The Tennessee Valley Authority has announced a cap on purchasing of solar power generated by larger Photo-Voltaic installations. The response from regional installers has been typically dramatic. For example, the owner of Sundog Solar declared that this would mean that his company would be "out of business before the end of the year". Tuscon Electric Power has recently cut its PV solar incentive from 75 cents to 10 cents/watt. Local installers predicted "a steep drop-off in sales at the 10-cent level".
The message is clear. Without significant direct subsidies the PV solar industry cannot survive.
PV solar advocates argue that the non-renewable sector has benefitted from heavy subsidies and infrastructure support for almost 100 years. The ability to write off all exploration expenditures, public funding of port facilities and road networks, and government R&D are all identified as direct and indirect subsidies to the oil & gas industry.
I actually have no argument with that accusation. There is a lot of subsidization of the oil & gas industry. However, there is one huge difference between those subsidies and the ones currently enjoyed by the PV solar industry – a difference that PV solar advocates completely ignore at their peril in my opinion.
Oil & gas and the products they produce, including automobile gasoline, aviation fuel, lubricants, and plastics are all absolutely essential to the health of our economy. Without them our daily lives would be impacted in a very serious way. Anyone old enough to remember the line-ups at gasoline stations in 1979 understands how reliant we are on these products, for good or ill.
Having worked in the oil and gas industry for more than 20 years I can state unequivocally that any reduction in the above-mentioned subsidies would translate directly into higher prices for the end products produced. It’s as simple as that. And since the vast majority of North Americans use these products any reduction in "subsidies" would simply be converted into higher commodity prices with little or no savings to the average American or Canadian.
Can the same be said of PV solar? Not at all.
In almost every jurisdiction in North America the local electrical utility already had sufficient dispatchable generating capacity, including a healthy reserve, to supply their customers. The regulated environment they operate in required that. So the introduction of the PV generation that has been added into the mix over the past 10 years has been 100% surplus to existing demand. In a truly free market this surplus electricity would find it impossible to compete with the reliable base-load electricity in place already and therefore would not have been developed.
For valid public policy reasons including the threat of climate change, an over-dependence upon foreign crude oil, and the excessive use of a non-renewable resource, it was decided that extra support was needed to encourage the development of renewable electrical generating capacity.
I actually have no complaint about that either.
But here is the thing.
PV solar generation does not match electricity demand in any significant way despite many statements by PV solar advocates to the contrary. In fact, if we were to implement Time-of-Use (TOU) electricity pricing (which most green energy advocates including myself feel we must do) customers that had installed PV would find they saved almost nothing on their electricity bills because they would generate very low priced electricity and would be paying for high priced electricity.
PV solar fades away to nothing exactly at the time the demand curve starts to rise sharply in the early evening. It follows that some other renewable energy source will have to be relied upon in the long run to meet the peak demand in the evening and into the night.
That source doesn’t exist yet but would likely be wind generation with some combination of a continental smart grid and energy storage. Logically, if that “other” renewable energy source can meet peak demand it can certainly meet non-peak demand so that, once again, PV solar would be 100% surplus to requirements.
In the meantime, PV solar is simply displacing non-renewable generation sources during off-peak times. That means that less coal and natural gas is being burned to generate electricity. Personally I think that is a good thing. But the cost of running the existing coal-fired and natural gas-fired plants has not been significantly reduced. They were designed to be run 7x24x365 and that was an underlying assumption when the construction of these plants was financed.
As a result they can no longer be run profitably and that is an unsustainable situation in either regulated or deregulated markets. And yet, it is impossible to shut any of these plants down because of the unreliability of wind and PV solar.
The result? Taxpayers and ratepayers will have to pay some sort of capacity fee for the non-renewable plants to be kept running inefficiently on standby as “spinning reserves”. They will also have to pay for the construction of new PV solar and wind generation and for the grid improvements required to tie in new renewable sources and for the various subsidies and feed-in-tariffs required to make renewables viable.
Unlike the "subsidies" provided to the non-renewable industry the removal of PV solar incentives would actually reduce the overall cost of electricity and might, in fact, provide more support for other renewable energy sources that would better match peak demand patterns.
At some point in the very near future this “house of cards” will come tumbling down. Artificially concocted RPS requirements will be met, the budget for subsidies will run out, and rate-payers will say “enough is enough”. I would argue that process has already started.
As soon as the demand for PV solar declines significantly there will be too many contractors chasing too few customers which will lead to a major disruption in the industry. The result would be job losses and possibly a serious reduction in the expertise with this technology.
The PV solar industry needs to fess up to the shortcomings of this technology immediately and begin to work to address these shortcomings. As I have suggested in an earlier blog one way to really make solar work as a base-load supplier would be to pair large PV solar installations with Concentrated Solar Power (CSP) with Thermal Energy Storage that would only be used as PV started to fade in the afternoon. That combination could provide relatively economical 7x24x365 solar power.
For residential installations PV solar should be equipped with on-site battery storage of between 10-20 KW-Hours. Of course, the ugly truth of that approach would be that it would probably double or triple the cost of the installation which would make it unpalatable for most customers. The solar industry should agitate for redirection of some of the existing financial incentives to go towards battery storage. Germany has recently initiated such a program.
I have personally been an advocate for solar power for more than 30 years. But it has to be introduced into the grid in a sensible way that will actually allow for the decommissioning of non-renewable electricity generating assets. I don't believe that is happening today and I think the industry is in for a "Humpty Dumpty" sized fall.
Background documents used in the writing of this blog are at http://www.debarel.com/BSB_Library/index.html