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Monday, June 09, 2014

Solar's Explosive Growth

John Farrell sees problems with solar's explosive growth as The Future of Solar Economics and Policy collide in the future. According to Farrell:
Solar power is at a unique place in history. It's growing rapidly, its price is falling precipitously. Within the next 10 years, it will compete favorably with utilities for electricity sales, on price, and without subsidies.
Given its rapid ascent, it might seem silly to talk about change. But the continued expansion of distributed solar power may rely on modifying a bedrock of distributed solar policy.
He goes on to see things changing in the next few years:
The growth in solar power and falling prices have led to a new dynamic in solar economics. For the first time in many places, solar electricity from the rooftop is cheaper than utility-provided power — without subsidies! And in particularly sunny places, the levelized cost of solar may even be below the "value of solar," meaning that solar energy producers (if paid this value) could make a return on investment just on these merits. This "present" phenomenon will take place in different regions of the country at different times, but will happen everywhere within 5-7 years.
Investors could make excellent returns if current policies aren't changed:
Net metering will become increasingly lucrative for solar energy producers. For example, if Germany used net metering instead of a feed-in tariff policy, customers with solar arrays would be paid $0.30 per kWh for solar energy that cost less than $0.13 per kWh to produce, a 130% profit margin!
Big profit margins for solar producers is a novelty, but bad policy. First, it's economically inefficient to pay so much more than is necessary to shift the grid to solar energy. Arguably, a 13% profit margin rather than 130% could move enormous numbers of utility customers to local solar energy. Second, when using net energy metering policy and paying a retail energy rate that is higher than the value of solar, it means that electricity customers as a whole are paying more for solar energy than its worth (assuming that the calculated value of solar is accurate). Finally, it's inequitable. More than 75% of residents don't own a suitable sunny rooftop for solar energy. If solar producers are getting over-sized profits, it comes out of the pockets of those who can't afford to go solar.
But the economics are secondary to the political implosion that results from poor policy. Americans overwhelmingly love solar energy because it represents self-reliance, clean energy, and local power. It means monopoly utilities (which they dislike) lose and they win. It's a political punch that unites the Sierra Club and Tea Party in Georgia. And it's gone in a hurry if the evidence suggests that solar is perpetuating an economic system of winners and losers.
Among other alternatives, Farrell suggests a solution to the problem:
Maybe 10 years from now battery storage is so cheap that everyone who has solar has one, and only excess power generation is sold to the grid at the value of solar. Or perhaps there's community shared storage.
Bingo! That's the right answer. Farrell doesn't realize it yet, but storage is the key. And, we won't have to wait 10 years. Cheap energy storage is coming in the near future that will make it the perfect solution to the problem.