The Texas Solar Energy Math Challenge

Let’s diffuse the old news that solar energy is too costly and is only competitive with subsidies and take a more current look at some simple data that indicate that we have a great opportunity in Texas to tap the untapped natural resource.

Which is better for Texas residential and small business energy consumers - $9.00/kWh peak wholesale electricity from centralized power plants that must be transmitted over long distances with the associated energy losses, or $0.07/kWh from distributed photovoltaic (PV) solar power generated where it is consumed with no transmission losses and which is generally aligned with the peak energy demand time periods in Texas?

The Texas Public Utility Commission (PUC) recently raised the price cap on wholesale electricity prices to $9,000/MWh, which is $9.00/kWh, and then denied a petition to have more public discussion about increasing the emphasis on using a huge, untapped natural resource in Texas – the SUN!

(See http://www.businessweek.com/ap/2012-10-26/texas-electric-prices-cap-to-double-over-3-years and http://greenmountainsummit.com/2012/11/texas-puc-denies-rps-petition-from-the-environmental-renewable-groups/.)

A September 25th article in Renewable Energy World comparing the cost of a residential-sized PV system (4kW) between the US and Germany indicated that the unsubsidized total installed cost in Germany is approximately $2/Watt.  With the sunshine we have in Texas, this is equivalent to decades of electricity at less than $0.07/kWh.

(See http://www.renewableenergyworld.com/rea/blog/post/2012/09/why-we-pay-double-for-solar-in-america-but-wont-forever.)

The basic calculation to translate $2/watt into $0.07/kWh is as follows:

• 4,000W(DC) system at $2/Watt is $8,000.
• A south facing PV solar system installed in Texas is estimated to produce 1,400 watt-hours, or 1.4kWh(AC) per installed watt(DC) of PV solar. 
• Therefore, a 4kW(DC) installed system will generate 4000 times 1.4kWh which equals 5,600 kWh per year. (467 kWh average per month)
• For 20 years, 5,600 kWh times 20 equals 112,000 kWh.  The cost per kWh over the 20 year period is then $8,000 divided by 112,000 kWh which equals $0.07/kWh, and then FREE after that……

So, the use of solar energy in Texas can provide:

• More energy independence from unfriendly foreign countries;
• More energy diversification and security by including the unending power of the sun in our energy mix;
• More stewardship of our natural resources – by using the untapped energy of the sun, and also saving our precious water resources normally needed by centralized conventional power plants;
• More price stability by pre-paying for long term energy (the life of PV solar systems is at least 25-40 years); For PV solar systems, the total cost is the installed system cost. There are NO ongoing fuel costs. For conventional power plants, there is the installed cost of the power plant plus the ongoing cost of fuel. Can anyone even obtain a 10 year energy contract from their utility company vs a 25-40 year price contract?
• More consumer choice with the option to generate some of your own electricity versus being totally dependent on the utility company;
• More support for the local economy with sales, design, and installation jobs for solar systems;
• More pollution-free energy production;

And:

• Less energy wasted due to losses in the transmission and distribution systems by generating a portion of the electricity where it is used;
• Less peak energy demand and stress on the Texas electric grid because distributed solar electricity is generated where it is used and when we need it the most – on sunny summer days;
• Less financial risk due to uncontrolled and unpredictable future energy price spikes;
• Less air and water pollution.

Are we saying that Texans don’t have the innovation, technological drive, and the cost competitiveness to match what is already being done today in Germany with distributed PV solar energy?  Let’s check this math again and find a way to tap this untapped Texas resource of the SUN!

Plano Solar Energy Advocate (LH)

For more information about energy subsidies, see "The Renewable Energy (Actually All Energy Sources) Subsidy Topic", at http://planosolar.blogspot.com/2012/09/the-renewable-energy-actually-all.html.

The Renewable Energy (Actually All Energy Sources) Subsidy Topic

Today, in many locations in the United States and around the world, PV (photovoltaic) solar systems already deliver cost-competitive electricity to  consumers. In some locations, various forms of subsidies help PV solar to achieve this cost-competitive position today. However, if the cost reduction trends in PV solar systems continue, in a very few years they will be cost competitive without any ongoing subsidies.

The issue of subsidies for renewable energy is a concern to me as well as to most people, so I have begun to research this topic in more detail. Although the message we frequently hear is that renewable energy sources are receiving too much in subsidies, what I have found in various studies is that when taken in the context of a longer period of history, all energy sources have benefited from significant and long-term subsidies. 

One of these studies is a September 2011 report, titled  "What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America’s Energy Future", by DBL Investors. (See a link to this report and others on the Plano Solar Advocates "Resources" page in the section titled "The Subsidy Topic".) 

The research reported in this paper states that through the end of 2009, the energy sector receiving the largest subsidies over time has been the oil and gas industry, with a cumulative amount of $447B over the period of 1918-2009. This averages approximately $4.9B per year for 90 YEARS!  It is no surprise that the technological revolution allowing for the cost-effective extraction of natural gas from shale occurred thanks to more than three decades of government subsidies for research, demonstration, and production. (See “New Investigation Finds Decades of Government Funding Behind Shale Revolution”, December 20, 2011, http://thebreakthrough.org/archive/new_investigation_finds_decade).

The DBL Investors report states that renewable energy sources, including wind and solar combined, have received a cumulative of just $6B during the period of 1994-2009, which equates to an average of $370M per year over 15 years.    

We usually don't hear this historical context when subsidies for renewables are being questioned and debated.   Subsidies for newer energy sources appear to be much more “visible” to us.   Subsidies for existing energy sources appear to be “invisible” to most of us because they are included in existing tax regulations and permanently on the books, not up for review on a regular basis.

So, if we think we must phase out subsidies on renewable energy sources any time soon, shouldn't we first make sure that subsides for other more mature energy sources are phased out first?  

I will be continuing to research this topic to learn more.  I think one of the good ideas that has been studied is to take a long term view, with a subsidy ramp down over a period of time (e.g. over 5 years) whether than ending abruptly at the end of a given year.  This approach would give business and industry a planning horizon that incentivizes further process improvements and cost reductions. The current renewable energy subsidy approach does not do this.

Please share your views and any research that you may find on this topic by providing comments to this blog posting.

Best Regards,

A Plano Solar Energy Advocate (LH)