A recent article breathlessly
noted “And the Cheapest Electricity in America is…Solar!” The
implication is that solar has become cheaper than other forms of
electricity, but the reality is that the story describes how one
contract for solar power came in at a very low price. And the story is like a bikini, more interesting for what it conceals
than what it reveals.
The price is given, but there is no indication if
that price is fixed for the life of the contract, adjusted for
inflation, or inflated in some other way. Some contracts have escalator
clauses that affect the actual cost of the power, but I can’t locate any
information on this particular one.
(Word to the wise: In attempting to find out what sort of contract
and price clause I could get from a solar provider, I entered my
information on a website and since have been overwhelmed with junk calls
from solar power installers/companies. It seems to be very difficult to
find a standard contract.)
Also, solar is not the cheapest electricity in America. Rather, the plant discussed in the story, First Solar’s Playa Solar 2 project, which
is located in Nevada, produces solar power cheaply. Given the location
and size of the plant (100 MW in Nevada), this should be just about
optimal for achieving low-cost power from solar panels. Which implies
that other locations will be more expensive; the National Renewable Energy Laboratory suggests that
New England and the upper Midwest receive one-third to one-half the
solar energy of the Southwest. Additionally, many residential rooftop
installations will not be oriented precisely towards the optimal angle
to receive the maximum solar radiation, meaning a further loss of power
compared to utility-scale installations.
And the story doesn’t appear to take into account the government
support for solar, which appears to reduce the cost for this plant’s
power by about one-third. Nor does it mention the cost of backup power
to cover the low capacity factor and times off-line, which are
admittedly less in Nevada than in New England.
It is also directly contradicted by a story about NRG, one of the
most avid promoters of solar and renewable energy, reducing its exposure
to solar by splitting off its solar operations into a separate company
because it wanted to focus on “good and near-term returns.” And in
countries like the UK, where the government suggested reducing
exorbitant prices paid to producers of solar electricity, producers expressed outrage.
Solar power has become much cheaper, but unlike nearly any other kind
of power, the cost is highly variable and dependent on local
conditions, primarily because of weather conditions but also due to
different levels of infrastructure. The Sahara Desert has ample solar
radiation, but constructing and maintaining solar plants in such an
isolated place can be expensive, to say nothing of the cost of
delivering the power. The counter example is Dubai, where solar power is
being sold at a low price into an advanced electricity grid.
And even more, electricity prices are vastly different around the
world, in large part because fossil fuel prices are far from uniform.
Primarily, natural gas prices are now three to four times as high in
Japan, Korea and Taiwan, which import LNG, than in the United States.
European prices are at least twice as high. However, this reflects
mainly the recent high oil prices and the impact of the nuclear power
shutdown in Japan, and the next few years should see sharply lower
prices around the world. Not as low as the US, unfortunately, but the
competitiveness of solar will be correspondingly reduced.
A sensible approach would be to use natural gas turbines in Massachusetts (build the Kinder Morgan KMI +3.45%
pipeline!) and send the solar power subsidies to the Southwest to
construct utility-scaled projects. Unfortunately, because promoters of
solar power often misrepresent the economics, opponents have more
ammunition to use in seeking to end government subsidies and mandates.
Not that that’s a bad thing.
http://www.forbes.com/sites/michaellynch/2015/10/01/solar-is-cheapest-reality-check/?ss=energy
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