A bit more on solar PV

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.

34 thoughts on “A bit more on solar PV

  1. 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”.

  2. 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.

  3. 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.

  4. @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.

  5. 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.

  6. 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.

  7. And the good news keeps rolling in


    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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