This is great news. Arizona solar energy could power the nation. Keep up the good work, Gabrielle Giffords!

Part 3 of 3

Germany learned an important lesson on renewable energy subsidies. The economic and environmental failure of their subsidy programs could, and should, be a warning for us.  Here is an excerpt from a recent German paper:

We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. To the contrary, the government’s support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.

The full paper can be read here: 

http://www.instituteforenergypolicy.com/documents/renewable_energy_report_rwi.pdf

Even if you find this all hard to believe, at least demand that political leaders demonstrate (using independent third parties) the full economic cost and benefits of these projects. Then we, and they, can make wise choices.

If we are truly concerned about energy security, our economy, environment, and the welfare of future generations, the clear path today is conservation of natural resources, best accomplished by reduced personal consumption.  This will buy time till better, more viable alternatives are ready.

-Joe Solar

Part 2 of 3

But perhaps the most egregious falsehood in these articles is the claim of job creation.  Make no mistake, we pay for these large negative net present value projects; it is not manna from heaven.  It is money that comes out of the pockets of tax and ratepayers.  This reduces our spending ability, and we buy less.  This causes job losses, reduced hours, and pay cuts in the general economy. 

The sinister thing about this political maneuver is that the job losses to the general economy are diffuse and hard to see, but the job gains in the solar industry can be counted.  So many people, including Gabrielle Giffords, sincerely believe these subsidies are helping create jobs, but this is false.  She is merely moving people from productive “free-market” jobs to artificial, non-productive solar jobs.  I say non-productive, because the net present value (NPV) of this solar activity is very low compared to the NPV of free-market business activities.  Free markets cannot waste money in non-productive activities (which is a great thing), but the government can continue to waste money in non-productive ventures as long as we allow it. 

The key here is to recognize the diffuse job losses across the economy which are hard to number, but just as real as the ones we can count at the new solar companies.  In effect, we are moving people from productive jobs to non-productive jobs and our economic output will be reduced.  These solar jobs are completely artificial and the moment the subsidies end, the vast majority of the industry will disappear immediately.  Our solar bubble will burst faster than the housing bubble.

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I agree with your general point that the solar subsidies reduce the cost of carbon credits, but the more important question is “at what cost?”  Are there less expensive ways to mitigate CO2?  If so, we can mitigate more CO2 with less money via other technologies.  The answer to this question is that solar technologies are an extremely expensive way to buy carbon credits.

From the same German report:

There are much cheaper ways to reduce carbon dioxide emissions than subsidizing renewable energies. CO2 abatement costs of PV are estimated to be as high as US $1,050 per ton, while those of wind power are estimated at US $80 per ton. By contrast, the current price of emissions certificates on the European emissions trading scheme is only $20 per ton. Hence, the cost from emission reductions as determined by the market is about 53 times cheaper than employing PV and 4 times cheaper than using wind power.

The conclusion of this and other reports is the same; if we are concerned about CO2, then installing solar panels is a waste of money.  So claims of CO2 mitigation as a key benefit of solar PV is disingenuous.  It took me a while to figure this out, but the solar industry is not at all interested in cost effective CO2 reduction, but they profit from maintaining this myth in the general public.

You and your faith in the free market, hmm. I wish I could believe, but I don’t. The current politics of this country will not support the taxation of “negative externalities” (which you forgot to add, would also be passed on to the consumer, with no benefit attached. Just more of the same.) Just look at the response to the disaster in the Gulf of Mexico. Do you see an outpouring of demand for a massive fine on BP? There has actually been sympathy expressed for BP!

Mass market energy production has always been subsidized; that’s how rural America got electrified. As we reach the era of new energy needs, and peak oil, the question is, what will it be? Clean coal? Nuclear? Damming every river on the planet? Research and development take money; deciding who will get the money depends on results. We are already seeing new full scale prototype PV panels with 24% efficiency, up from 17%. That is the result of research and development, encouraged by the strength of the current support for solar.
See http://investors.sunpowercorp.com/releasedetail.cfm?elq_mid=65&elq_cid=91212&ReleaseID=482133&elq=01966f6ea3b2463aa02d679bd4d1d57a

I wish you would say what you think is the downside to solar, or wind, besides “the initial investment is too great,” because I would rather invest in solar and wind, than try to contain another Chernobyl, or clean up another Gulf of Mexico, or to watch ancient cities drown.  At what cost, indeed!

If you do not understand the economic impact of taxing externalities which would drive up fuel prices and cause consumers to substitute to alternatives, nor appreciate the extraordinary way free markets allocate resources, you should consider moving to a country where resources are allocated by the really smart government bureaucrats. 

Let me know how things turn out for you there in the former Soviet Union.  Mother Russia always knows best eh comrade? 

Perhaps you will learn a valuable lesson about markets and governments.

P.S. Yes, I know SunPower’s cell technology.  We bid it 3 weeks ago in a military system were high energy density was very important.  But we proposed using their cells on a custom flexible substraight so they could fold and be packaged tighter.  It gave us a much better packing density than the standard frames.  It turned out we could fit more than 700 kW of panels in a 20-ft shipping container using the flexible substraight arrangement.  But the requirement for batteries and inverters dominated the volume and weight limits, so we had to find the optimal balance to package the most net energy in the container.  Of course using Li, NiMH, or lead changed the packing configurations and cost per watt, so we bid all three arrangements.  Richard Swanson is in my address book, and I speak to him from time to time at solar conferences. 

This is my business.  I know the costs and I know the technologies and I know the financial limitations.  I’m just trying to prevent our state from wasting a lot of money.

Damn, my comment was over 2000 words and it got wiped out.  OK, this time I will be short.

This is a good project.  Solar thermal appears that it may be ready to begin to be used as an actual energy source, beyond just a lab curiosity.  A prototype plant of a production scale (300 MW is pretty decent scale) is needed to assess.  This is an appropriate place for the govt to share in the risk.  Nuclear power by the way also is reliant on government involvement.  France’s highly successful nuclear power program is a government-private enterprise partnership.

Let’s see how this generator does, it will give us a lot better handle on whether solar thermal is ready for prime time.

So in conclusion:

I believe before either wind or photovoltaics can contribute a major portion of our energy supply, one prerequisite is that we come up with a low-cost method of mass energy storage, one that is convertible to and from electricity with very high efficiency. (some proposed approaches are large-scale batteries or storage of compressed air in underground caverns)  There is not yet an energy storage technique that comes close to being capable of meeting this need. 

In fact, in my view the scientific and/or engineering breakthrough needed to achieve such an energy storage method is the biggest obstacle to a renewables-based energy economy.

(I endorse the government spending lots on that one, provided there are enough researchers in the field that have the competence and judgement that the money winds up producing good R&D)