This is a brief paper I wrote for my "Future of Energy" course at Stanford last fall.
As we renew our march towards a sustainable energy solution, the
solar industry is poised to play a crucial role. While much is being asked of
it, this nascent industry is also faced with extraordinary challenges. This
paper will explore the impediments that remain despite the promise of trillions of dollars and millions of jobs.
THE STAGE IS SET
The opportunity that has been laid at our feet is nothing short of remaking our energy infrastructure, rescuing our economy and saving the environment. Never before has the fate of these three issues been so intertwined. Likewise, never before has public pressure for a solution and political support for movement on these issues been so great.
The time for half measures has run out. The recent tripling in the price of a barrel of crude oil and the subsequent collapse has brought moderates and conservatives off of the fence. It is now clear to most observers that our future energy needs must be met by renewable sources of energy. Whether their reasons are national security, isolationism, environmentalism or capitalism the American people are ready for the transition to new sources of energy. At the same time, the labor force needed to create this great change is looking for a new job and their factories have become available for the creation of new products. Even the transportation industry professes to be ready for a complete overhaul.
It seems the stars have aligned for the transition to renewable sources of energy, yet success is not guaranteed and the headwinds against this great transformation remain exceedingly strong. We will now explore the barriers to energy success through the lens of one of the pillars of the new energy paradigm, the solar industry.
THE SIZE OF THE PROBLEM
Estimates for the portion of the future energy supply that will need to come from solar vary, but it is safe to say at about a third. Since both the United States and the World produce less than 1% of their energy from solar power today the size of the shift is tremendous. Another way to look at this, however, is through the potential of various energy sources. For the world to generate its’ entire energy needs from solar, it would only need to capture .02% of the potential capacity (89 PW of solar power fall on the planet's surface).[i]
Whether this transition takes 10 years or 100 years, the barriers to implementation remain the same. The following will attempt to summarize these impediments to implementation under the categories of markets, people, infrastructure, legislation and technology.
MARKETS
Perhaps the greatest
challenge and opportunity lies with markets. Historically solar energy has been
extremely expensive to produce ($32 per watt in 1979). There is a great
excitement building in the solar industry about the fact that its costs are
closing in on grid parity. But for the massive necessary transition to take
place grid parity alone will not be sufficient. Individuals, corporations and
governments must believe that there is a long-term financial incentive to
change and then they must have the necessary access to capital and equipment to
realize that change.
In the business sector, financing difficulties are quickly being resolved by power purchase agreements. Some of the largest corporate participants, Macy’s and Walmart, use PPA’s to finance their solar installations. Fifty percent of commercial systems were installed in this manner in 2007 and it is expected that 90% will be by 2009.[ii]
Non-Residential Installations by Financing Type, 2002-2009
PEOPLE
For individuals there remain other barriers, including misplaced incentives. This occurs when “energy decisions made by an agent of the consumer are not in the consumer’s best interest (e.g., a landlord does not install energy-efficient appliances because the renter pays the energy bills)”[iii]
Personal solar installations must also become cost effective on a reasonable timeline. People need to be able to see a return on their investment at least in the time that they expect to be in the home. This may mean 5 to 10 years instead of the current 20 year return on investment. This can be accomplished through tax incentives, private investment and leasing arrangements, perhaps in combination with public no-interest loans. These agreements could be financed along with a house or new electric vehicle or they could be mandated by local building codes as a way to meet federal guidelines.
Even with all of these incentives, “if consumers cannot identify the relative advantage of solar power over their current sources of power, which is supplied readily and cheaply through a main system, it is unlikely that adoption will follow.”[iv] This is commonly referred to as the “locked-in effect” and derives from our “long experience with electricity provision by monopoly suppliers and the associated lack of consumer choice and responsibility for product differentiation.”[v]
In addition despite thousands of scientific studies on peak oil and global warming and even though the majority of Americans now believe these issues are a problem, there remains a complacency problem. Public awareness campaigns about consumer options as well as the environmental, financial and national security advantages of solar are recommended.
INFRASTRUCTURE
Even with improved market conditions and public awareness campaigns, some researchers feel that “cumbersome and inappropriate interconnection requirements—including technical, insurance, metering, and billing issues—are single greatest barrier to development of market for customer-owned, grid-tied PV systems.
[vi]
There also remain technical hurdles within the
“transmission and distribution systems, such as the need to accommodate bidirectional power flow and high penetrations of nondispatchable variable generation. Advancements in energy storage may be required to address many of these issues. Systems that can intelligently manage residential photovoltaic (PV) systems with other advanced home energy devices may also offer further enhancements.”
[vii]
Under the current installation and distribution environment there are disincentives for utility companies to coordinate with individual home installations verses large scale installations. The fundamental question here is whether large public and private utilities view themselves as distributors of energy or creators of energy. Much of this may be determined by the incentives created within the legislative environment. The speed of transition, security of the country’s energy supply and the overall cost to the government can best be served by the simultaneous development of industrial, commercial and private installations. Federal regulations should remove the barriers to grid participation by these groups immediately. Perhaps a mandated separation between energy distribution and production would better align utilities with current societal energy goals.
LEGISLATION
Congress’ recent 8 year extension of tax incentives for solar is a hopeful sign for legislation to come. Like this piece of legislation there is additional red tape to cut and incentives to be realigned. Two incentives are immediately apparent, the elimination of all oil and coal subsidies and the removal of caps for individual tax credits from solar installations.
At the federal or local level, governments can mandate that new construction meet energy creation and conservation requirements. At the very least any building getting subsidies or zoning preferences should be required to meet minimal energy efficiency and production standards.
If there is any doubt that legislation works, California provides good guidance. Its mandates have created and environment in which, Pacific Gas and Electric (PG&E) now produces 50% of grid connected PV energy in the United States. In fact the top 10 of the more than 3000 US utilities create 97% of grid connected PV energy.
In Spain new homes have to be equipped with solar panels to provide between 30 and 70 percent of their hot water, depending on where the building is located and on its expected water usage. New non-residential buildings, such as shopping centers and hospitals, now need to have photovoltaic panels to generate a proportion of their electricity.
TECHNOLOGY
A few technical solutions have already been discussed in
infrastructure, but one key technological development that needs legislative
assistance to be effective is time of use net metering. “Instituting net metering rules and simple, consistent
interconnection standards is critical to all developing solar markets.
Technology and equipment (e.g., advanced inverter and controllers) that allow
real-time monitoring of the output of the solar system will also benefit both
owners and utilities.”[viii]
Time of
use net metering can play a duel role. Not only will it motivate a transition
to solar by rewarding an energy source whose peak performance coincides with
peak usage, but it can also encourage consumers to use electricity more
efficiently during high priced periods.[ix]
MINERALS
While overall production costs for solar energy continue to dive, there are a few rising costs on the horizon, particularly in the materials that are used to create PV cells. While much ink has been spilled over the impending silicon shortage, recent studies suggest that this will be a short lived phenomenon. “We believe the shortage of silicon will dissipate, if not disappear, sometime before 2010. At that point, we believe that silicon suppliers will have begun to bring enough silicon feedstock online to meet the needs of both the global solar PV and computer-chip industries.”[x] Due to the abundance of silicon available and the diversity of minerals being used to create the next generation of solar energy, minerals are not included as a weak link in the supply chain.
HOPE
The individual efforts, legislative incentives, tax credits, innovations and financing that have happened to date are critical but they are also only a spark. The SEPA Challenge calls for a thirty fold increase in solar capacity by 2016. “If realized, this level of increased solar deployment would represent more than 60 billion kilowatt-hours of solar generation, over $230 billion in total investment, and 440,000 permanent jobs and associated economic development benefits.” This challenge should be turned into a minimal requirement.
A moon effort may not be big enough for the coming challenge. Instead of the effort of one government, what is called for is a private / public, multinational, effort with armies of engineers and laborers remaking every habitable space and mode of transport. The daunting truth is that we have run out of options. The opportunity is that we have no other option.
[i] Tester, Jefferson W.; et al. (2005). Sustainable Energy:
Choosing Among Options, The MIT
Press. ISBN
0-262-20153-4.
[ii] Non-Residential
Installations by Financing Type, 2002-2009
http://www.greentechmedia.com/reports/research-report-solar-power-services.html
[iii] Brown, M.A. (November 2001). “Market Failures and Barriers as a Basis for Clean Energy Policies.” Energy Policy (29:14); pp. 1197–1207.
[iv] Faiers, A.; Neame, C. (September 2006). “Consumer Attitudes Towards Domestic Solar Power Systems.” Energy Policy (34:14); pp. 1797–1806. doi:10.1016/j.enpol.2005.01.001
[v] Fuchs, D.A.; Arentsen, M.J. (May 2002). “Green Electricity in the Market Place: The Policy Challenge.” Energy Policy (30:6); pp. 525–538. doi:10.1016/S0301-4215(01)00120-3
[vi] Florida Solar Energy Center (March 2000). Florida Photovoltaic Buildings Program: Status Report, Observations and Lessons Learned. Cocoa, FL: Florida Solar Energy Center.
[vii] National Renewable Energy
Laboratory (NREL), Solar Energy Technologies Program. http://solar.energy.gov
[viii] National Renewable Energy
Laboratory (NREL), Solar Energy Technologies Program. http://solar.energy.gov
[ix] Brown, M.A. (November 2001). “Market Failures and Barriers as a Basis for Clean Energy Policies.” Energy Policy (29:14); pp. 1197–1207.
x Pernick, Ron and Wilder, Clint, (September, 2008)
The Clean Tech Revolution
Collins Business ISBN-13: 978-0060896249
Additional resources:
Margolis R. and Zuboy J. “Nontechnical Barriers to Solar Energy Use: Review of Recent Literature”
NREL, September 2006
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