12/4/2013 Economist Debates: Solar energy: Guest
http://www.economist.com/debate/days/view/1035 1/5
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Themoderator'sopeningremarks
Oct29th2013|MrGeoffCarr
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Openingstatements
RichardM.Swanson
Founder,SunPowerCorporation
Photovoltaicspriceshavedeclined50%inthepastfiveyears,andplansareinplaceforanother50%decrease.When
achieved,photovoltaicswillbeamongthelowestcostoptionsforgeneratingelectricenergy.
BennyPeiser
Director,GlobalWarmingPolicyFoundation
Despitemorethan30yearsofresearch,developmentanddeployment,solarenergyhasbeenunabletosolvetheinherentandobdurate
problemsthatmakethistechnologyuneconomicfortheforeseeablefuture.
AsRichardSwansonobserves,thismotiondependsonwhethertheworldneedssaving,andifso,fromwhat?
Therearetwoconventionalanswerstothesecondquestion.Oneis,"fromtheeffectsofclimatechangebroughtaboutbymanmadeglobalwarming".Theotheris,
"fromdependenceonfossilfuelsthatare,bydefinition,afiniteresource".
Summary Opening(73comments) Rebuttal(82comments) Closing(15comments) Postdebate
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Solarenergy
Cansolarenergysavetheworld?
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12/4/2013 Economist Debates: Solar energy: Guest
http://www.economist.com/debate/days/view/1035 2/5
Theproposer'sopeningremarks
Oct29th2013|RichardM.Swanson
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Bothoftheseanswersarechallengeable.Fewinformedpeopledoubtthathumanity'soutpouringsofgreenhousegases,particularlycarbondioxide,arealteringthe
climate.Butthereisdoubtoverbothhowbigthateffectwillbeandwhethertheresponseshouldbetotrytostopthechangeortoadapttoit.Theformerwould
certainlyrequireanallhandstothepumpsapproachtoalternativeenergy,inwhichsolarpowerwouldplayanimportant—andprobablyeventuallydominant—role.
Thelatterwouldargueforbusinessasusual,withaccesstothecheapestenergysources(ie,atthemoment,fossilfuels)tohelpbringabouttheeconomicgrowththat
will(intermanyalia)helppayforadaptationtoanalteredclimate.
Similarly,astheriseoffrackinghasshown,previouslyinaccessiblesourcesoffossilfuelscanbemadeaccessiblebytechnologicaladvance.Andyetmoreuntapped
resourcesareknowntoexistevennow,suchasmethanetrappedatthebottomoftheseainicystructurescalledclathrates.Withsuchabundance,whyinvestin
solarpower?
Butdemandforenergyisgrowingfast—doublingevery40years.Putanotherway,humanbeingswill,unlesssomethingchangesdrastically,useaboutasmuch
energyoverthenextfourdecadesastheyhavedoneinthewholeofthepast.Humanityandnature,then,areplayingagamesimilartothewheatonthechessboard
gameproposedinfablebyacunningsubjecttoamathematicallynaivemonarchwhowantedtorewardhim.Someofthosewhoseethisgameendingindisasterfor
Homosapienssuggestanticipatingtheproblembyhoningsolartechnologiesnow—eventhoughtheyarenotsustainablewithoutsubsidy—sothattheycanbe
deployedrapidlywhenneeded.
Intriguingly,bothproposerandopposerhavefocusedonthecaseofGermany—andhavemanagedtodrawdiametricallyopposingconclusionsindoingso.
MrSwansonnotesthatrenewablessupplyaquarterofGermany'selectricityneeds;thatsolaralonesupplies5%(andonsunnysummerdays,upto40%);andthata
thirdoftheworld'ssolarcellsareinstalledthere.Clearly,inhisview,thosecellsareaforceforgood.
BennyPeisner,bycontrast,pointsoutthatGermanyhasthesecondmostexpensiveelectricityinEurope;thatitssubsidybillforgreenenergyis€20billion($28
billion)ayear;andthatduringthewinterithastoimportpowerfromitsneighbours.Inhisview,thecountryisteeteringontheedgeofsufferingblackouts.
OnereasonfortheimportsisobviouslythatGermanyisnotaparticularlysunnyplace,especiallyinwinter.Butcountriesfarthersouthare.Withasuitable
intercontinentalpowergrid,itwouldbepossiblefornorthernEuropeancountriestoswitchtosolarenergybyimportingit,ratherthangeneratingitinsitu.
ForEurope,thatwouldbringotherproblems,sincemanyofthesunniestnearbycountrieshavegovernmentsofquestionablestabilityandunquestionable
noxiousness.ButplacessuchasAmerica,whichhavesunnydesertswithintheirterritories,mightfindmovingsolarenergyaroundinthiswaymorefeasible.
Thatleadstoanotherpossibility,whichisthattheworlddoesnotactuallyneedsolarpowertosaveitbutwillgetitanyway—simplybecauseitwillprovebetterthan
thealternatives.Thisargumentdependsonthefactthatsunlightisfree,andtherunningcostsofatleastthesimplestsortofsolarpowerstation,onemadeof
photovoltaicsolarcells,arethusminimal.Getthecapitalcostsofsuchtechnologylowenough(whichdoesseemtobehappening)andsolvetheproblemofovernight
storage(ahardertask,butonethatmanyareworkingon,withideasfromusingholesinthegroundtostorecompressedairtobuildinghugebatteriesfromcheap
materials),andmarketeconomicswilldotherest.
Thequestionofthefutureroleofsolarenergyisthusrichwithpossibility.Itshouldbeafascinatingdebate.
"Cansolarenergysavetheworld?"Solarenergysurelycannotsavetheworld(assumingitdoesneedsaving)allbyitself.Iassumethatourdebatemoderatoris
speakingsomewhathyperbolicallyforthepurposeofdramaticimpact.Theworldis,however,inthemidstofanevolutioninitsenergyinfrastructure.Aswestriveto
decreasethepollutiondamageinherentinourcurrentfossilfuelintensivesociety,thereisanexcitingsmorgasbordoftechnologiessteppinguptocontribute.These
includesolarenergy,butalsoadizzyingarrayofoptionssuchasenergyefficiencyimprovementsinbuilding,industryandtransport;otherrenewablessuchaswind
(whichissolarafterall),geothermalandbiomass;smartgridswithfeaturessuchasdemandsidemanagement;distributedandcentralstoragetohandlethe
variabilityofwindandsolar;andimprovedlongdistancepowertransmissiontofurthersmooththisvariability.Eventraditionalsourcesareevolvingtobettercompete,
withthecontinuingadvanceofnaturalgas,displacingcoalanditshigheremissions,cleanercoalwiththepossibilityofcarboncaptureandsequestration,andeven
nuclearwiththepossibilityofnewconceptsthatmaygreatlyreducecostandrisk.Allthesetechnologieswillbecompetinginadynamicmarketplace.Therelative
importanceofeachovertimewillbedeterminedbyhowwelltheirdeveloperscontinuetoreducecosts,andtoalesserextentbygovernmentpolicies.
Indeed,thistransformationofourenergysystemiswellunderway.ItoftensurprisespeopletolearnthatduringthepastthreeyearswithintheEuropeanUnion,
photovoltaics,windandnaturalgascontributednearlyallthenewinstalledelectricgenerationcapacity.In2012,photovoltaicsadded17gigawatts(GW),wind12GW
andnaturalgas5GW(netofretirements).Coalandnuclearwerenegativeduetoplantretirements.Tobetterforeseehowthismayplayout,oneneedlooknofurther
thanGermanyasacasestudy.Germany,withoversixtimesthepopulationdensityofAmericaandhalfthesolarresourceperunitarea,hasbecometheglobal
renewableenergyleaderamonglargecountries.Scepticsoftenstatethatsolarandwindcannotprovidesufficientenergytorunamoderneconomy.Lastyear,
renewablessuppliedover25%ofGermany'selectricenergyconsumption.Photovoltaicsalonesuppliedover5%,upfromzerotenyearsago.(Onethirdoftheworld's
photovoltaicmodulesareinstalledinGermany.)Onsunnydaysphotovoltaicsoftensupplies3040%oftheelectricitydemand.TheGermanelectricitygridhasdealt
withthisinfluxwithoutthesignificantdisruptionalsopredictedbysceptics.TheGermangovernmentplansforcontinuedexpansionofrenewableenergy.The2050
targetisforrenewablestoaccountfor80%ofelectricityproduction.
Soitcanbedone,buthowaboutcosts?Photovoltaicshashistoricallybeenmuchmoreexpensivethanconventionalgeneration;however,thanksinparttothelarge
Germanmarket,massiveincreasesinmanufacturingscalehaveresultedinrapidlydecreasingprices.In2012ahistoricmilestonewasreachedwhereGerman
residenceswerecompensatedfortheirrooftopphotovoltaicproductionatlessthantheprevailingresidentialelectricityretailrate.ByJune2013,thefeedintarifffor
residentialgenerationhaddroppedto€0.15perkilowatthour(kWh)whiletheaverageretailelectricitypurchaseratewas€0.25/kWh.Despitebeingpaidlessthanthe
retailrate,homeownerscontinuetoinstallsystemsbecausetheystillgenerateattractivereturns.Largegroundmountedphotovoltaicplantsarenowcompensatedat
about€0.10/kWh.Thisiscomparabletothecostfromcoalpowerwhenexternalities(healthcosts,etc)areincluded,andsimilartowhatlargeindustriespayfortheir
electricity.Afurther4050%costreductionisneededforphotovoltaicstocompetewiththecoalcostwhenexternalitiesarenotincluded.Fewintheindustrydoubt
thatthisisachievablewithintenyears.Systempriceshavedeclined50%inthepastfiveyears,andplansareinplaceforanother50%decrease.Whenachieved,
photovoltaicswillbeamongthelowestcostoptionsforgeneratingelectricenergy,eveninsunstarvedGermany.Muchofthesunnypartsoftheworldwillenjoythis
benefitsooner,or,asinItaly,alreadydo.
12/4/2013 Economist Debates: Solar energy: Guest
http://www.economist.com/debate/days/view/1035 3/5
Theopposition'sopeningremarks
Oct29th2013|BennyPeiser
Skipto... Moderator Pro Con
ItistruethatGermanconsumershavesupportedthisremarkablestorybysurchargesontheirelectricbills.DidthissurchargehurttheGermaneconomy?Hardly,as
itisthestrongestinEurope.Diditcreateunemployment?No,theGermanunemploymentrateof5.3%isquitelow,lowerthaninAmericaortheUKforexample.
Whatitdidhelpcreateisanew,nonpollutingandrenewableenergysourcefortheworld.IbelieveweoweGermanyadebtofgratitudeforshiningabrightlighton
whatispossiblewithrenewableenergy.Fortunately,othercountriesarealsonowbeginningtotakeupthechallenge,withparticularsuccessoflateinAmerica,Japan
andChina.Therenewablerevolutioniswellunderway.
Despitemorethan30yearsofresearch,developmentanddeployment,solarenergyhasbeenunabletosolvetheinherentandobdurateproblemsthatmakethis
technologyuneconomicfortheforeseeablefuture.
Thepitfallsofsolarenergyarefourfold:
•First,solarenergyremainstooexpensiveandcansubsistonlywiththesupportofgovernmenthandoutsorsolarsubsidies.
•Second,itsmultibillionsubsidiesarecausingeconomichardshipandsocialconflictashugeamountsofmoneyarebeingtransferredfrompoorandordinaryfamiliesto
wealthygreeninvestors.
•Third,photovoltaicenergygenerationistooirregularandcauseshugeknockonproblemsasaresult.
•Andfinally,wherelargescalesolarenergycompeteswithconventionalenergyatasizeablelevel,theentireelectricalgridfacesdisruptionsandeconomicdamage.
Germany,whichhaslongbeentheworldleaderingeneratingsolarelectricity,isthebestandworstcaseinpoint.Itdemonstrateswhysolarisn'tworking.
Morethanhalfoftheworld'ssolarpanelsareinstalledinGermany.Butsolarenergyisnotoriouslyunreliableasapowersourcenomatterhowmuchacountryhas
installed.SolarsubsidiesforGermanfinanciersareextremelygenerous.Theyguaranteeinvestorsan810%annualreturnfor20years.Givensuchanunparalleled
offer,itisnotsurprisingthatmorethanamillionGermanfamiliesalreadyhaveinstalledsolarpanels.
However,Germany'sunmatchedsolarboomhassaddledthecountrywithobligationsofmorethan€130billioninsubsidies,leadingtoeverrisingenergyprices.These
billionsarebeingpaidbyordinaryfamiliesandsmallandmediumsizedbusinessesinwhatisundoubtedlyoneofthebiggestwealthtransfersfrompoortorichin
modernEuropeanhistory.
Germany'srenewableenergylevy,whichsubsidisesgreenenergyproduction,rosefrom€14billionto€20billioninjustoneyear.Sincetheintroductionofthelevyin
2000,Germanconsumers'electricitybillshavedoubled.GermanyhasthesecondmostexpensiveelectricityinEurope,withanaveragepriceof€0.27perkilowatt
hour.Nowonderthechancellor,AngelaMerkel,haswarnedthattherapidexpansionofgreenenergyprogrammesisweakeningGermany'scompetitiveadvantagein
theglobaleconomy.
Aswealthyhomeownersandbusinessesownersinstallsolarpanelsontheirhousesandcommercialbuildings,lowincomefamilies,livinginrentedapartments,haveto
footrocketingelectricitybills.Manycannolongeraffordtopay,sotheutilitiesarecuttingofftheirpower.
TheGermanAssociationofEnergyConsumersestimatesthatupto800,000Germanshavehadtheirpowercutoffbecausetheycouldn'tpaythecountry'srising
electricitybills.AsDerSpiegelwarnedlastmonth,solarsubsidiesareturningelectricityintoaluxurygood,threateningtobringdownthecountry'sgreenenergy
transition.
OnJune6ththisyear,Germany'ssolarpowerproductiontouchedanewrecordof23.4gigawatts,meetingalmost40%ofthecountry'sentirepeakelectricity
demand.Buttounderstandthatthisworldrecordisquitemeaningless,considerthegrid'snarrowescapelastwinter.FormanyweeksinDecemberandJanuary,
Germany's1.1msolarpowersystemsgeneratedalmostnoelectricity.Duringmuchofthoseovercastwintermonths,solarpanelsmoreorlessstoppedgenerating
electricity.Topreventblackouts,gridoperatorshadtoimportnuclearenergyfromFranceandtheCzechRepublicandpowerupanoldoilfiredpowerplantinAustria.
Thegovernmentisincreasinglyconcernedaboutthedetrimentalimpactofsolarenergyonelectricitypricesandthestabilityofthenationalgrid.Tostopthesolar
boom,thegovernmenthasreducedfeedintariffsforphotovoltaicschemesinthepastfewyears.Since2010morethan5,000companiesinvolvedinthesolar
businesshaveclosed,sheddingtensofthousandsofgreenjobs.
Duringthepast12months,thewaveofbankruptciesinsolarhasdevastatedmuchofGermanindustry,whilesolarinvestorshavelostalmost€25billiononthe
stockmarket.Nowthatthenewgovernmentplanstophaseoutsubsidiesaltogether,thesolarindustryislikelytodisappearbytheendofthedecade.
OfalltheunintendedconsequencesofGermany'sEnergiewendeperhapsthemostextraordinaryisthedevastatingeffectofsolar(andwind)powergenerationonthe
priceofelectricitygeneratedbynaturalgas.Almost20%ofgaspowerplantsinGermanyhavebecomeunprofitableandfaceshutdownasrenewablesfloodthe
electricitygridwithpreferentialenergy.Toavoidblackouts,thegovernmenthashadtosubsidiseuneconomicgasandcoalpowerstationssothattheycanbeusedasa
backupwhenthesunisnotshiningandrenewablesfailtogeneratesufficientelectricity.
NowonderthatagrowingnumberofEuropeancountriesarecuttingbacksubsidieswhileothers,suchasSpainandtheCzechRepublic,haveendedsupportfor
renewablesaltogether.Germanytoohasbeenscalingbackitsgenerousstatesupport.MrsMerkelhaspromisedtophaseoutsolarsubsidiesaltogetherinthenextfew
years.Andoncethegravytrainstops,thefutureofsolarwilldarken.
12/4/2013 Economist Debates: Solar energy: Guest
http://www.economist.com/debate/days/view/1035 4/5
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Solarphotovoltaiccells(PVs)producedabout0.7%ofglobalelectricityin2012from100gigawatts(billionwatts)ofcapacity,windpower3%from283GWandother
renewables(excludingbighydrodams)about1.5%from97GW.Yetmanyutilitiesconsiderthesemodestsources'plummetingcosts,increasinglycompetitiveprices
andswiftscalingtoposeamortalthreat,oratransformationalopportunity,orboth.
Solarcellpricesfall30%witheachdoublingofcumulativeproduction.Theyfellatleast30%in2012alone.Once$100perwatt,then$10,theyarenowaround
$0.60,soonwillbe$0.40.Alreadyhalved"balanceofsystem"costs—customeracquisition,approvals,interconnections,installation,wiring,inverter—keepfallingtoo.
Byadding30GW,GermanycutinstalledsystemcoststohalftheAmericanaverageforthesameequipment.YetevenattwicetheGermancost,utilityscalesolar
powerinsunnierAmericanregionshasfallenbelow$70permegawatthour(mWh)netofa30%federaltaxcredit(smallerthanmanynonrenewables'subsidies).
That'sthreetimesthelowestMidWesternwindpowerprice,halftheHinkleyPointnuclearpriceandcheaperthanefficientnewgasfiredpowerplants.
Gaspricesarerising,andthemarketvalueoftheirvolatilityaddsatleast$1020/mWh.Yetsolarpower,likewindpower,typicallysellson30yearfixednominalprice
(decliningrealprice)contracts,hedgingthegaspricerisk.Moreover,solarpoweronyourroof,likemostinGermany,avoidsa$3050/mWhdeliverycost.
BloombergNewEnergyFinancerecentlyforecastsolarpowerwouldreachgridparityinthreequartersofworldmarketsin18months.Todayin20Americanstates,
privatefirmsinstallrooftopsolarpowerwithnodownpaymentandbeatutilityprices.Assolarcostsfallandutilitytariffsrise,"nomoneydown"couldturnto"cash
back",furtherspeedingadoption.TheSanDiegoutilityexpectssolaroutputtoidleitsfossilfuelledpowerstationsonsunnyafternoonsby201516.Andby2015,
Chinaaimstoboostitssolarpowerto35GW—aboutwhattheworldinstallseachyear.
Solarpowerincreasedby60%ayearduring200712becauseitisamassproducedmanufacturedproduct.Inthedecadeneededtobuildamultibilliondollar
electricitygeneratingcathedral,youcanbuildeachyearaPVfactory,makingsolarcellseachyearthatcanproduceeachyearasmuchelectricityasyourcentral
station.Thussolarcellsareproliferatingfasterthanmobilephones.Inpoorcountries,1.4billionpeoplewithoutelectricitycansidesteppowerlines.Inallcountries,
solarpowerandotherequallyunregulatedproductscanadduptoa"virtualutility",bypassingelectricitycompaniesjustasmobilephonesbypassedwirebasedphone
companies.Thisgivesutilityexecutivesnightmaresandventurecapitalistssweetdreams.
Inliberalisedpowermarkets,windandsolarpoweraredestroyingutilities'traditionalbusinessmodel:competitionmakescentralstationsrunlessandgetlowerprices.
Germany'swholesalepowerpricehasfallenbythreefifthssince2008,andonhotafternoonswhenelectricityisoftenmostvaluableandprofitable,solaroutputis
greatest.Somewrongfootedutilitiesandfuelvendorsspreaddisinformationabouttheirrenewablerivals—especiallyaboutGermany'simpressivesuccesses.
ApersistentfictionholdsthatbecausePVandwindpowerarevariable,theyareunreliable,needingbackupby"24/7"or"baseload"fossilfuelandnuclearstations.
Actually,thosegiantstations'intermittence(unforecastablefailures)requirescostlyreservessothegridcanbackupfailedplantswithworkingones.Butwelldesigned
renewableportfoliosoftenneedlessbackup.Thegridcanoffsetvaryingsolarandwindoutput(bothmoreaccuratelyforecastablethandemand)bydiversifyingtheir
typeandlocation,thenintegratingotherrenewables(dispatchablewheneverneeded),flexibledemand,anddistributedstorageinsmartelectricvehiclesandice
storageairconditioning.SuchaportfoliocanreliablypowertheisolatedTexasgridwith100%renewables,withnobulkelectricitystorageandonly5%leftover
renewableenergy.
Asflexibledemandanddistributedintelligencemakethegridmoreagile,suchchoreographymadeEurope'smostreliableelectricity(inGermanyandDenmark)
respectively23%and41%renewablein2012,andinthefirsthalfof2013,Spain'selectricity48%andPortugal's70%renewable.Ignoringsuchdata,flatearthers
stillproclaimminusculerenewablepotential.
Therenewablerevolutionisaccelerating.HalfofAmericanand69%ofEuropeancapacityaddedin2012wasrenewable.China,Japan,GermanyandIndianow
producelesselectricityfromnuclearpowerthanfromnonhydrorenewables,whichin2012addedmoreChineseelectricitythanallnuclearandfossilsources
combined.Globallyeachyear,nonhydrorenewableswin$250billionofprivateinvestmentandaddmorethan80billionwatts,withsolarexpectedtopasswindpower
thisyear.
Modernrenewablesaretakingoverthemarketbecausetheyhavelowercostsandrisksthanfossilornuclearenergy.Togetherwithrapidlyevolvingenergyefficiency,
theymorethansufficetopowertheworldprofitablyandresiliently.
RockyMountainInstitute's2011synthesis"ReinventingFire"showedhowa2.6foldbigger2050Americaneconomycouldeliminatecoal,oilandnuclearenergyand
cutnaturalgasusebyonethird,trebleenergyefficiency,shiftfromonetenthtothreequartersrenewablesupply,emit8286%lesscarbon,makethegridresilient
andsave$5trillion—allwithoutinternalisation,newinvention,oractsofCongress,thetransitionledbybusinessforprofit.Sofar,solarcostshavefallenmuchfaster
thanweassumed.Efficiencyandrenewablescouldwellsavetheworld,notatacostbutatahandsomeprofit.Wejustneedtonoticewhat'shappening.
12/4/2013 Economist Debates: Solar energy: Guest
http://www.economist.com/debate/days/view/1035 5/5
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