2153. The Consverative Case for Solar Subsidies

By Ben Ho, The New York Times, Januaray 5, 2015

TO many skeptics, particularly on the right, the spectacular failure of the solar-panel manufacturer Solyndra in 2011, after receiving a $535 million loan guarantee from the Department of Energy, demonstrated the industry’s shaky future and the danger of government efforts to subsidize it to success.

Fast forward to today. Solar energy prices have continued to fall rapidly, twice as many Americans work in the solar industry as in coal mining, and last year one-third of new electricity generation came from solar power.

Solar, long viewed through the lens of crony capitalism, has shown the ability to inject real market competition in energy distribution, one of the last monopolies in the energy sector, while improving the efficiency of the grid and putting more dollars in the pockets of middle-class Americans. Conservatives, in other words, need to take another look at solar.

The case for solar isn’t limited to prices and jobs. Consumers want choice. Unfortunately, in most markets around the country, electricity is still one of the few areas where we have virtually no choice over our supplier. Imagine you want to buy a G.M. car, but you were told you can buy only a Toyota. You’d be outraged — yet this is how almost all Americans are forced to procure their electricity.

Solar also solves an efficiency challenge. Right now, demand peaks during the daytime, far exceeding the supply of baseload power. To meet demand, we have invested in a great deal of spare capacity. Most of this capacity comes from coal and natural gas plants that run only for a fraction of the day. According to the Energy Information Administration, outside of peak hours, most natural gas-fired power plants in America used only 5 percent of their total capacity in 2012.

Again, to borrow an automotive analogy, you wouldn’t buy a new car just for those few days you had extra errands. Instead, you’d call an Uber or rent a Zipcar. That’s the same role rooftop solar panels can play for our energy challenges — instead of building another huge plant for a few peak hours, we can build just as much solar capacity as we need.

Critics of solar have often said that it produces only “when the sun is shining,” and that is true. Fortunately, we need energy most during the daytime — making rooftop solar a smart choice for consumers while adding energy to the grid when we need it most.

And while challenges of storage and metering policies remain, both technology and regulatory models have made significant strides. States like California are considering metering policies that incentivize solar consumers to reduce their demand at peak hours and enable them to sell energy back into the grid when the grid needs it most. Technologies like Google’s Nest “smart” thermostat and Tesla’s home battery are making it easier for consumers to monitor their energy consumption and better store renewable energy when the sun isn’t shining.

Of course, conservatives will respond that their core objection remains: Solar functions only because of government subsidies. But there are a couple of issues to consider.

For one thing, not all subsidies are created equal, and the government actually has a good track record in promoting new energy technologies. New developments often face two market gaps that can potentially delay or even kill them: the “technological valley of death,” in which promising advances hit a technical brick wall, and the “commercialization valley of death,” in which an effective technology can’t get to market. Government research labs and subsidies have supported a number of forms of energy — from nuclear energy, to hydraulic fracturing, to photovoltaic solar — through these troughs.

And there’s nothing unique about the government’s support for solar. According to the Congressional Research Service, total government support for the oil and gas sector over the years dwarfs the amount of support for the solar industry.

Furthermore, the solar investment tax credit is pretty smart. It’s structured so that as solar power becomes more efficient, the effect of the credit on each watt produced becomes smaller. Ideally, we would let markets decide the winners on their own, but so long as government is intervening in markets, it should do so in an evenhanded way. Similarly, any government support for the solar industry should be impartial, rather than having government bureaucracy pick and choose favored companies as it does through its loan guarantee program. The solar investment tax credit comes close to that ideal.

And there’s nothing in free-market economic theory that precludes government support. Markets tend to underproduce what economists call positive externalities — that is, the broad social benefits, like a cleaner environment, that aren’t captured on a company’s balance sheet.

Solar panels, and the companies that make them, are replete with such benefits: They eliminate redundant power plants that otherwise lie idle, empower consumer choice and have fewer negative consequences than most other forms of energy. But markets don’t always reflect these, which is why it makes sense for subsidies to enter the picture.

The kerfuffle over the Solyndra collapse aside, many conservatives already agree, and have for years. When I was at the Council of Economic Advisers under President George W. Bush, we believed that an across-the-board energy policy was by far the best approach — and that included solar. From both a market and an environmental point of view, supporting the solar industry should make sense, no matter which side of the aisle you come from.

Ben Ho is an economics professor at Vassar and Columbia. He served as the lead energy economist for the White House Council of Economic Advisers from 2006 to 2007.

1656. Solar and Wind Energy Start to Win on Price vs. Conventional Fuels

By Diane Cardwell, The New York Times, November 23, 2014

A solar farm in Nevada

For the solar and wind industries in the United States, it has been a long-held dream: to produce energy at a cost equal to conventional sources like coal and natural gas.
That day appears to be dawning.

The cost of providing electricity from wind and solar power plants has plummeted over the last five years, so much so that in some markets renewable generation is now cheaper than coal or natural gas.

Utility executives say the trend has accelerated this year, with several companies signing contracts, known as power purchase agreements, for solar or wind at prices below that of natural gas, especially in the Great Plains and Southwest, where wind and sunlight are abundant.

Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources.

In Texas, Austin Energy signed a deal this spring for 20 years of output from a solar farm at less than 5 cents a kilowatt-hour. In September, the Grand River Dam Authority in Oklahoma announced its approval of a new agreement to buy power from a new wind farm expected to be completed next year. Grand River estimated the deal would save its customers roughly $50 million from the project.

And, also in Oklahoma, American Electric Power ended up tripling the amount of wind power it had originally sought after seeing how low the bids came in last year.

“Wind was on sale — it was a Blue Light Special,” said Jay Godfrey, managing director of renewable energy for the company. He noted that Oklahoma, unlike many states, did not require utilities to buy power from renewable sources.

“We were doing it because it made sense for our ratepayers,” he said.

According to a study by the investment banking firm Lazard, the cost of utility-scale solar energy is as low as 5.6 cents a kilowatt-hour, and wind is as low as 1.4 cents. In comparison, natural gas comes at 6.1 cents a kilowatt-hour on the low end and coal at 6.6 cents. Without subsidies, the firm’s analysis shows, solar costs about 7.2 cents a kilowatt-hour at the low end, with wind at 3.7 cents.

“It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these technologies,” said Jonathan Mir, a managing director at Lazard, which has been comparing the economics of power generation technologies since 2008.

Mr. Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available on call from other sources that can respond to fluctuations in demand. Alternately, conventional power sources produce pollution, like carbon emissions, which face increasing restrictions and costs.

But in a straight comparison of the costs of generating power, Mr. Mir said that the amount solar and wind developers needed to earn from each kilowatt-hour they sell from new projects was often “essentially competitive with what would otherwise be had from newly constructed conventional generation.”

Experts and executives caution that the low prices do not mean wind and solar farms can replace conventional power plants anytime soon.

“You can’t dispatch it when you want to,” said Khalil Shalabi, vice president for energy market operations and resource planning at Austin Energy, which is why the utility, like others, still sees value in combined-cycle gas plants, even though they may cost more. Nonetheless, he said, executives were surprised to see how far solar prices had fallen. “Renewables had two issues: One, they were too expensive, and they weren’t dispatchable. They’re not too expensive anymore.”

According to the Solar Energy Industries Association, the main trade group, the price of electricity sold to utilities under long-term contracts from large-scale solar projects has fallen by more than 70 percent since 2008, especially in the Southwest.

The average upfront price to install standard utility-scale projects dropped by more than a third since 2009, with higher levels of production.

The price drop extends to homeowners and small businesses as well; last year, the prices for residential and commercial projects fell by roughly 12 to 15 percent from the year before.

The wind industry largely tells the same story, with prices dropping by more than half in recent years. Emily Williams, manager of industry data and analytics at the American Wind Energy Association, a trade group, said that in 2013 utilities signed “a record number of power purchase agreements and what ended up being historically low prices.”

Especially in the interior region of the country, from North Dakota down to Texas, where wind energy is particularly robust, utilities were able to lock in long contracts at 2.1 cents a kilowatt-hour, on average, she said. That is down from prices closer to 5 cents five years ago.

“We’re finding that in certain regions with certain wind projects that these are competing or coming in below the cost of even existing generation sources,” she said.
Both industries have managed to bring down costs through a combination of new technologies and approaches to financing and operations. Still, the industries are not ready to give up on their government supports just yet.

Already, solar executives are looking to extend a 30 percent federal tax credit that is set to fall to 10 percent at the end of 2016. Wind professionals are seeking renewal of a production tax credit that Congress has allowed to lapse and then reinstated several times over the last few decades.

Senator Ron Wyden, the Oregon Democrat, who for now leads the Finance Committee, held a hearing in September over the issue, hoping to push a process to make the tax treatment of all energy forms more consistent.

“Congress has developed a familiar pattern of passing temporary extensions of those incentives, shaking hands and heading home,” he said at the hearing. “But short-term extensions cannot put renewables on the same footing as the other energy sources in America’s competitive marketplace.”

Where that effort will go now is anybody’s guess, though, with Republicans in control of both houses starting in January.

1405. Relax! Solar Energy Can Save Us, Krugman Says So

By Ted Trainer, May 4, 2014

In a recent article in the New York Times Paul Krugman tells us that the fall in the price of PV panels means that “…we can look forward to decarbonising electricity”, because  “…drastic cuts in greenhouse gas emissions are now within fairly easy reach.”

 There are a few things Paul seems to have overlooked.

The first is that PV cannot meet more than about 4% of world energy demand.  It is generally understood that the limit for PV is around 20% of electricity demand.  This is because PV modules can only produce during the equivalent of about 6 full-sun hours a day, so if they were to contribute 100% of electricity needed then during those hours it would have to be feeding in at a rate 4 times demand, meaning a) a vast amount of PV generating plant would sit idle for 18 hours a day, and b) a vast amount of other renewable plant would be needed to resort to during those 18 hours, and it most of it would all sit idle for those 6 hours.  For this reason the practical limit to PV might be around 15% of the electricity required.

But only 18% of rich world energy use is in the form of electricity, so PV can’t be expected to meet more than about 20% of 18% = 4% of our energy demand.

But wait, what about storing the PV electricity to use at night?  Forget it.  Yes electricity can be stored, but it is very difficult and costly to do this in large quantity.  Your best bet is by pumping water into dams, but even if all dams could be retrofitted for pumped storage the total generating capacity would be about 15% of demand.  

Hydrogen?  Round trip efficiency from PV panel to hydrogen to fuel cell or gas turbine power would be around 20%, and we would need huge quantities of energy intensive and dollar costly plant to generate, compress, store and reconvert hydrogen.  

Well then, batteries?  The world’s biggest grid storage battery system, at Fairbanks Alaska, can store 4 MWh, at a cost of $30 million.  To store the output of a normal big power station for 24 hours would involve capacity to hold 24,000 MWh.   To store this via a Fairbanks system would cost 6 times as much as the power station.   

Locate enough solar thermal plant in the Sahara to supply Europe?  Estimate the cost of doing that.  How about storing energy in the heat tanks solar thermal stations have?  They are starting to build units capable of running for 17 hours on stored heat, but that is nowhere near enough.  And the recently completed Spanish Gemasolar plant with 17 hour capacity cost around $40,000/kW.  A coal-fired power station costs only about $3,100.  

The capacity to store very large quantities of electricity is not on the horizon.  In winter Europe can suffer one or two weeks of more or less continual freezing cold, calm, and cloudy conditions. How are they going to get through these periods on renewables? 

The second major point Paul seems not to be aware of is that several recent studies have found that when all relevant factors are included the ratio of energy produced by a PV module in its lifetime to the energy needed to produce it is not 10/1 as is commonly thought, or 60/1 as some advocates have claimed, but probably between 4/1 and 2.4/1.  

Krugman mistakenly thinks the price of PV is the crucial factor.  What matters most is its Energy Return on Energy Invested.  If a PV panel produces in its lifetime only enough energy to produce three panels it can't sustain an energy-intensives society. Estimates in the literature are that the ratio must be at least 7/1 for a technology to be viable.  The ER for corn-based ethanol is around 1.4.  For coal it is around 20 (…but falling fast.)

A third question for Paul is, where is he going to get the other 82% of energy we use that is not in the form of electricity?  The answer is not biomass; there is far too little available on the planet for that.

How about running as many functions as possible on electricity?  A good idea, but that multiplies the problems involved in integrating highly variable solar and wind energy sources into grids, which means greatly increased costs for equipment, interconnectors, storage, redundant plant and dumped energy.

 “But many experts are telling us it can all be done by renewables, and at negligible cost.”  This is true, but there is a small but increasing number of energy researchers who think those arguments are flawed and that there is a weighty case that it cannot be done at an affordable cost, given the kinds of difficulties sketched above.

“Well let’s forget about renewables and just use nuclear reactors.”  If you are going to provide present rich world living standards to 9 billion people you will need tens of thousands of fast breeders, all involving reprocessing of plutonium…and operated by humans who  never ever press the wrong switch.  You choose.

So, what is the answer?  If the question was, how can we keep our energy-intensive, affluent, growth obsessed society going, then the answer is …  you can’t.   Paul Krugman, like almost all economists, politicians, journalists and business leaders, seems to be totally unaware of the now enormous literature showing that there are savage limits to growth, that we have gone through them, and that it is the over-production and over-consumption of growth and greed society that is generating the many global problems threatening to destroy us.  The magnitude of the overshoot is clear in the common “footprint” figures;  the average Australian or US person is using about ten times as much productive land as will be available per capita in 2050 if it is shared among all expected 9 billion people.  The problems cannot be solved unless we in rich countries not only abandon the quest for economic growth but go right down to something like our fair share of world resource use.

For sixty years now increasing numbers have come to see that the pursuit of growth and affluence has been a terrible, probably fatal mistake and that global problems cannot be solved unless we achieve a historically unprecedented transition to what some of us label as The Simpler Way.  This cannot be done unless some of the foundational structures, assumptions, ideas and values of Western culture are scrapped, including almost all of the current economic system, but, most problematically, also the culture of individualistic, competitive, acquisitiveness.   

Paul is reinforcing the faith that we don’t have to think about such a transition, because renewable energy and other tech-fixes will make it possible for us to go on pursuing affluence and growth for ever.  Well if by 2050 9 billion have risen to the living standards we will have given 3% growth, then  world annual levels of production and consumption will be about fifteen times as high as they are now.  No problem Paul?

A sustainable and just society would of course run entirely on renewable energy, but at far lower use rates than we have now.  Small numbers of people in the Global Eco-village, Transition Towns, Permaculture, Voluntary Simplicity etc. movements are pioneering a "Simpler Way" alternative vision and we have no doubt that it could provide all people with a far higher quality of life than most people in the consumer rat race have now. 

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For the detailed case see The Simpler Way http://socialsciences.arts.unsw.edu.au/tsw/, Ted Trainer, The Transition to a Sustainable and Just World, Envirobook, 2010, and the papers at Simplicity Institute  http://simplicityinstitute.org

1384. United States: A Problem of Demand for Biofuels

By Katie Thomas, The New York Times, April 14, 2014

HUGOTON, Kan. — There is an old joke in the energy business that advanced biofuels are the fuel of the future, and always will be.

A Spanish company, Abengoa Bioenergy, has bet $500 million on robbing that joke of its punch line. In the middle of a cornfield here it is building a 38-acre Erector set of electrical cable and pipe that will soon begin producing cellulosic ethanol, which it calls a low-polluting alternative to petroleum products. This is just as the George W. Bush administration and Congress intended seven years ago with legislation promoting energy independence.

But even as Abengoa and other companies prepare to produce significant amounts of cellulosic ethanol, using corn stalks and wheat straw as opposed to corn itself, the appetite for such fuels seems to be diminishing.

The market is saturated with ethanol from corn. The automobile and oil industries are resisting efforts to increase the amount of ethanol blended into gasoline. And now the Environmental Protection Agency is considering reducing the amount of advanced biofuels required for blending into vehicle fuels this year by more than 40 percent below the original target in the Energy Independence and Security Act of 2007. A final decision is due in June.

“It’s very frustrating,” said Christopher Standlee, executive vice president of Abengoa. “The whole purpose of the Renewable Fuel Standard was to encourage investment to create brand-new technologies that would help the United States become more energy-independent and use cleaner and more efficient fuels. We feel like we are just on the verge of doing that and now the E.P.A. is talking about changing the rules.”

Other things have changed, too, since 2007. A boom in shale drilling has produced a sudden gush of domestic oil. Increasingly efficient cars and a sluggish economy have cut demand for fuel. (In recent weeks, ethanol prices spiked because of transportation problems in the Midwest. Gas stations in several states ran out of gasoline because there was not enough ethanol to blend, but the problem is considered temporary.)

And there is disagreement about the potential for biofuels. Several companies have failed to develop commercial biofuels or have given up trying.

The energy act’s goal of reaching 21 billion gallons of advanced biofuels by 2022 is now considered virtually unreachable, even by biofuel enthusiasts. “It would take an enormous effort of deploying capital and labor and engineering,” said Paul Winters, a spokesman for the Biotechnology Industry Organization.

Many energy experts remain skeptical about the new plants. “It’s stuff being built, but that doesn’t mean they are cost-effective or at large enough scale to make a difference,” said Michael E. Webber, deputy director of the Energy Institute at the University of Texas at Austin.

For years, the future of biofuels has been debated in Congress and at various federal agencies, pitting oil companies and refiners against the biotech industry and farmers who grow corn. Oil executives say corn ethanol and advanced biofuels are uneconomical. Biofuel producers say the oil companies just want to squash a potential competitor. They insist they can compete as long as the price of oil remains above $70 a barrel (it is now roughly $100) and gasoline stations offer higher blends of ethanol.

A major obstacle for the biofuel industry is the “blend wall,” the current 10 percent limit on ethanol at most gasoline stations. Some car companies warn that above that level, fuel could damage engines in older vehicles. The Energy Department has disputed such concerns, and the E.P.A. has approved use of 15 percent ethanol blends for cars manufactured after 2001. But gasoline stations have been slow at installing the necessary equipment. And only a modest number of vehicles can use E-85, a blend that is 85 percent ethanol.

But biofuel producers and lobbyists say the country needs more of their product. “Cellulosic biofuel has the promise to deliver tens of billions of gallons of ethanol to the United States, but there needs to be a market for that,” Brian Foody, president and chief executive of the Canadian biofuel company Iogen, told reporters in a recent conference call by industry executives discussing the impact of the E.P.A. proposal. “We believe it’s critical for E.P.A. to create a segment or space in the market for E-85 to grow and to set numbers that will provide incentives.”

Biofuel executives say that if the E.P.A. adopts the proposal, they would probably have to limit new American investments and develop plants instead in Europe, China and 

More than $5.7 billion has already been invested in developing advanced biofuels as they have progressed from laboratory tables to pilot and demonstration projects, and now to a handful of commercial-scale plants, according to the Biotechnology Industry Organization. The group estimates that it will take private investment of $95 billion or more over the next decade or so to scale up commercial production to meet long-term congressional targets.

The biggest cellulosic ethanol plant is in Italy, and it produces 10 million gallons a year, roughly half the capacity of the Abengoa plant here. A few tiny plants in the United States opened last year and have had mixed success.

But this is the year biofuel production will finally lift off, industry executives say.

By the summer, the South Dakota-based ethanol producer Poet, in partnership with the Dutch company Royal DSM, will complete the start-up of its Emmetsburg, Iowa, plant, which is projected to produce up to 25 million gallons a year making use of corn cobs, husks and leaves. Within the next year, DuPont is expected to complete the biggest of the three plants — a $225 million plant near Nevada, Iowa, with a capacity of, 30 million gallons a year, that will make ethanol from corn waste.

But Abengoa, which received a $134 million loan guarantee from the Energy Department, will be first out of the gate, its plant beginning full operations by early May. The company plans to produce 25 million gallons of biofuel a year at the plant here and has already started a 21-megawatt electricity plant at the site powered by biomass.

Abengoa has developed a proprietary enzyme to mix with corn stalks and wheat straw to produce sugars that will then be fermented and distilled to produce cellulosic ethanol. That more efficient process can increase yields and decrease costs. Over the last four years, Abengoa has improved yields from 55 gallons of ethanol per ton of biomass to 80 gallons per ton.

What is more, because cellulosic ethanol relies on the waste products of corn rather than corn itself, it does not raise demand for corn or raise corn prices.

The plant here has seven giant steel tanks capable of storing a million gallons each of feedstocks and products, and three railroad spurs can accommodate 100 rail cars loading and transporting ethanol to blending facilities.

The industrial process would be familiar to any brewer — one of the tanks here is even called the beer well — except perhaps for all the recycling that is done. Any excess water will be used to irrigate the adjoining 400-acre corn farm that Abengoa runs. The boiler at the electricity plant is fueled by biomass byproducts from the extraction of the alcohol. Excess electricity will be sold to local utilities, and residue from burning biomass will be sold to local governments for construction of roads.

“We are very bullish on the whole idea,” Mr. Standlee said. “And that’s why we are moving forward.”