My piece for the National Interest is now up. It ran under the headline “The end of the nuclear renaissance”, but that’s only half the story and probably the less interesting half. The real news of 2011 was the continued massive drop in the price of solar PV, which renders obsolete any analysis based on data before about 2010. In particular, anyone who thinks nuclear is the most promising candidate to replace fossil fuels really needs to recalibrate their views. There’s a case to be made for nuclear as a backstop option, but it’s not nearly as strong as it was even two years ago.
Feel free to comment here or at NI.
John Quiggin 
Nice to see it John. In my experience it’s quite unusual for an economist to be up on the play. Rapidly Falling PV prices was big news about 6 (and 12, and 18) months ago but for an economist to write about it so quickly since markets started pricing in the data is quite remarkable.
I’d not be giving up on nuclear too soon though. There’re a lot of vested interests with their tentacles in the public pocket.
pop
OK I’m calling the bluff of solar enthusiasts; renounce all subsidies and mandates. That is no more feed-in tariffs, renewable energy certificates, green development grants and sanctioned renewable energy targets. We don’t need them any more.
@Hermit
ah, gee, can we wait until I’ve had a chance to profit from them?
p
One point though – we really need Gen IV reactors (or whatever they are called today) to use up the current high-level waste and convert it into stuff that is safely disposable. The fact that they will generate some power too is just incidental.
Its been quite amazing watching the PV price falls and increase in installations over the last half decade.
Couple of quick observations:
– the price drops seem to be due to economies of scale, production shifting to countries with cheap labour costs (ie China) and improvements in manufacturing processes, rather than any great change in technology – single layer crystalline silicon screen printed cells are still the dominant technology (as has been the case for three decades), although thin film technology continues to grow (albeit at least a decade or more behind early predictions for it).
– while I have no qualms about industrial or commercial scale systems, I would hazard a guess that in countries where there has been a very rapid subsidy-led increase in domestic rooftop PV installations (such as in Australia, particularly NSW) the standard of installation has probably dropped, with lots of new, inexperienced installers joining the market to take advantage of the goldrush.
– Still a long way to go – with only about 60 GW(peak) of installed capacity worldwide, that’s not enough to power even just Australia, and still a ways off encountering big difficulties for grid management.
– Subsidies and or a feed-in tariff are still needed, to drive the market. You have to get a great install price and then use some generous assumptions to get a reasonable payback time on a PV system without any subsidies.
@Hermit
As long as we use the real price for carbon (according to JQ, $50 per tonne), I’d be happy to remove other subsidies.
@Sam – SNAP! I was just writing exactly the same thing, with the proviso that subsidies for nuclear in the US and elsewhere should also go.
@The Peak Oil Poet
Since I detect a tiny hint of snark in your post, let me observe that I have been going on about this for quite some time, in fact rather longer than the 18 months you mention.
https://johnquiggin.com/2011/06/11/reasons-to-be-cheerful-part-2/
https://johnquiggin.com/2011/05/13/budget-clears-decks-for-carbon-tax/
https://johnquiggin.com/2010/11/01/learning-from-mistakes-not-repeating-them/
https://johnquiggin.com/2010/03/18/going-solar/
https://johnquiggin.com/2009/05/03/grid-parity/
@John Quiggin
Double SNAP! – with the proviso that subsidies for fossil fuels should also also go.
I should have added this link.
http://www.smh.com.au/environment/billions-spent-on-fossil-fuel-incentives-20110228-1bbsn.html
OK, Hermit – it seems as if our cards are on the table, so it’s time to compare hands.
Would you support the cancellation of nuclear loan guarantees in the US, subsidised deals like UAE/S.Korea and publicly mandated nuclear programs like that in China, conditional on a $50/tonne carbon price?
@John Quiggin
I’d be happy for all subsidies for specific installation/development (as opposed to R & D) to go on all technologies, subject to there being no technological bars to any energy technology — all constraints to relate purely to technology neutral environmental footprint feasibility questions.
As an alternative …
Where there are significant capital cost questions, I’d be happy for any technology that met proper technologically neutral environmental, schedule, technical and operational feasibility tests and due diligence to be granted loan guarantees up to a certain agreed value per GW. These would be available, in theory, to geothermal, tidal, wave, wind, nuclear, solar thermal, PV or any technology or combination of technologies that would pass muster. All technologies would have to be able to show credible plans for decommissioning of plant and equipment and storage of waste at minimum hazard to the biosphere for at least 100 years.
All subsidies to fossil fuels would also be removed.
An independent commission would oversee the drawing up and measurement of all developments in which state funded loan guarantees were mooted to ensure that value for money was being obtained. It would also report on developments in energy technology.
Fair enough?
@John Quiggin
Good question I think the answer would be some kind of least cost combination. Relevant variables include the gas price and the cost of energy storage which both nukes and renewables need to cope with fluctuations. I think at $50/t for CO2 and no technology specific quotas then nuclear would get the lions share of the generation mix based on long run carbon taxed average cost. An optimum mix for 2050 Australia might be something like coal baseload 15%, nuclear baseload 40%, unsubsidised wind power 20%, open (peaking) and combined cycle gas 10%, hydro and biomass 5%, solar thermal with storage 5%, PV 5%, wavepower & geothermal assume nil. The problem has stochastic energy flows and unknown prices. We only know CO2 must be 20% of current levels.
BTW the subject of subsidies needs some rules. For example Australia’s diesel rebate is more of a tax refund than a cash giveaway. Low power prices to aluminium smelters traces back to interstate rivalry I believe. A lot of US nuclear funding was for the military and won’t happen again.
And I assume an explicit carbon price of at least $AUD50CO2e rising incementally to $AUD100CO2e by 2020
It appears we (that is, most commenters here) are agreed on the policy issue, where discussions like this might have some marginal and peripheral impact on the actual outcome (at the very least, most people reading this have a vote). By contrast, I (like, I assume, everyone else here) have no influence at all on the investment decisions of electricity generators.
So, we should just push for a higher carbon price, and a corresponding winding back of all kinds of subsidies, in whatever venues are open to us. There is little point in arguing about what investments would be likely to be more preferred if that push were successful.
@John Quiggin
Pretty much, with a minimum of exception from carbon pricing and absence of free permits, a maximum of due diligence in “offset” schemes, and a removal on any express technological bars.
John, that’s great, but there’s something missing from your analysis – what happens to the cost of grid electricity once solar parity arrives?
@John Quiggin
Yes – there’s a certain charm to keeping stuff simple, probably not uncorrelated to the fact we’re simple-minded creatures.
More importantly, what happens to the cost of 2D TVs once once 3D TVs reach price parity? Currently there is a huge amount of infrastructure devoted to building and distributing 2D TVs. We can’t do away with this infrastructure because a large portion of the population feel sick, get headaches, or throw up when watching 3D TV. As fewer 2D TVs are sold, manufactuers and distributers will have no choice but to increase the cost of 2D TVs to make up for the shortfall in sales. So while 3D TVs will have gotten cheaper, 2D TVs will become much more expensive and the price rise in 2D TVs will cancel out any benefit from decreased price of 3D TVs.
@Fran Barlow
I hate to break up the warm glow of agreement, but I feel I should put all my cards on the table. I would still support the ban on nuclear in Australia even if we were seeing the exact opposite kind of economic development. That is, even if solar had stagnated, while nuclear had got an order of magnitude cheaper, my position would be unchanged.
The risk of catastrophic meltdown, routine small radioactive releases into the environment, and moderate exposure to some nuke workers make nuclear very much a second best option in my view, even were the electricity practically free. I simply don’t believe the safety claims made by the other side, especially after Fukushima. In poor countries, where lives depend on economic growth, perhaps they’d have no choice and nukes should prevail. Being as rich as we are, and with as much sun as we get, I’d prefer just paying 50c/KWh for the luxury of not getting cancer. Fortunately, the economics seem to be on my side of the argument anyway, so the point is moot.
So my ideal policy position is
1) No commercial reactors in Australia ever.
2) No subsidies to anyone.
3) A real carbon price.
@John Quiggin
Snark? Moi? 🙂
ok ok, so i missed your earlier posts. Consider me admonished and remorseful.
I did read this today (a la Peter Smith’s comment above):
http://bravenewclimate.com/2012/01/05/plentiful-energy-ifr-book/
p
@Ronald Brak
Your analogy misses the point. Unless you plan to take Australia off-grid entirely (call me when you’ve priced the batteries) you still need pretty much the same grid you had before, spread across fewer Kwh sold.
Now, maybe you can cost-shift to those who haven’t installed solar cells. But the price still has to be paid.
Cool! I was able to predict the future!
Dropping subsidies would be an appropriate response to calls for austerity and (more) conservative fiscal management. This should nclude govt and other non market guarantees. Should libertarians and other cultists adopt this strategy nuclear power should/would be dead and buried.
Happy New Year!
Great article. Good news on many fronts, including yet another example of mainstream economics (as distinct from dominant macro-economic ideology- ‘schools of thought’) trumping corporatist public relations talk as well as a certain Lord’s theories).
What lessons do people take from the Solyndra collapse? To me, it seems that government helps best when it is a customer to industry, not a financier. I’m prepared to be a bit of a free-marketeer on this. Is my position reasonable?
@Robert Merkel
Your analysis assumes that all solar power is generated from rooftops & similar distributed sources – otherwise, there’s no effect on the grid relative to existing sources. In reality, I expect a lot of solar PV will be generated in desert locations, and transmitted via HVDC. That requires some extra transmission investment (one reason we need a carbon price, even when generation costs reach grid parity), but doesn’t require any change in distribution networks.
More importantly, the grid has to be able to carry peak demand, which is precisely what solar will reduce. So an increase in distributed solar will reduce the need for further increases in distribution capacity, which have driven the big increases in the cost of electricity we’ve seen.
There are some problems with the current design of the grid, which is ill equipped to handle reverse flows of electricity. Similarly the transmission network and pricing structures have been set up with the existing generators in mind. But these are really second-order issues when we are looking at a timescale of decades.
Sam @25. Reasonable yes, in reality probably no. Today the Australian Coal Association asked the Federal Government for more assistance in developing CO2 sequestration, in particular for a share of the recently announced assistance for alternatives (AFR Thursday 5). The Greens oppose it but my guess is that Gillard will find a way to placate the coal sequesters. Maybe she could tie it to more rigour on controlling fugitive emissions of methane from existing and future coal mines.
Also I wonder what solar panels would cost if aluminium smelters paid a ‘market’ price for their electricity? On top of a C tax next July it would be a more realistic figure.
@John Quiggin
At the risk of revisiting very old stoushes..
Retail grid parity, I’ll pay. But wholesale grid parity (even assuming carbon pricing)? I can’t retrieve the paper at the moment, but it appears that even with $1/watt PV modules, one estimate that I’ve been able to dig up suggests a 3% cost of capital to produce electricity at 6.4 c/kWh in the Gobi desert and 5.3 c/kWh in the Sahara. Australian solar PV would presumably be somewhere between the two, and that’s in the ballpark to be competitive. But 3% cost of capital? Can I borrow money at that rate, please?
Solar cells placed to maximise daily energy output produce their maximum output at noon (assuming a cloudless day). 1pm, daylight savings time, and drops off quite a lot after that. The faintest of clouds in the sky (which can still occur on very hot days) can also drop the output a great deal.
Peak demand (in Victoria, at least) occurs on stinking hot days around 4:30 pm or so.
Amongst other things, this suggests that solar panels (if not steerable) should be oriented to the north-west, not the north.
But it also suggests that you won’t be able to underinvest in your grid on the basis of widely deployed small-scale PV, unless you also factor in a lot of demand-shifting technology which is conceptually simple but would take a while to deploy (see stoush on nuclear thread).
As someone who had some time ago settled for the conclusion that “nuclear power is the least bad of a number of bad alternatives”, I just want to say that the declining capital costs of solar are changing the balance.
But that said, I disagree that we should ban nuclear. Rather, I think we should try as hard as we can to price inputs appropriately, and let the technology develop accordingly. If nuclear power does provide a cheap, safe and efficient power source, more power to them. I’m OK with setting the safety bar and long-term costs as high as it needs to be.
I also suspect we’re about to learn some unpleasant truths about the unintended environmental consequences of widespread solar deployment. New technologies bring new problems.
Still. All rather heartening.
@Paul G. Brown
I largely agree with Paul’s framing of the issue above.
A question that has been posed by others is how much PV could we use if it was free? That is 0c per kwh. We could plaster every garden shed and dog kennel with panels and store the excess daytime output for night and overcast conditions. However we could be looking at 20c per kwh to retrieve that energy from a battery type system. Few parts of Australia have the option of mountain storage of pumped hydro so that option is limited.
The other option is gas fired electricity for night and cloudy conditions. That is we use all the free PV electricity when we can and switch to gas fired when we can’t. The wholesale cost would be about 13c per kwh in 2012 but by 2050 as global gas supplies dry up the cost of gas generated electricity could be nearer $1 per kwh. The fact that daytime PV needs either energy storage or gas fired backup means it can never be truly cheap when the shadow costs are factored. It’s the price of intermittency.
@John Quiggin
JQ writes: “I expect a lot of solar PV will be generated in desert locations, and transmitted via HVDC.”
I absolutely hope you are right, JQ. When I see this happening, in serious quantities, I will know (as well as any human can know anything) that we have turned the corner and might just save the climate from AGW.
In the (recent) past, I was a big advocate of solar convection towers (SCT) for this desert power generation. It seems however on efficiency grounds (especially surface collection area to power generated but very likely on cost too) that SCT cannot compete with PV. SCT need a large collection apron (black tarmac covered by a greenhouse set-up). The advantage of SCT is that they can produce power (even more power) at night as the temperature differential between ground level and 500m to 1000m altitutude is greater at night. Whether this advantage of SCT offsets the significant day time advantage of PV I do not know.
Does PV also outperform solar concentrating arrays?
I admit I am surprised by the apparent imminent victory of PV in the large-scale generating race. I thought SCT would ultimately be the large scale solution. On the other hand, as one of my old workmates used to say; put solar PV on roofing material and the entire roof of every new house in Australia can generate power. That would be a lot of power.
As I’ve pointed out many times, the problem with nighttime power at present is that we have too much of it. That’s why it’s offered at giveaway prices. The adjustment to a different pattern of supply will take time and a variety of changes in network structures, but this kind of change happens all the time. It won’t be costless, but it also won’t be the end of industrial civilisation as we know it, or even a noticeable drag on the rate of economic growth
At current growth rates, the annual *increase* in output is around $40 billion, four times the *total* revenue from the current carbon price. If a price of $50/tonne were phased in over a few years, the effects would barely be noticeable.
@Hermit
While I’m certainly in the skeptical camp on PV scaling up to do the work of fossil hydrocarbon thermal plants, your reasoning on price seems flawed.
The bulk of demand is during the day. If the price of night usage went up to $0.20kWh retrieving from batteries for after dark, the total end user cost of power on demand would not be onerous.
Of course, it’s the non-household usages with which one needs to be concerned.
Pumped storage is certainly possible — we have a huge coastline and even some locations where getting elevation cheaply would not be a huge problem. We’ve also got some quite deep mines which could be modified for such usage. It would be very expensive up front but amortised over 40-50 years much less so.
Politically, there would be wailing and gnashing of teeth over such a big budget item, but technically, it would be viable.
Regardless of the application of solar to industrial-scale power production, I do want to say that news of falling costs for PV is very welcome.
I caught some of Foreign Correspondent the other night, and the chap was wandering about Bhutan, looking for some fungus — I kid you not. He came across some nomadic folk living in a tent on a windy hilltop. They had a portable solar panel supplying them with, presumably, some low marginal cost power that simply could not have been supplied any other way.
In a seprate story the other day I saw some shots of an aid project — in Sierra Leone I think — and again, the locals had solar panels supplying light, power for mobile phones, and so forth.
Personally, I like the idea that scaling up solar panel production may have the consequence of providing relatively cheap power (and indirectly, other services of importance, like communication, lighting, hot water) to marginalised people in the remoter parts of the developing world and if that means that I personally have paid more for power here, I’m entirely relaxed about that. If this is one of those cases where ‘trickle down’ really has worked as imagined, then I’d say that was a very good thing.
@Fran Barlow
[in violent agreement] Although – and it’s not an area I keep a close eye on – I was under the impression that some or many of these PV cell producers were on the financial brink in 2011?
Trickle down often works with technology, perhaps less so with money. But it’s unlikely outside 30s Science Fiction to happen with nuclear. It’s an interesting advantage of solar. And it makes it more difficult to monopolise – there are options apart from engaging with large corporate providers.
@John Quiggin
The publicly available details of the Moree PV farm, said to be one of the largest in the world are as follows:
Capital Cost: 0ver $900 million
Nameplate Capacity: 150 MW
Capacity Factor: 30%
Technology: One axis tracking PV
Storage: none
Completion: 2015
Scaling this up to generate the same amount of electricity as 1GWe nuclear would cost about $18 billion – over three times the capital cost of the supposedly expensive EPRs (with substantial time and cost overruns) being built in Europe. The PV farm would have an expected LCOE of $0.20-0.30/kWh.
No doubt that lower panel cost and some learning would drop that $18 billion back of envelope figure considerably, but it would need to be by a factor of nearly 3 to become roughly equal to the most expensive nuclear. And then it still is not reliable.
Apparently, Moree is a good solar location. Presuming we have a global perspective, the economics of PV will be a lot worse in many places than at Moree. To declare the The End of the Nuclear Renaissance, obsoleted by PV the very least that is required for starters is the the LCOE of PV is comparable to that of nuclear in all the worlds major population centres. That’s just for starters, then we could move on to the as yet unsolved issues of short term storage at some reasonable cost. And move on to the extremely thorny (and very likely insoluble) issue of what to do in climates such as northern Europe where PV exhibits extreme seasonality that is inversely correlated with seasonal demand. The high winter seasonal demand in Northern Europe can only be expected to grow if the required transition to heat pumps and resistive heating occurs. This is a big issue – in Scotland for example nearly 50% of end energy use is for heating.
The issues are so much bigger and more complex that $1 per W panels.
Quokka is one of many to suggest an all renewables grid system would cost triple that of a nuclear based system but with less reliability. Some will say Fukushima proves nuclear is not reliable. Given that 20,000 people are dead or missing from the Japan tsunami and quake while the radiation death toll so far is 0 people I’d be prepared to take the risk.
Pricy solar installations like Moree will require backup generation that is immune to the weather. That means even more capital or fuel use for a given output
http://www.smh.com.au/environment/weather/moree-residents-threatened-by-floods-20111128-1o1wu.html
@Troy Prideaux
I don’t know about how many PV panel manufacturers are “on the brink” and should such circumstances exist who’s going to be entirely forthright about it anyway? Notably BP has recently dumped it’s PV panel business.
What is known is that there is currently a glut of panels on the world market and prices are depressed. Manufacturing facilities are running under capacity and planned scaling up has been dramatically reduced in 2012.
I don’t know what PV panel prices are going to be in five or ten years, but I would suggest that even a modestly conservative attitude to risk would be to wait a few years to see how this all sorts itself out. There is rather a lot at stake here. Sometimes all I see are appeals to the X^Y key on a calculator backed by faith in the prophet Moore.
Prof Q suggests in this article that one consequence of the Fukushima accident is that there will be costly redesigns of the current Gen III+ nuclear power plants on offer to better deal with decay heat that caused the Fukushima accident. I have seen no substantial evidence of such and invite anybody to present it together with some estimates of what such purported costs are.
The AP1000 has received NRC design approval, apparently without any major post Fukushima redesign work. There is apparently no such redesign work demanded by the UK regulator for the EPR whose design approval is pending and immanent. I have seen one report about some changes to the Flamanville project demanded by the French regulator, but it is far from clear that this will have a major impact on the economics. In China the outcome will most likely be an accelerated transition to Gen III+ designs, in particular the AP1000 and/or derivatives, but that was very likely to happen anyway.
The bottom line is the decay heat problem has been known “for ever” and considerable effort has been put into dealing with it in more modern designs – well before the Fukushima accident. In other words the claimed “redesign work” has already occurred and is factored into the cost pre-Fukushima. Regulators apparently consider that it is satisfactory for designs such as the AP1000.
@quokka
I’m not sure whether you’re not paying attention to the news, or just ignoring evidence that doesn’t meet your predetermined view. As an example of a shutdown directly traceable to Fukushima, Google tosses up:
http://www.dallasnews.com/business/energy/20110419-nrg-ends-project-to-build-new-nuclear-reactors.ece
Note that it was not only TEPCO’s financial problems but the NRC safety review that killed this project, which was probably the most promising candidate to be built after the two AP1000 sites mentioned in the post.
Hi Quokka.
Despite the dropping costs of solar panels the, market is going bullish on utilities with substancial nuclear generation capacity. I guess you can put your money where you month is by putting some dollars into stock recommended in the following Forbes article:
http://www.forbes.com/sites/thestreet/2012/01/05/5-stocks-that-will-have-investors-going-nuclear/
If the article is correct, you could do pretty well out of it. From what I can see, the return seem to be much better than investment in photovoltacic. Even PV companies which seem to have relatively good technology like First Solar are generating massive negative returns. (And then there is Solyndra!) It seems like the Chinese are flooding the PV market with silicon below cost, so the drop in prices may just be a marketing tactic to monopolise the market. (Bloody captialists that they are!)
Fran #36
You really don’t have to go to the windy hilltops of Bhutan to find people getting all their power from solar. My elderly next door neighbours have been solar only for 40 years, not because they are hippies but because the cost of getting the grid extended to their house when they built it was was prohibitive. Even today many “remote” houses in my central Victorian area are off the grid due to cost considerations.
I’m someone on the fence with nuclear power – it seems that even as we develop safer and cleaner fuel cycles, the human element is always the problem (eg: incompetent Japanese regulators, the usual big company bullshit with TEPCO). Personally, I hope that R&D continues but that doesn’t fix the human problem…
As I understand it, Chinese manufacturers of PV and associated electronics have had a windfall from heavy government subsidies and strong domestic sales. That’s great news for the environment and consumers – the down side is that a bunch of innovative companies in other countries are finding it pretty hard to compete with that (especially given domestic economics in places like the USA and Germany) – have a read about the current fortunes of companies like SMA.
The other upside for solar power is the “NIMBY” factor – large scale solar plants are pretty inoffensive… while coal mines, nuclear plants and even wind turbines have fairly active lobby groups opposing them.
@Hermit
OK, you’re on. Can we renounce fossil fuel subsidies while we’re at it?
@Ben
Sure but you may have seen my comment that what some claim are FF subsidies are arguably not so. For example the diesel rebate is essentially a partial fuel tax refund to those eligible. Below market electricity prices paid by aluminium smelters I think are the result of interstate rivalry to attract jobs. Non-indexation of fuel excise and car fringe benefits tax are a bit of a stretch. However I would like to know how much Infrastructure Australia is contributing to FF promoting projects like the Gladstone harbour development. That kind of info seems to be hidden behind a veil of fog and I suspect the amounts are large.
@PeterM
This could be a furphy. There is no way of determining “cost”. What is the evidence that China is selling below cost?
My guess is; you do not know what Chinese costs are. So presumably all this is just a Western winge.
Anyway, I understand that Western costs are so high because BP Solar has purchased PV intellectual property rights and other producers must now hike their selling prices above costs.
You cannot winge about Chinese economics if you accept free trade. If Chinese production is truly unfair, then tariffs are the only recourse.
@Chris Warren
One thing is for sure, it’s not all roses for them:
http://blogs.wsj.com/venturecapital/2011/12/07/chinese-solar-industry-fueled-by-unsustainable-debt-analysts-say/