grid parity

Solar energy advances at rocket speed

Politicians are fond of cliches, especially this one: "I didn't get that memo."

Memos are just one thing that politicians don't get, but it could be true in the case of solar energy. Technology has advanced so fast and so far that policy makers and even utilities have been left behind. Many experts are working off outdated information and don't realize renewable energy is now cost competitive in many circumstances, according to this report from Bloomberg New Energy.

"...awareness of the current economics of solar power lags among many commentators, policy makers, energy users and even utilities," the report stated.

Authors attributed the lag to rapidly dropping prices of solar panels, ambiguous metrics used in the solar industry and persistent dissemination of outdated data - "occasionally by those with an interest in clouding the discussion," they say.

The authors also take issue with traditional metrics and messaging, such as "grid parity," which is used to describe the point where the cost of renewable energy matches other more traditional power sources. But the method is so yesterday, according to the authors, because, in part, it often compares a "retail technology to a wholesale price."

Bloomberg isn't the only group touting the attractiveness of renewable energy. Goldman Sachs put its money where its mouth is to the tune of $40 billion. Such an investment in clean technology isn't greenwashing, says Christopher Swann in Slate. As he says, "The Wall Street never far from the money."

Goldman Sachs is trying to capitalize on an emerging industry - one with many twists and turns. The Bloomberg report entitled, "Re-considering the Economics of Photovoltaic Power," suggested that obtaining an accurate accounting of  industry shifts is difficult because prices change so fast, and because the supply chain and manufacturing process is complex.

From the study: "Adding to these complexities is the wide range of policy support mechanisms that have been utilised to facilitate PV deployment in different jurisdictions. In a number of countries these policies have become increasingly politically controversial within wider debates on public subsidies and climate change action. As such, the quality of reporting and information on the PV industry economics can vary widely. "

A trip down memory lane

The authors give a brief history lesson on solar energy, and acknowledge that costs have generally exceeded other forms of power generation. But that was then; this is now:

 "...With  rapid cost reductions, a changing electricity industry context with regard to energy security and climate change concerns, increasing costs for some generation alternatives and a growing appreciation of the appropriate comparative metrics, PV‟s competitiveness is changing rapidly. As an example, large drops in solar module prices have helped spur record levels of deployment, which increased 54 percent over the previous year to 28.7 GW in 2011. This is ten times the new build level of 2007. "

Again, from the report: "Grid parity is now largely an outdated concept stemming from an industry that has traditionally been used to being an "underdog" of small scale, and constantly fighting for a "level playing field".

Clean energy is maturing, and in some ways repeating history. Technological changes aren't smooth. Just look at what is happening to the newspaper industry . The Bloomberg authors suggest the rapid changes in solar energy carry implications for policy makers designing new fiscal and supporting programs.

"The challenge is to elegantly transition PV from a highly promising and previously expensive option, to a highly competitive player in electricity industries around the world," they say.

Financing mechanisms evolving

Bloomberg New Energy also found, in another study, that the evolution of the industry is leading to new financing vehicles. It is moving toward a broader array of support. Read more here.

Bloomberg and its consultant on the study, Reznick Group, contend the broader support will help the industry keep growing. The new financing sources will replace traditional players, such as the federal government, who cut back. New players include pension funds, insurance companies, big corporate firms such as Google, and vehicles such as partnerships and programs akin to real estate investment trusts.

New financing methods. Falling costs. Technology improving.

Sounds like an industry on the move.

Solar power and grid parity in California

Skeptics of clean energy often say it's too expensive, when, in reality, prices are falling so fast that they are close to more traditional forms of power.

This item in CleanTechnica suggests California has already achieved that milestone, thanks to the state's aggressive support of renewable fuels, such as solar energy. This post also says that solar parity has arrived, while this blog suggests parity is still a few years away.

Either way, prices have dropped to the point where solar and other renewables make better sense economically, especially in California, where sharp minds and incentives are adding fuel. I like this idea: using a solar carport to help run EV chargers at a Metrolink station. Farmers, winery owners and municipalities are turning to solar to run portions of their operations.

Photo of Yosemite by dereklink.

Grid parity and the rooftop solar revolution

The costs of solar power are decreasing so fast that grid parity - where the cost of solar energy without subsidies equals the residential retail electricity rate - could be only a few years away for several cities in California and the United States.

San Francisco, Sacramento, Los Angeles, Riverside and San Diego are among 21 cities that could reach parity by 2018, according to the Institute for Local Self Reliance, which this month released a study entitled, "Rooftop Revolution: Changing Everything with Cost-Effective Local Solar."

The study claims the nation is on the cusp of expanded decentralized electrical generation, but also asks rhetorically if we are prepared. "The nearness of solar grid parity brings urgency to the discussion of electricity policy, from incentives to grid design," the authors state. "Well before any new fossil fuel power plants have passed their infancy, electricity from solar will be cheaper. . . It means that citizens and their elected leaders will have to carefully consider the policies that guide investment in the electricity system."

The push for decentralized energy isn't new. As noted in this blog from last year, decentralized energy means that rooftops of houses and other structures connected to the grid essentially become mini power producers. Localized power can come from other places too: such as the 90,000 square miles of right of way next to roads, the 600,000 acres of commercial parking lots or under the nation's 155,000 miles of transmission lines.

Those doesn't include solar projects that are placed near existing buildings or the solar land rush in California's deserts and marginal or unproductive former farm land in the San Joaquin Valley, where our nonprofit is based. (In a related story, PG&E plans to power up the sun in the next several years.)

How much residential rooftop solar power is created remains to be seen. Even though solar still
generates less than one-tenth of 1 percent of the nation’s electricity, the prospect of cost-competitive and widespread solar energy offers an unprecedented opportunity.

Giving things a push

The installed cost of solar has fallen 10% per year since 2006 and grid electricity price hikes have averaged 2% annually in the last decade. To capitalize, the authors recommend:

1/ phasing out rather than outright eliminating solar subsidies;
2/ easing permitting fees(which account for up to 20% of installed costs);
3/ creating feed-in tariffs (such as one just approved in Palo Alto);
4/ Revise upward the restriction that limit solar to 15% of the distribution grid to to 30%.

A friend, who like me is in her mid-50s, recently wondered aloud why solar and other sustainability programs didn't take off in the 1970s, when we were in our teens. "We (understood) it," she said. "But what happened?"

Maybe it was price. In 1974, solar electricity cost more than 100 times the residential retail electricity rate. Today, the differential in many communities is 2 times or less. "Grid connected solar is on the verge of becoming competitive – without incentives – with
conventional electricity," the report proclaims.

An explosion of localized solar would generate jobs, stimulate the economy and add value to the properties and to the grid. Each megawatt of power generates eight jobs and $240,000 in economic activity, the study projects. With a potential of 30,000 megawatts of new residential solar over six years comes a projected 250,000 jobs and $18 billion in economic stimulus.

The study is not the first on this subject - the report has links to others - and likely won't be the last. It claims to be conservative - basing its information on the assumption that solar panels last 25 years even though evidence shows they continue to produce power after that point.

Who knows what will happen, but solar power makes sense in California where the sun shines brightly for much of the year.

Video from U.S. Department of Energy