Is Solar Power Inherently Deflationary?
The current regrettable financial crisis in the U.S. has completely blinded investors to the importance of solar energy in resolving our energy dependence a year from now. Investors have fled the sector in droves, driving some of the stocks down to IPO lows.
We’ve had two sequential 7 year economic bubbles - the first nurtured by the incarnate bubbleonian himself (Alan Greenspan) and the second one (real estate) abetted by Greenspan to cover up for his Fed policy in the first. In his day, Alan Greenspan was hailed as the King Midas of the United States financial system. But I think it came with a twist - everything he touched turned to debt instead of gold. It's no accident that gold began its historic run just after he left office.
Greenspan kept negative interest rates afoot for far too long in 2003 and 2004, nurturing a mortgage industry that expanded three deviations above the historical norm in 2005-06. It will take a home-price drop to the level of 2000 before homes are once again priced along the trajectory of median income. For all my criticisms of Mr. Bernanke, he inherited a disaster waiting-to-happen from Sir Alan. And to his credit, he has been creative in his efforts to posit a solution for the financial crisis short of taking the whole thing on himself. I'm not sure why he delayed so long, because his boldness in 2002 helped the American economy out of the first jam, but at least he is taking action.
Wall Street has always averred that the best government is one of gridlock - unable to "mess" with it. But the last 10 years of legislators could best be described as "activist ignoramuses". The mess we are in today is a direct result of Alan Greenspan's Fed encouraging the repeal of the Glass-Steagall Act. Here is a link to the sordid history of that event - Wall street financial companies spent $300ML and 20 years of time to get it repealed.
Senator Carter Glass was a former Treasury secretary, the founder of the U.S. Federal Reserve System, and the primary force behind the Glass-Steagall Act. Henry Bascom Steagall was a House of Representatives member and the chairman of the House Banking and Currency Committee. Both of these men knew what they were doing when they wrote this important piece of legislation - a bill that could prevent the United States from falling into another depression at the hands of Wall Street stock and real estate speculators (which is exactly what we have today). Steagall agreed to support the act with Glass after an amendment was added permitting bank deposit insurance (this was the first time it was allowed).
Back to solar energy. As I have said in previous articles, once a process of solar epigenesis is embraced on a national level, the investment premise will be similar to the former "next new things" in technology that preceded it - computers, networking, the Internet, and cell phones.
New applications of electricity generation will seep into every aspect of energy production - and with them - new inventions and new uses for them. The main thing is the adoption of the "first principle", and from that, the subsequent categories will naturally develop. If you look carefully at the expensive technology (and investment capital) needed to extract fossil fuels from 5 miles under the earth or ocean, and compare that with the technology needed to extract electricity from the sun, you can see that the main debate is levels of cost-efficiency ($) for creating power.
Here's some examples.
- Lighting (lumens) accounts for 20% of all elecricity-usage in the United States. LEDs can now produce the same level of lumens and at better quality (because you can "adjust" or tinker with every level of the color spectrum digitally) at 1/100 the cost of electricity required by our current lighting fixtures (incandescent and fluorescents).
- Pumping water for agriculture accounts for 20% of the cost of electricity in major farming states. Farming is synonymous with sunlight. There are diesel-solar engines in development that can power irrigation systems directly from the fields themselves.
- The average American drives no more than 80 miles a day back and forth to work, and most cars never go more than 200 miles/day. Electrical cars within that range can be powered from rooftop solar-generating systems at home (plug and play) - and at work - which will assist the grid in providing electricity for transportation. The benefits in greenhouse gas reduction and the elimination of transportation fuel expense are obvious.
- Air conditioning to cool homes and for food preservation in the sunbelt of the United States comes at an enormous cost. What kind of cost reduction is possible when 75 million refrigerators, stoves, and air conditioning units are powered by a home-installed solar grid instead of a natural gas fired power plant? And further, what kind of reduction in business costs occurs when several million square miles of warehouse roofs are covered with solar energy materials?
These are just a few examples, but solar energy - like the Internet before it - is a grid-based (networked) application and inherently deflationary [progressively producing more output at less cost ($)]. Just as the Internet created greater access to data and information for individuals, solar energy creates energy independence with an easy-to-do expansion of our existing infrastructure to accommodate it.
I think the United States is in the right psychological place at the right time with the right technology (and the right geography) to revolutionize its energy-production if public policy and public opinion can embrace it.
For investors trapped within our current negativity bubble, take a look at the recent earnings of this European solar equipment maker, Roth & Rau, and take heart.
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This article has 28 comments:
- TanToday
- 95 Comments
Mar 17 10:54 AMThe Brung'ers are the oil interests, and increasingly they are wearing keffiyeh along with the Brooke's Brothers bespoke threads and designer sunglasses.
And that isn't about to change soon.
Until, and unless we recognize that this "crisis" is more a political and willpower crisis than an actual commodity shortage crisis, nothing much will change. Sure, you will have a lot of speeches and hot air about "doing something' but in the end, what has government EVER solved, besides a shortage of overeducated doofuses wearing silly hats and standing in front of EVERY go getter, with a clipboard in hand, the other held out, and NO .. NO ... hung around his or her, or it's neck?
- TanToday
- 95 Comments
Mar 17 10:56 AMNow I ask you, how on EARTH is it possible that all of these are trading flat to down as oil SPIKES to ... where is it today, $112?
- frflyer
- 96 Comments
My Website
Mar 17 12:12 PMCheck out this proposal in Scientific American, on how to convert the U.S. electric grid to solar in this century.
Scientific American A Solar Grand Plan
www.sciam.com/article....
How we can have 65% solar grid by 2050 and nearly 100% by 2100, spending much less in public money over 30-35 years, than we now spend just on oil and gas subsidies in five years. When you consider the other $700 billion or so annually in hidden costs of oil, solar really really make sense.
Just imagine what that is doing to our economy. The most expensive option we have is to continue doing what we are doing.
Green Wombat has several articles on progress with solar thermal power plants in California.
blogs.business2.com/gr.../
According to Ausra, one of the solar thermal companies:
"Solar thermal power plants such as Ausra's generate electricity by driving steam turbines with sunshine. Ausra's solar concentrators boil water with focused sunlight, and produce electricity at prices directly competitive with gas- and coal-fired electric power."
"All of America's needs for electric power – the entire US grid, night and day – can be generated with Ausra's current technology using a square parcel of land 92 miles on a side. For comparison, this is less than 1% of America's deserts, less land than currently in use in the U.S. for coal mines."
But no one at FOX news challenged the talking head who claimed that solar couldn't propel a small sailboat, never mind contribute meaningfully to our energy needs.
www.setamericafree.org...
www.monitor.net/monito...
www.progress.org/2003/...
www.eoearth.org/articl...
- supershort
- 114 Comments
Mar 17 12:13 PMSolar is just a small part of our energy picture, but on a cost saving basis, it will take you like 10 years to recoup your investment. Not efficient enough, and they say the costs of the systems are increasing, so I don't think that solar energy the way it is now will be that important in the future. Hydrogen power is more promising.
Nuclear power is the answer for the most part to our need for energy, plain and simple. It is very efficient and low cost per unit power.
- batengineer
- 2 Comments
Mar 17 12:57 PMNuclear is the most expensive means to generate electricity, unless you ignore the decomissioning costs.
- vitamin_j
- 34 Comments
Mar 17 01:53 PMI also don't know where you get this "they say the costs of the systems are increasing." Who is this "they," and to what systems to they refer? Sunpower has laid out a plan to cut installed system costs in half by 2012. Suntech is going to do them one better. While a silicon shortage has kept panel prices high, silicon production will more than triple over the next two years, more panel makers are getting in the game, so panel prices have nowhere to go but down. Competition is going to become fierce and bloody, in fact. And that's just for traditional silicon based PV panels - Nanosolar is selling 3rd Gen CIGS panels that generate at the price of coal - their main question is, can they scale?
Meanwhile, Akeena has designed an EZ install panel that cuts other system costs like labor and racking.
And that ten-year payoff you describe for a system (I assume your "investment" refers to a solar system, not a solar stock)? It's well worth it for a system that is guaranteed for 25 years by panel companies (and may last even longer, given past panel performance). It also assumes that electricity rates in a place like California remain flat going forward vs going up more - not too likely, right?
Yes, I have skin in the game (long Suntech and Akeena). Yes, I believe in solar from an ecological perspective. Yes, it's not going to be a fix-everything energy solution for the next five years (more nuclear could be needed too) - still a lot of growing for the industry to do. And yes, it may change a lot from its current form. Or perhaps not change, but diversify into a wider package of solutions.
However, I think that you really can't dismiss solar at this point. The subsidies needed to get the industry to grid parity (in the 2012 to 2015 realm) are nothing compared to the money our government already gives oil companies, not to mention the billions in defense spending for maintaining security in our Middle Eastern and now African filling stations. I think, long term, it's also the best single energy solution running - think of it as the real, original nuclear power, fusion energy at last. The sun is a giant reactor; all we have to do is find the best way(s) to plug in.
- frflyer
- 96 Comments
My Website
Mar 17 03:59 PM"We import 65 percent of our oil, but 90 percent of our uranium. At a time when state and federal leadership has set goals for "energy independence," reliance on nuclear power would mean depending on technology that requires fuel imported from overseas. Moreover, according to MIT scientists, there is less global supply of enriched uranium than commonly projected and the price has increased more than tenfold over the last five years."
"A report from Argonne National Lab concluded that aircraft crashes could subject nuclear plants to numerous multiple failures that could lead to "total meltdown" even without direct damage to the containment structure."
Don't tell the terrorists.
"Estimates of the cost to construct nuclear power plants are as high as $4,000 per kilowatt, as compared to about $1,400 per kilowatt for wind projects."
"The nuclear industry has long enjoyed limited liability for nuclear accidents under the Price-Anderson Act, which ensures that taxpayers, not industry, will pay for damages in the event of a serious accident."
"Part of our electric rates go to payments to the federal Nuclear Waste Fund, which is intended to fund the construction of the Yucca Mountain repository in Nevada and pay for transportation of waste to the proposed disposal site. To date, Wisconsin customers have paid about $600 million into this fund."
That's just one state.
"Nuclear plant owners are responsible for costs to dismantle retired units, dispose of waste, and decontaminate the site. Each unit has its own decommissioning trust fund, paid for by customers. Wisconsin ratepayers have spent $1.5 billion for the eventual decommissioning of the Point Beach, Kewaunee, and Genoa plants."
Again, that's just one state.
"Some people object to government subsidies for renewable energy projects. What they might not know is that new nuclear plants are being underwritten by tax dollars in amounts infinitely larger than any support being offered to clean, safe energy sources."
www.cleanwisconsin.org...
www.eoearth.org/articl...
- stckpkr7000
- 7 Comments
Mar 17 06:05 PMspwr trades at a FORWARD pe of 15! You have no clue buddy......And by the way, 7-8 years is now the time to recover your costs and produce free energy. Is there an ignore feature on here?
- John C. Briggs
- 1 Comment
Mar 17 08:53 PMI am in the process of putting in solar panels and perhaps I can give some more realistic numbers.
Firstly, the payback time for the solar panels is about 14 years after government support. Without that support, payback is over 20 years. Installed cost is about $10/watt.
The economics are better on larger installations like on large building. So perhaps in that case payback might be 7 years after government support.
But let's not get too carried away, Solar power is not something that pays back quickly. In contrast, I have done a lot of "conservation&quo... investments like a new refrigerator that payback in a short time of like 6 years. Too bad that story isn't being told more widely.
As for the cost of solar panel, they are in fact on the rise. In 2004 they were about $4.32 per watt and now they are $4.82 per watt. This is according to solarbuzz which tracks the prices in the US and Europe carefully each month.
So for all the talk about solar panels decreasing in price, actually they are slowly increasing in price.
My understanding is that solar panels need two things to be practical 1) government subsidy, and 2) high price of electricity. In areas where these two factors do not exist, solar panels sales are very slow.
Thanks
John C. Briggs
- long solar
- 2 Comments
Mar 17 09:50 PMYes Solar is a big threat to the oil and coal industries. But the truth is we don't pay the true cost at the pump of those dirty fuels as they poison our streams and choke our populations.
Oh, and nuclear is an insane proposition with a heap of baggage.
- long solar
- 2 Comments
Mar 17 09:50 PMYes Solar is a big threat to the oil and coal industries. But the truth is we don't pay the true cost at the pump of those dirty fuels as they poison our streams and choke our populations.
Oh, and nuclear is an insane proposition with a heap of baggage.
- Unke AL
- 19 Comments
Mar 17 10:55 PM- Solar Power Comes to My Home
- 1 Comment
Mar 18 12:00 AM- windy city man
- 5 Comments
Mar 18 09:19 AMThe article correctly points out that a consistent public policy is mandatory to shifting our dependence to Solar, WInd and other alternative means of power generation. Localized generation and usage will ultimately get people off the grid with (home) solar generated power fueling electric vehicles.
- jajagabor
- 9 Comments
My Website
Mar 19 09:24 AMHere are some obvious reasons:
Most states charge more in proportion on tag/title costs the newer the vehicle -- so that goes up.
A newer vehicle, if financed (as is usually the case), requires full coverage, and because it is new, ANY coverage on the vehicle will be higher than before. Yet, do you see articles discouraging people from buying new cars and trucks? NO, because that would "hurt the economy." (read: auto manufacturers, insurance companies etc.)
The book value of any new vehicle drops usually instantly at least by $1000-$2000 as soon as it leaves the dealer's lot.
A typical solar installation, in a state with incentives of some type, usually will cost about the same as a new car, and will start paying back instantly in lower utility bills. In addition, solar panels are warrantied for 20-25 years. Automobiles obviously are not warrantied in that range.
Unless the new vehicle is a hybrid, plug-in hybrid, or just plain more economical, there is even the possibility that it will get less mpg than previously, especially since our society generally still puts status on bigger vehicles. And people are vain and silly enough to want such earmarks of "success."
Insofar as nuclear, frflyer really summed the situation up very well. However, I don't think even he mentioned some of the hidden costs, like the reprocessing of spent fuel rods, which taxpayers are socked with. Likewise, while Yucca Mountain was mentioned, there is certainly no guarantee that it will even ever open -- or should. It is said that there are more faults in the earth in that area of Nevada than practically anywhere else on earth. Even if it does open, it is still very expensive to maintain -- and the costs are passed on to us.
In short, it is insane that we didn't initiate a huge transition to renewable technologies ages ago. Read Aldous Huxley's comment on Solar Thermal Power from his 1939 novel, "After Many a Summer Dies the Swan," at my website:
www.simpleandclear.com...
- Arch
- 5 Comments
Mar 20 09:55 AM- supershort
- 114 Comments
Mar 20 04:40 PMYou guys need to do your research on nuclear power. That is one of the cleanest ways of making energy. Our Canucks to the north do well with it and actually sell it to us. France is Nuclear. Safety you say? Gee, I think it’s pretty safe if they use it to propel large ships with a lot of bombs on them, and I never heard of them having any issues.
Solar panels are just a way if someone wants to “go green.” But it isn’t economical or proven long term. Logistically, the home has to face a certain way to be able to fully use it. God forbid there are any trees in the area, just cut them down and increase your carbon footprint anyway.
Solar stocks are the next bubble SPWR has burst, it will just slowly shrivel up now.
- Sterlingman
- 2 Comments
Mar 26 02:41 PMAs for oil. The world will change when the expense to pull a barrel of oil out of the ground costs a barrel of oils worth of energy. Costs of everything we produce (including food) need to be evaluated in energy content - how much energy, in barrels of oil, does it take to produce? And the entire value change needs to be evaluated this way including the energy component of labor.
Solar is the energy source with the least baggage, I agree.
- supershort
- 114 Comments
Mar 27 01:49 AMwww.sanluisobispo.com/...
Given that the average US home requires 9000 killowats that plant will be able to power maybe 20 homes. It will also need backup power, because it won't be able to handle the "peak power" periods.
I think solar has huge baggage. Tremendous amount of land wasted that could be used to plant trees and other CO2 reducing plants and agriculture. The cost of these panels is way too high, and I don't understand why. Silicone has become an incredible cartel it seems, worse than the oil cartels. If they would make these panels cheaper, then the homebuilders could place a few panels on every new home built that would help everone involved. Until that happens, panels will have limited use.
Nuclear power will be our ultimate choice. They will have to build more plants soon and they will. 200/bar oil is in our near future.
- supershort
- 114 Comments
Mar 27 02:16 AM- supershort
- 114 Comments
Mar 27 03:39 AMwww.gasandoil.com/goc/...
- Sterlingman
- 2 Comments
Mar 27 05:15 PMThere is, or has been a shortage of silicon that is the constraint for higher production of PV panels. That is one of the factors keeping the price up. Also, competition globally for panels has driven the price up.
I stand by my square mile statement (1 Sq mile = 640 acres) - I got it from an Ausra press release :
media.cleantech.com/20...
"Ausra said the project, to be located in San Luis Obispo County, will use only one square mile of land and is expected to start generating power in 2010.
"Solar thermal technology provides our customers with a reliable source of clean renewable energy that is ideally suited to meet peak energy loads," said Fong Wan, VP of energy procurement at PG&E.
The plant will burn no fuel, use minimal water, and have no air or water emissions, according to Ausra."
My point is that with energy prices rising the cost of these projects will look like a bargain some day in the not too distant future.
- supershort
- 114 Comments
Mar 27 06:48 PMI would be surprised to see if this actually gets done, on time and on schedule and then produce the amount that they say it will. This may be another waste of our taxes when we clearly don't have the excess to throw away. Proven sources of power will win out.
- long pal
- 4 Comments
Mar 29 03:09 PM- long pal
- 4 Comments
Mar 29 03:22 PM- supershort
- 114 Comments
Apr 21 04:20 PM- supershort
- 114 Comments
Apr 21 04:28 PM- Scott479
- 3 Comments
May 04 05:37 PMThe program is for states which allow you to sell unused juice back to your utility. They design, install, and maintain your panels for the 25 years of your contract. Last I checked your out of pocket is $500 and the fixed monthly fee based on current rates and usage which remains unchanged for the contract.
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