This post asks the provocative question whether solar PV is really market ready yet. It goes on to suggest that it might be counter-productive for the long term growth of the sector to push solar photovoltaic adoption rates through the use of government subsidies, making the point that this may in fact be slowing down the adoption of needed innovation and process improvement that should ultimately make renewable energy more affordable.
On Monday, Matt Hunter of CNBC asked provocatively “Does the Solar Industry Have a PR Problem?” The story was based on a fall study done by students at the SJSU Sbona Honors Program, and as someone who helped mentor the students, I was proud to see it published.
However, the conclusions reported by CNBC were different than those of the March webinar that discussed the report. To quote from Hunter’s report:
See our related post: “DOE SunShot Initiative Aims for Cost Competitive Solar Energy by 2020“, to read more about the DOE initiative that Energy Secretary Steven Chu was refering to in the quote above.
Hunter quoted another expert that noted the payback period for residential PV is normally 10 years or more.
The reality is that today, solar makes economic sense for some people but not for others. (As Hunter notes, some people who are affluent or “passionate about green energy” may buy it even if it doesn’t pencil out.)
In our related post: “Solar Price Parity Achievable by Streamlining Cost of Permitting“, Bill Roth argues that permitting costs alone will add $1 billion to the price structure of rooftop solar PV over the next five years, and that if permitting process was modernized and codified the savings would help make solar PV achieve grid parity in many more markets than it does today.
There are five things that drive the economics o PV adoption:
- 1 – cost of the system
- 2 – subsidy for the system
- 3 – amount of sun
- 4 – cost of capital to finance the system
- 5 – the price of the substitute (grid power)
The press tends to focus on the first three. However, in talking to people in industry, the real action is where electric rates are high: with PG&E’s tiered rate structure, running an air conditioner in the Central Valley is prohibitively expensive and thus even an expensive PV system looks attractive.
Certainly the “grid parity” curves on PPT decks for the past decade assumed increasing fossil fuel prices (which may be a false assumption). In places like the Central Valley — or especially Hawai‘i — the substitutes are already expensive enough to make solar cost-competitive.
As it turns out, on Monday I had a farewell lunch with one of my coworkers, Gita Mathur of the SJSU College of Business. Gita noted that her 1985 first doctorate (of two) was on GaAs photocells, and the lab efficiencies she was demonstrating 25 years ago were almost the same as those for commercial products today. In her view, the subsequent innovation was mainly in the packaging — reducing the balance of system costs (including labor) to get those cells installed and available to generate power. This is certainly the area where industry continues to make strides, and in fact the basis of the low cost (and low efficiency) thin film startups. [See: Solar Takes Another Step Towards Grid Parity]
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