Home > Economics - General, Environment > Reasons to be cheerful, part 2

Reasons to be cheerful, part 2

June 11th, 2011

There are plenty of reasons to be gloomy about the prospects of stabilising the global climate, but there are also some promising developments, so I’ve started a series on this topic.

I’ve been meaning to write this post for a while, but Stephen Lacey at Grist (via David Spratt on Twitter) has done much of the job for me, and better than I could have. The crucial point is that the cost of solar photovoltaic electricity has fallen dramatically and is almost certain to fall further. In particular reaching the point where it is the cheapest large-scale alternative to carbon-fuelled electricity generation, and competitive (at reasonable carbon prices and in favorable locations) with new coal-fired power.

This makes for some fundamental changes in the debate over climate change and mitigation, even as it reaffirms the central point that advocates of mitigation have made all along, namely that, with an appropriate policy response, the costs of drastic reductions in carbon emissions will be modest in relation to national or global income.

Until very recently, solar PV was just a promise, with a share in total electricity generation so small as to be negligible. As Lacey observes that changed in 2010, with 17GW of peak capacity installed. Allowing for availability, that corresponds to something like 4GW of coal or nuclear (standard plants are typically about 1GW). But that’s overly conservative because solar output is such a good match for peak daily demand.

The growth in solar PV has been driven by subsidy schemes like those in Australia. As in Australia, the decline in costs has produced massively more demand than expected, leading to succesive rounds of cuts. But while individual markets have bounced around, the market as a whole has grown massively, even as subsidies have been scaled back. At least so far, that’s true for Australia as well. As I said in the Fin a while back, this is one of the rare instances of an ‘infant industry’ outgrowing the need for subsidies.

Capacity for annual output of new solar modules is now approaching 50GW (peak), at which point solar PV would be one of the main sources of new generating capacity, comparable to wind and gas.

There is no obvious constraint on further growth. Until about 2005, the solar industry depended on offcuts from the semiconductor industry for silicon (the blip marked ‘silicon shortage’ on the graph represents the point where demand outgrew that source). And much of the ‘balance of system’ (installation, inverters and so on) still represents adaptations of devices developed for other industries, with the associated problems of supplies and inventories. But with recent growth, the whole supply chain will be optimised for solar.

At some point the share of solar PV will be large enough (say 30 per cent) that it will change the balance of supply and demand, ending the present situation where the excess supply of night-time power from coal must be sold at a discount. That will entail both changes in pricing structures, most obviously a premium for power supplied in the early evening or for storage technologies. But starting from a zero base, that’s quite a way off. For the moment, the main issue is cost

If the cost of solar PV continues to decline at rates similar to those we have seen in recent years, the whole debate over climate mitigation will be changed. Plausibly, a CO2 price of $50/tonne will be enough to drive a fairly rapid decarbonisation of the whole electricity sector. That means a smaller increase in prices than would otherwise have been expected, and therefore less of a role for adjustments in final demand.

Coming back to the claim of vindication made above, the sensible case for the claim that mitigation could be achieved at low cost was not to identify some particular technology as the anointed savior, but to argue that, with a carbon price (through a carbon tax, emissions trading scheme, or, less desirably, ad hoc measures that produce an effective price) and supporting policy instruments, some combination of options (renewables including solar, wind and geothermal, nuclear, CCS, energy efficiency, changes in demand patterns) would produce substantial reductions in emissions at relatively low-cost. At this stage, it looks as if solar PV and energy efficiency are the most promising candidates, along with wind, while most of the others look less hopeful than they did a few years ago. While this particular outcome could not have been predicted with any reliability, the general pattern could be predicted and was.

Earlier in this series Reasons to be cheerful (Part 1): Peak gasoline

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  1. adelady
    June 13th, 2011 at 09:36 | #1

    BilB “With the uptake of electric vehicles the demand for electricity will grow, but I am predicting that the grid sector will not share in that growth.”

    I always thought the great advantage of electric vehicles was that they would be integrated into the grid. The batteries of x million vehicles would act mainly as an overnight battery storage system for the grid as a whole. So a large fleet of electric vehicles will become the smoothing mechanism for a highly distributed grid – powering up with solar (mainly) during the day, available for drawdown overnight.

    By the time we have enough EVs to be a significant part of the system, refrigeration and air conditioning systems as well as lighting for commercial buildings and advertising should be designed for interactive signalling throughout the system to compensate for variations in generation.

  2. BilB
    June 13th, 2011 at 10:49 | #2

    Adelady,

    What you say is entirely possible. However, I imagine that few people will make their vehicle batteries with their finite number of recharge cycles available to the grid for smoothing when the possibilityis that in the morning they could find that the grid has sucked their batteries dry to power an aluminium smelter in Queensland.

    You second point is on the money. Intelligent appliances and smart grids are the future and already being installed in Europe. I believe that the grid will not need as much smoothing as some “experts” suggest. It is less reported that PV panels convert light to electricity even on cloudy days at about 30%. So when people install systems in the 10 kw range the cloudy day output is still sufficient to provide regular energy needs. It is the extras such as charging cars, pumping pools, pump watering lawns, etc, that will be put off till full sun solar output returns. I nthe future we will see more refrigerators with eutectic energy (cold) strorage panels built in to smooth energy consumption to match solar output.

    If sat here for a day and listed the adaptations (relatively low cost) that we can make to our energy hardware to be compatible with the solar energy cycle, I think that the list would run into thousands. This all means extra business for our economy (read: all of those Coalition voters have the most to gain commercially), and huge energy cost savings for consumers. And the uptake of such changes will occur over a 20 year period as people replace ageing hardware and buy new. ie no aditional cost.

    What it takes to kick this off is strong and positive commitment from government, which means that we are waiting in limbo for Tony Abbott to drop politically dead.

  3. Sam
    June 13th, 2011 at 11:27 | #3

    @BilB
    Agree with your general point here. However, you could tell your car; “sell x% of your stored electricity back to the grid only under two conditions. 1) The price differential is high enough to make money even after allowing for the battery degradation AND 2) if you have at least y% of reserve charge.” This could put a maximum limit on price volatility while making sure no one is caught out.

  4. BilB
    June 13th, 2011 at 12:13 | #4

    On reflection, Sam, that is indeed the case. Other variables are the number of cars available per garage and the energy storage type. Ultra capacitors in place of batteries may be only 10 years off, hopefully sooner, and these devices have relatively unlimited charging cycles without the progressive loss of capacity. You could add a rule 3) that power borrowed must be returned by 7am.

    What I think is more likely that houses with larger PV systems will have pregressively larger stationary storage capacity. The advantage will be to be able to charge the “all day out car” at night where remote charging is not available.

    Remember that as the size of the distributed energy sector increases grid providers who will be steadily loosing market share may not be cooperative. The government has an important regulatory role to play here (and this is largely why I have revealed as much of GenIIPV’s feature parcel) in ensuring that the distributed energy generation sector has commercial access to the electricity transmission grid. The alternative is that independent local area grids will arise ie cable connection down the back fence line (important to note synchronised with the grid phasing).

    It sounds complicated when you start to delve into detail, but the reality is that this is a far more attractive world than the one we reside in today. I’m excited by the prospects. when you have the time have a look at

    http://blog.cafefoundation.org/

    to see how micro aviation is changing. It is mind blowing to consider what is coming up in the next 10 years.

  5. Sam
    June 13th, 2011 at 13:09 | #5

    @BilB
    Will do. Personally, I think the grid itself (as opposed to generators) should really be seen as a natural monopoly that ought to be government owned and run in the interests of the public. But then, I’m a raging pinko commie.

  6. quokka
    June 13th, 2011 at 13:20 | #6

    A couple of points:

    1. 17 GW nameplate capacity of PV is not in general equal to 4 GWe of nuclear – this is probably the upper bound. Depends on location. In Germany PV capacity factor is about 0.12. About 8 GW of that 17 was installed in Germany which makes that about equivalent to one AP1000 NPP at 0.9 capacity factor.

    2. In the chart provided by Stephen Lacey at Grist, he shows solar PV production charted against summer demand. But the solar PV he shows is tracking and the output from the far more common fixed PV is much more bell shaped with mid-day/early afternoon peak.

  7. Sam
    June 13th, 2011 at 13:25 | #7

    @quokka
    What’s the capacity factor in favourable parts of northern Australia? Do you know?

  8. June 13th, 2011 at 14:40 | #8

    Cloncurry averages about 25-26% capacity for a fixed panel, but goes up to about 40% with two axis tracking. Brisbane is about 22% for a fixed panel and the vast bulk of Queesland gets more sun than Brisbane. Australian electricity demand is very peaky compared even to California and so fixed panels are a pretty good match here, although I’d be tempted to tilt them a little to the west.

  9. stockingrate
    June 13th, 2011 at 16:28 | #9

    The graph notes the blip up in prices due to the silicon shortage, but is silent on the current large inventory of modules which may be causing a blip down in prices at the moment. A detail.

  10. June 13th, 2011 at 16:44 | #10

    Stockingrate, the silicon shortage resulted in higher prices because demand outstripped supply. If anyone had a warehouse full of modules the silicon shortage would have been the exact time to sell them, not stockpile more.

  11. doug
    June 13th, 2011 at 17:01 | #11
  12. stockingrate
    June 13th, 2011 at 17:45 | #12

    Ronald Brak, no disagreement on that. The inventory surplus (that I see reported on the net) would have built more recently.

  13. Ken Fabos
    June 13th, 2011 at 19:57 | #13

    The well of innovation is far from dry yet, in both PV and in energy storage. Get storage, even bulky stationary storage, sorted out and both solar and wind will leap ahead. I suppose that chances are this ‘biggest battery breakthrough ever’ will end up being more hype than substance, yet you never know.

  14. BilB
    June 13th, 2011 at 20:40 | #14

    Quokka,

    You equivalence factor for nuclear to PV is wayout. One of Nuclear at 90% is equivalent to 5 of PV in Australia.

  15. ajwak1
    June 14th, 2011 at 10:02 | #15

    John, the link at the bottom is broken, it should point to: http://johnquiggin.com/2011/05/16/reasons-to-be-cheerful-part-1-peak-gasoline/

    Belatedly fixed, thanks – JQ

  16. derrida derider
    June 14th, 2011 at 12:11 | #16

    I reckon those who argue aluminium smelters don’t matter in thinking about electricity grids aren’t thinking globally. Of course any one country (including Oz) would barely miss them, but that is missing the point.

    A high-tech low-carbon world economy will have far stronger demand for Al and other electrically refined metals (eg titanium refining is moving to an electrolytic process, a heavy tax on coal makes arc furnaces for steel more attractive, most of that rare-earth exotica is electrically smelted). Economically aluminium is already basically crystallised electricity and many other metals will become increasingly so.

    Put another way, the very high price of all these metals will greatly increase the rewards to freeloading countries. Which is to say that technologies that can’t accomodate the needs of smelters aren’t a global solution to AGW, however locally competitive they might be.

    I also think people are being way too optimistic about the cost of solar panels – the sharp drop in panel prices in recent years is mostly a one-off as China geared up. I reckon solar thermal, nuclear and hot rocks might all be better long-term prospects. But let’s put a hefty carbon price on and see which technologies win out; get social and private costs aligned and it is amazing how well markets can work.

  17. June 14th, 2011 at 14:15 | #17

    Stockingrate, I haven’t been able to find anything about a current large inventory of modules, but if you can provide a link I’ll happily read about it. I do know that poor economic performance in Europe and elsewhere has caused some people to downgrade the rate of expansion of PV they expect, but that’s not quite the same thing.

  18. Hermit
    June 14th, 2011 at 17:12 | #18

    RB your info upthread that a kg of aluminium require 15 kwh of electricity leads to a good case for carbon tariffs. Aluminium imported from a greenhouse ‘rogue nation’ should be slapped with an equivalent carbon input penalty. If carbon tax was $20 per tCO2 here that’s about 2c per kwh on black coal fired electricity. Per tonne of aluminium the tariff would then be 15 X 2c X 1,000 = $300 on top of the current price of $2,500 or so. That’s on ingot or slab while recast or machined aluminium should be charged more.

  19. sam
    June 14th, 2011 at 17:50 | #19

    @derrida derider
    Well how much new aluminium (as opposed to recycled) will the average global citizen use in a year by mid century? If we assume 100 kilograms, then that’s 1.5 Mwh of electricity per year, or 166 watts constantly. If you install a 600 watt panel in a sunny desert area, then that gives at least 166 watts for 10 hours. For the rest of the day, use solar thermal, biogas, regular gas, geothermal or hydro. It doesn’t sound like an insurmountable target.

  20. stockingrate
    June 14th, 2011 at 19:42 | #20
  21. June 15th, 2011 at 00:03 | #21

    Thanks for the link, stockingrate. It seems the inventory buildup has occured in the first half of this year and is expected to clear out in the second half. As it occurred this year it isn’t shown on the graph at the top of this post. While it may have an effect on prices in the short term, I don’t think it will effect the overall trend of steadily decreasing prices, as even if the basic design of the cells themselves aren’t improved on there still appears to be plenty of scope for further price decreases.

  22. derrida derider
    June 15th, 2011 at 16:05 | #22

    Hermit – you’re saying that photovoltaic solar can in fact accomodate the needs of local smelters. I have my doubts there, but in any case you’ve missed my point.

    My point is that any technology that is competitive locally but that can’t accoomodate a local smelting industry is unlikely to be competitive GLOBALLY, because someone somewhere has to smelt.

  23. Hermit
    June 15th, 2011 at 17:16 | #23

    @derrida derider
    I agree with you. I think PV is and most likely always will be a show pony not a work horse. Smelters need power sources with massive round-the-clock grunt .. coal, hydro or nuclear. Since they have cheap energy the Russians even use silicate rock as a source of aluminium rather than the typical bauxite. As I mentioned upthread with the proposed Trinidad smelter gas is getting too precious to use for baseload power. I think we simply have to pay more for aluminium (either local or imported) and recycle more.

  24. John Quiggin
    June 15th, 2011 at 19:50 | #24

    As I said previously, I’m mystified by this focus on aluminium smelters as the test case. It’s like arguing that, because some people have gluten intolerance, wheat will never be a major food source.

  25. stockingrate
    June 15th, 2011 at 20:59 | #25

    Ronald Brak,
    I agree that costs and prices are trending down – but perhaps not quite at the slope indicated.

  26. June 16th, 2011 at 11:17 | #26

    I would like to point out that if the Australian aluminium export industry went into an orderly decline, it would not be a disaster for Australia. It would mean we would be gradually reducing the force with which we smash our heads against a brick wall. On average, Australians appear to be paying money for the privilege of burning lignite so people in other countries don’t have to pay so much for aluminium. While I’m a great believer in foreign aid, I do think we should focus our efforts a little more precisely than this.

  27. Hermit
    June 16th, 2011 at 13:17 | #27

    I think the cheap power prices paid by Big Al stem from circa Menzies era competition between the States to host a prestigious smelter, a bit like hosting the soccer World Cup or the Olympics. Now we have implicit subsidies via electricity discounts of well over $100,000 annually per worker. We could pay the Australian workers $50k to go to the pub all day and let the Chinese make all our aluminum for us. The catch being that it gets slapped with a $300-$500 per tonne carbon tariff when it arrives on our shores.

    What might be called ‘offshoring’ seems to be the new paradigm for the easily offended. It covers cattle for slaughter, immigrant processing, sweatshop labour and buying a lot of your electricity from France.

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