means my system should have cost me $100,000, when in fact it only cost $14,000 with tax credits, $35,000 without.
And I simply worked the phones and internet to get a good deal. But see, that's "Brown Power's" game -- convince everyone that Solar PV power is more expensive than Brown Power, so no one will even think about it, much less invest in it. That "just so happens" to keep everyone dependent on Brown Power.
Seba, meanwhile, says nuclear costs $8 - $12/watt ("Solar Trillions" at 75), and again, my own system cost me $3.5/watt in 9/10, net $1.4/watt after tax credits. Since 10/10, my system's cost (with me shopping the deal) has fallen to $3.30/watt unsubsidized. That's just six months later and the Chinese are still ramping up massive Solar PV investment (perhaps 50 GW domestically by 2020) for tens of billions in worldwide demand, thus fomenting further economies of scale.
So one major way to develop a residential Solar PV market is to simply do what you're doing here -- read this and pass it on, and remember that anyone who makes an appointment with me can some see my array and my receipts. Stripped of financial crutches (subsidies), Solar PV is either going to die as an overpriced curiosity or it is going to continue (like PCs did) to fall in price. I'm betting the PC route. In that case, I'm projecting that within 36 months it will make sense for Joe to invest even without subsidies, and sales volume will cross over and take off at the ten-million unit/year level by 2015. This will occur while every part of the supply chain is pursued for higher efficiencies, including the simple task of converting DC power to AC (solar inverters do this, power is lost in the process, so this company's working on preventing that).
B. Rationalize the Solar PV Market
Both Solar PV vendors and government policy makers should jointly venture to rationalize and uniformize the market, as well as further incentivize it. Consider this group's very sensible approach to creating favorable free-market conditions to tapping "The Golden Greed" (my "meter-gold" concept) at the mass-residential-solar-power level. It's bottom line:
Focus for a moment on the third point above, about utilities and the need for easy connections to their grids by Joe, once he gets his Solar array erected. That's a big deal, and you can read here how it took me over a year to get my utility to play ball with me, yet I'm still fighting with it. Too, the federal government's 2011 energy report (at page 5) flat-out complains that such utilities stand in residential Solar's way: “Limits on the availability of interconnection services for customers who have distributed generation and other market barriers leads to slow growth of distributed generation in the residential sector than would have otherwise occurred.” Vermont's heading in the right direction.
In any event those suggestions should be implemented to foster free-market Solar P.V. power -- the kind that does not rely on corporate welfare, either directly (e.g., the federal government's 30% grants) or indirectly (e.g., the federal government's 30% tax credits, which only help inflate solar hardware prices, thus enabling solar corporate interests to cop that tax benefit).
That must be done now because the post-2011 shake-out (I believe the whole industry will undergo a shakeout in 2011, when the current subsidies that are propping it up vanish) will drop the next price-point for a 10KW system from the current $35,000 range (that's if one really hoofs it to bargain down prices, as I have done, plus "barn-raise" their array using friends and neighbors and only paying for the trickiest electrical part of the job) to $15,000 (my projection of what a 10KW system's top price must be to take off at the 10-million unit level, $7,000 to precipitate 100-million unit sales) to invest in a rooftop or back-yard Solar P.V. system.
C. Replay PC's Free Market Playbook
Next, Georgia Legislators, its Governor, Solar PV vendors and Georgia citizens should help the Solar PV market mature into the same mass-commodity level producer as the PC market became in the 1980s and 1990s. They can do it by fostering these developments via legislation and consumer demand (hey you budding solar entrepreneurs out there, listen up!):
* Let the Chinese "Donate" Their Wealth (cheap labor, subsidizing tax dollars) to Us:
Look, price rules, as it does in any free market for mass consumer goods. What's stopping the solarization of free rooftop and backyard and unused farm field (and other unused) space in America is the high price of Solar PV. So even at the expense of American solar-panel-fabrication jobs, let the Chinese "donate" their wealth (their underpriced labor, their tax dollars that subsidize Chinese Solar PV panels sold here) to us -- to bring that price down to the $1/watt or less that this market needs to take off. Here's why.
* Create a "Consumer Reports' for Solar P.V. products: People must be able to figure out what's the best deal for solar panels, inverters, and "Balance of System" -- BOS -- components. This is a chicken and the egg thing. The Big Solar Players should get behind creating this source, even if it must initially run at a loss. A credible third-party ratings source is indispensable, because no one wants to buy blind, and quality-control is an issue (click here, too). I'd never heard of my first PC (a "Northstar") in 1981, and I resented having to buy on blind faith (it worked out OK). I similarly resented having to do the same in 2010 for my first PV system (it's thus far working out OK). Here's a good start, I hope. And here's an honorable mention.
Here's a guy who lists "top brands" without showing the criteria he used, so I don't believe it. Consumer Reports gets street cred because it takes no money from anyone. We need a Consumer Solar Reports that's kept up to date because the Solar PV industry is changing quick enough and it's too much work for Joe to keep up. He has to be able to quickly ascertain, just as I did decades ago by consulting "PC World" type magazines, what are the "top ten" grid-tied Solar PV systems for him to consider buying. Someone (I guess I will, in a separate blog) should collect user links (like from this fellow) on how buyers got their array erected and what they spent, and how they improved their arrays, so that crowdsource information can be usefully shared. Here's a site that purports to list the best of a lot of non-solar stuff. A site along that model -- for solar -- might work.
* Create a Reliable Warranty System No one should have to live with the stress of investing over $10,000 in a product that could fail, and effectively have no warranty because the manufacturer went out of business during its 30-year lifespan. The failure of big name manufacturers like Sharp (this, too) remind us that paying more for a "name brand" yields little extra comfort here. There are defective panels out there, and they harm the market. Third party warranty insurance might be a consideration, as noted here, here and here.
* Embed "Granular Level" System Performance Monitoring This fellow sums it up nicely -- every part of a solar array must have, like a car's engine monitoring/reporting system, monitoring and performance reporting so that Joe Six Pack can be assured that he's getting the optimum return on his investment and timely file warranty claims.
* Create a Benchmark Product Standard: People need a benchmark (like a car's horsepower, or its MPG rating) on which they can frame a reference point for Solar P.V. systems. Example: When I seek to replace my home's A-C system, I know that I want a 2 ton system with an efficiency rating of at least a 16. Those numbers mean something to me, and will mean something to vendors when I use them to shop for a new A-C system by phone or online. The same must be had for Solar P.V.
I propose using a 10KW system as the standard benchmark.
Why? Because in my solar-radiation zone (Central Georgia), a 10KW system can produce (and mine is currently meeting this) north of 1000KWH (Kilowatt Hours) a month, which is what a typical family of four consumes.
And 10 is a "metric system" number, easily divisible and cost-fractionable (example: if I told you I paid $35,000 for my 10KW system you can quickly figure that I paid $3.5/watt for it; compare to this guy's $9.5/watt system; this is analogous to how raw land is sold -- it's quoted at a per-acre price so one can quickly grasp a comparability factor in their mind).
Again, my home is very efficiently designed, and I'm projected to never pay another power bill for the next 30 years, but instead collect (currently $.08/KWH) reverse-meter payments, via a "net metering" from my local utility during that time (hence, it's a "positive energy home," and 10KW systems will be more marketable if associated with a "positive energy home" moniker). In other words, because 10KW is what a typical family of four consumes, it is a "Liberator System" benchmark, too. It's a system about which "Joe" will feel terrific saying, after he's installed it, that "I'll never pay a power bill again."
And, since it liberates Joe's home from ever having to pay power bills, it will add tremendous (albeit not precisely calculable) value to a home's resale price by enabling its owner to market it as a "net-zero" or "positive-energy home."
Note, too, the cost-per-watt (CPW) ratio used above. The mass consumer must be able to recognize grid-tied systems, as mass marketed by companies like this and this, by a differentiating factor, and that factor must be Cost Per Watt. So, if Wholesale Solar wants to sell me a 10KW system at $3/watt but SED counters at $2.75/watt, now I've got a horse race I can understand! More on CPW below. Just remember the two terms: 10KW (or multiples or fractions or that) and CPW.
* Create an Independent Source (like the EPA) For "Mileage Results": Check this out. See how those folks are trying to collect Solar PV production data from all over the planet so that one can at least develop a sense of what Solar PV can do? Even better would be to, sort of like Kindle, embed an automatic-internet-upload reporting feature in every inverter so that a collecting source(s) can capture and interpret solar-harvest data. Understanding production efficiency is critical here. I based my decision to buy my 2003 Toyota Corolla in no small part on its EPA 32/40 mpg rating. I want to know what a given Solar PV Kit (yes, they are already sold in kits online) produces in my neck of the woods, and an objective reporting system that I can trust would be indispensable here.
* Make the Hard Environmental and Public-Safety Trade-off Choices Up Front:
One Solar PV big-wig claims that, even if his industry gets Solar PV down to $1/watt, the bureaucrats will still add another $1/watt to the cost. Half of permitting comes from "safety" issues -- government folks want to make sure you're installing Solar PV according to code, and following safety regulations. The other half is environmental protection -- some little rat or other critter could have his habitat disturbed. See this guy's explanation. There was no permit at all in Treutlen County, Georgia, where I installed my 10KW rooftop Solar PV array. That's the way it ought to be, as the Germans have demonstrated. Yes, people will get hurt if safety codes aren't followed, and some species will be harmed or existentially threatened. But consider the long-term public health and environmental damage costs to continuing with brown power (air pollution, mercury, etc. costs to public health, habitat erosion/destruction) in the status quo. Let's make a choice here. I say clear the decks for Solar PV to get it down to $1/watt or less will engender way more economic and ecologic good than bad.
* Recognize That Price Rules. Look at how artificially (via subsidies) lowered Solar P.V. prices spurred 2009-2010 solar buying activity in the commercial building sector. Money quote: "With the solar installation that we’re looking at, we would probably be able to save $11,000 to $12,000 a year off our electric bill,” he said. “And with the incentives, we’re looking at a payback about Year 4." (Emphasis added). Catch that? With the rest of us (through our taxes) paying part of the freight, the consumer acted at his price-point and illuminated for the Solar PV industry an important piece of market data: What gets Joe to open his wallet and make a buying decision (short payback cycle, hence, a price low-enough to enable that cycle). This industry publication sums it up: “Subsidies and grid parity are not necessary to generate positive demand, Lux Research adds. An anticipated future increase in the cost of retail and wholesale power is all that is necessary to generate positive demand - even in countries without subsidies.” In other words, price rules: Increase the cost of power at Joe’s meter and he’ll erect solar panels to make his own power, just as overtaxed liquor led “Country Joe” to erect his own still and “shine the moon."
This naysayer in many ways is right. But he's really arguing about a simple thing: Price. Get the price of solar down and it will fly (compare, by the way, his $5/watt price compared to my $3.5/watt cost, net $1.4/watt after my yes, hypocritically claimed tax credits). Ditto for this analysis's $7.5/watt for 2009. And no, I don't believe his net-pollution analysis (he claims solar produces more pollution than it saves, but he uses the same analysis that anyone can use for manufacturing big-screen TVs, cars, and all the other stuff we routinely purchase -- including specious lost-opportunity cost analysis. His fallacy is revealed by comparing a 10KW Solar PV array with a 10KW natural gas fired electric turbine or similar electricity generator. Which will earn back it’s "embodied energy" (what it took to make the turbine, versus the solar panel) first?
The answer is the turbine never does, because once it's built, shipped and installed, it must forever be fed natural gas (which leaves its own pollution tail, still to be revealed to us, also discussed here), while the solar panel need only be pointed at the sun, thus sparing energy-forage/harvest/transportation/conversion costs.
The solar industry (yes, mostly China, which now has "almost three-fifths of the world’s production capacity" of Solar PV and also predominates the wind turbine market, according to this article) now has what I believe is the magic number to meet: 10 years. Sell Joe a system that can pay for itself in 10 years, then put money in his pocket for the next 20 or so after that and a Solar Gold Rush will be unleashed. Right now, my system, on even the most conservative of projections, is warranted for 30 years and will pay for itself in just over 14 years: I've got net $14,000 in it after tax credits, and it's making, at $.07/KWH, $980/year [note, this has since been raised to $.08], but also saving me money on top of that since I use some of the electricity my system creates. So after 14 years it's pure gravy, not to mention the increased value that it's added to my home, the energy self-sufficiency it's providing me during the day, and the energy-inflation protection it affords. And yes, obviously the lower the system price the faster the payback cycle, and the more folks wind up walking down the "Solar Aisle" that will be formed at Home Depot and Lowes. And, of course, if the price gets down to $1/watt ($10,000 for my 10KW array), the payback cycle's down to 10 years or less. This fellow's projecting that (notice the free market at work?). This well-meaning group, in contrast, is literally hawking Solar PV yet with a ridiculous (because no one who can do basic math) 27-year (with no home appreciation factor) payback cycle on a 6KW system. Seriously, who would invest tens of thousands of dollars for "profit" after 27 years on a system warranted for 30? I commend them for at least not trying to obscure their self-invalidating numbers.
Here's an example of innovation that focuses on the simple lower price = increased demand mechanism (this is from an online interview with the head of a solar magnification product aimed at increasing Solar PV cell efficiency, and the "ER" questioner is referencing the U.S. government's "Sunshot" program -- a program aimed at boosting utility-scale Solar PV power and lower solar power to 5 cents/KWH, which is an offshoot of the Advanced Research Projects Agency-Energy (ARPA-E) program):
ER: A goal of the SunShot initiative is the advancement of sunlight-to-energy solar cell technologies. What is your expert view on how the government can achieve that?
TY: The goal of the U.S. Department of Energy’s SunShot initiative is to make solar technologies cost-competitive with other forms of energy by reducing the cost of solar by about 75 percent before the year 2020 under the premise that reducing the cost of solar to equal that of energy from traditional sources (or 5 to 6 cents per kilowatt hour without subsidies) will result in the rapid, large-scale adoption of solar. But it is my belief this goal will not be achieved through incremental improvements in solar cell efficiency; rather, it will be achieved by the development of a disruptive technology that will change the market for solar in an unexpected way. We believe HyperSolar has the ability to dramatically alter the market for solar in the same way that the introduction of the Internet or the debut of the Ford Model T, which made low-cost automobiles available to the masses, dramatically altered the technology and automobile industries.
The solar cell is inherently inefficient. The original solar cell, which was invented in 1883, had an energy-conversion efficiency of less than 1 percent, while the efficiency of the first viable photovoltaic cell, Bell Labs’ “Solar Battery,” which was developed in 1954, was about 6 percent. After nearly 130 years of research and development, the average energy conversion efficiency of the solar cell is now only about 15 percent, meaning that only a fraction of the sun’s energy is converted into electricity. Moreover the silicon solar cell appears to be reaching its theoretical limits of efficiency. Because of this, large numbers of expensive solar cells have to be used in order to generate substantial amounts of electricity. While other types of cell materials are more efficient, they are even more expensive.
In order to become competitive with energy generated from traditional sources, solar has to become more efficient. Rather than focusing on incremental improvements in cell efficiency, HyperSolar is developing a breakthrough technology that can be viewed as a “performance enhancer” for solar. The HyperSolar technology takes the form of an acrylic topsheet that, when applied to an off-the-shelf solar panel, boosts performance by 300 percent. As a result, the number of cells, the most expensive element in a panel, can be reduced by 66 percent, with a corresponding reduction in cost. HyperSolar believes that it will eventually achieve concentrations of 400 percent. Moreover, although the HyperSolar technology is now being developed for use with silicon cells, it can be used with any type of cell material: whatever a cell’s efficiency, HyperSolar will boost it.
* * * *
Catch that? Make Solar PV more efficient and thus lower its price. Then more people will buy it. Simple free market mechanics. And it will be best if it is out of self interest, because "[s]elf-interest, not self-sacrifice, is what induces noticeable change."
Others have grasped this fundamental concept, as demonstrated here. And some are projecting Solar's triumph in the peak-energy sector via price tumbling within the next 6 or so years.
* Advance the Smart Grid: This article describes the benefits of a smart grid, though what I'm proposing here does not make a smart grid indispensable (my array's working fine on a dumb grid). Still, consider this assertion from it: "By some estimates, the smart grid could help reduce electricity use by more than 4 percent a year by 2030 and save $20 billion a year for utilities and their customers.” That may be somewhat wishful thinking because "the enemy is us," meaning, higher efficiencies enable energy and dollar savings which Joe might be inclined blow in even more wasteful behavior -- what economists call an energy rebound effect (make energy cheaper, people waste it, thus consuming more energy and more resources, etc.). Like $4/gallon gasoline, however, I'd be in favor of (in lieu of higher income and sales taxes) taxing electricity to force lower consumption (Detroit's now making higher-mileage cars and fewer SUVs) to cure that "attitude" problem (look, if energy's cheap, humans will waste it; we always have). Pain and pleasure is the basic unit of the human operating system. Taxation (pain) alters mass behavior. If we must tax, I'd rather it alter bad behavior (cigarette taxes, gas guzzler taxes, etc.) and reward good (exempt all alternative-energy sales from income and sales taxes).
Chapter 10: It's Thus All About The Payback Cycle
Fourteen years gets a tight-wad like me to open his checkbook. Seven years, however, gets The Wal-Mart crowd lined up before dawn on Black Friday, pushing up against the front doors, waiting to get in and buy. And 7 years is the outer-limit of car loans, a debt level with which Joe feels comfortable.
How do we get to a seven-year pay-back price, where Joe has recovered 100% of his cash outlay and now revels in "meter gold?"
That gets us deeper into my free-market philosophy, and thus politics, and thus precipitates umbrage from many. I'll start with my most practical suggestions and then delve into the ones that are bound to piss at least some of you off:
A. Super-clear free market conditions for mass-volume buying/selling -- "Wal-Martify" Solar P.V. parts and accessories. I want my political leaders to, except for responsible environmental regulations (no hazardous waste emissions from solar panel plants), eliminate all red tape (the Vermont example for residential systems) and taxes for solar supply chain production, just as has been done for the latest economic energizer: The Internet. Yes, I'm cheating here (to exempt from taxes is to indirectly subsidize), but that's better than just handing cash over to producers, and just look at Amazon's and E-Bay's success with a free-statist internet (free of content controls and of federal and state sales taxes). Create "free trade zones" for Solar PV (in NYC they're called "Solar Empowerment Zones"), where red tape (including nuisance laws like federal/state "Title VII" and local regulation/taxes) is eliminated.
Precedent for such referential treatment exists. In Georgia, for example, farmers are exempt from a lot of sales taxes, and churches and non-profits are exempt from property taxes. These political choices reflect Georgia citizens' values. I say elevate Solar similarly, because those "exemption" preferences are based on the perceived "extra" layer of mass-benefit farmers, non-profits and churches produce.
And nothing is lost in Georgia by "free-trade-zoning" Solar PV, because Georgia has so very little of it (just a couple of vendors in Atlanta and Dublin, GA) to begin with. Most importantly, Solar PV produces net new wealth (as opposed to "government printed currency") wealth. Is there any other industry that can claim that? Can there be any better net mass benefit than that? Georgia now gives away our tax dollars to biomass producers in hopes of creating jobs and renewable energy, which is absurd because it overlooks the fact that biomass requires constant water and energy expenditure: the inputs that go into growing the crop, then harvesting and transporting it, then converting it to energy. Solar PV produces energy on the spot -- with no continuing inputs (planting, watering, harvesting, transporting) nor losses incurred in converting it to usable energy (one burns coal to extract energy from it -- burning operations are themselves a cost factor).
And Joe will use his own money to erect Solar PV, while biomass producers suck money out of our pockets -- because no one will buy their end product in the free market. That's just insanely stupid, and GEFA -- Georgia's government agency for giving away our money to money-losing producers (but not one dime for Solar PV) -- knows this. We should terminate the give-a-way function of GEFA and take that spared expense to absorb whatever revenue loss is perceived in free-trade-zoning Solar PV.
B. Vig-up Solar PV's emotional appeal: See my above excursion on why Solar P.V. is so satisfying to me, and thus I believe will be to the masses, at an emotional level. And emotions sell (women buy not just perfume, but "an experience"). Solar PV vendors should skip glossy (expensive) trade and general-population magazine ads and pool their money into the reverse-meter add-on payments proposed above, then feature those "living showroom" customers like me who naturally attract visitors seeking "live" product exhibition and the emotionally satisfying experience of watching a meter spin backwards, depositing money into my pocket all day long. That is the converse emotion one feels at a gas pump watching numbers spin away, draining the cash right out of one's pocket. Solar PV vendors must capitalize on that flipped emotion ("Geezis, this thing's making me money!").
C. Open-Source all designs: Solar P.V. producers need to know that, unless they're on the verge of producing a 7-year payback cycle, plug-and-play simple, 10KW Solar P.V. system that Joe can buy in the Home Depot "solar aisle," they will become a penny stock in 2011if not shortly thereafter, because all the government largess is running out (subsidies are drying up, European countries are broke and so is the USA), and only rich greenies and crazies like me are going to bite into a plus-7-year-payback product. One way to reduce product production costs is to open up all research to the public domain, and thus post it on the internet so the planet's collective wisdom can be brought to bear on, and accelerate, solar-efficiency research.
Crazy, you say? C'mon, the Chinese are only going to steal it from you anyway -- that's what they do. And then they'll shut you down, just like they did Evergreen Solar, which sucked up a lot of American subsidies, got reduced to a penny stock, and basically wound up selling its name (oh, I'm sorry, "opening a factory in China") to the Chinese, before finally going bankrupt. Ditto for the failing Canadians. Open-sourcing technological research enables spared Research and Development design costs, just like in PC software realms (Mozilla Firefox, Linux), and also enables the most efficient Solar PV hardware producers to thrive, which leads to greater efficiencies that much more quickly. Your profit layer, as the Asians repeatedly prove, is in the production cycle (i.e., produce it cheaper than anyone else and skim the thin but commodity-level profit layer), not in "patent power."
Because that's the bottom line. It took 54, 185 watt panels to get my 10KW system going. What if it took only 5? And cost only $9,995 at Home Depot in a kit? Memo to our Asian brothers and sisters: That's the critical mass price point. You've enabled me to buy $13.95 hammers for $3.95 at Harbor Freight; you must now do the same for $30,000, 10KW systems at $9,995, if not $6995.
D. Hawk Cost-Per-Watt, Not Efficiency Ratings: Solar PV purveyors should stop hawking efficiency factors (e.g., "XYZ solar panels are 39% efficient") because I don't care, and neither will Joe. What we care about is how much electricity our arrays will produce, and for what cost. Thus, how many watts per panel will each panel output, and what will our resulting, grid-tied system register on our reverse meter credit on our monthly power bill? This ties into the need for an industry standard measurement: CPW (cost per watt)? As a commentator to this “39% efficiency” article said: “Efficiency is only part of the game, what really matters is cost per watt. You see it doesn’t matter if they can make a module that has a rating of 50% efficiency if it cost 10x the cost of a 20% efficient module.”
Relatedly, I don't care whether one prefers monocrystalline, polycrystalline, or thin solar PV, so long as Joe's bottom line is respected: How much money must he invest to get how much electricity output, and will that CPW (cost per watt) be the same or cheaper than what his utility charges him (the real "grid parity"). Put another way, price rules. And, as this source claims, prices have fallen 30% since 1998, and will continue to fall (though that source's analysis doesn't filter subsidies out of its analysis).
E. Get "Joe" Comfortable With Trading Off Space for Lower Cost: Thin-solar costs less to produce but is also less efficient than mono- or polycrystalline panels, so so both consumers and producers need to find each other. If Joe decides he's got the roof or yard or field space and his net CPW for thin solar is lower than with fixed panels, then he'll buy thin (assuming comparable warranty). My home's got 4000 sq.ft. of usable roof space and only 33% of it has been consumed by my 10KW array. Someone sell me this stuff cheap enough and I'm in! Especially if thin-solar came in a roll with E-Z fastening, plug-and-play installation, I'm happy to get up on my roof some weekend and add a few KW of power -- for the right price. Vendors, however, must get this product to me, and that means getting it in my mind -- so I can think about buying it, and rationally decide to buy lower-efficiency for less money and compensate with space, of which I have plenty.
F. Clear the Decks for Economies of Scale: Georgia spends oodles of dollars luring Hollywood to come film movies in Georgia. I'm not in favor of government hand-outs, but at least clear the decks (no red-tape, set up a regulatory glide-in service) for any and all parts of the Solar PV supply chain production. Seba, in "Solar Trillions," claims this: "The cost of solar will drop to 3-5 cents per kilowatt-hour by 2020—cheaper than subsidized coal." That contemplates enormous economies of scale, and I hope he's right. Because right now brown power, according to my EMC, costs my EMC just over 6 cents/KWH to buy at the wholesale level (it resells it to many of its customers for about $.11 cents/KWH, but with nuisance fees effectively charges me around $.30 - $.60/KWH because I use so little power).
So if solar-based power can be produced at 3-5 cents/KWH, then that more or less cuts way down on the need for coal and other brown-power. Correspondingly, residential Solar PV will have to cost even less for "Joe' to erect if his utility can buy it for 3-5 cents/KWH and re-sell it to him for, say, 6 or 7 cents/KWH. I'm betting that, like PCs, PVs will follow some sort of Moore's Law route. Remember that with 100 million homeowners out there tweaking their system for more energy, thus "mo money" out of them, 100 million minds are incentivized to work on, and discover (and crowdsource-share over the internet) higher and higher efficiencies, including the development of DC-current appliances so DC power direct from solar panels can power them, rather than run through inverters and suffer some energy loss in the process.
G. Uniformize Standards: Bill Gates became the richest man on earth in no small part because the world needed one standard for PC operating systems. Just as any home in America will have the same sized opening in its walls for an electrical outlet (hence, you can buy commodity priced outlet boxes at the Big Box stores), we needed something analogous to that for PCs. Microsoft and Apple supplied that (OK, two operating systems, but you catch my drift). A solar industry analyst says solar producers should observe the following standards and requirements: Underwriters Laboratory 1703 Standard; International Electrochemical Commission Standards; National Electric Code requirements; Restriction of Hazardous Substances Directive compliance; and TUV and Canadian Standards Association approval.
Whatever the best standards are, they must apply to the three major components of Solar PV systems: (1) the solar panels; (2) the inverters (convert the DC current to AC current for use in your house and to feed into the local grid); and (3) the Balance of System (BOS) components like the connecting wires, connectors, mounting racks, and lightning arrestors. These parts must all stand up to 30 years or more of rain, sleet, snow and high-heat sunlight and sometimes vibration (vibration is not an issue on my own home, but consider homes next to rail and bus lines), but also be arranged with quick connect/disconnect wiring and “snap-lock” and audible-click wire mating, accompanied by internal locking mechanisms protected by latch guards to prevent unwanted connector decouplings. (source: December 2010 Solar Industry at 28).
Americans buy name-brand HVAC systems and large appliances based on brand and reputation, and also because they know that whatever they buy will work in their homes, conform with national standards, are reliable, and pack a decent warranty. The same must happen for grid-tied, Solar PV systems. "Plug it in and forget about it" must be the norm here.
And again, residential solar needs uniform interconnection standards so that Joe will not have to hire an expert (lawyer, if not some other specialist) to plug his new solar array into his local utility's grid. He should not have to fight my battle. A 2006 Georgia task force report, in "Strategy 1.9," details how to do it: “Develop Statewide Interconnection Standards That Are Consistent With Best-Of-Class National Standards Statewide interconnection standards.”
H. Don't Let Stupid Politicians Turn Solar Into a Jobs-Creating Boondoggle: As this source confirms, throwing money at an industry in hopes of creating jobs is yet another fool's errand. Money Quote: "Despite the billions of dollars that have been allocated nationwide to increase demand for residential retrofits, the corresponding surge in job growth just hasn’t appeared." Just get government out of the way, free up investment dollars and rely on the self-interest of investors to sniff out the best way to produce and market Solar PV. Laborers will then see the opportunity, train up and pursue the "green" job. Solar PV, by the way, is not all that complex, except where tricky roof engineering issues are involved (I designed my home like an erector set, very easy to add to, modify, etc., and it's built like a tank; so, I got my array up in two weekends using "barn-raising" neighbor-labor and paying a guy to do the wiring and hook-ups).
Here's another quote against misusing "green" power to "create jobs": "The Green Jobs Rationale borders on the preposterous". To paraphrase: Governments should outlaw the use of heavy equipment for digging ditches and mandate the use of an army of workers using spoons...."There is no analytic difference between inefficient ditch digging and inefficient power generation as tools with which to pursue increased employment." (Source).
I. Don't Let Stupid Politicians Harm Solar with Trade Protectionism Policies: I don't care if China makes 100% of the solar panels consumed in the U.S. Side note: China now dominates the world market, including 39% of California's "CSI" market, and will reap "15% of its power from renewable sources by 2020." “U.S. imports of Chinese solar panels grew by 240 percent over last year, and the number of imports surged nearly 1,600 percent between 2006 and 2010," according to one politician.
I don't care if the Chinese corner 100% of the solar panel market and you don't care, either. Because if you did you'd be forced by logic to not shop at Wal-Mart, where half the stuff there comes from China, or Sears, where the last set of "Craftsman" tools I purchased (the only tools I've bought all my life) were "Made in China," or Harbor Freight (is there anything sold there that's not made in China?) or pretty much any dollar store, for that matter.
And there are millions of Chinese living in squalor and sweatshopping basically giving us the value of their labor and tax-dollars (through massive subsidies in cash, loans and land) as reflected in amazing low-priced stuff (TV's, tools, tires so cheap the US tariffed them). It's like a guy knocks on my door and offers to mow my lawn for 50 cents instead of the $25 my neighbor pays. Hey buddy, you got it! He's now putting the value of his labor ($24.50) in my pocket. Value's value. I've now got $24.50 to spend elsewhere, and chances are I will, here in America. A net wealth transfer, and the Chinese fella that "unfairly took American jobs" is feeling the pain (by being underpaid and living in a hovel on the other side of the world), not me.
But more importantly, remember this: There is basically no residential Solar PV of any mass-consumer scale in the US right now (the kind of scale that forms that Home Depot "Solar Aisle"), and despite boosterism articles like this, no US company is even attempting to cultivate one. Look at the typical American-sited (or Canadian) Solar PV company's website and tell me if you see any claim that Solar PV panels are being 100% manufactured in the U.S. (warning: watch for hedgy language like "our panels are built to American specifications" -- that means they can be built in China, but "to American specifications").
Meanwhile, our worst form of capitalism is an inefficient company that consumes government hand-outs and then sells out to the Chinese, such as what happened here. In the meantime, if the Asians create a Solar PV market that America would not otherwise create -- by making solar panels so cheap that Americans start buying and self-installing them (and this would not otherwise happen), then they've done us a favor and we've lost nothing (again, there is no solar mass-market sector in the US now, and no American company's even trying to create one), because that market would not otherwise exist.
Look at the wealth the Chinese are giving us: "China last year invested $49.8 billion in development of renewable-energy sources, more than one-third of total global investment in the sector, according to the United Nations. Such subsidies are helping bolster the global ambitions of China's clean-energy-gear manufacturers." (Source). That technologically cannot be held captive (i.e., it's easily "lifted," just as the Chinese have lifted technology from us), and hey, better they spend their money (they feel they have no choice) developing it than us.
Hence, the Asians (or Indians, whoever....) will do us a massive favor by not only creating a mass-solar market sector (China's own target is now 50GW Solar PV by 2020), but also creating American-staffed, side-supply chains, including the labor to install it, for homeowners who don't want to do it themselves, plus the companies that sell the Balance of System -- BOS -- stuff like wires, mounting racks, connectors, etc. You can see this now in new, electric car manufacturing -- an American company that's creating a product that's never existed before (mass-marketed electric car) is now outsourcing its manufacture to -- no, not China, but Finland -- and no one's raising a stink, even with $529 million American tax dollars backing it (Money Quote: "Production of the [Fisker] Karma has been outsourced to Valmet Automotive in Finland to lower overhead costs.").
J. Loss-Lead Pricing to Capture Market Share: The richest man in American history, Bill Gates, taught us this much: Initially, give your product away (his Microsoft operating system, sold at $10/unit or less to original equipment manufacturers of PCs), then jack people on the upgrade (once nearly everyone had his operating system and invested substantial installation and learning-curve time into using it, inertia set in and they "naturally" paid Gates big bucks for the upgrades). Solar PV vendors must do the same, and do not get ground up by America's tort-based product liability system. Just as PC makers and its software vendors forced users to learn how to use the PC and its software products on their own, or find help from smart geek friends and family (hence, fewer lawsuits and liability insurance policies), so too should Solar PV vendors constrain the mass consumer to learn the hardware (no software, really) and install it themselves and thus assume their own responsibility for operating their Solar PV systems (again, I'm living proof that any moron can get it done with a modicum of resources). Just as I can hire a "Geek Squad" guy to help me with my home, PC, venture capitalists should think about investing in Solar Geek Squads. But all initial vendors of grid-tied Solar PC systems should think about selling at cost or even at a small loss to capture the market, then make money on the "upgrades." Early adopters (like me) paid top dollar for the early PCs, and that funded the commodification of PC's (they went from "Computer Shoppes" to Wal-Mart shelves). The same must occur in mass-residential Solar PV sales.
Here's an example of how to do that: Instead of a big Solar PV vendor like Sharp, for example, blowing $500,000 a year on mass advertising, it should consider partnering with a local utility to stream reverse-meter "bonus" rebates back to, say, its first 100 customers. In my case, for example, it could give $5000 to my EMC and it could use that to now pay me $.10/KWH instead of $.7KWH say, for the first five years that my array is on its grid, until the $5000 is consumed. I now have an additional incentive to conserve my new solar-generated electricity and feed it into the grid to capture that $5000 as soon as possible. Thus, Sharp has gotten my business and further incentivized energy conservation. It's also captured me as its consumer and thus market share.
Those who loss-lead or thin-margin the front end of their market can dial directly into 1BOG and other demand-aggregation groups like this that facilitate pooled purchasing power and corresponding financing arrangements like PPAs, and create/capture the early adopter, then commodity-scale buyer markets.
K. Create and Market Solar PV Packages -- GMAC, before it drank the home-mortgage-lending Kool-Aid and died, at one point was more profitable financing GM cars than GM’s automotive division itself. Joe would walk into a dealer and drive off with a complete car package: “Just sign here.” Even if Solar PV gets down to a 10-year payback cycle (hence, $10,000 - $15,000 for a 10KW system), many a Joe still won’t have $15,000. Home Depot and Lowes could sell total packages, installed and financed -- just sign here.
Except that a good part of that’s a fantasy, because unlike cars, there’s no common medium (paved roads, weaved into national road grid that enables Joe to drive from NYC to Vegas using a GPS or road map) for Solar PV systems. Put another way, homeowner roofs are not uniform. Many are not facing “Due South,” are shaded by trees, or can’t bear the weight of a Solar PV system. And, of course, millions live in apartments and thus have no rooftops.
That’s why, to jump start the mass-commodity level Solar PV market, I’m focusing on the rural PV market first, which is where my home is -- right nearby is MAGE, which should pay attention here. There people are blessed with cheap(er) land (hence, if not the roof, then ground-mounted solar panels in a nearby field), and few aesthetics obstacles (zoning codes, homeowner association covenants). I had 11 trees shading my array, they were cut down in 44 minutes;17,000 trees on my farm remain. A home in a densely packed, HOA-controlled subdivision would not be so conveniently adaptable.
And it is in rural Georgia where non-profit Electric Membership Cooperatives (EMC’s) are found. Non-profit, as in, they’re not supposed to care whether residential Solar PV systems diminish “brown” power source profits, since many EMCs simply do not produce their own power but buy it off the national grid and redistribute it at cost. My EMC’s been giving me problems (I’m working on that), but rational EMCs can and should assist home-grown Solar PV systems, and thus bring jobs and prosperity to their regions, by at least paying residential Solar PV producers like me what they pay wholesale, brown-sourced suppliers (mine is paying me $.08/KWH).
Greenies would argue that my EMC should pay me more (say, $.10/KWH) because browns get to pollute our planet and don’t get charged for it (the carbon tax), and so my EMC’s unfairly under-paying me. Plus, Greenies argue, nuclear is heavily subsidized by governments and ratepayers, so EMCs that pay “only” $.064/KWH are really living in a financial mirage because that $.064, once the subsidies are removed, would really by $.20 or more. See T. Seba, “Solar Trillions” at 75.
That all makes sense to me. But what makes sense doesn’t drive politicians to alter laws. Money does. Take the $156 million taxpayer dollars lost in an epic ethanol boondoggle just 15 minutes’ drive from my solar array, and the untold amount with another biomass effort just 5 minutes' away. I'd like to know how many lobbying dollars it took to loosen up all that public largess for a venture never ever proven to yield a net ecological/economic benefit. Politics, not prudence, rules here. With a free-market approach a product proves itself or is quickly dispatched to history's dustbin. People lined up on Broadway overnight to buy the new Apple I-Phone. They had to be scammed to invest in the Range Fuels travesty. Write your congressman, tell him/her to shut down the public handouts, including to brown power, and let the free market games begin!
L Consumers Should Demand "Solar Ready" Homes and Builders Should Hawk Them: Where feasible, builders should position their homes with solar-ready roofs (facing South), preferably with standing seam metal roofs (ideal for solar panels). Consumers should demand them, too, as "Solar Ready" no doubt will connote extra value (a built-in feature, like any built-in feature adds perceived if not actual value to pretty much anything). Here's a study (yeah, I don't know how accurate) putting a dollar value the increased home value one enjoys from installing a solar array.
M. But if there must be subsidies..... Look, I'm not naive. America is now ineluctably a corporate welfare state. Pretty much all energy is subsidized directly (grants) if not indirectly (tax breaks). So here's where the rubber meets the road if we're not going to de-addict ourselves from subsidies: At least optimize them by blending, at no less than 50-50% public and private dollars. In 2010 Obama signed away $8 billion in public money (loan guarantees, which will surely be called and never repaid) on a nuclear power plant 75 minutes away from my array. That means private investors would not put their own money at risk, so now the public must put its money at risk. You can see what's wrong with that picture, and the ethanol boondoggle just painfully illustrated that. But at least the ethanol boondoggle involved private investors risking (and losing) $100 million of their own dollars, which incentivized them to do all that they could to make their gig work. Not so with nuclear, which Seba says has never operated at a profit, and has always cost us all $8-12/watt even ignoring long-term waste storage costs (but yes, it's a good base load source and we're not stuck buying its fuel from the bad guys, so there's that).
N. Back-End All Subsidies
So if politicians and policy wonks insist on subsidizing residential solar then they should back-end subsidize it. Like this: Joe shops for and finds a $20,000, 10KW system and spends $3000 (what I spent) installing it. So now he's got to make $23,000 back via spared power bills plus reverse meter payments. He calculates 14,000/KWH a year yield on his system (what mine's projected to make, and has been thus far). He pays $.12 cents/KWH and let's say his utility pays him $.07/KWH for excess energy that his new array will feed into the grid. Thus, he saves $.12/KWH for every KWH his home consumes directly from his array during the day (and thus, that he doesn't draw from the grid) and he makes $.07/KWH, or $70/month, for a blended net savings of $100/month. That's $1200/year, about what I"m reaping. Suppose Joe put $23,000 in a 19 year CD paying 5%. His yield is $1150/year.
Thus, his $23,000 array (at today's prices) yields him almost 5% net gain. Except that at the end of 19 years he gets his $23,000 back on a CD. In this scenario he gets .... what? He gets a Solar PV system guaranteed to output 80% of that 14,000 KWH for another 11 years (30 years is the industry standard now). Plus he gets all the other benefits referenced above (increased value to his home, personal energy independence, tax free savings/income, and "feel-good-green" credits).
But wait! There's more! Take the subsidy everyone insists on using and stream it to him through his local utility by increasing his reverse-meter payment to $.14/KWH. Now take his 14,000/KWH per year an multiply it by $.14. Net yield is $1960/year, or almost a 9% yield, and his system is paid off after 11.5 years. Ask Joe where he can get 9% on his money nowadays. Even better, he has an incentive not to waste his solar power, and in fact to super-maintain and constantly tweak his system to reap more "meter gold." This sort of incentive encourages conservation and careful spending (Joe's putting his money at risk, and working for just a sliver of public money, and can only reap it if he optimizes his feed into the grid). Even better -- solar vendors can offer to augment the reverse-meter rate by a few more cents by offering rebates (buy a system from XYZ company and it will stream, say, $2000 into the utility's system to pay Joe on top of the utility's rate). This shortens Joe's payback cycle and thus steps up his brag to his neighbors that he's got a 10KW system that'll be paid off in less than 10 years. Here I show how best to use subsidies (back-end them, only) and how the $8 billion Obama just signed away to Georgia's nuclear industry could, if diverted to Solar PV, result in 1 million Solar PV Arrays producing 13GW of power.
Finally, it's all about (as noted above), payback cycle, which can be shortened on the front end (lower up-front costs, thanks to the Chinese), and on the back end (step up his savings, which perversely, will occur through increased electricity prices, and through increased reverse-meter rates). Falling up-front prices and rising back-end prices/reverse-meter payments = shorter payback cycle. By streaming subsidies to Joe through reverse-meter payments only, energy-efficiency and output optimization will be hyper-accelerated (millions of Joes tweaking their systems, and trading notes via crowdsourcing in the process).
O. Go Ahead and Touch The Third Rail of Solar Politics: Deal with the third rail of solar politics: Taxing "brown" power (carbon tax). In negotiating reverse-meter rates with utilities, especially in Georgia, the bottom line is cost, which is a term that's become heavily politicized. In Georgia, utilities and Electric Membership Cooperatives only have to pay solar producers like me the "avoided cost" of my energy (hence, whatever cost my EMC "avoids" in buying solar from me is what it must pay me when I reverse my meter and feed its grid with my solar-generated electricity. But in coming up with $.08/KWH to pay me, my EMC is basically saying it can buy electricity from fossil and nuclear based interests for that amount so therefore that's all it's going to pay me.
Yet, those interests are heavily subsidized -- with my tax and ratepaying dollars -- so their charge to my EMC is artificially underpriced. Too, they get to emit air pollution (particulate matter, carbon, etc.) and my system produces no pollution once it's installed. Greenies therefore reason that "brown" power must be "carbon taxed" for browning up the fish tank in which we all must swim (put a price on polluting, thus discourage it) and some of the proceeds then must be paid over to people like me to level the playing field competition-wise. Hence, carbon taxation often makes it to "solutions lists," such as here. And if that's done right, guys like me get higher "reverse meter" payments. This is something worth debating, let's not run from it.
I say this: Pricing carbon isn't going to happen in the US anytime soon, but Tea Partiers and small government nuts like me may see some success in at least ending "corporate welfare" subsidies for brown power. That would at least eliminate the offensive dynamic of government taking money from my pocket to subsidize the very competitor that then passes that subsidy to my EMC via lower wholesale prices to it, which then lowers my reverse meter payment because brown-power "avoided cost" has been artificially (via subsidies) lowered.
P. Beware of Solar Industry Trade Groups Looking to Pick The Taxpayers' Pocket
Consider this from a 12/9/10 email from the Georgia Solar Energy Association:
The GSEA is a consortium of green-power private and commercial interests who mainly hawk a subsidy-driven Solar PV market, and I urge them to explain what goes into a "fair price," because that, like the "cost" of something (brown power), itself packs a lot of divergent values in it. And clear communication forms the informational oxygen of environmental politics. For example, in urging others to contribute to it so it can pressure the Georgia legislature to pass more subsidies (tax breaks, feed-in-tariffs), it claimed this in a 12/22/10 email:
North Carolina, electricity from new solar installations is now cheaper
than electricity from proposed new nuclear plants, having profound
implications for North Carolina's energy and economic future. Over
6,000 jobs were created in just two years there."
Well you know, that's a pretty amazing claim to make -- "electricity from new solar installations is now cheaper
than electricity from proposed new nuclear plants." From that how could anyone sanely want to build nuclear plants? I'd like to see evidence on that -- evidence that includes an econometric free of subsidy dollars (i.e., don't show me Solar or any other power that "is as cheap as" something only because it's being subsidized and thus its true cost is artificially lowered).
Plus, solar provides only day-time (hence, variable) power, while nuclear provides "base-load" (24/7) power, so it's not like Solar PV can flat-out displace base-load (nuclear, coal, hydro) power outright. These guys never address that elephant in their room, which "the masses" should know about (i.e., solar is not likely anytime soon to substitute for base load power, hence coal plants, but at best can only mitigate the need for them). At bottom, the GSEA is asking everyone to subsidize their vendor-members' profit margin on a muted, vague promise that Solar PV, if only further subsidized, will be a panacea, and not just another subsidy-crutched product. The GSEA should address the base/variable power dilemma and put it on the face page of their website, lest they be dismissed as just a bunch of solar-corporate-welfare queens.
In fact, I find the GSEA's position particularly galling because it ignores Georgia's record budget deficit in demanding more subsidies for its commercial members, and all the other "budget-cuttees" will just have to suffer that much more. GSEA should cite us financially feasible overnight power storage. It should make the case for Solar PV standing on its own in the free market. And it should support any grid parity claims with real, not subsidized cost numbers. And if it really believes that subsidies make sense solely to birth a truly free (hence, self-sustaining) market for Solar PV, then it should detail its evidence in support of that belief.
Because we sure don't need the public debate bogged down by misleading statements. Almost everyone of these GSEA talking points has an obvious "yeah, but...." response (just one example -- in response to it's "Solyndra" minimization, see this "Boondoggle Watch" page to show multiple instances where the pols and `crats bet on mega-million-taxpayer-dollar losers). Consider this guy's conclusion that Solar PV's first world market value is overhyped, will lead many ventures to fail and, ironically, will benefit third world (Africans) denizens because those without a grid, who thus must burn wood, kerosene, (etc.) for light and cooking, will find it very valuable: "Bringing distributed energy to a distributed population that lacks baseload power generation will be the greatest unintended philanthropic consequence the world has seen in many years."
What that fellow is saying should be obvious: Create and sell your product where there is actual demand -- a basic free market concept. We need is a free market where mass-purchasing decisions separate the wheat from the chaff. Where people are actually buying Solar PV, with their own hard-earned cash and not with other people's money (tax credits, FITs and rebates), because it's a product that's actually worth the money. Again, I gladly paid over $2000 for the early PCs that I owned because they were worth the money to me, so much so that 30 years later I have no regrets at all on those expenditures.
Joe must feel the same about Solar PV. And he should not need bribes and hand-outs to get there. What he needs is a useful product at a price that makes sense to him, just as the early and later PCs were useful products at prices that made plenty of sense to me. Solar installers/suppliers/traders that form groups like GSEA to lobby for hand-outs and corporate welfare (both of which tend to inflate, not lower prices) simply hurt that effort. But of course, they don't care. They ply cash and other political lubricants to get the pols & `crats to hand over (directly or indirectly) more and more of our hard-earned money to them without any regard, for example, whether things like the Subsidy Farms they help build make ecologic/economic sense. They are harmful to the green movement, not helpful. Their only shot at redemption is to be able to look back years from now and claim that the big blast of free moolah engendered a huge solar-panel manufacturing ramp-up that wouldn't otherwise have occurred, and thus a momentum that ultimately brought us across the grid-parity ($1/watt) goal line. Sure, I hope their right about that, at least we'd all get some benefit, but that sort of reckless subsidy spending is the equivalent of burning down your house just to light your gas stove. My Boondoggle Watch page demonstrates just reckless the Solar Spendocrats have been. And, of course, all that adds up: “Our national debt, at $15.8 [trillion], would form a stack of $100 bills 10,712 miles high.” (Source).
Q. Here's another Plan that bears many useful ideas.
There is a market for Solar PV, but it has no chance of making to the Home Depot "Solar Aisle" if it keeps getting price-inflated and bubbled by wishful-thinking subsidies. The best thing the American politicians and bureaucrats can do is get out of the way and let the Asians flood us with ultra-low-cost Solar PV panels. That will create more jobs (installation, balance-of-system sales) for Americans than any trade-protection practice aimed at deterring the Asian flood. Plus, by lowering the net installed cost of Solar arrays, the Asians will trigger the critical mass of buying that the American market needs to make this industry take off -- become a commodity scale market. And that is what will foment millions of roofs and backyards and farm fields arrayed-up and producing GWs of new, pollution-free electricity.
At the same time, brown-power should be fairly priced (it ought to pay something for the privilege of browning up the fish tank and making us inhale its "brown,") so that utilities pay a truly fair market price for reverse-meter credits. Nevertheless, government mandates (Renewable Portfolio Standards, which basically tell utilities "you must buy X amount of green power") and artificially high Feed-In-Tariffs or reverse-meter rates are silly because they only raise power rates to cover such costs. That, in turn, forces utility ratepayers to subsidize green producers like me, and subsidies ultimately just suck.
Finally, turf-protecting laws and regulations should be repealed to clear the market for Solar PV and other alternative energy players. And the market-uniformizing measures (a Consumer Reports for solar, an independent rating system, certainty behind the 30-year warranties, etc.) explained above must be implemented.
All of those developments, in turn, will assist in creating a free market wherein massive numbers of Americans invest in Solar PV -- because it's in their economic self-interest to do so. Everyone has their price-point, and for me it was $14,000 (10-14-year payback cycle, see my letter to MAGE for data on that), while for most I'm guessing $7000 - $10,000 for a 10KW system (7 to 10 year payback). The Asians now have their benchmarks to meet -- where they must drive prices to spark a $500 billion market. And Georgia, indeed America, will reap two huge benefits: higher employment and economic upside from Balance-of-System and installation sales (again, those will not occur without low-cost Asian panels), plus epic ecological upside (assuming a rational grid integration -- and a gird operator bud who studies this assures me this is feasible -- substantial numbers of brown-power plants will not need to be built with millions of Americans making and consuming their own power).
Finally, on a price-competition basis the biggest threat to Solar PV may well be cheap, shale-based natural gas. If the WSJ is right, electricity prices may well fall at the wholesale level, further pressuring solar to follow the PC approach (again, the price of computing power fell 99% from 1977-2009). We need that natural gas, by the way. As the WSJ reports, "[e]ven with increased energy efficiency over the next two decades, growing demand for power in the U.S. could require the equivalent of 540 new coal plants or 200 new nuclear power plants." And Solar PV is not going to rise above its less-than-1% contribution to America's energy needs anytime soon, especially with its growth-retarding subsidy advocates and trade-protectionists in the mix. So, Solar PV is best advanced as a personal wealth-generator, and not the panacea some solar-greenies claim it to be. Get it up to 100-million arrays (yes, including in places like NYC) and then let's see where we are re: net environmental impact. Because right now it's statistically insignificant, and thus does not justify picking Joe's pocket to force him to pay for it.
Click here to learn of my experience tying my Solar PV system to the local grid.
-- James Christopher Desmond
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