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Category — Solar power

Solar is Not an Infant Industry (Part I–Pre-Twentieth Century)

“Not satisfied with such direct benefits as he derives from sunshine, man has developed numerous ways of utilizing solar radiation indirectly and of appropriating energies other than his own.”

    – Erich Zimmermann, World Resources and Industry (Harper & Brothers, 1933), p. 43.

“Although much interest in the scientific community has been focused on solar energy at various times in history, widespread development of solar power equipment has never been achieved—primarily because of the high cost of developing solar power compared to that of technologies utilizing cheap fossil fuels.”

     - Wilson Clark, Energy for Survival: The Alternative to Extinction (Garden City, NY: Anchor Books, 1974), p. 379.

Solar electricity has a long history, not unlike its cousin windpower. The infant industry argument does not apply, and solar’s diluteness and intermittency suggest that this off-grid starter energy will not be an on-grid resource this century if not far beyond.

But the hype continues. Yesterday at Climate Progress, Stephen Lacey argued in The Real Impact of Loan Guarantees: “Solar Is Now Bankable” and “Becoming Part of a Much Broader Capital Market“:

With panel prices hitting record lows and performance of projects steadily improving, solar photovoltaics have become increasingly attractive to large investors. Investment in solar has surged to unprecedented levels due to interest from large Wall Street banks, investors like Warren Buffett, and technology firms like Google.

Does Mr. Lacey want to get into the weeds of the cost and reliability of solar power, or is his just cover bluster for a politician of his liking to get overbig green lie” Solyndra?

Here are some quotations that put solar in its proper historical context, just in case President Obama does not share any during his visit today at the 48-megawatt Copper Mountain Solar 1 facility in Boulder City, Nevada. Part II tomorrow will look at solar’s history in the twentieth century–and the hyperbole of solar when energy politics entered the scene in the 1970s.

17th Century Solar [Read more →]

March 21, 2012   7 Comments

Micro Solar: Eyesore NIMBYism and the Curse of Dilute Energy

Many years ago at at a DOE/NARUC conference, I took note when Christopher Flavin of the environmental Left (EL) Worldwatch Institute commented that he didn’t support solar farms (macro solar) because of their large resource and land requirement. 1

‘Wow!’ I thought. That depletes the EL supply-side strategy, leaving just industrial wind and distributed (micro-solar)–and maybe a little biomass.

I was reminded of this when I read a recent article in ClimateWire (sub. req.), by Lacey Johnson, “Boom in Solar Panels injects NIMBY Battles into Neighborhoods.”

The story begins with Barbara Katz, whose hilltop home in historic north Baltimore, amid roaming wildlife, was threatened by her neighbor’s plan to install a 600-panel solar array. Johnson reports:

“My initial reaction was, ‘Oh my gosh, this is going to be an eyesore,’” remembers Katz, who was confronted by a plan for more than 600 ground-based solar panels on her neighbors’ lawn. “No one would want this in their backyard. It looks like it’s an industrial park.”

Johnson continues:

It takes a good deal of work — and regulations — to keep suburban communities looking picture perfect, and arrays of shiny solar panels don’t always fit the vision homeowners have for their neighborhoods. All over the country, citizens like Katz have begun organizing to block renewable energy projects, throwing a wrench into some peoples’ plans to “go green.” [Read more →]

January 27, 2012   5 Comments

On-Grid Solar: An Industry in Plight (Government-dependence perils)

“Without these subsidies … ‘On-grid PV,’ would be virtually non-existent. It only exists because the solar industry lobbied government officials to compel citizens to purchase this otherwise non-economic energy source.”

“Included in the list of failed solar companies is Solon of Germany whose corporate slogan was ‘Don’t Leave the Planet to the Stupid.’ Fortunately for taxpayers, it appears Solon will be leaving the planet.”

A recent Wall Street Journal article, Dark Times Fall on Solar Sector(December 27, 2011), surveyed the latest solar industry fallout, as well as overviewed the financial condition of the surviving companies.

But the article seems to mistakenly equate the fallout to viability as if better profits would mean sustainability. The industry is not viable, but this is unrelated to the recent fall-out. The industry was growing and profitable in the recent past and was equally non-viable then. The difference is that with profit-enabling government subsidies intact, many established U.S. and European manufacturers are now competing with China. And they cannot compete.

Risky Business

There is a measure of justice in this recent turn of events. The old adage “he who lives by the sword dies by the sword,” comes to mind. In this case, one might say, “the industry that lives by government intervention dies by government intervention.” [Read more →]

January 6, 2012   25 Comments

Solar Subsidies: Misdirecting Industry and Consumers

“Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems.”

“In the near term, perhaps our bigger concern than climate change is anthropogenic energy policy.”

In a recent Economist on-line debate, the affirmative motion “This house believes that subsidizing renewable energy is a good way to wean the world off fossil fuels” was surprisingly defeated.

In his closing remarks, the moderator softened his strident opposition to the negative case, even admitting that “subsidizing renewable energy, is wasteful and perhaps inadequate [to address
climate-change concerns].”

Beyond the Climate Debate

The debate, indeed, reopened the question whether anthropogenic greenhouse-gas forcing was a serious planetary environmental concern. But such focus short-changed what I think is the more important question for the Economist. Not only are the renewable-energy subsidies (such as for solar) wasteful and potentially insufficient, they are outright diabolical if indeed there is a looming environmental crisis.

I am not evaluating whether anthropogenic global warming is real and potentially cataclysmic; I’m arguing that if there is a valid concern about the enhanced greenhouse gas effect, not only will the subsidies not solve the problem, but may very well prevent or postpone a legitimate solutions.

Grid Solar: Radically Uneconomic, Intermittent

I’ve written before about why on-grid solar power is absurdly uneconomic and has almost no hope of becoming a viable alternative to current generation technology–or even competitive with other more viable renewable technologies. I’m asking the reader to accept this position for the sake of understanding the potential implication of my claim. [Read more →]

December 15, 2011   4 Comments

Peltier: Political Solar’s ‘Epic Fail’–With More to Come

” The Solyndra technology was far from innovative, much less game-changing. The DOE … failed to quantify the elasticity of production costs in a highly competitive market where solar panels are a commodity.”

“Given the many other companies with shaky financials that have received loan guarantees, I expect we’ll see more and larger epic fails like Solyndra in the coming years.”

- Robert Peltier, “Epic Fail, POWER, October 2011, p. 6.

The seasoned warnings against politically correct, market incorrect technologies for electric generation by POWER magazine editor-in-chief Robert Peltier are now being vindicated. Peltier did not anticipate the unseemly crony capitalism involved in such cases as Solyndra, but he knew that there was trouble ahead because of the technological problems of converting very dilute, intermittent energy into affordable, dispatchable power flows.

The special insight of Peltier on political solar is worth studying (full article here): [Read more →]

November 1, 2011   3 Comments

Beyond Solyndra: Solar Energy’s On-Grid Torment

In Solar Energy Tough Love, I described the perverse impacts of government industrial policy on the solar energy sector in its vainglorious attempt to choose winners and losers.  That policy is failing, Solyndra aside. 

The market gods hate to be trifled with, and they respond with thunderbolts and torment.  Solar’s pain will continue until grid parity is reached. In the meantime, the solar energy sector must purge itself of government subsidies and address its weak financial performance.

So when I read the story in the trade press about SunPower’s wider Q2 losses I decided to get beyond the numbers to look at some of the market factors tormenting the solar business and holding back its true potential.

One key fact is that solar energy demand is up, but so are input costs for solar panels.  Rising demand stimulates rising production and thus excess inventory is a persistent problem and results in falling prices for PV panels.  Then there is the Feed in Tariffs (FiT) fits that cause burps and headaches as governments in Europe no longer able to afford the soaring cost of subsidies regularly adjust the tariffs—usually downward.

Changes in FiT shift demand from market to market as manufacturers adjust and seek to lose less margin on each incremental deal.  Often, as was true in SunPower’s Q2 report, revenue comes in at or close to investor expectation because demand is growing but cost and margin control has proven difficult and can quickly eat away at profits.

Key Factors

  • Deal Flow is Up but VC Funding is Down. The consolidation process in solar energy is clearly underway with the mixed news on the solar investment and funding front. While the number of venture capital funded solar deals remained about the same in Q2:2011 as the previous quarter (25 vs 26) the value of those deals fell to $354 million in Q2:2011 from $658 million in Q1:2011.  Even worse, that $354 million in Q2:2011 was down from $948 million in Q2:2010 even though deal flow increased 25 vs 18) according to Mercom Capital Group.
  • Bankability is limited, but deal flow schemes are abundant.  There are many vendors eager to sell solar energy systems but few of them are bankable meaning they look like what they are—a big credit risk.  So these solar firms spend much of their time dreaming up schemes to finance their deals.  Pace loans was one of those when upfront costs could be funded through government assessments like sidewalks and sewer lines.

It all sounded so logical and convenient until lien holders began to realize that the PACE loans would get priority ahead of the first mortgage in a bankruptcy since they were government bonds and that was a scheme not even Fannie Mae and Freddie Mac would tolerate.

  • One of those schemes is residential solar leasing.  Think about it!   If you are a homeowner and you want to ‘do the right thing’, save the planet and stick it to your utility company.  So you decide to put a solar rooftop system on your house but it costs thousands of dollars and tax credits and subsidies don’t cover all of it.  No problem, the vendor says we will lease you the system with no upfront cost.  This sounds like a great deal until you realize that you are signing a 20 year lease on equipment with rapidly falling prices and in a market of rapidly improving technology. [Read more →]

October 13, 2011   7 Comments

Solar Power Cost: Don’t Forget Intermittency (energy economics 101)

[Ed. note: David Bergeron is president of SunDanzer Development, Inc., a solar energy company located in Tucson. His earlier posts at MasterResource are Free-Market Solar: The Real Opportunity and Economic/Environmental Assessment of Grid-Tiered Photovoltaics: Arizona Lessons for the U.S.]

“The economic case for grid-tied PV is indeed quite hopeless, and the sooner we stop the misguided subsidies the sooner we can focus on actually addressing our legitimate energy and environmental concerns.”

The U.S. Energy Information Administration (EIA) recently published an excellent report on the projected cost of electricity generated by different technologies: coal, natural gas, nuclear, and various others, including renewables.

Levelized Cost of Energy

Their Levelized Cost of Energy (LCOE) calculation combines upfront cost with recurring cost to estimate the average cost of power produced by these technologies. Here is the EIA cost datafor coal, natural gas, and solar PV.

At first glance, it looks like PV could be competitive with coal or natural gas plants if the PV cost were to drop below 10 cents/kWh. But there is an important difference between PV and the traditional technologies which makes this simple cost comparison invalid.

But first, take a look at the cost of electricity from a coal plant. The total cost is projected to be 9.5 cents/kWh per the EIA study. About 6.5 cents of this is capital cost[1] and about 2.5 cents is the cost of the coal. Looking at the natural gas plant, one can see the capital cost is about 2 cents, and the fuel cost is about 4.5 cents.

Solar has no fuel cost element but significant capital investment.

Intermittency = Backup Required

But here is the rub. If you plan to power a city with PV, it is not sufficient to simply build a large PV array, because PV only produces power during the day. At night and during cloudy weather, a back-up power source is needed since there is no practical way to store the PV energy. [Read more →]

October 12, 2011   23 Comments

Solar circa 1994: What Has Really Changed? (Remembering Enron’s hoodwink in the age of Solyndra)

[This post reproduces a front-page story in the New York Times business section that excitedly reported a breakthrough with solar energy as represented by a heady energy company named Enron. Formed in the mid-1980s, Enron had just entered into the solar business and was destined to revitalize--if not save--the U.S. wind industry just a few years later.]

“Federal officials, aware that solar power breakthroughs have shined and faded almost as often as the sun, say the Enron project could introduce commercially competitive technology without expensive Government aid.”

Allen Myerson, Solar Power, for Earthly Prices, New York Times, November 15, 1994.

The nation’s largest natural gas company is betting $150 million that it can succeed where the Government has so far failed: producing solar power at rates competitive with those of energy generated from oil, gas and coal.

The Enron Corporation plans to build a plant in the southern Nevada desert that would be the largest operation in the country making electricity directly from sunlight, producing enough to power a city of 100,000 people. It is expected to begin operating in late 1996.

Grand promises in the late 1970′s about the potential of virtually pollution-free, endlessly renewable energy sources like solar energy faded into an embarrassed hush. But several of the nation’s leading solar power experts say Enron’s optimistic goal is probably reachable.

The reason is that during the last decade, the cost of solar power generation has quietly declined by two-thirds. Far from depending on some wondrous breakthrough, the experts say, Enron can offer commercially competitive solar power by inexpensively mass-producing solar panels, and then employing thousands of them in the Nevada desert. [Read more →]

September 20, 2011   13 Comments

Sustainability Lessons from Evergreen Solar’s Bankruptcy (Part II)

Part I yesterday described Evergreen Solar Inc.’s recent bankruptcy protection filing, which has left Massachusetts holding the bag for tens of millions of dollars in tax benefits and subsidies for a Devens, MA solar panel factory. Massachusetts wanted to be a true believer, and the promise of 800 jobs in a recession was too good to pass up even if the risks were high.

For politicians looking for good press this was a great opportunity—until reality hit the fan. So what lessons does this failed ‘green’ energy experiment impart for other political jurisdictions eager to create jobs? I offer five.

1. Being green does not mean being sustainable.

Evergreen Solar expanded just as the solar market was reeling from feed-in-tariff (FiT) subsidy cuts in Spain and later Germany, the then hottest markets in the world. Those FiT cuts were caused by rising and unsustainable costs to the Spanish and German governments seeking, just as Massachusetts had done, to prop up local business and create jobs when they were needed most.

2. Solar energy is governed by global markets for commodity prices—and few play that game better than China. So when China saw the luscious FiT subsidy fruit being dangled in Europe, it undercut the prices of local manufacturers for photovoltaic panels and took both market share and FiT subsidy Euros and sent them back to China. The European solar manufacturers were—pardon the pun FiT to be tied—but they were also still screwed because they could not meet or beat the low Chinese prices and saw their business fade away as unsustainable in a market that had become dependent upon unsustainable government subsidies.

These EU PV makers then dumped PV panels on the global commodity market at fire sale prices thus causing a worldwide problem of falling prices that swamped many solar players including Evergreen.

3. Feed-in-Tariffs are Risky Business. The EU story of industrial-policy good intentions gone unfulfilled is also a lesson unfortunately re-learned many times as disappointed results, this time in Massachusetts, remind us that when we seek to build entire new industries on a bed of sand. Our business future (sales, revenue growth, and supply chain channels) can be toppled by tremors in the markets half a world away. [Read more →]

August 24, 2011   10 Comments

Evergreen Solar Inc.: Anatomy of a ‘Green’ Bankruptcy (Part I)

Earlier this month, Evergreen Solar Inc. filed for chapter 11 bankruptcy protection, claiming the lower costs of Chinese competitors drove it to restructure. The Massachusetts Economic Assistance Coordinating Council, the Commonwealth board charged with overseeing MassDevelopment tax breaks to business, had previously voted May19 to end the 20-year, $15 million property tax break and terminate the $7.5 million in state tax credits for Evergreen, two months after the company shut its state-aided manufacturing plant in Devens, Massachusetts built and eliminated 800 jobs.

Adding insult to injury, Evergreen borrowed money to build a new solar manufacturing plant in China.

‘Clean-Energy’ Investments Up, but Performance Lags

According to Bloomberg New Energy Finance, new global investment in the clean energy sector (including solar) was up 27% to $41.7 billion in Q2:2011 from the prior quarter–and 22% higher than a year ago. This included several very large utility scale solar thermal projects including the BrightSource $2.2b 392-MW Ivanpah project in California, the 100-MW FPL Termosol project in Spain and Eskom’s 100-MW Upington project in South Africa.

Solar energy investment in the U.S. was also up 195% in Q2 to $10.5 billion according to Bloomberg, largely driven by successful financing of the Alta and Ivanpah wind and solar projects in California.

But after lusting for clean energy investment opportunities, the performance of many of those investments is not very satisfying. The WilderHill New Energy Global Innovation Index (NEX), which tracks 98 clean energy shares worldwide, fell 13% in Q2 2011 after a strong first quarter. Bloomberg New Energy Finance says the story is the same in every corner of the global with continued strong interest in investment in clean energy but poor performance has often been the result.

Evergreen blamed falling prices from Chinese competitors for solar panels, reductions in feed-in-tariff subsidies in Europe and the failure of the US to adopt supportive policies.

What!?#$%&! 

Let’s face it, if you can’t make a project go in a market where the state permits the project, mandates that utilities must buy renewable energy even above cost (and where the deals are done typically on long term power purchase agreements that substantially reduce the risk), and where the U.S. government writes you a Treasury Tax Grant check for 30% of the cost, the problem CANNOT BE a lack of policy support. [Read more →]

August 23, 2011   2 Comments