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Solar Hyperbole 2009: Don't Forget Enron/Solarex circa 1994

Solar hyberbole is decades old. Inevitably, every few months there are fresh headlines about significant cost reductions, insinuating that the competitive moment of solar panels is arriving. In a recent post at Climate Progress, for example, Joe Romm reports: “Solar prices set to fall by up to 40 per cent by year end.” Google “solar” and “advances” to see what you get for previous years and even decades!

But fossil-fuel technologies have advanced too, and the competitive gap between solar and hydrocarbons for generating electricity remains huge. DOE Secretary Stephen Chu told the New York Times recently that solar technology will have to get five times better than it is today to be part of the energy transformation that he and other alarmists think is necessary.

Why is “free” energy from the sun so expensive? The answer is that it takes a tremendous amount of capital equipment to convert a dilute, intermittent flow of energy into electricity that is competitive with that generated from the stored solar of fossil fuels–the sun’s work over the eons of time. Fossil fuels overcome intermittency and require a lot less capital for turning a resource into useful energy.

Enter Enron and reenter the New York Times for a cautionary tale. Back in 1994, the Times reported that solar’s competitive moment had arrived thanks to Solarex, the second largest U.S. manufacturer of photovoltaic cells, operated and half-owned by Enron.

The Story concerned a proposed $150 million project in the southern Nevada desert that would be the largest in the country, generating enough electricity from sunlight to power the equivalent of a city of 100,000 people. It was expected to begin operating by year-end 1996. Here is what I wrote in Capitalism at Work (pp. 310–11):

Enron hoodwinked the public back in 1994, claiming that its proposed $150 million project could produce solar power “at rates competitive with those of energy generated from oil, gas and coal.”

A business-section feature in the New York Times, “Solar Power, for Earthly Prices: Enron Plans to Make the Sun Affordable,” reported Enron’s pledge to deliver power for $0.055 per kilowatt hour from a 100 megawatt solar farm in the Nevada desert within two years, comparable to the average cost of delivered electricity across the nation. Enron’s rate was unheard of, exceeding even the most optimistic estimates from environmental pressure groups. But it was highly contrived, depending on a raft of government subsidies, as well as questionable assumptions about financing, technology, and delivery schedules. The rate was also back-loaded, with compounded annual cost escalations for thirty years.

Still, the article described the enticing profit prospects of Enron’s advances. Two officials from the Clinton Administration’s Department of Energy were quoted. “This establishes the benchmark we want and restarts a stalled solar industry,” said the head of DOE’s photovoltaic section. Deputy Secretary William White (aka Bill White, one of Enron’s last defenders [and now Houston's mayor])stated his intention to try to help make the economics of the project work.

But the smoke-and-mirrors project was too much for the Clinton Administration—and even for Enron, despite a suite of special subsidies. It languished and quietly died. Nevertheless, it was a heady PR moment for a politically correct company and a credulous press that either did not know or did not report the whole story.

Source: “Solar Power, for Earthly Prices,” New York Times, November 15, 1994.

Postscript

Back at Enron, I heard that this project had a secret feature: a gas turbine that would run at night to average down the cost of power and combat intermittency. I have not been able to confirm this, however, so I took it out of my book. But I will not be surprised if this was part of the subterfuge. That was an incredibly low rate–and still is.

8 comments

1 quanticle { 02.28.09 at 1:53 pm }

While I agree that many of the subsidies given to solar and other renewable technologies are distorting the market, I still think there is a role for government funding for basic research into renewable energy. Basic research lays the groundwork for new technologies, and its payoffs are often far enough in the future that there are no incentives for corporations to pursue it.
The reason I’m advocating more government basic research is that, while we may have adequate stocks of fossil fuels today, the fact remains that fossil fuels are a finite resource. Even if we’re not about to deplete our supplies now, we will deplete our supplies eventually, unless there are technological developments that make fossil fuels obsolete. I think there is value in government research in finding these substitutes, even if there are no “practical” applications for them.
My favored analogy is that of a student studying for a test. Waiting for fossil fuel supplies to become critically low before searching for alternatives is akin to waiting until the night before the final exam to study. Beginning research now is more like staying on top of your reading and homework. While both approaches may end in you passing the class, the latter approach is much less stressful.

2 Ray { 02.28.09 at 3:39 pm }

For many years, I’ve also been frustrated and wearied by solar hyperbole (if you’ll permit me the use of your felicitous phrase), and I commend Robert Bradley for his fine article. Actually, if you’re at all interested, this same subject was addressed from a slightly different, but no less sensible, perspective last September:

http://blog.the-thinking-man.com/wind-and-solar-energy-versus-nuclear

3 Ed Reid { 02.28.09 at 4:20 pm }

I would far rather the government fund research than adopt “technology forcing” standards and hope that someone’s research is successful.

4 alena { 03.01.09 at 5:18 pm }

Does someone at this site not like nuclear energy?

5 Robert L. Brown { 05.25.09 at 4:54 pm }

Oh! For the days of Anti-Trust when Oil would never have been allowed to own solar photovoltaic . Can we ever expect solar to compete with hydrocarbon as long as it is up to petroleum to say, “you may, solar”.

6 Florida, Like Texas, Rejects Renewables Push (solar & sugarcane proposals attract nuclear and offshore drilling tie-in’s in the Sunshine State) — MasterResource { 06.10.09 at 8:47 am }

[...] way. The age-old promises of solar breakthroughs are a mirage, and Enron’s 1994 contrived Solarex splash should not be [...]

7 Enron and Waxman-Markey: Response to Joe Romm — MasterResource { 07.02.09 at 7:06 am }

[...] failure and fraud were closely related to its “sustainable energy” strategy with solar, wind, and energy [...]

8 rbradley { 09.29.09 at 5:54 pm }

This is strange.

The author of the New York Times article announcing the 5.5 cent solar to the world, Allen R. Myerson, age 47, committed suicide in August 2002 by jumping from the newspaper’s building.

http://www.nytimes.com/2002/08/23/nyregion/allen-r-myerson-47-a-times-business-editor-and-writer.html

Myerson wrote numerous positive stories about Enron and thus there was speculation (see link below) that Enron’s bankruptcy contributed to his final state of mind.
http://www.freerepublic.com/focus/news/737684/posts

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