Home > Economics - General, Environment > A bit more on solar PV

A bit more on solar PV

March 20th, 2010

I wanted to develop a few more points on solar PV. Like quite a few commenters, I think subsidies for rooftop solar PV installations are not a first-best policy option, and probably not even second-best. But the fact remains that a relatively modest subsidy is enough to make this a reasonably attractive choice (in comments to the previous post, Uncle Milton describes it as ‘marginal’, which is about right – at the margin, there’s just enough to make it an appealing option for suitably located households).

It doesn’t look so good as public policy. Assuming 6 KWh/day, the energy saving is around 2MWh/year, which, if it displaced brown coal would save about 2.5 tonnes/year. If the public subsidy is $5000, and the real annual interest rate faced by the government is 4 per cent, that’s about $100/tonne.

There are certainly better options than trying to achieve a large proportion of our emissions reduction goals through an approach like this. But lets suppose that the kind of political noise being made by Tony Abbott and others forces us into a high-cost winner-picking approach. Now suppose we decide to reduce emissions by 500 million tonnes a year (about 90 per cent of existing emissions), using approaches that are, on average as efficient as residential rooftop PV, that is, at an average cost of $100/tonne. The cost would be $50 billion a year or about 4 per cent of GDP, that is, about 2 years worth of annual growth in income per person.

In other words, even using highly inefficient approaches, the cost of climate stabilization would be marginal in comparison to the ordinary fluctuations in GDP associated with the business cycle, let alone the variations in personal income (IIRC, the coefficient of variation is more than 20 per cent).

This is a point that seems to be resisted vigorously both by advocates of ‘business as usual’, and by lots of people who think that the existing order of things is doomed by virtue of necessary increases in the cost of energy. The arithmetic above shows that this can’t be true[1], but I doubt that I will convince to many people of that.

A couple of points noted down here, for want of better. First, the infant industry argument for subsidising this looks reasonably good, if you postulate a 20-40 per cent reduction in the total cost of rooftop PV over, say, the next five years. Since the subsidy is currently 50 per cent of total cost, this means it would fall by 40-80 per cent. In the best case of a 40 per cent reduction in total cost, the subsidy would fall to around $20/tonne which would make the policy a reasonably appealing one.

Second, here’s my list of technologies that could reduce CO2 emissions at cost much below $100/tonne

* Energy efficiency – reductions of at least 50 per cent in energy use for almost all energy-intensive activities
* Wind – at least up to 30 per cent of electricity supply, more with storage which could easily be afforded at costs well under $100/tonne and with large intelligent grids (ditto)
* Carbon capture + biochar pyrolysis (scope unclear, but potentially large)
* Hybrid/electric vehicles – most road transport emissions
* Fuel cells – ditto
* Nuclear – assuming reasonable success of current US efforts to restart the industry
* Large-scale solar PV and solar thermal again, up to 30 per cent of electricity supply and more with storage+grids
* Geothermal – again including cost of distribution
* Natural gas replacing coal

As a little bit of arithmetic on this shows that a doubling of energy efficiency, a switch from petrol fuelled vehicles to electric, and an electricity supply that’s 60 per cent zero-emissions, 40 per cent gas would achieve a 90 per cent reduction in emissions with ease. That could be done, with current technology at a cost below $100 tonne. And there’s plenty of room for one or more of the above to fail.

fn1. And the point won’t be salvaged by quibbles about intermittent power and similar.

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  1. BilB
    March 20th, 2010 at 17:08 | #1

    Even though I disagree substantially with your grading, JQ, the approach is totally on the money. This is very much what the German government achieved through its research by:
    Dr. Franz Trieb, German Aerospace Center (DLR), Institute of Technical Thermodynamics, Stuttgart and Dr. Wolfhart Dürrschmidt, Ludger Lorych, BMU Division Z III 5, Berlin

    The thrust at the time was to find a way to replace their Nuclear power with alternatives. The end result was noteable for its full energy spectrum approach. The US DOE has published a fair bit of information in this same manner.

    Energy replacement is not one technology, but many. This is perhaps what urks the establishment, it is difficult to control a complex solution.

    Frankly I am of the opinion that a carbon price is helpful, but largely unnecessary now if technology continues to advance at the pace that it is. The reality is that the new technologies are far better than the old. All electric cars cost a fraction of the price to run and maintain. Electric planes have one principle moving part which has an indefinite life, LED lighting lasts 20 years,,,,. The new stuff is just so much better. That is what will win the day.

    Have a read of this

    http://www.mysanantonio.com/livinggreensa/56133912.html

    particularly the section on storage.

    As I have shouted from the roof tops, I am pretty confident that we will be looking at solar PV at around $1.5 per watt very soon. The future is, by my evaluation, very promising. Whether this all culminates in a global warming solution in time depends entirely upon how astute and sincere our politicians are. The technologists are doing their part in good faith at least.

  2. Freelander
    March 20th, 2010 at 17:19 | #2

    Probably not too important, but one small benefit, on a hot day, from solar PV or a solar water heating system is that energy that would otherwise end up as heat on your roof and from there making its way to heat your house, is either being transformed into useful energy or is being spirited away (into the hot water system). This, in addition to the electricity or hot water gained, although unlikely to make much difference in itself, is at least a difference is in the right direction.

  3. charles
    March 20th, 2010 at 17:36 | #3

    The 4% is not money saved but money spent boosting the economy. Or in other words the economy grows because you are spending an extra 4% doing something useful. It is only a zero sum game if you are taking resources from other useful areas like say building bombs for a war that you hope will never come.

  4. BilB
    March 20th, 2010 at 18:27 | #4

    The hub of the argument is here

    “First, the infant industry argument for subsidising this looks reasonably good, if you postulate a 20-40 per cent reduction in the total cost of rooftop PV over, say, the next five years. Since the subsidy is currently 50 per cent of total cost, this means it would fall by 40-80 per cent. In the best case of a 40 per cent reduction in total cost, the subsidy would fall to around $20/tonne which would make the policy a reasonably appealing one”

    Distributed energy systems are far more reactive to technological change and cost improvement than large scale infrastructure. Distributed energy is installed on an progressive basis, therefore in an environment of rapid improvement the effect of older less efficient systems is ultimately marginal in the final total system, as is the overall cost profile. Or in this case as is the total subsidy profile, as you point out.

    Against that is the risk associated with committing to major infrastructure which must remain unchanged for many decades. This is one of the many advantages of CSP. The larger cost is the collector array which has a 1% per annum failure rate. That failure rate is in fact an advantage. Replacement parts are by experience steadily more efficient, so the total system is not only incrementally replaced, it is steadily improved. So also is the distributed energy system if it is seen as a whole.

    The problem with any subsidy system is where it must cross electoral time boundaries. If, that is, there is interparty conflict. Although it is tedious, this would be the main reason for maintaining this seemingly endless debate. We really do need concensus.

  5. TerjeP (say tay-a)
    March 20th, 2010 at 20:25 | #5

    This is a point that seems to be resisted vigorously both by advocates of ‘business as usual’, and by lots of people who think that the existing order of things is doomed by virtue of necessary increases in the cost of energy.

    Not by me. My opposition to the ETS is not primarily about the direct cost. It is about institutional concerns. I do however believe that a carbon tax achieves the same outcome at a lower cost. Also the relatively stable cost of a carbon tax allows alternate energy investors and conventional energy investors to know the price they should use in their investment models with great clarity. As such they can invest with less doubts.

  6. Ed
    March 20th, 2010 at 22:10 | #6

    J.Q.
    In Victoria all energy prices are deregulated. All the retailer/distributor has to do is notify the Essential Services Commission of their intention to increase prices. ( The Energy Ombudsman does not take any complaints about pricing matters). W.r.t. PV installations Brumby/Batchelor legislated that feed in tariffs are paid only on net energy supplied to the grid. The tariff is miserably low, perhaps not a bad thing. The sting in the tail is that the retailer/distributor installs a new meter with the off peak tariff removed. The result is that you have a PV system on the roof but you end up with a significantly higher energy bill than before. There are other sharp practices that the energy retailers use to gouge price increases, such as if you move into a newly built home you are likely find a 25% increase in tariff. This applies to Origin Energy who then blame your electrician/distributor for installing that type of meter. At this stage it looks like you have an open and ethical system in Queensland.

  7. BilB
    March 20th, 2010 at 23:36 | #7

    There is a fix to that situation Ed. If the PV owner householder installs a seperate meter from the PV’s to the line and can officially account for his line output then he, in theory, has the option to sell his power through a broker. This way he pays for his useage as usual with offpeek discounts intact and collects a seperate credit from the broker minus commissions.

    This would be fiddly at present with low PV output, but when households begin to have a significant nominal 10Kw output then the brokered electricity will be stubstantial, leading to more options for the distributed generation system contributors. As electricity prices rise driven by the increase in carbon price then this electricity income may well be approaching an averaged $100 per week. I say all of that assuming that a feedin tarrif will not last long as PV capacity builds. The negative is that households with significant energy exports will ultimately be required to pay an increased fee for line maintenance. This is the key area where the government can be helpful in preventing gouging by distributors.

  8. Peter Molloy
    March 21st, 2010 at 04:18 | #8

    Would love to see a comparison between Solar incentives/rebates/subsidies today relative to current generation technologies when they were in their infancy/commercialization stages. Anyone done anything to compare apples to apples.

  9. Hermit
    March 21st, 2010 at 08:28 | #9

    JQ the trouble with the list of possible energy alternatives is that much of it is unproven on a large scale or it assumes consumer behaviour that may not pan out. On the behaviour front I suspect that people might voluntarily cut or substitute their energy use by 20%. For example shorter showers, microwave cooking, smart meters and so on. Getting to 50% might be a bridge too far or require draconian rationing schemes. Also on behaviour I suspect when petrol is exorbitant that urban four wheel drivers might prefer a big natural gas powered car to a plug-in hybrid. In sufficient numbers transport demand for gas could make gas fired electricity even more expensive relative to coal.

    To get 30% penetration of commercial wind and solar will require a lot of overbuilding and new transmission. If that overbuild factor is 3 or 4X and thousands of kilometres of new transmission are required (at say $1m/km) then I’m not sure the hoped-for savings will materialise. As of now there is little reason to suppose CCS, biochar or geothermal will go big league anytime soon. It all points to the need for a nontrivial CO2 cap and let the various players work out the optimum energy mix. If Germany is an example to be emulated then we must wonder why they are unable to disconnect their nuclear plants and why they want to build new coal fired power stations. I also understand their domestic electricity prices are typically 50+% higher than Australia’s.

  10. BilB
    March 21st, 2010 at 08:53 | #10

    “If Germany is an example to be emulated then we must wonder why they are unable to disconnect their nuclear plants and why they want to build new coal fired power stations”

    That was a political decision made for ideological reasons rather than practical reasons. As also was Sweden’s backflip at a change of government. In Germany’s case huge parts of their solar program were put in limbo when the green/socialist party lost office (my recollection).

  11. Ernestine Gross
    March 21st, 2010 at 19:16 | #11

    IMHO, the implementation of a ghg emission reduction policy requires going away from GDP as a relevant point of reference. The point is that the actual monetary prices that are used in GDP calculations are ‘wrong’. They are wrong in the sense that they are commercial prices produced by a system that assumed ‘free disposal’ of ghg emissions (and other significant negative externalities – something the promoters of nuclear as a substitute for coal and oil don’t seem to wish to understand).

  12. Ernestine Gross
    March 21st, 2010 at 19:23 | #12

    @BilB

    The ‘left’ vs ‘right’ division doesn’t work well for Germany on this topic. For example, the CDU/CSU coalition government during Helmut Kohl’s time talked about Germany having a ‘social-ecological-market economy’ – about 20 years ago. The current CDU Chancellor, Dr Merkl, is a scientist herself and is the strongest contemporary promoter of ghg reductions in the EU. True, the current Free Democrat coalition partner tries to stir the pot a little. But the main proponent, Mr Westerwelle, isn’t very successful.

  13. Alice
    March 21st, 2010 at 19:35 | #13

    @Ernestine Gross
    Much like how GDP calculations exclude the positive externality of the productive childraising labour of women Ernestine…..alas…non commercial, yet somehow very commercial but a future gain that is never realised by the very masculine (in its historical development and its current implementation) GDP calculation. Maybe it should be renamed GMP.

  14. BilB
  15. Robert Merkel
    March 22nd, 2010 at 07:40 | #15

    Ernestine, without wishing to have YAND (yet another nuclear debate), I certainly don’t wish away the problem of negative nuclear externalities. I (and most nuclear power advocates I’m aware of, particularly those that aren’t moronic climate denialists) contend that, while they do exist, they are far, far smaller than those of fossil fuels and are actually comparable to renewable energy technologies.

    I accept that there’s plenty of room for debate on that issue, but it’s important to accurately identify what is actually in dispute.

  16. John Quiggin
    March 22nd, 2010 at 09:00 | #16

    @hermit: A carbon price of $100/tonne would raise electricity prices by more than 50 per cent, so
    (i) you aren’t relying on voluntary action, but on straightforward cost of ownership incentives
    (ii) examples like Germany are relevant, arguably more so than current Australian decisions based on the availabilty of cheap electricity

  17. Fran Barlow
    March 22nd, 2010 at 09:26 | #17

    @John Quiggin

    A carbon price of $100/tonne …

    Of course, as I write these lines, $100 per tonne (2010 dollars) is the right starting price for carbon dioxide, since this is the minimum price at which CC&S (the government’s publicly funded strategy) is said to be feasible. If this is a bridge too far, then the government ought not to be funding it.

  18. Ernestine Gross
    March 22nd, 2010 at 13:59 | #18

    To the best of my knowledge, there is no policy proposal to revoke the exist plan for nuclear power in Germany. The debate is about the timing and the sequencing of shutdowns, ie management issues rather than policy per se. I have no information that the planned construction of coal fired electricity and heat generation plants signals an end to their policy of further developing and increasing the renewable energy supply component nor their objective on ghg emission reductions. (While the Greens are not a coalition partner at present, the green movement is a grass-root movement in Germany.) There is also concern about insuring a minimum of resource independence from any one non-EU country and there are EU objectives of reducing uneven development (buying black coal form Poland may be preferred to buying nuclear generated electricity from Poland). Furthermore, the financial budget implications of the GFC reduce, at least temporarily, the set of possible actions for the government as well as for individuals and companies. (Merkel (CDU) and her government – with or without the approval of her Deputy, Westerwelle (FDP) – are busy at present chasing money from bankers.)

    When reading BilB’s references, I came across a Spiegel article which contains the following statistic. The ghg emissions of the new coal plants is 14% less than that of old plants but in one region of Germany, Nordrhein-Westfalen, these plants generate as much ghg emissions as that of all of Switzerland. I mention this as an easy example of the limitations of international comparison because the said region in Germany has about 18 million people while the population of all of Switzerland is barely 8 million people. I should add that both, Switzerland and the said region in Germany, have a stable population for at least 50 years and no significant change is expected in the near future.

  19. jquiggin
    March 22nd, 2010 at 14:14 | #19

    It appears that a large proportion of the planned coal plants have been abandoned or deferred

    http://uk.reuters.com/article/idUKLDE62G1JG20100317

  20. BilB
    March 22nd, 2010 at 14:28 | #20

    Ernestine,

    What the German situation did was pull up progress on the Desertec (North Africa) programme. At the time that Angela Merkel took office there was talk of retaining the Nuclear facilities, and even though there is no major policy change the posturing created uncertainty. That is my memory of what Franz Trieb said when I last spoke with him. As you can imagine Desertec is a massive undertaking with implications for all of Europe, so uncertainty is the last thing that such a project needed. I doubt that changes in any one energy source signals a change in policy direction for Germany. In the “CSP Now” document you will see that Germany is managing the full spectrum of energy inputs with a determination to reduce its CO2 emissions. They have a heavy emphasis on wind generation. So if Germany was to instal a coal fired plant I imagine that it would be part of the managed plan which does include coal, but at a declining level.

  21. Ernestine Gross
    March 22nd, 2010 at 15:44 | #21

    BilB,

    I have no information that would contradict or even qualify what you write @20. I could add that there is also energy demand management and this is also not new (eg heavy taxes on petrol). There is also a history of governments keeping industry on its toes by means of introducing regulatory plans, with specified time frames, which require innovation (a slightly different notion of competition policy!)

  22. Ernestine Gross
    March 22nd, 2010 at 17:21 | #22

    Robert, almost all human activities create negative non-monetary externalities but they can’t be measured in the same unit and not all of them require legislation. For example, someone eating an apple in a public place creates a negative noise externality for others. There is no call for regulation – cultural habbits do the trick sufficiently well. Surely, it would be unreasonable to measure this type of negative externality in the same unit as ghg emissions or nuclear contamination over several countries or the effect on flora and fauna of a hydro-electric plant involving a dam. In short, your assertion about negative externalities of renewables in relation to nuclear power (“comparable”) is incomprehensible to me. Returning to something closer to the topic of this thread, what exactly are the negative externalities of solar PV?

  23. Alice
    March 22nd, 2010 at 22:10 | #23

    Germany has always been way way ahead of Australia in any positive environmental sense.
    In the early 1980s you could rip the excess packaging off your groceries and leave it for the German equivalent of Woolworths to deal with in big bins out teh front of the store.
    Plastic bags? No-one used them.
    Australia…too dumb and too sycophantic towards BB (big business) to get even simple legislative changes through.
    Are the ologopolies and the tight elite really in control here?. Must be. Cant even get a no plastic bag rule in…….three decades after the Germans.
    Grow greens, grow….

  24. SJ
    March 22nd, 2010 at 22:57 | #24

    John Says:

    As a little bit of arithmetic on this shows that a doubling of energy efficiency, a switch from petrol fuelled vehicles to electric, and an electricity supply that’s 60 per cent zero-emissions, 40 per cent gas would achieve a 90 per cent reduction in emissions with ease.

    There’s a problem in this statement.

    There are two types of “electric” cars. One type is the petrol/electric hybrid, like for example the Toyota Prius. The other is a purely electric fed from the grid.

    The carbon footprint of a grid-fed car depends on the energy being fed into the grid. In Australia, that energy comes mostly from coal, and at the margin, the energy fed into one additional grid-fed car will come almost entirely from coal. Not from wind, hydro, solar, or any kind of renewable resource. There might be some gas int there, but all of the renewable resources already operate at their full capacities.

    So a Prius type car fed from the Australian grid produces about 50% more CO2 than one that runs on petrol.

    Link to an earlier comment about topping up Prius cars from the grid.

  25. SJ
    March 22nd, 2010 at 23:29 | #25

    Just in case it’s not clear, I will assert that there’s no feasible scenario in the near future in Australia where coal is not the marginal energy source.

    And that grid fed electric cars make things worse, not better.

  26. jquiggin
    March 23rd, 2010 at 00:27 | #26

    SJ, you’ve missed the point I’m making. At a carbon price above $25/tonne, coal-fired electricity is more expensive than gas. At $100/tonne, as I’ve shown, it’s more expensive than residential roof-mounted solar PV. Somewhere in between are wind, large-scale solar PV, geothermal, and probably coal+CCS and nuclear.

    The problem is that you are putting a huge amount of weight on the “near” in “near future”. Obviously, our existing capital stock is based on coal, and your comment simply restates this. The question I’m asking is whether it could be replaced at moderate cost. The answer to this question is “Yes”.

  27. BilB
    March 23rd, 2010 at 02:39 | #27

    SJ,

    “So a Prius type car fed from the Australian grid produces about 50% more CO2 than one that runs on petrol”

    This might only be the case if a Prius is charged from the grid, which to date they are not, I believe. The current Prius cars in Australia run predominately or entirely on petrol. Their main advantage is their efficiency and the use of regenerative breaking.

    But looking forward as plug in hybrides and all electric cars become available I think that your comment is entirely speculative. You are only guessing that renewable sources will not increase rapidly in the near future. It is a reasonable assumption based on todays politics, but the public as a whole believe that there will be a change in the face of the global warming threat so that is the most certain outcome. There is very little resistance to the installation of rooftop PV, the only impediment is that of cost. Your statement gambles that this will not change. And this is an extraordinary position considering the rapidly declining price for PV and the immense amount of research and design effort underway globally to drive PV prices down on the one hand and drive their energy output up.

    Based purely on the evidence of the forces for change I assert that your remark is unfounded. If plug in vehicle energy consumption exceeds the available renewable capacity, this will only be momentary in the grand scheme of things. The most important thing is that the uptake of both rooftop PV and electric vehicles is strong. This is the key indicator for the future.

    This very blog tells the story. JQ is installing rooftop PV and he is enthusiastic to tell everyone about it and to share with their experiences.

  28. Fran Barlow
    March 23rd, 2010 at 06:09 | #28

    And in any event, the claim about the Prius would not be true, even if it were charged from the grid. Anthracite coal as used by the grid is not more CO2 intensive than petrol. Of course, some of the grid is a mix of other sources, and in Tasmania, it’s almost all hydro.

  29. Ernestine Gross
    March 23rd, 2010 at 09:01 | #29

    @Alice

    I don’t quite agree with your conclusions @23. Australia is extremely natural resource rich per capita in comparison with Germany and in comparison with the entire EU. Necessity is the ‘parent’ of invention is more like it. The US used to be in a similar position to Australia and, very broadly speaking, production and marketing technologies developed which, in comparison to those in the EU, were very wasteful of natural resources (think of white goods, cars, air conditioning versus building methods, packaging). These methods looked commercially profitable from the perspective of Australia. I am confident that Australia will return to what it used to be good at, namely observe what is happening elsewhere but develop solutions to its problems, without worrying too much about international league tables.

  30. BilB
    March 23rd, 2010 at 09:43 | #30

    Alice23

    The plastic bags are in fact very efficient. There is very little plastic in them. Their problem is that they are a membrane which becomes a problem when they enter the waterways. I invented a simple solution for their disposal which melted them into a biscuit from 20 or 30 bags which could then be disposed of in the recycle bin. A simple device which removed the hazard as the bags were emptied in the kitchen. No-one was enough interested. If Australia has a problem syndrome then it would be apathy along with a steady decline in empathy.

  31. hix
    March 24th, 2010 at 07:17 | #31

    We Germans are a bit stupid when it comes to energy policy. Energy lobbyists of different types own all parties. So we have this combination of huge subsidies for coal and solar. The backpedaling on Nuclear is a combination of sucesfull lobying and simply an election victory for the right (CDU/CSU) which was never enthusiastic about shutting down existing nuclear power plants. The traditional coal industry has a higly unionced workforce in the labour heartland. So the left SPD supports huge subsidies for that backwarded industry.

    Roof solar panel subsidy are attractive for farmers, especially southern famers, which are very strong in the CDU/CSU. They are also nice for the suburban well to do greeny with a big house on his own. So Solar panels are the green initative with most support on the right side of the political spectrum since they dont hurt anyone expect poor people and the general unorganiced public ( since the subsidy is structured in a very regressive way – as a price up on electricty use) which as everywhere doesntt have much political power.

    Solar will soon be great for sunny regionssince the technology improves fast. For now and in rather cold climate Germany, all those solar subsidies are rather inefficient.

  32. BilB
    March 27th, 2010 at 11:36 | #32

    Here is a little bit more on the Alcoa item along with new links. It all adds to the trends.

  33. BilB
    March 27th, 2010 at 12:04 | #33

    http://anz.theoildrum.com/node/6314

    and now the artocle link.

  34. BilB
    March 27th, 2010 at 12:15 | #34

    And the good news keeps rolling in

    http://blog.cafefoundation.org/?p=750

    and getting it right this time here is the link to the article.

    Again this should be seen as an indicator of the rate of change of renewable energy in all of its forms, most specifically distributed energy generation.

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