June 20, 2005
Photovoltaics Market Product Of Government Subsidies

A New York Times article on solar energy installed by homeowners demonstrates that the home photovoltaics market is the product of government subsidies.

In moving toward the energy mainstream, solar expenses have dropped to around $8 a watt, from roughly $100 three decades ago; the cost is even less if a system is installed as part of a new home's construction.

In either case, that puts the price of a system that can reduce electric bills significantly - like a three-kilowatt system - in the $20,000 range. That's still a lot of money, but buyers may be able to get a lot of it back immediately, through government incentives. And with energy prices rising, the payback period for the rest is getting steadily shorter.

With real costs like those described below I have to wonder how long it takes for the energy used to manufacture the photovoltaic panels to be balanced out by energy collected once they are installed. Some of the manufacturing cost has got to be due to energy consumption.

On Long Island, Mr. Sunde's systems are working smoothly, and he expects them to keep doing so over their guaranteed 25-year life. A staunch environmentalist who had dreamed of owning solar panels since he was a boy, he now has more power than he needs.

He couldn't have done it without the incentives. With rebates and tax refunds, he chopped nearly 75 percent off the $115,000 bill, bringing the cost down to $30,000. With about 7.5 kilowatts for each house, he wound up paying about $2 a watt.

He did so well because Long Island kicked off New York's incentive programs with rebates of up to $6 a watt. Now it's in line with the rest of the state, offering $4, while the newer New Jersey program, is the most generous in the New York metropolitan area, with incentives of $5.50 a watt.

...

Over all, he calculates the payback period at a bit over 15 years.

Government subsidies paid almost three quarters of the cost of his system and yet the payback period was still over 15 year. Absent those subsidies the installation of solar photovoltaics systems on houses in much of the United States would be very rare. Payback periods would be longer than the lifetimes of most homeowners (though eventually SENS technologies will change that).

But even with large subsidies few homeowners see photovoltaics as worthwhile. If most homeowners wanted to use these subsidies governments would have to abandon these subsidies programs due to high costs.

The article reports on a woman who installed pool heater which she expect to pay itself back in 2 years and a guy who installed solar heating for his home who expects a payback in 8 years. In each case no tax subsidies contributed to the heating installations. Well, this raises an obvious question: Why are governments spending large amounts of money on subsidizing photovoltaic systems when smaller amounts of money on thermal heating systems will pay back more quickly without subsidy? If the government wants to get the most out of its energy subsidy dollars it ought to subsidize heating rather than electric generation. Or if the goverment doesn't want to spend the money it could increase the spread of solar heating by putting requirements for it in building codes.

If governments (including state governments) want to encourage the development of cheaper photovoltaics then my advice is that governments should shift money from subsidies to fund more photochemistry research to discover processes for making photovoltaics that are inherently cheaper. Subsidizies for the purchase of photovoltaics made by processes which are inherently expensive just aren't going to get us to cheap photovoltaics.

Share |      Randall Parker, 2005 June 20 01:56 PM  Energy Policy


Comments
odograph said at June 20, 2005 4:22 PM:

I get the "Real Goods" catalog, with solar and etc. I have been staring at the most recent cover in amazement. It says "This California couple saved $500 a month by going solar with Real Goods." I say to myself, who on earth PAYS (let alone saves) that much? My home electric bill was $30 before an efficiency drive and $15 after. What's up?

Anyway, I think that rounds around to the answer, the payoff, grid capacity, and the tax credits. IF we just had tons of elctricity at our current base rate (8-10 cents or whatever), no one would need solar. Only the most environmental would pay for solar. BUT given that we (in California at least) are tight on our power supplies, it benefits us to get those big ($500 a month?) users off our grid. There are two ways to do that ... charge them (even) more, or give them credits. FWIW, I think we should just work the front end and increase rates for the highest users. Then let them decide if they want to back off on usage (efficiency being the cheapest and most effective solution), if they want to install wind or solar ... or if they just want to pay the frieght.

With higher rates we'd see EVERYONE conserving, and not just a few oddballs going solar.

And gosh, charging higher rates or penalties reduces government debt, granting tax credit increases it.

Joseph said at June 20, 2005 7:44 PM:

As far as the subsidies.. the current system makes sense if you consider the intent. Yes solar sucks.. no question it's way to expensive as of this time. It does have potential to become much cheaper (here I must cynically note that I've been waiting over a decade for the paint on etc. etc. solar cells). However if you simply pour money into research you may create an item but you haven't created a consumer product. In fact the item may never reach market if it's deemed to risky. By use of subsidies you allow a currently overpriced item to be sold at an affordable rate. This allows profit and time for the manufacturer to do further developement. It also builds experience in manufacturing, marketing and services the product.

In summation you've basically used the money to create a system of which the item is only a part and you're hoping the profit motivation will drive research to improve the item (along with manufactuing and usage of the item contributing to the future developement). It seems backasswards I admit but it's normally the more practical method for getting something into use. If there's ever a practical breakthrough (multi spectrum or whatever) then after the patents/licensing fuss is through then there's allready a manufacturing, sale and rudimentary service base out there to get the product into use.

gmoke said at June 20, 2005 7:59 PM:

from http://www.pvresources.com/en/economics.php

"Energy Payback Time - EPBT is the time necessary for a photovoltaic panel to generate the energy equivalent to that used to produce it. E. Alsema made some interesting EPBT calculations for photovoltaic modules. He estimates 600 kWh/m2 energy produced with monocrystal-silicon modules or 420 kWh/m2 with polycrystalline silicon is used to make near-future, frameless PV systems. Assuming 12% conversion efficiency (standard conditions) and 1,700 kWh/m2 per year of available sunlight energy, Alsema calculated a payback of about 4 years for contemporary polycrystalline-silicon PV systems. Projecting 10 years into the future, he assumes a "solar grade" silicon feedstock and 14% efficiency, dropping energy payback to about 2 years. Some other calculations generally support Alsema's predictions. For amorphous-silicon Alsema estimates that it takes 120 kWh/m2 to make near-future, frameless amorphous-silicon PV modules. He adds another 120 kWh/m2 per frame and support structure (for a rooftop-mounted, grid-connected system). At 6% conversion efficiency (standard conditions) and 1,700 kWh/m2 per year of available sunlight energy, Alsema calculated a payback of about 3 years for contemporary thin-film PV systems. Kato and Palz for example calculated even shorter paybacks for amorphous-silicon, each ranging from 1-2 years."

Solarex was planning a solar breeder ten or twenty years ago but then ten or twenty years ago there was a PV manufacturer called Solarex.

Randall Parker said at June 20, 2005 9:28 PM:

gmoke,

The guy in the NY Times article bought a $115,000 photovoltaic system. How much is his monthly electric bill? How much does his photovoltaic system reduce it? Suppose he had no subsidy from the government. Then do the math.

A 4 year payback means you have to save enough per month that in 48 months you have paid for the system (and interest on the initial purchase price). For a $115,000 system assuming a 0 percent interest loan you'd have to save $2400 per month off your eletric bill to pay back the principal in 4 years.

Of course the 0% interest loan is unrealistic. If you buy the $115,000 system and borrow the money to buy it and get a loan at 6% interest (and I have no idea what home equity loans go for these days) then you'd be faced with $6900 per year or $575 per month just from the interest.

Work backward from your yearly electric bill. Suppose you spend $1200 per year for electricity. Then at 6% interest for borrowed money a photovoltaic system that replaced 100% of your utility electricity could cost no more than $20,000 total in order to break even. Even that figure is too high since it is assuming the photovoltaic system does not wear out or have maintenance costs. So you'd need to figure in depreciation and maintenance costs as well.

Randall Parker said at June 20, 2005 9:32 PM:

Joseph,

I see the current system of photovoltaic subsidies as more akin to subsidizing the purchase of trains because some day you want to be able to buy cars. The connection between current demand for products made by processes that cost too much and future products made by more efficient processes is just too tenuous.

Joseph said at June 20, 2005 11:59 PM:

Randall

Hmm I can see the viewpoint that would lead you to that statement. Perhaps I'm looking at it more esoterically. Consider if subsidies weren't priming the pump. Without subsidies there'd be no actually production or purchase of photovoltaic, it's just to impractical except for people with more money than sense. I still contend that subsidies will enable a system of manufacturing, sales and servicing to take off when/if cost effective devices are developed (there has been quite a few promising developements announced but up to now it appears these devices remain "laboratory queens." Working great in the lab but just not capable of being produced/sold for various reasons). Having a base of this type allready in place means that when/if it happens venture capitle will be more forthcoming due to lower risk etc..

Braddock said at June 21, 2005 4:52 AM:

Photovoltaics are extremely sensible for people who live off the grid. The cost of connecting to the grid for some people is more than the cost of an excellent photovoltaic system complete with state of the art batteries. For people on the grid, a photovoltaic backup system with battery bank might be appropriate if the utility power is prone to outages and the homeowner can afford the cost.

For people with reliable grid connections photovoltaics make no sense currently, particularly in the southeastern US where humidity is high and air conditioning is a must.

If the US withdraws from the middle east entirely and allows the fanatics to grow in power as they did during the 1990s, soon the salafists will be bombing utility lines and substations in the US. Then it will be a necessity to have some sort of independent backup power supply. Electrical engineers and electricians with practical experience in backup power supplies will be in high demand at that time.

odograph said at June 21, 2005 6:29 AM:

Braddock, I don't live in the southeast, and I don't know how bad it gets.

I can comment that I grew up in California's hot (dry) San Gabriel Valley. At the time, it was exceedingly rare to find a middle class home with air conditioning. Now they all have air conditioning. That is one major source of California's explosion in electricity demand. It wasn't just that new homes were built, old homes had their usage multiply.

... off hand, I'd guess that no fewer people are going to run air conditioning, and we'll end up building nukes to keep up. Not that I like that.

odograph said at June 21, 2005 6:31 AM:

BTW, on the high energy requirement for photovoltaic manufacture ... I had noticed that the panel prices had drifted up for the last year. I know the most likely cause was increased demand ... but it did worry me a bit that they might get MORE expensive as other energy prices rise.

In other words, in an electricity/oil crunch, solar would become more expensive(?)

Price data:

http://www.solarbuzz.com/Moduleprices.htm

Bob Badour said at June 21, 2005 7:02 AM:

Randall,

I suggest you consider an apology to gmoke. I believe he was answering the very specific question you posed in your original article:

"With real costs like those described below I have to wonder how long it takes for the energy used to manufacture the photovoltaic panels to be balanced out by energy collected once they are installed. Some of the manufacturing cost has got to be due to energy consumption."

I do not believe he tried to justify the subsidies or to provide an argument supporting the cost effectiveness of current solar technology.

If one installed a PV system with an EPBT of 4 years and only used it for 2 years, one would use more non-solar energy to make the PV system than one extracted from solar energy. e.g. one might have burned 1000 joules of coal or oil to receive 500 joules of solar electric energy.

Of course, the costs of manufacture and distribution will be much higher than just the energy consumed. I would expect labour costs to dwarf all other costs. Even with highly automated production facilities, one needs truck drivers, longshoremen etc. to deliver the product and carpenters, electricians etc. to install the product.

Thus, even if one used the above PV system for 8 years, one might receive twice as much energy as went into manufacture, but the energy received might only represent half of the economic benefit (eg. money) one gave up to purchase and install the system.

hans said at June 21, 2005 7:31 AM:

Yes, photovoltaics is still expensive.
But they have the potential to become cheaper.
So why not wait untill they become cheaper and more efficient?

The best way to make technologies better and cheaper is by marketdriven research and scale enlargement. But at current prices this will not occur automatticly.
By artificially creating a market you accalerate the learning process of the industry. So you can later harvest the results

Randall Parker said at June 21, 2005 8:16 AM:

gmoke,

I didn't read your excerpted article carefully enough. I thought the "payback" was for cash purchase price. Sorry for my lazy reading.

Randall Parker said at June 21, 2005 8:21 AM:

Joseph,

You say:

I still contend that subsidies will enable a system of manufacturing, sales and servicing to take off when/if cost effective devices are developed

When the Apple II became cheap did it take a government subsidy to set up computer stores? No, of course not. Distribution and installation will not require any sort of government subsidy once photovoltaics become cheap enough. Plenty of existing home construction and electrical workers will be able to install them.

You also include manufacturing in your system. Well, a manufacturing facility for photovoltaics created using, say, nanotubes will look nothing like one that uses silicon crystals.

Randall Parker said at June 21, 2005 8:30 AM:

odograph,

The higher photovoltaics module prices are due to a recovery in the market for semiconductors for computers. The rising demand for computer chips has greatly increased (like by multiples - I forget the exact multiple) the cost of pure crystalline silicon. Photovoltaics currently start with the same pure silicon crystals that semiconductor manufacturing uses and those crystals are a substantial portion of the total cost.

In a few years less pure silicon crystals that cost less to grow will be made specifically for photovoltaics manufacturing and at that point photovoltaics prices should fall some.

Beyond that amorphous silicon manufacturing promises to lower prices still further. Whether amorphous silicon can lower prices far enough to make photovoltaics competitive remains to be seen.

odograph said at June 21, 2005 8:47 AM:

Hans, I agree that research grants and subsidies can speed development, but remember that we are already looking at that kind of development.

Several countries and many companies have been working hard on this for 30 years. It is interesting to note that the most rapid progress, and the most rapid fall in $/W happened back in the 70's when this was a fresh problem. We are now slugging away at well understood dificulties.

Note the falling (and then leveling) "(US$/Wp)" on the first figure of this page:

http://www.unu.edu/unupress/unupbooks/uu24ee/uu24ee0j.htm

Brendan Bartlett said at June 21, 2005 10:47 AM:

The other thing to consider when comparing the cost of grid electricity to that of Solar is that the power companies get sizeable subsidies themselves. Therefore that 8-10 cents per KW/hr is actually more expensive, you just pay for it out of your taxes instead.

I'd love to see local power generation with the grid being a backup rather than the way it is now. I shudder to think how much power and money is wasted in long-distance transmission lines and the time and effort involved in maintaining the grid. To me it would make more sense to have a lot of very small power generation stations. For instance, my neighborhood has about a hundred houses in it. If we all had photovoltaic systems or some sort of small solar farm that was used by just the neighborhood it seems that it would be more efficient.

Naturally, I'm just spitballing here so I have no idea how effective this idea would be. I suspect to make it workable a neighborhood would have to be a planned community owned/managed by a corporation or co-op. This would allow you to enforce various energy saving features. Perhaps centralized solar-water heating for all houses, specific insulation and building guidlines. Plus there'd be the hassle of how to charge for electricity. Assuming the neighborhood electric company didn't generate a consistant power surplus, anytime they needed to tap into the powergrid, everyone's bill would increase. This means that the power hogs would make the power miser's bills increase. This could probably be somewhat lessened by every house getting a certain amount of power at a particular rate and anything over that they paid more. Then again, how different is this from our current system? When power hogs use too much electricity and the demand exceeds the local capacity, additional electricity is rerouted from somewhere on the power grid making everyone's electricity more expensive.

Still, it seems like it ought to be workable.

Ah if only they could figure out how to make room-temperature superconducters. Hell, as long as I'm fantasizing a heat superconducter would be great as well.

Engineer-Poet said at June 21, 2005 2:00 PM:

Brendan, your speculation is backed up by research.  I've read that local solar power can be worth as much as $.34/kWh because it eliminates transmission & distribution costs and losses and displaces grid generation during summer afternoon peaks.  Treating a watt as a watt regardless of where and when it is generated misses many of the sources of value.

nick said at June 21, 2005 3:36 PM:

The other thing to remember is that market prices are only as good as the accounting that supports them. The most conservative of economists will agree that "externalities" such as pollution are real costs that should be included. So, the cost of acid rain, smog, asthma, unreliability of supply, military costs to secure supplies, global warming, etc are all real.

People intuitively include these costs when they compare solar to conventional energy (and government does too, when it creates subsidies), but they can be quantified. One estimate I've seen calculates the costs of pollution on which everyone agrees (as opposed to things like military costs to secure supplies and global warming, etc, which some people reject) for coal as $.04 per KWH.

gmoke said at June 21, 2005 3:56 PM:

Randall Parker seems to believe that the only way to address the energy crunch is to build nuclear power plants and support research, specifically into new photovoltaic materials and better batteries. At least that's what I get from reading his work. He doesn't like subsidies for PV or for wind. I've never seen him write anything addressing the subsidies for nuclear (Price-Anderson, fuel processing....) I wonder if he is against those subsidies as well and whether nuclear would be cheaper than wind or PV without them.

BTW, Randall Parker doesn't have to apologize to me for anything. I've been flamed before and misunderstood before and tend not to take such things personally. I appreciate that Mr Parker did issue an apology for mistaking my post above about the costs of production of PV with the cost of payback on an installed system.

Randall Parker said at June 21, 2005 4:18 PM:

Nick,

I doubt that the uninternalized costs for electric power generation are as high as 4 cents a kwh. I'd like to see a link to such an analysis. I've asked for such analyses in the past and have yet to see anything that tries to be thorough.

gmoke,

I don't like production subsidies because I think they are inefficacious if the goal is to lower the costs of some form of energy.

In addition, I oppose wind specifically because I like scenic views on mountains, river valleys, rolling hills, coastlines, and other places.

Aside from Price-Anderson how do you see the nuclear energy getting subsidized? They pay for waste storage at their own reactor sites. They are paying for Yucca Mountain out of a tax on generated nuclear electric power. In fact, the government has collected far more from them in taxes than it has spent on nuclear waste disposal (and I can produce details on this if you want them). The government could add another tenth of a cent to nuclear electric if waste disposal costs became a problem.

They also pay for the uranium. Are you claiming that they are getting a subsidized deal on the uranium? What part of their total costs of fuel do you see as subsidized? I doubt you can count up anything that adds much to the price per kwh.

As for Price-Anderson: I've had this debate with libertarians and always point out that governments also set liability limits on car drivers. Do you think that we should each be required to carry insurance equal to any possible harm we might cause to others individually? The libertarians evade answering that question. I'm far more worried about some drunk driver hitting me and turning me into a quadraplegic than I am of a melt down at Diablo Canyon. How dare individuals fail to carry sufficient liability insurance.

While I'm at it: How dare individuals fail to carry adequate medical insurance and expect the rest of us to pay for it.

gmoke said at June 22, 2005 2:51 PM:

If I understand the comment, Randall Parker believes that nuclear power gets no effective subsidies from US taxpayers. That doesn't sound reasonable to me, based upon my understanding of the world and government and industry, but maybe I'll go look at some numbers and get back to you, that is, if I want to keep engaging with somebody who seems to wear nuclear-powered rose colored glasses.

Bob Badour said at June 22, 2005 5:38 PM:

gmoke, why the ad hominem? It seems rather pointless to me.

gmoke said at June 22, 2005 9:49 PM:

"Nuclear powered rose colored glasses" is ad hominem? My, my what tender sensibilities we seem to have.

Anyway, the argument that the government limits liabilities so Price-Anderson is no big thing is beside the point. The question for me is whether that limitation of liability is commensurate with the actual liabilities and costs of said liabilities or not. Does Price-Anderson seriously undervalue the damage from nuclear accidents and if it does, does it constitute a subsidy?

from http://www.riverkeeper.org/campaign.php/indian_point/the_facts/269

"Here are a few of the subsidies and regulatory breaks afforded to the nuclear power industry:

"According to a July 2000 report by the Renewable Energy Policy Project, the U.S. government has spent approximately $150 billion on energy subsidies for wind, solar and nuclear power--96.3% of which has gone to nuclear power.

"Limited Liability: The Price-Anderson Act establishes a taxpayer backed insurance regime for nuclear power plants that limits liability of nuclear operators in the event of an accident. (The Act was enacted in 1957 as a temporary measure to support the fledgling nuclear industry.) Under Price-Anderson, commercial nuclear operators are required to carry only $200 million in primary insurance. A second level of retrospective premiums in the event of an accident is capped at approximately $88 million per reactor, for an industry-wide total of approximately $9.4 billion.

"Yet according to a November 1, 1982 Congressional Subcommittee Report, based on the Nuclear Regulatory Commission's "Calculation of Reactor Accident Consequences" ("CRAC-2") model, a worst case scenario accident at a U.S. nuclear reactor could cost as much as $500 billion in damages. The economic consequences of a severe nuclear waste transportation accident could cost as much as $271 billion. The sizable discrepancy between the coverage available under Price-Anderson and the calculated consequences of severe nuclear incidents leaves the public unprotected and the industry unaccountable in the event of a serious accident. Furthermore, by artificially limiting the liability of nuclear operators, the Price-Anderson Act serves as a subsidy to the nuclear industry in terms of foregone insurance premiums. By masking the risk of nuclear power, the Price-Anderson Act distorts economic viability assessments of nuclear power and encourages the construction of new nuclear plants. No other energy source benefits from this level of subsidy.

"Electric utility deregulation and the stranded cost bailout essentially amount to $120-200 billion, mostly to utilities that are selling off their commercial nuclear power reactors."

from http://en.wikipedia.org/wiki/Nuclear_power#Subsidies

"Energy research and development (R&D) for nuclear power has and continues to receive much larger state subsidies than R&D for renewable energy or fossil fuels. However, today most of this takes places in Japan and France, in most other nations renewable R&D get more money. In the U.S., public research money for nuclear fission declined from 2179 to 35 million dollars between 1980 to 2000 [38]†(http://www.world-nuclear.org/info/inf68.htm).

"Renewables receive large direct production subsidies and tax breaks in many nations [39]†(http://www.world-nuclear.org/info/inf68.htm). Fossil fuels receive large indirect subsidies since they do not have to pay for their pollution and in various other ways [40]†(http://www.ucsusa.org/publications/report.cfm?publicationID=149). Nuclear power also receives subsidies, for example in the U.S. they have limited liability for accidents (9.5 billion dollars as of 2004) under the Price-Anderson Act."


I don't know if the statements above are accurate or not but at least I've given the references so those interested can track the sources down. My observation is that the trend in late stage capitalism is toward removing all liabilities from corporations. I don't believe that is a wise course to follow. In fact, it is by definition irresponsible.

Randall Parker said at June 22, 2005 10:48 PM:

gmoke,

That is what I suspected: most of the supposed subsidies are in the form of research and development. Also, in many countries the amount of research money going to other energy forms is larger.

I think Wikipedia is wrong about the size of a decrease in US federal research money for nuclear energy. The money spent is much greater than that. Check out the Bush Administration's original proposed FY 2005 Department of Energy budget (and, no, I don't know how closely Congress followed this).

Coal R&D is proposed at $470 million, an increase of $19.5 million above FY 2004. The President's Coal Research Initiative, the mainstay of the coal R&D budget, would get a $68.6 million increase. The Administration proposes a dramatic shift in the coal research program in FY 2006. Rather than the previously planned funding of several clean coal demonstration projects around the country, the proposed budget would shift nearly all those funds into the FutureGen program to create a zero-emission coal-fired power plant simultaneously creating hydrogen.

Natural gas technologies R&D requested funding is $26 million, a decrease of $17 million below the FY 2004 enacted level. Decreases would also occur in gas hydrates research ($6 million, down $3.4 million), exploration and production ($17 million, down $5.2 million), and advanced gas turbines ($11.8 million, down from $12.7 million in FY 2004). Funding for oil technology would be reduced 57.2 percent, to $15 million, reflecting "reordered priorities."

The FY 2005 proposed budget for nuclear energy (NE) is $412.6 million, an increase of $4.7 million above the FY 2004 enacted level. The major increase within NE ($300 million) is for infrastructure related to creation of the Idaho National Laboratory, an entity to be created by merging the Idaho National Engineering and Environmental Laboratory and Argonne National Laboratory-West. Also within NE, nuclear energy R&D is decreased to $90 million, or 26 percent. Increases within R&D would go to the Nuclear Hydrogen Initiative ($3.5 million, for a $9 million total) and the Generation IV Nuclear Energy Systems Initiative ($2.8 million; $30.5 million total), while the Advance Fuel Cycle Initiative would be significantly decreased, down $20.4 million from its $66.7 million FY 2004 level. The Nuclear Energy Research Initiative (NERI) and Nuclear Energy Plant Optimization (NEPO) program would be eliminated.

The Administration proposes a total of $3.43 billion for the DOE Office of Science for FY 2005, a slight decrease from the FY 2004 enacted level of $3.45 billion. With the exception of the biological and environmental research program (down $140 million; $501.6 million total), most programs within the office would see modest increases. Basic Energy Sciences, the largest program within the office, would increase $53 million, for a total of $1.064 billion and the Fusion Energy Sciences Program would remain essentially constant at $264 million. (For more on DOE, see Chapter 9.)

Note that more is spent on coal than on nuclear fission as an energy source. DOE spends much larger sums on nuclear but for weapons. Not quoted above, solar gets about $100 million (give or take 10 million) with most of that not going to basic photovoltaic research. That is just plain dumb and has been dumb for decades. Note that natural gas and oil get little. The Bush Administration definitely sees them as having little to offer in the future and has been cutting their budgets. Whereas the US has a lot of coal and hence research into making coal cleaner gets a lot more money.

Also, for nuclear waste storage Yucca Mountain gets a separate large multi-hundred million dollar sum that is paid for by a tax on the nuclear power industry which is a tenth or two tenths (forget which) of a penny per kwh of nuclear electric generated and sold in the United States. That fund has collected far more from the nuclear power industry than has been spent on Yucca Mountain.

If I was calling the shots on the DOE budget I'd increase 4th gen nuclear, photovoltaics, and battery research funding by large amounts. I'd also allocate a lot over the total federal budget toward making the federal government itself far more energy efficient.

Bob Badour said at June 23, 2005 8:32 PM:

gmoke,

The "if I want to keep engaging with somebody who" is ad hominem regardless what you put after it. I stand by my earlier appraisal of its worth.

gmoke said at June 26, 2005 8:26 PM:

Boston Globe of June 26, 2005 has two articles concerning nuclear power.

On page A19, "Nuclear Power Gains Economic Momentum" by Ralph Vartabedian for the LA Times;

"Three utiliy consortiums are getting $539 million of taxpayer subsidies through the Energy Department to seek nuclear construction licenses under the new regulatory system. By going though the bureaucratic motions of applying for a license, the utilities are supposed to gain confidence in new licensing rules intended to reduce delays and litigation...

"An energy bill now before the Senate contains operating subsidies in the form of tax credits, much like the solar and wind industries receive. The legislation would also renew the Price-Anderson Act, which provides legal immunity in the case of a meltdown or other nuclear accident."

Sounds to me like the nuclear industry is getting over half a billion bucks to do paperwork.

On page B5, "Mass. Probes Nuclear Plant's Radiation Tests" from the Assoc Press:

"'Yankee Atomic Electric Co state that the concrete shiled blocks were radiologically clean, appropriate for unrestricted use, and that all contaminant had been removed from the blocks,' stated the administrative order signed by Michael Gorski, regional director of the Massachusetts agency [Dept of Env Protection].

"'These statements are inaccurate and constitute a violation as shown by the recent sampling results,' he added.

"Gorski noted in a separate letter to Yankee Atomic that the company knew of the problem last year but did not tell the state until this month."

Not that's demonstrating public responsibility.

gmoke said at June 26, 2005 9:11 PM:

from http://www.salon.com/opinion/feature/2005/06/25/muckraker/index.html

"Better yet, if all goes according to plan, the program [California's Million Solar Roofs] would make the cost of solar power 'equal to or cheaper than conventional fossil-fuel electricity in 10 years,' according to Campbell. That kind of price adjustment -- a result of increased economies of scale -- could have national and even global implications, transforming America's energy landscape and making solar an even more logical choice for developing nations building up their energy systems.

"Moreover, Hochschild predicts that the estimated $2 billion in subsidies that would be doled out over 10 years would result in energy-cost savings to consumers of roughly $12 billion over the 25-year life cycle of the solar panels installed under the program. A surcharge on electricity bills would subsidize a rebate program to make solar installations more affordable for consumers. The rebates would be gradually phased out over a decade, with incentives declining each year to encourage investments up front and stimulate economies of scale.

"The program is based on a financing model that's already proved successful in Japan. In 1994, the Japanese government launched a 10-year subsidies program by paying 50 percent of the cost of every solar installation; now it is paying only 3 percent, and the subsidies are due to be completely phased out by the end of the year. 'They've managed to reduce the average cost of a residential solar system by 72 percent in a decade,' Hochschild said, 'and built a robust solar industry that now dominates the global market.'"

Used to be the USA that was leading the world in solar but that's before the depradations Reagan began and Bush I continued and Clinton's lack of interest and Bush II's basic animosity to anything that isn't high cash flow energy.

Randall Parker said at June 26, 2005 10:31 PM:

gmoke,

"Better yet, if all goes according to plan, the program [California's Million Solar Roofs] would make the cost of solar power 'equal to or cheaper than conventional fossil-fuel electricity in 10 years,'

Well, if all the Soviet 5 year plans had gone according to plan the USSR would still exist.

As for the claim about Japan: That sounds like fantasy. If the Japanese photovoltaics makers had achieved some place breakthrough we'd be seeing much cheaper imported photovoltaics. But we aren't.

We led the world in incredibly high expense photovoltaics. Now the Japanese lead in making photovoltaic electricity that costs several times competing energy sources. But I hear a German company has a new amorphous (if memory serves) silicon semiconductor that is cheaper. So maybe the Japanese have wasted all that tax money?

Nuclear subsidies for paperwork: Oh, the irony. Well, the government created a regulatory approval process that has not been debugged. They probably don't even know what the process really amounts to and will make up a lot of it as they go along. So they need guinea pigs to try it out. All the utilities are pointing at each other and saying "You go first". Whaddaya gonna do?

The subsidy is for whoever goes first. It is a one-off. Meanwhile, we are spending $2 bil this year on hybrid vehicle purchase subsidies and the Bush and Congress want to increase the subsidies.

gmoke said at June 27, 2005 2:42 PM:

"As for the claim about Japan: That sounds like fantasy. If the Japanese photovoltaics makers had achieved some place breakthrough we'd be seeing much cheaper imported photovoltaics. But we aren't."

All I know is what I read in the papers. It behooves you to prove your assertion as to the fact or fantasy of the Japanese experience.

If you read the article closely, you will see that the lower cost for photovoltaics over the life of the subsidy was probably because of market priming and building an economy of scale that allowed for lower production cost per unit. It seems to have little or nothing to do with technological breakthroughs.

gmoke said at June 27, 2005 3:23 PM:

I know it's not hybrids and is only a thought experiment but you might to check out http://www.primidi.com/2005/06/26.html#a1230:

"Hydrogen Cars Will Save Lives -- and the Planet

"What would happen if all U.S. current vehicles -- powered by fossil fuels -- were converted to hydrogen fuel-cell vehicles? In this article, Nature writes that a very detailed study from Stanford University reveals that up to 6,400 lives could be saved each year. Besides saving lives, this also may significantly improve air quality, health, and climate. After looking at several ways to produce hydrogen, the scientists have concluded that wind is the most promising means of generating hydrogen. It's even cheaper if some hidden costs to produce gasoline are taken into account: gasoline's true cost in March 2005, for example, was $2.35 to $3.99 per gallon, which exceeds the estimated mean cost of hydrogen from wind ($2.16 equivalent per gallon of gasoline). Now the researchers are calling for an 'Apollo Program' for hydrogen energy."

gmoke said at June 29, 2005 11:09 AM:

I've been looking at a world-wide report on the solar industry written by Michael Rogol in 2004 to see what he has to say about the Japanese PV market. You can read his full report at http://www.photon-magazine.com/news/ww%20ms%20Sun%20Screen%20Studie.pdf.

"...the cost of producing photovoltaic modules decreases by ~20% for every cumulative doubling of output. This means that as cumulative output of the industry went from 1 to 2GW, the cost of manufacturing a single watt fell by 20%. With market growth of >30% per year over the last decade, this has translated into >5% annual cost reductions. Based on company interviews and plant tours, there is strong consensus that module cost reductions will contine at least 5%/year through the end of the decade, with potential for even stronger cost reductions. Similar cost reductions are expected for the rest of the solar-power system (including inverters, other components, and installation)."

Japan is the largest PV market by far. According to a chart in the report, in 2003 Japan installed 250 MW of PV. Germany is second with about 100MW and the US is third with about 50MW. According to Rogol at the lecture I attended at MIT in October 2004, California is the primary US site for PV and would be the third largest consumer of PV even without the rest of the USA.

The average residential power price in Japan is 25 cents per kWh and since 1992 the average PV module price has decreased by 7% per year. "While innovation is important, manufacturing process improvement is the main driver of reducing costs... As a top solar scientist said in an interview,'The pipeline of research breakthroughs is huge, but the real challenge for the industry isn't in the labs, it's on the plant floor. There is so much more we can do to improve economics by improving our manufacturing systems. Manufacturing process is the key for this industry for the next 10 years.'"

If that statement is true, then government incentives to increase production, build the market, and engage economies of scale may be just what is needed.

"In Japan, the national government provides payouts to individual households that purchase solar systems of ~US$500/kW (~7% of total installed system cost) and banks offer consumer loans/mortgages with 1-2% point reduction for solar homes.... In addition, cost improvements in the solar sector and price increases for grid power enable solar to be more competitive each year regardless of incentives. This is already happening in Japan, where government incentives for residential installations were cut in half this year and will be eliminated by 2006. Despite the reduction in government support, all of >25 Japanese solar companies interviewed believe that the domestic Japanese solar market will continue to grow >30%/year through 2010. Our visits to solar retailers, installers, and customers support this strong growth outlook. In short, Japan appears to have successfully supported the growth of its PV market with incentives and is now in the process of removing those incentives without disrupting market growth."

Rogol interviewed many of the most important people at most of the major PV manufacturers world-wide and based his report on the information he gathered. He is quite impressive, as is his report.

Anybody can believe anything they want to and make whatever assertions and assumptions they feel like. However, I'd like to see some references, facts and numbers that validate those assumptions and assertions. Until then, I can only consider them "a fantasy."

Engineer-Poet said at June 29, 2005 2:37 PM:

Hydrogen is definitely not the solution.  It is too bulky, and the cells to use it are far too expensive to replace internal combustion engines and will almost certainly remain so for many years.

On the other hand, zinc has some very useful properties beyond just being a good battery material.  I'm going to be blogging that, probably this evening - it's a bombshell.

Engineer-Poet said at June 29, 2005 6:22 PM:

I wrote my entry
The numbers weren't what I thought
Many surprises!

Nick said at July 18, 2005 3:30 PM:

Hmm. So, Randall, are we agreed that it is appropriate to introduce a charge into energy accounting to account for pollution, and other external costs? If so, then the question is how much that should be. The estimate I saw was $.04 to $.15 per KWH for coal. I agree, it's frustrating that no one has provided the detail for such an analysis. And yet, we should take a shot. I have to believe that the costs are significant (for instance, Warren Buffet has been making big noises about the cost risks of climate change to the insurance companies that he owns - he seems like a pretty credible source). What would your estimate be, as a starting point?

2nd, on Price-Anderson, if hard headed insurance companies see nuclear risks as too great to insure, they seem like a pretty good authority that the risk of large costs is real. Would you agree that Price-Anderson constitutes a subsidy?

Randall Parker said at July 18, 2005 4:25 PM:

Nick,

I have no idea what the external costs are from coal. Any estimate has to show what its assumptions are. Problem is that any assumptions would include some wild guesses. What are the health effects of particulates? What are the health effects per ton of sulfur or nitrogen oxides? How much of mercury in fish comes from coal versus chlorine plants (which produce more mercury) versus natural environmental sources? Heck if I know.

No, I'm not going to take a guess because I have no idea.

As for climate change: the net effect of global warming might be beneficial.

Price-Anderson: Do you think government set limits on insurance requirements for car drivers are subsidies?

Nick said at July 19, 2005 9:22 AM:

Randall,

All I can say on pollution costs (including global warming) is that I think we have to be realistic. Sadly, I don't have the time to research warming myself, but I think there is a danger of wishful thinking. The most convincing thing to me about global warming is that there is clearly a consensus in the profession that deals with this-climatology. There will always be skeptics - heck, look at evolution, where there isnít even big $ at stake. You might ask yourself: what would it take for me to be convinced?

I think it's helpful to come to some working assumptions and estimates on costs. Anything else seems to me to be avoiding the issue.

On Price-Anderson: Iím not clear what you mean. Are these state limits? Are drivers not liable for damages over the limits? In my state, if youíre underinsured, an award over the limits would just come out of your pocket. The only state mandates are minimums.

Randall Parker said at July 20, 2005 9:16 AM:

Nick,

On pollution costs my guess is that the coal generators create lots of costs for others that do not show up in the price of electricity. Obviously if you get sick from breathing coal pollution you can't sue the coal plant operators. Proving the cause would be hard. I favor nuclear power over coal for this reason. I want cleaner air.

People who have few assets can drive around cars with fairly low levels of liability insurance. Then they can through their own error hit someone else and kill them or give them brain damage or make them a quadraplegic. As things now stand the US government does not require people to carry car insurance at a level high enough to pay for any damage they might do to others. This is just like the nuclear power industry. In theory a nuclear plant could have an accident that would cause much greater costs than the Price-Anderson insurance requirements. A nuclear reactor operator might not be able to pay all the costs. Similarly, every day people cause accidents that create costs for others that far exceed the ability of the accident causers to pay. The government lets drivers do this.

Nick said at July 20, 2005 1:50 PM:

Randall,


Well, basically I agree with your thoughts, though with a little different emphasis.

I agree, nuclear looks cleaner than coal. And, yes, allowing people to be under-insured is indeed a subsidy for them, and a bad idea, no question.

I guess it's a question of priorities in energy strategy. I would pursue a number of parallel energy strategies, with the following rough priorities: efficiency, especially plug-in hybrids; battery R&D (vehicle and utility size); PV and wind; nuclear; cleaner coal. I think I would place a little higher priority on wind, and a little lower on nuclear, than you, but I suspect we both agree that we should purse all of these in parallel.

I like market solutions, which includes taxes on oil and coal rebated to income taxes, a tactic which is politically unlikely because of the backlash from voters disproportionately hurt by it. Change is painful, and hard to do. I just think we're postponing the pain (and making it much worse) by not doing something now. I think as a country we're in denial. sigh...

I think nuclear is better than coal, oil and gas, but I find it hard to be enthusiastic about it, given the risks of weapons proliferation, and its protection from liability.

Randall Parker said at July 20, 2005 2:06 PM:

Nick,

I agree we are not that far apart.

I'm glad you agree with me that battery R&D is so important. My view of plug-in hybrids is that battery research is the best thing governments could do to make them more cost effective. But now there is a big tax break for hybrids (I think in in excess of a billion per year but I'm not certain on that point) and the tax break is doing little to make hybrids cheaper. Toyota does not expect hybrids to become cost effective in the United States until 2010.

We'd be better off putting money into electrochemistry research than into subsidizing hybrid purchases. Also, I'd love to see governments instead spend money on making all of their buildings energy efficient. Buildings use more energy than transportation. But energy for transportation gets the bulk of the press attention. This focus of greater attention on cars seems like an error to me.

I'd like to see the Price-Anderson liability limit raised. Has it ever been adjusted since it was passed? My guess is no but I'm not sure. Or would an inflation adjustment double or triple it to restore it to its previous level?

Also, I'd like to know whether the nuclear generators insure for that liability or do they expect to cover it out of assets on their balance sheets? Also, if they do insure for it what is their yearly cost for doing so and what is the fraction of a penny per kwh for paying that insurance cost?

Nick said at July 22, 2005 1:37 PM:

An interesting question: R&D vs. subsidies. I guess I would agree that dollar for dollar, R&D is probably a much better investment than subsidies. Unfortunately, subsidies (especially through taxes) are much, much easier politically than direct expenditures. Also, I have to agree with Engineer-Poet: our current energy policy seems more geared toward policies that are easiest for the energy industry, rather than effective policies that would be disruptive. For example, I hate to say it, but energy storage through hydrogen really does seem to be a deliberate red-herring - I suppose the kindest interpretation is that it's support for a bad strategy by GM. For another example, the Freedomcar program was precisely the kind of R&D thing we're talking about, and the Bush admin killed it.

I'm hopeful that lithium nano-electrodes (like Toshiba and Altair) will pan out. See also the recent ultracapacitor announcement (at $400 per KWH), which (if it pans out) may be the answer for utility scale storage.

Similarly, government energy efficiency (like buildings) is a good idea, but is much harder work than tax changes. sigh. It is interesting to note, though, that the Pentagon is investing substantially in efficiency, hybrids (esp. tanks), solar, wind and battery research.

I'd also be curious about the actual costs of Price-Anderson and insurance. Raising the limits would be a good incremental step.

Dylan said at January 13, 2006 10:59 AM:

Yeah, the whole thing sound like a scam, and they are pushing it hard here in California.

No one talks about the toxic metals in the panels, or the fact that most panels last 25-45 years at which point they will have to be discarded.

They are putting a ton of money into this.

Perhaps it is to reinforce the aforementioned "peak oil" myth that

There is plenty of oil, but the oil companies create an artificial scarcity to up their prices.

Thanks for the great thread... it's hard to find information that might contradict California's brilliant scheme.

Perhaps the prices went up because more Gov. money came in.

Like a 50 dollar hammer...

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