Thursday, December 25, 2008

The Solar Bail Out

Yes. Solar has a very bright future. A long as the subsidies keep coming.

If estimates hold up, by 2030, 2000-GW-scale power plants will be necessary to meet new electricity demand, and a potential need will arise to replace a large number of obsolete power plants. Demand on this scale, coupled with industrial and consumer demand and the desire to be free of foreign-fuel sources, has opened up significant opportunities for the PV market, Gartner says.
China alone is building a 1 GW coal plant every week and plans to keep doing it for decades. So let us see 21 years times 52 weeks a year equals over 1,000 GW scale power plants for China alone. That is a lot of electrical demand. Solar can surely help.
Paula Mints, principal analyst for Navigant Consulting’s PV-services program and associate director of Navigant’s energy practice, agrees that solar will continue to maintain the excitement it has garnered as of late. However, she says, the market is first going to soften, for the obvious reason: the economy. “People are drawing back on larger projects because credit is tight,” she says.

Equal to that pressure, Mints says, is the cap Spain recently put on its feed-in tariff, a popular program in Europe. Given that Europe contains more than 70% of the global solar market, this blow was significant. “Spain has been growing enormously, a lot of product was shipped into Spain, and now it has nowhere to go,” she notes.
Uh oh. Just one solar power consuming country ends its subsidy and the market backs up.

And here is the problem in a nut shell. Or perhaps a better name for the problem is the taxpayer's wallet.
According to Navigant’s Mints, incentives are the only factors that drive demand in solar unless it is off-grid. “The Spanish market is a case in point,” she explains. “[Spain] put a cap on [its] market, and now the whole world shrinks because of that [decision]. These are really expensive programs that are very difficult to design. They have to be designed to stimulate a market [but] also be controllable and economically viable because someone has to pay for it. Essentially, where there are incentives, there will tend to be a market. This [situation] is a little offset right now because of the economy, but I don’t think anyone believes the recession will go on forever. … Once there is a recovery, the proper incentives will be in place to drive demand.”

Gartner’s Hines agrees that government subsidies drive demand for this product. Therefore, growth depends on the ability of governments to support investments in solar projects through these subsidies in whatever form they take: feed-in tariffs, as in Germany and Spain, or other incentives that exist in the United States. It appears that the subsidies are intact for now, he says, but if the economic situation worsens or stays bad for a longer time, governments might have no choice but to pull them back.
Incentives are another word for bail out. Translation: bail out equals theft from taxpayers. So let me see if I get this: as long as solar electricity costs more than the alternatives it will be dependent on government thieves for survival. Or if you prefer - a bail out? Or better yet nationalization. Maybe we just hide what is going on and call it a Green jobs program.

Not to fear. Solar can depend on the dupes (oops - I mean taxpayers) to keep funding their life style.
But Applied officials remain optimistic. “We see a lot of opportunities in the solar market, and a couple of things drive that [opportunity],” says Boone. “First, government incentives still are quite strong for solar. The United States finally [passed] the extension of the ITC [incentive tax credit], and, for the first time, that tax credit is now available to residential homeowners without a cap—that means any size system.” The $2000 cap limited who could take advantage of it, she explains. “And we certainly don’t want to be in a position where … only people at a higher-income category can afford to get solar.”

Second, Boone adds, Applied sees the ability of utility companies to take advantage of the ITC for the first time as a groundbreaking opportunity. “When we look into the future, we see a very clear divide in the solar market: the residential-rooftop and small commercial-space-constrained installation, dominated by the wafer-based crystalline-silicon products that are very high in efficiency but a little bit more costly. That is a market that we see growing in both the United States and Europe.”

The company is also seeing the rise of what it believes is going to be the “transformative heart of solar’s answer to the energy equation,” as Boone explains, which is utility-scale solar. “Allowing utilities to capture tax credits for solar-generation facilities is going to unleash a lot of demand here in the United States. We have a lot of sun in the United States. Germany, the largest solar market in the world, gets as much sun as Maine, and that’s not a very sunny place. We see growth in places like California, the Southwest, and the Southeast,” she notes, pointing to Florida as an example. Last year the state passed a new RPS (renewable portfolio standard) that essentially is going to require its utilities to get a certain amount of generation from renewable portfolios.
No caps? Well good. That means there is no limit to the theft. I mean bail out. This has got to be more fun than No income, no job, no assets mortgages.

So let me see if I have this right. Electric rates will tend to go up due to higher costs but the difference will be made up in part by stealing (oops again - I mean taxing) the same people who are paying higher prices for electricity. Who ever figured this scam out was a genius. Was it Chris Dodd or Barney Frank? Something like this would be right up their alley.

So what are the prospects for getting the costs down? Not bad.
It is currently about three times more expensive to generate electricity with PV (photovoltaic) technology than with fossil fuels. But strong efforts to reduce costs in crystalline PV and thin-film PV could allow grid parity to occur between 2012 and 2015.

However, the grid-parity argument is invalid to some experts, including Andrew Skumanich, PhD, founder of SolarVision Consulting. Grid parity is an artificial notion, he warns. "You're comparing solar panels to your wall plug for the toaster, and the problem is that, when you buy solar panels, you are buying hardware that is going to generate electricity," he says. "But you have to write a check for $20,000 or $30,000 for a typical house. … Even if you lower the cost to … maybe $15,000, you're still paying only 10 or 15 cents a kilowatt hour out of the plug."

Skumanich cautions against rationalizing that, over the life of the house, you're paying 10 cents per kilowatt hour, which is the same as the grid: "You can't lose sight of the fact that you said, 'over the life of the house.' That's pretty major. When you are writing the checks for the month, do you want to write a check for $15,000 for something that is not going to pay back for 10 or 15 years?"
Well yeah. There is that capital cost thing and the banks aren't loaning money right now. And BTW are you sure to be living in the house for 10 or 15 years so you can get your money back?

I have a swell idea. The government should force every home owner it bails out to buy a roof top full of solar cells. One thing though. I hope they don't do that in Alaska. For six months out of the year they hardly get any sunlight at all. Or for that matter Seattle which is dismal and dreary most of the year. Must be all those socialists and Greens. A more earnest dreary lot would be hard to find.

One thing is for sure, once the government starts stealing there is no limit to the number of people it can help. And if the government steals everything from everyone there will be almost enough money to help every one. And why almost? Well we will have government people helping with this project and as per usual they will help themselves to more than their share and some one is sure to get shorted.

I do know what to do though. Phase out the subsidies and just let people keep their own money. No matter what you have been told, government cannot help Paul by robbing from Paul and Peter will be leaving the country due to high rates of theft. I mean taxes.

Cross Posted at Power and Control

1 comment:

Christophe said...

You might want to call attention to an actual economic theory version of exactly the same argument you made : that you can't pay people's livelihoods with taxes.

It's called the "broken windows fallacy" and it's been discovered by a man who saw the world around him change from laissez faire in the meaning of "rape your female employees at will, as long as you're paying them", to massive government intervention that would make obama create commercials with a small black kid looking at a tax collector and then ask his mommy why they "taxed" his only meal for the week.

It's all been done before, what Obama's trying to do. France, Germany, Spain, Russia, all have "oops crisis, let the government spend it's way out of it" periods in their history.

And due to a possible violation of Godwin's law, yes, it's exactly what the nazi's tried to do. But they're not exactly the first. Napoleon did so too.