A free-market energy blog
Random header image... Refresh for more!

Free-Market Solar: The Real Opportunity (this solar executive tells the feds and Arizona to cool the subsidies)

[Editor note: David Bergeron is president of SunDanzer Development, Inc., a solar energy company located in Tucson. His first post at MasterResource was titled Economic/Environmental Assessment of Grid-Tiered Photovoltaics: Arizona Lessons for the U.S.  More information on Mr. Bergeron and SunDanzer is provided at the end of this post.]

It’s Saturday. I’m testing a new solar powered vaccine refrigerator that uses ice packs rather than batteries to store energy and maintain cold temperatures. This is a key component of the distribution chain for vaccines and part of a global effort to eradicate polio and other preventable diseases.

Solar energy is my passion, field of study, and occupation. It started when I was 13 years old, a time of the Arab oil embargo and gasoline lines at the pump. Only later did I realize that the long lines were caused by misguided government price controls, not a tiring mineral-resource base.

Today, our government is again engaged in misguided energy activism, policies that mandate inappropriate solutions to real and imagined problems.

Such is the case with grid-tied solar panels, an energy alternative which fails to effectively address either energy security or environmental concerns. Although unintended by state and federal lawmakers, preferences and mandates for political correct energies will ultimately stifle creativity and generate false solutions to our energy dilemma.

Sunny Arizona–Cost-Prohibitive Solar

Solar Photovoltaic (PV) electric panels are far too expensive to provide a sustainable energy alternative to homes and businesses already connected to the electric utility grid.  The on-grid solar industry and associated jobs are artificial and only exist because of special government favor.

The solar industry today is a bubble ready to burst. It is similar in many ways to the housing market bubble created by easy mortgages enabled by government favor.  When the subsidies end, the solar bubble will burst, and much of the industry and jobs therein will vanish overnight.

This is because the underlying economics of Solar PV are not viable.  In sunny Arizona, my homeland, the true cost of a typical 1,000 Watt solar system is approximately $5,000. This system will save our state about $65 per year in fossil fuel. This 77-year payback exceeds the life of the equipment and ignores the maintenance and eventual disposal cost of the hardware.

Despite idealistic claims that solar PV can allow Arizona to avoid construction of new power plants, it will not.  Solar is not consistent enough as a power source to meet the utility’s reliability requirements for power generation (the dispatchability problem). In addition to intermittency, the peak output of solar panels is at noon, but the peak electrical demand is in the late afternoon.

The bottom line is that solar cannot be counted on when it is needed most. So no significant reduction in generation or transmission infrastructure is possible by adding solar panels to the power grid.

Can Solar Get There?

For PV to be economically feasible, the “installed” cost would need to be equal to or less than $1/watt.  This is the holy grail of the industry and consistent with the statements of Dr. Chu, the Secretary of Energy. Very large-scale PV systems are reaching $4/watt today, which is admirable, but still four times too expensive to be a credible solution.

Can we get to $1/watt any time soon?  At present, solar panels are about half of the system cost. The remaining cost is mounting hardware for the panels, the inverter to make AC power, wiring, labor, and permitting. So even if it were possible to manufacture panels for free, the balance of system cost is still about $2 per Watt and the industry would continue to be non-sustainable without substantial subsidy.

So the answer is that when it comes to the grid, the future belongs to stored solar, not the dilute solar flow, that is embedded in super-fuels oil, natural gas, and coal.

The Fallacious “Jobs” Argument

So why do we continue to subsidize solar power? There are many reasons, but mostly because of myths propagated by the solar industry and some naive public officials.

Perhaps the most egregious myth is the claim we are helping our economy and creating jobs. This is false. Money for the solar subsidies comes from taxpayers and ratepayers. As this money is taken from us, spending for other goods and services must fall. This causes economic and job losses in other segments of the economy, such as in restaurants, department stores, and service and manufacturing companies.

There is no free lunch, but it is easy to be fooled into thinking we are creating jobs.  This is because the newly created solar jobs can be seen and counted. But the job losses in other segments of the economy are diffuse and difficult to see unless one knows to look for them. Many politicians take credit for the solar jobs, but never mention the job losses caused by reduced spending in the balance of the economy. Even worse, the new solar jobs are not as productive as the jobs that were lost, because of the poor economics of solar. This is one reason why total unemployment remains high even with all the new solar jobs.

This is Economics 101, presented perhaps best of all in Henry Hazlitt’s timeless primer, Economics in One Lesson.

The Fallacious “Energy Security” Argument

Another fallacy is that solar power provides energy security against imported oil. But using solar does not reduce oil imports because the U.S. generates not more than 2% of its electricity from oil.

We make electricity with coal, nuclear, natural gas, and hydro–all homegrown. Domestic supplies of gas and coal are in the hundreds of years. Energy insecurity has a lot more to do with intermittency than it does the fuel source.

An Economical CO2 Saver?

But the most ironic fallacy is the idea that solar effectively helps the environment by reducing carbon dioxide (CO2). Conservation and other technologies allow carbon credits to be traded for $20/ton in Europe. But saving CO2 with solar costs at least $150/ton. Solar, in other words, in the loser of losers, perhaps the last thing that should be done even from the viewpoint of climate alarmists.

Conclusion

If and when solar PV becomes economical, the market will come to us in places such as Arizona where the sun really shines. But for now, and the foreseeable future, solar has a niche: not here but in developing countries where they can provide electricity where there is none. As such, solar panels can be a bridge to the denser, consistent energies that the developed world enjoys today.

Installing PV solar on U.S. roofs, on the other hand, does nothing except make us feel good and drain our economy of more productive employment.

—————————-

David Bergeron founded SunDanzer in 1999 and currently serves as President and CEO.  SunDanzer has operations in Qingdao, Monterey, Tucson, and El Paso with 15,000 square feet of office, laboratory, manufacturing, and warehouse space.

SunDanzer performs R&D for NASA and the Department of Defense in the area of solar powered cooling equipment, manufacturers in the USA, and exports solar refrigeration equipment to every continent.

16 comments

1 Steve C. { 10.21.10 at 9:22 am }

Wow. A solar industry executive who acknowledges the “broken window fallacy”.

2 Tom Tanton { 10.21.10 at 9:45 am }

Excellent article. I have but one quibble. “So the answer is that when it comes to the grid, the future belongs to stored solar,” is true, but also (and consistent with growing use in developing countries as noted in article) use PV in direct current application. Lose major headaches and costs by eliminating inverters. People are surprised at how pervasive DC end-uses actually are–and becoming even more so with digital controls even on coffee makers. Of course that moves PV from being 4x to only 3x the cost of other tchnologies, but opens up the third world somewhat even more (as the avoided infrastructure of A.C. reduces enabling costs.)

3 rbradley { 10.21.10 at 9:47 am }

Yes, Henry Hazlitt lives!

4 Paul Kenyon { 10.21.10 at 5:12 pm }

I even have an issue with battery storage…such as we use here living off-grid. A battery, no matter the size, has a limited size and once full–on a good and sunny (or windy) day, the resource still providing the energy to the battery must be wasted…which is a waste of (an inefficiency of) the infrastructure (panels, turbines, wiring, inverters and all the rest) installed to gather this energy. Additional costs come with the particular battery technology itself. Lead acid is a good example given that, for today’s off-gridders like us, it’s what we use. The lead acid battery has something like a 50% efficiency, discharge to full charge and they must be babied, the babying not necessarily being in sync with resource cycles just as electricity use patterns are not in sync with PV/wind resource patterns. Lead acid batteries will sulphate if left discharged too long requiring a series of destructive charge/discharge cycles to recover the full capacity of the battery being one example. Batteries require a particular environment (temperature, usually) for ideal (least cost) operation. Other battery technologies will have their own particular limitations and pecularities. All these requirements put persistent and troublsome limits on even stored solar and, bottom line, makes the technologies that more incompatible with current and future energy use requirements and the more costly.
Paul Kenyon

5 juanslayton { 10.21.10 at 10:59 pm }

I generally agree with everything you say. So why am I about to put solar on my roof?
1. The subsidies are there even though I oppose them, and my tax dollars are helping provide them.
2. The same people who created the subsidies are doing their level best to raise the price of carbon-based energy sources. They are likely to succeed. (For example, watch as California’s proposition 23 goes down in flames next week.)
3. The same people who created the subsidies and who seek to raise the cost of conventional energy are pursuing other policies that are likely to result in substantial inflation. The only personal defense against inflation is to put your savings into tangible assets. Up to a point, that solar panel on the roof will increase in value, even as its remaining life span diminishes.
Bottom line, the personal payback time will be reduced and may fall somewhere betwen 10 and 15 years. For me that is a solid investment. Of course the societal payback time will still likely exceed the life of the hardware.
John Slayton

6 Brian H { 10.22.10 at 5:34 pm }

Rediscovering old truths.
Google “Bastiat” with “unseen”.

7 Eric A. { 10.23.10 at 7:22 pm }

Roger Angel at the University of Arizona understands the holy grail of $1/watt and is working toward that goal…including reducing the cost of all the “stuff” (hardware) you need to hold your stuff and connect it to the grid.

I don’t mind a few research dollars going into that, but I think we all understand the goal is a self-sustaining solar-energy industry.

8 David Bergeron { 10.25.10 at 11:45 pm }

Eric A, obviously the goal is a self-sustaining solar industry, and I’d love to see that happen. But I can’t pretend it’s likely or probable. It’s a long way off and many in the industry are acting like were there or almost there. This is dishonest. These folks are intentionally misrepresenting solar PV’s viability for their gain. The very naive Arizona congresswoman, Gabrielle Giffords, actually announced on her website that solar has reached grid parity. That is exactly the kind of ignorance I’m trying to stomp out. I hope Roger is successful, and I’m glad he is honest about the cost.

I’m ok with funding the type of research he is doing, but not the massive deployment of a very cost ineffective technology which is where some in the solar industry have led the public and political leaders.

It’s well beyond the few dollars in research you assume. It has become a noticeable drain on our state’s economy. We’re spending over $100M a year in Arizona on a very bad investment. A few are getting rich, most are losing, and it’s accomplishing very little.

Those of us in the industry have an obligation to be honest about the chances this will pay-off. I’m trying to be honest with people like you, who don’t have the time and information to judge each particular government expenditure.

9 David Bergeron { 10.28.10 at 1:44 am }

Tom T., I agree, PV has better returns in DC applications. Off-grid is the true market for PV. Also if one day the grid had inexpensive storage or loads that could use power effectively when it was available (like swimming pool pumps, or maybe water heaters), PV and other intermittent renewables would be more cost effective. But we’re putting the cart before the horse by installing PV on the grid now.

10 Message to Young Journalists: Connect the Dots « NoFrakkingConsensus { 10.29.10 at 1:15 pm }

[...] that aren’t yet ready for primetime. This kind of power costs consumers several times more than power that is generated by traditional [...]

11 Dennis Curley { 11.13.10 at 8:01 pm }

Intriguing article. And I have to admit, even as someone who works in solar, that much of what Dave B. says about PV costs are painfully true. Just wanted to point out that, when talking about high costs of PV, we don’t confuse people so they lump in solar thermal with some impracticalities of PV. If you work in the industry you know how easily that can happen. Solar thermal technology, even without subsidies, can save customers money and save fossil fuel comsumption.

12 Michael McVan { 11.17.10 at 12:22 pm }

I agree with Mr. Curley, I work with thermal panels and designed correctly the can be used to offset a large portion of the fossil fuel loads. I am installing a glazed flat panel array on my home that will supply my domestic hot water, and in the summer pool heat and in the winter some space heat. The main advantage to solar thermal is the availablity of storage. This system will cost about 10K and have a payback of 5 to 7 years. This makes sense to me.

13 Solar Power: Two Worlds | Institute for Energy Research { 05.12.11 at 1:57 pm }

[...] uses ice packs rather than batteries to store energy and maintain cold temperatures,” Bergeron wrote at MasterResource some months ago. “This is a key component of the distribution chain for [...]

14 David Bergeron { 01.02.12 at 11:05 am }

Dennis and Michael, I agree solar thermal is more economic than on-grid PV. I’m just not sure solar thermal is fully economic without subsidies for these on-grid applications.

15 Rod Whiting { 08.31.12 at 10:55 am }

I am in the solar industry and though I don’t disagree with the views above, the bottom line is always the same. Historical data shows power providers increasing their cost to the consumer by 7% a year(varies per region). Solar panels are what is available at this time to set your energy cost and reduce your electrical expense. Every consumer will see tens of thousands or more in savings over the next twenty years and will no longer have to be afraid to use a luxury like A/C during our hot seasons. The bottom line is still savings for the consumer.

16 Rod Whiting { 08.31.12 at 11:00 am }

Also, it has saved my family from bankruptcy after 4 years of part time employment. And NASA uses solar panels, dept.of energy , dept of defense, and many corporations who spend millions on research before investing. Not a long term solution, but an immediate savings over the next thirty years.
By the way, the organizations above all chose SUNPOWER.
Sunpower is traded publicly so you might want to buy up some stock. :)

Leave a Comment