August 09, 2009
Main Battles For Solar Power Cost Reductions In Industry

What is most needed are many small refinements that drop the costs of existing manufacturing technologies. These refinements are best done by industry development teams.

The federal government is behind the times when it comes to making decisions about advancing the solar industry, according to several solar-industry experts. This has led, they argue, to a misplaced emphasis on research into futuristic new technologies, rather than support for scaling up existing ones. That was the prevailing opinion at a symposium last week put together by the National Academies in Washington, DC, on the topic of scaling up the solar industry.

My thinking has been moving along similar lines. 5 and 10 years ago I was a big advocate for more funding of academic research into photovoltaic materials. But as I watch First Solar drive down the cost of manufacturing to now below $1 per watt and dropping I get the sense that the field of battle has really shifted to factories and engineering teams who work on automating PV manufacturing. Companies like eSolar make me think the same thing about concentrating solar.

The meeting was attended by numerous experts from the photovoltaic industry and academia. And many complained that the emphasis on finding new technologies is misplaced. "This is such a fast-moving field," said Ken Zweibel, director of the Solar Institute at George Washington University. "To some degree, we're fighting the last war. We're answering the questions from 5, 10, 15 years ago in a world where things have really changed."

Solar is not a panacea, even if its price drops in half and then again in half. It has the obvious problem that the sun does not always shine. A world insolation map shows that on the worst day of the year insolation varies from one part of the world to another by multiples. Arizona's worst day gets several times more solar energy than Germany's worst day. This is especially problematic for Germany and other northern European countries (and some eastern parts of Canada and Maine) whose electric demand peak is in the winter. Arizona (and even more so Darwin Australia) gets a solar peak when electric demand peaks for air conditioning. So solar works well for air conditioning in some hot climates with sunny summer weather.

The ability of concentrating solar power (CSP) heat to be stored in molten salts for use several hours later makes concentrating solar's potential substantial as a way to supply solar power when the real summer demand peak occurs in late afternoon and early evening. Moderate sized CSP projects in Spain and Arizona are where CSP technologies are getting refined. Arizona is a perfect place for this sort of thing given the very hot summers with lots of air conditioning electric power demand and blue skies. But since these projects need government (meaning taxpayer) subsidies in Arizona they are a long way from making sense in Seattle or Berlin - much less Helsinki.

Share |      Randall Parker, 2009 August 09 01:02 PM  Energy Solar


Comments
James Bowery said at August 9, 2009 2:33 PM:

Why would you mention a company like eSolar that provides no price numbers?

Here are some numbers for solar power satellite baseload. Having come of age in the era of the Shuttle, I never would have believed that earth-launched powersats could be viable. However the recent spate of commercial launch services may make an industrially reasonable learning curve look viable. 10% per doubling is reasonably conservative ILC parameter for a real launch service industry.

jay alt said at August 9, 2009 3:16 PM:

"We need more research' has long been the cry of those who oppose deployment.
Other recent examples: hydrogen cars and 'clean' coal with carbon capture.

First Solar has a manufacturing process that makes turns out rolls of solar cells, not batches in the manner of electronic device manufacturers.
We can thank the Germans and Spanish for providing the market necessary to drive down the cost below $1/watt.
Similarly, FS can now by cheaper four-9s pure Si rather than six to seven 9s needed for transistor devices.
PV power never needed silicon of that purity, but without the demand from a steady market, silicon refiners would never have built the
new furnaces used to supply the cheaper silicon.

Those are just the tip of the (melting) iceberg.

Randall Parker said at August 9, 2009 3:30 PM:

James Bowery,

Yes, eSolar doesn't provide a way for us to judge their costs. But I get at eSolar's costs indirectly.

PG&E filed for permission to build a site with eSolar and when they did they claimed in their filing that a rate hike was not necessary since eSolar's CSP is competitive with natural gas for peaking demand. Now, that claim depends on future prices for natural gas - which has been pretty cheap since the financial meltdown and the development of cheap ways to extract shale gas. But eSolar sure don't sound high cost.

jay alt,

I'm coming around to Engineer-Poet's argument that subsidies for deployment will bring down costs faster than subsidies for research. He's been telling me that for maybe 5 years. I think he's right.

Robert Sperry said at August 9, 2009 5:02 PM:

As a economic strategy taxing coal, natural gas, and oil is a much better way to spur alternatives than to directly subsidize a particular company or technology. It is less subject to political manipulation, which is probably why its not done. In this way there is a subsidy for all the alternatives.

energydude said at August 9, 2009 5:33 PM:

Roughly speaking there are 3 cost items to a solar system; solar modules, inverters and balance of system material, and labor and overhead to install it all. Last year solar modules were half the system cost, but they've now dropped about 25%. Over supply in the market is driving module makers to lower prices and drive productivity. Forecasts are for a drop of another 25% in the next year.

Solar will be the end game. When storage technology and costs improve, the need for the grid goes away. Already in the northeast, I can run a full-featured home for several days except in winter with PV supplying a $15k battery back-up system without even needing the grid. And the wife can't even tell the grid is out.

Randall Parker said at August 9, 2009 5:35 PM:

Robert Sperry,

Taxes on dirty energy sources aren't used more widely because people hate taxes and higher prices. The US Congress is even afraid to raise gasoline taxes to keep up with inflation. So there's not enough money to pay for highway maintenance.

bbartlog said at August 10, 2009 7:36 AM:

Unfortunately the city I live in (Pittsburgh) has truly crappy insolation. It's too bad; I have a section of nice south-facing roof, but after doing the math it's clear that I won't be installing solar anytime soon. At least power is moderately fungible, though - more solar installations in Arizona means more other power generation freed up for those of us who live in cloudy northern areas...

anonyq said at August 10, 2009 8:58 AM:

There is no need for molten salt storage as solar is produced during peak consumption so there is no need for storage until solar produces a high percentage of total power.

Bill Woods said at August 10, 2009 10:45 AM:

"... solar is produced during peak consumption ..."

Solar production peaks in the middle of the day. In most places, demand peaks in the late afternoon or evening. See today's electricity consumption in California: http://www.caiso.com/outlook/outlook.html If you have solar without storage, you still also need some other source of power.

Nick G said at August 10, 2009 11:44 AM:

Bill, California may peak today between 3 and 6 at roughly 42GW, but there's still 36GW of demand at noon. That's enough to accommodate a lot of solar. Remember that if the sun goes away, so does a lot of A/C demand.

Also, please note that consumption is peaking late because most residential consumers still have artificially flat pricing. Start charging 3 times as much between 3 and 6 pm, and that peak will flatten out. PG&E, for example, is in the process of rolling out smart meters to all of it's customers, and all other utilities are required to offer them. We'll get there.

hjb said at August 10, 2009 12:48 PM:

Storage is really moot. If we need to, we can split water to make Hydrogen at the plants. That Hydrogen can then be burned when the sun isn't providing adequate energy (which yields water again, which can be split at a later point). This would be especially useful at a solar-concentrating plant which already uses steam turbines for generating power. Alternatively it could be run through fuel cells to generate energy in a non-steam plant.

But as others have pointed out, we have a long, long, long way to go before Solar provides enough of a percentage of our power that we would have a wasted surplus. Today, we have a core power-generating infrastructure that is running constantly, and can scale up its power generating capability a moderate amount (by burning more coal or natural gas). Supplementing that, we have peaker plants that tend to burn Natural Gas and can be started up relatively quickly and provide daily doses during peak times.

As long as solar generation's capacity cannot exceed the excess capacity of the Core plants and the Peaker plants, we will never be wasting the energy. Instead, those fossil fuel sources will only burn additional fuel when Solar runs low, and will conserve while solar is running high. In essence, we are "storing" the excess power generating capacity of the entire grid in unused fossil fuels.

There might be a day when Solar Generation is such a substantial portion of our grid that we start shutting down peakers and core plants that could fill in during shortfalls, but those days are a long way off.

Orion said at August 10, 2009 2:45 PM:

With the development of a smart grid it becomes less important to site the power plant as near as possible to the consumers. Go superconducting and New England's PV plants could be located in Arizona. Pumped-storage, where you either raise a liquid from a lower to higher reservoir or compress gas in a sealed cavern is probably the most efficient method to store excess power.

Powersats are not going to be economic until we can build and launch them from the Moon. The step up to LEO is just too expensive (I'll leave space elevators and tether discussions for another time). The 1/6g gravity of the Moon and the wide availability of raw materials in the regolith makes Moon manufacturing extremely attractive for space enterprises. However it's going to be a long, long time before that starts up.

billb said at August 10, 2009 5:07 PM:

Why no discussion of the most economical solar application which also provides the most rapid pay back? THERMAL! Domestic hot water.

M. Simon said at August 10, 2009 5:36 PM:

As a economic strategy taxing coal, natural gas, and oil is a much better way to spur alternatives than to directly subsidize a particular company or technology. It is less subject to political manipulation, which is probably why its not done. In this way there is a subsidy for all the alternatives.

Of course. Strangling the American economy and sending jobs over seas is the best way to support solar. As opposed to using it where it makes economic sense (lower cost than other options). One way wastes capital the other way increases it.

The market for solar in Germany and Spain has collapsed due to governments pulling their subsidies in the downturn. Just what we want. An industry dependent on government rather than real profits.

M. Simon said at August 10, 2009 5:45 PM:

I love people who can't run the numbers.

Storage is really moot. If we need to, we can split water to make Hydrogen at the plants. That Hydrogen can then be burned when the sun isn't providing adequate energy (which yields water again, which can be split at a later point).

Conversion from electricity to H2 - about 50% loss. Conversion of it back to electricity thermally - about 50% loss. i.e 75% total loss. The electricity had better cost less than 1/4 of current costs or the capital invested is wasted.

I love American who can't do numbers. They are such easy marks. I have this solar storage scheme I'd like you to invest in. All the technology is known and proven. Care to pony up for a sure thing? The utility companies are too stupid to figure it out. But I'm really smart and together we can make billions.

AST said at August 10, 2009 6:57 PM:

Just tell us what the overall cost of an average household's electricity will be using solar panels versus buying it from power companies. The manufacturing cost per watt doesn't tell me much. All the rest is camouflage. This is what I hate about all the talk about alternative energy. They never give us a clear bottom line comparison in cost, that allows us to determine for example, what it will really cost to drive an electric car and be rid of smokestacks and smog.

Until we get that information, the whole green movement just resembles a big shell game.

bbartlog said at August 10, 2009 6:57 PM:

The electricity had better cost less than 1/4 of current costs or the capital invested is wasted.

It's more complicated than that. At the margin, your installation just needs to be cheaper than existing electrical supplies (and pay for the capital costs with the profits). If you then also turn out to have occasional (effectively free) excess production, as is likely with solar, wind, or hydro, you have to compare the capital costs of the storage and release mechanism to the cost of producing off-peak electricity by other means. Your argument holds true only for energy production where the marginal cost of production is reasonably close to the total cost per unit (probably true for most fuel-based technologies but far off for things like hydro or solar).
Your percentage efficiencies are probably about right for currently deployed gear, but electrolysis and (for example) hydrogen/oxygen fuel cells can both hit 70+% efficiency in the lab. Not saying we'll see that tech rolled out in production anytime soon but 25% recovery is by no means the highest we can hope for here.

I love people who can't run the numbers.

A little learning is a dangerous thing.

bbartlog said at August 10, 2009 7:02 PM:

The manufacturing cost per watt doesn't tell me much.

Unfortunately, the cost of capital, the cost of installation, and the insolation of the site are all huge variables when it comes to calculating the cost per kilowatt-hour. The reason companies can't provide you a simple figure is because those things are not fixed quantities.

Randall Parker said at August 10, 2009 7:44 PM:

AST,

In order to tell whether solar will pay off for you where you live and whether you should buy now you have to take into consideration many factors:

- current electric prices from your local utility.
- expected future electric prices including possible future dynamic pricing (which would make solar more attractive).
- insolation by time of year at your location.
- local utility regs on utility prices paid (if any) on surplus PV when you aren't using it.
- your pattern of demand by time of year.
- state and federal tax credits.
- your cost of capital. What interest rate will you pay on the money you use to install solar?
- current cost of the solar install.
- future expected prices for solar. Do not buy right before the price falls.

This is a lot to consider. But if you live in SoCal, Arizona, or New Mexico the likelihood of a pay-off is far greater than in Seattle, Ann Arbor, or Nova Scotia.

For some of this stuff you can find calculators on the web. Companies that install solar have calculator spreadsheets and web sites and will provide info about how they calculate.

I can tell you one thing: right now PV prices are dropping. I expect further price drops due to declining production costs.

Anonyq said at August 10, 2009 8:03 PM:

bbartlog

So it 70%x70%. I will make it a round 50%. Pumped storage is at least 70%.

Randall Parker

SoCal, Arizona, or New Mexico have a lot of hydro power/potential pumped storage which lowers max. peak price. That is much more important for solar than the difference in light which surprising isnīt that great between Arizona and Nova Scotia

John Biddle said at August 11, 2009 6:41 AM:

Randal Parker, That's a good list, and it points out just how difficult it is to made a sound investment in this area.

But there's even more! What will happen when solar prices come down enough and people put in enough systems to have a negative financial impact on the electric utilities? These politically well connected entities will not sit back and take losses. How will they change their behavior to prevent it? I don't know but I can guess. There's no end to the creativity, but one simple way is to cut how much they'll pay people for supplying power to the grid, or stop buying it at all. This and other potential changes that could easily happen adds substantial risk to the calculation, making it even harder to justify.

One problem with much economic analysis is that it's static. But behavior changes as conditions change, so assumptions used for predicting revenue streams or savings can go right out the window.

K said at August 11, 2009 1:03 PM:

John B: I think you overstate the political clout of utilities.

In the U.S. they tend to be regional and rates are tightly regulated by state commissions. In some cases they are owned and operated by the cities themselves - Los Angeles is an example.

But there is some clout. Many electric utilities are owned by holding companies that are often engaged in other activities. A prime example is Duke Energy working in China and about a dozen other countries. Their clout is focused on national grid issues and emissions rather than on local rates.

Utilities are under (usually) statte mandates to boost alternative energies. And some of those mandates are tough to meet. Thus utilities are delighted when homeowners help them by adding PV roofs. A big reason is rebates and/or tax credits. The utilities get credits for sharing the costs for the installation. In some places they alos get rate overrides and pass the cost of alternative energies to customers.

Credits and rebates vary at the whim of Congress and the state. Some have been extremely generous. Possibly less so now that governments are frantic for revenues.

I live in Arizona which has plenty of room for the concentrated solar which I think is better for utilities. And plenty of benefit from PV on buildings. My electricity cost is about $70 in winter and almost $300 in summer. Part of that is water heating which can run on in all seasons. But the difference is for air conditioning which can run from PV.

Paul said at August 11, 2009 2:16 PM:

But there's even more! What will happen when solar prices come down enough and people put in enough systems to have a negative financial impact on the electric utilities? These politically well connected entities will not sit back and take losses. How will they change their behavior to prevent it? I don't know but I can guess.

I can tell you just what will happen. It's not even obvious the utilities would be in the wrong.

What grid-connected solar customers are doing is exploiting the grid as a source of backup power. The utility has to provide this even if the customer is not usually going to be consuming the electricity. This imposes fixed costs on the utility.

What the utility would do is charge a flat base fee regardless of the KwH actually consumed. This is the (amortized) cost of supplying the backup capability. On top of this, there would be a per-KwH price (which might be smaller than currently.) Utilities would offer discounts if your demand were made dispatchable (under utility control).

Already large utility customers (like steel minimills with electric arc furnaces) have "take or pay" contracts, because the utility has to devote nontrivial resources to supply their huge appetites.

Randall Parker said at August 11, 2009 8:11 PM:

Anonyq,

In my post I linked to a world insolation map that shows a very large difference between Arizona and Nova Scotia. Look at the map.

One big factor that makes the economics different: The differences in insolation by month varies far more at some locations than others. See this chart of insolation by month of year for a list of cities in Canada. Halifax gets 4.16 times more solar energy in July (5.41 kWh/m2/day) than in December (only 1.3). That's a big problem for Halifax because Nova Scotia electric power demand peaks in winter, not summer.

In Oslo Norway insolation varies by a factor of 25 from summer to winter based on monthly averages. Oslo also has winter peaking electric power demand. You'll notice in that table of Europe the ratios between best and worst months are less than 4 for some southern European cities. In those cities solar is relatively more practical than in most of Germany or Scandinavia. Still, it doesn't work great for those cities in winter time.

A lot of South American cities have huge differences in monthly average insolation. This even is the case for Lima Peru. That's got to be due to cloud cover. Lima's too close to the equator for the Earth's tilt to be responsible for most of the difference.

Micha Elyi said at August 12, 2009 1:12 AM:

"...people hate taxes and higher prices."
--Randall Parker

Thank God for the ignorant masses.

"The US Congress is even afraid to raise gasoline taxes to keep up with inflation. So there's not enough money to pay for highway maintenance."

Fiddle with taxes all you want, there will never be "enough money to pay for highway maintenance." Why? Congress-droids are rewarded far more for new highway lane-miles than for patching up the ones already in place. So the tax take is diverted toward laying down more paved miles and away from maintenance. We end up with exactly what we've got - a way, way overbuilt highway system.

anonyq said at August 12, 2009 5:43 AM:

Randall,

Nova Scotia's electric power generation also peaks in winter because of co-generation in which electricity is almost a by product of heating.

Randall Parker said at August 12, 2009 6:29 PM:

anonyq,

Nova Scotia peaks in winter for a few reasons:

- they don't need a lot of A/C in the summer.
- they use electricity for heating (e.g. ground sink and air sink heat pumps).

Co-generation: I haven't come across reports on it for Nova Scotia. You got any links on how much it is used? I do come across reports of community heating in parts of northern Europe and Russia though.

Micha Elyi,

Where's your evidence for an overbuilt highway system? Speaking as someone in SoCal the highways do not seem overbuilt. The 101 is too narrow for the traffic. I come across busy highways in Michigan and some other states I've been in too.

Engineer-Poet said at August 13, 2009 12:57 PM:

There's no need for the grid to store energy from PV if that energy can be stored elsewhere, as electricity or otherwise.  Examples include:

  • Ice Bear air conditioners, storing electricity as ice to supply cooling later.  These were intended to use off-peak power at night, but morning solar energy supply before other demand ramps up would work fine too.
  • Electric vehicles can take a charge whenever they are plugged in and less than full.  If the excess supply moves from the wee hours to sunny mornings, charging can move with it.

Nick G said at August 13, 2009 2:03 PM:

E-P,

I agree. I was struck by the EPRI Projection of 100M PHEVs by 2030. A lot of possibilities there.

anonyq said at August 13, 2009 5:03 PM:

I don't know the exact energy market in Nova Scotia but i expect Micro-CHP to be big in a few years. But i expect co-generation to be normal with larger build complexes.

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