David Bergeron Special To The Arizona Daily Star
Posted: Thursday, December 9, 2010 12:00 am
The solar industry has asked the American taxpayer to make a considerable investment in subsidies for deploying solar photovoltaic (PV) systems in the hope these subsidies will drive down the price of PV to a point where subsidies are not needed.
Taxpayers have supported this on the promise that it will provide energy security, benefit the economy and help the environment. I'm writing today because I believe this good will is being abused. These systems are not as economical as the industry suggests.
But to see this, one must be able to look past the financial benefit to an individual homeowner and look at the economic effect of solar subsidies on the entire community. Subsidies have made solar electric systems appear attractive to homeowners that aren't sound for our state and country.
For clear thinking to prevail, we must learn to think in terms of the actual cost to the community versus artificial savings for the individual homeowner.
We are suffering from a myopic view of the cost and benefits of installing solar electric panels, and the industry is willing to wink and nod as these misconceptions spread.
Industry promoters have hidden the real cost and exaggerated the benefits of solar electric systems in an elaborate scheme of subsidies and net metering laws that give the illusion that solar is much more viable than it really is.
Here are the subsidized and unsubsidized figures for a 3 kW system in Tucson.
• Subsidized cost: $4,550 ..................Real cost:$13,500
• Apparent savings: $538/yr .............Actual savings: $132/yr
• Artificial payback: 8.5 years ............Real payback: 102 years
About two-thirds of the cost of a system can be recovered from utility, federal, and state credits, which the community pays through higher taxes and utility bills. Additionally, net metering laws force the utility to pay full retail price for much of this home-grown electricity, when the local utility could have purchased the same power for about 3 cents per kWhr from other sources. Utilities pass this overpayment onto the community through higher electric bills.
In summary, the homeowner pays about one-third the real cost and is credited about three times the actual value, and even then, solar electric systems are only marginally attractive. The total subsidy is approaching 90 percent. We are making a big wager that solar electric panels will become economically viable, a bet that some in the industry are happy to make with other people's money.
As a solar professional, I say we need to be very honest about the cost of the technology and not misuse the public trust.
The installed cost needs to fall by a factor of almost 10 before it will be a viable alternative for homes and businesses already on the grid.
If we reduce the cumulative solar subsidy from the current 90 percent level to a very reasonable 50 percent and the grid-tied segment of the industry can't survive, maybe it shouldn't exist in the first place.
Besides, we have much smarter ways to reduce greenhouse gas emissions, stimulate the economy and reduce our nation's reliance on foreign oil, none of which solar subsidies do to any meaningful degree. A revenue-neutral carbon tax is our least expensive and most effective means to reduce carbon dioxide.
ABC15 Article
It’s Saturday, and I am at work testing a new solar powered vaccine refrigerator that uses ice packs rather than batteries to store energy and maintain cold temperatures. This is a key component of the distribution chain for vaccines and part of a global effort to eradicate polio and other preventable diseases. Solar energy is my passion, field of study, and occupation. For me it started when I was 13 and the US experienced the Arab oil embargo and subsequent long lines at the gas station. Only later did I realize that the long lines were caused by misguided government price controls.
Today, our government is likewise engaging in misguided policies to address similar energy concerns, policies that mandate inappropriate solutions, such as grid-tied solar panels, which fail to address our energy security or environmental concerns. These mandates will ultimately stifle creativity and generate false solutions to our energy dilemma.
Solar Photovoltaic (PV) electric panels are far too expensive to provide a sustainable energy alternative to homes and businesses already connected to the electric utility grid. The solar industry and solar jobs are artificial and only exist because of large government subsidies. The industry is similar in many ways to the housing market bubble created by easy mortgages. When the subsidies end, the solar bubble will burst and most of the jobs and industry will vanish overnight. This is because the underlying economics of Solar PV are not viable.
In sunny Arizona, the true cost of a typical 1000 Watt solar system is approximately $5,000. This 1000 Watt system will produce 1650 kWh/y and save our state about $65 per year in fossil fuel. This 77-year payback exceeds the life of the equipment and ignores the maintenance and eventual disposal cost of the hardware. Despite idealistic claims that solar PV can allow Arizona to avoid construction of new power plants, it will not. Solar is not consistent enough to meet the utility’s reliability requirements for dispatchable generation. In addition to intermittency, the peak output of solar panels is at noon, but the peak electrical demand is in the late afternoon. The bottom line is that solar cannot be counted on when power is needed most. So no significant reduction in generation or transmission infrastructure is possible by adding solar panels to the power grid.
For PV to be economically feasible, the “installed” cost would need to be equal to or less than $1/watt. This is the holy grail of the industry and consistent with the statements of Dr. Chu, the Secretary of Energy. Very large-scale PV systems are reaching $4/watt today, which is admirable, but still four times too expensive to be a credible solution.
Can we get to $1/watt any time soon? At present, solar panels are about half of the total system cost. The remaining cost is mounting hardware for the panels, the inverter to make AC power, wiring, labor, and permitting.
Therefore, even if it were possible to manufacture panels free, the balance of system cost is still about $2 per Watt and the industry would continue to be non-sustainable without substantial subsidy.
So why do we continue to subsidize solar power? There are many reasons, but mostly because of myths propagated by the solar industry and some naive public officials. Perhaps the most egregious myth is the claim we are helping our economy and creating jobs. This is false. Money for the solar subsidies comes from taxpayers and ratepayers. As this money is taken from us, spending for other goods and services must fall. This causes economic and job losses in other segments of the economy, such as in restaurants, stores, and service and manufacturing companies.
There is no free lunch, but it is easy to be fooled into thinking we are creating jobs. This is because the newly created solar jobs can be seen and counted. But the job losses in other segments of the economy are diffuse and difficult to see unless one knows to look for them.
Many politicians take credit for the solar jobs, but never mention the job losses caused by reduced spending in the balance of the economy. Even worse, the new solar jobs are not as productive as the jobs that were lost, because of the poor economics of solar. This is one reason why total unemployment remains high even with all the new solar jobs.
Another fallacy is that solar power provides energy security against interruptions in oil supplies. But using solar does not reduce oil imports because we do not make electricity with oil. We make electricity with coal, nuclear, natural gas, and hydro, all domestic energy supplies with more than 200 years of known reserves.
But the most ironic fallacy is the idea that solar is an effective means to help the environment by reducing CO2. Conservation and other technologies reduce CO2 for a cost of $20/ton. But saving CO2 with solar costs at least 150/ton. The writing of one respected economist strongly suggests that subsidies to renewable energy, on net, actually generate more CO2 than they save.
One day solar PV might be economical, and if that happens, we will still have great sunshine in Arizona and a competitive advantage. The market will come to us. But if we insist on subsidies to the industry on the hope it will drive the price of solar to $1/W, let’s at least ship the panels to developing countries where they are needed and would make a difference in the lives of millions. To install them here on our homes does nothing except makes us feel good and drains our economy of productive jobs.
So what is the future of solar in Arizona? The APS and SRP cut-backs were necessary because they burned through the annual budget for solar credits ahead of schedule. The budget will be renewed and spending for solar will continue. The real question is should it? If we are sincerely concerned about energy security, our economy, and the environment, the answer is no.
October Op-Ed in Tucson Paper
From inside, the fallacies of solar power
By David Bergeron, Special to The Explorer
Published: October-27-2010
It's Saturday, and I am at work testing a new solar-powered vaccine refrigerator that uses ice packs rather than batteries to store energy and maintain cold temperatures. This is a key component of the distribution chain for vaccines and part of a global effort to eradicate polio and other preventable diseases.
Solar energy is my passion, field of study, and occupation. For me, it started when I was 13 and the U.S. experienced the Arab oil embargo and subsequent long lines at the gas station. Only later did I realize that the long lines were caused by misguided government price controls.
Today, our government is likewise engaging in misguided policies to address similar energy concerns, policies that mandate inappropriate solutions, such as grid-tied solar panels, which fail to address our energy security or environmental concerns. These mandates will ultimately stifle creativity and generate false solutions to our energy dilemma.
Solar Photovoltaic (PV) electric panels are far too expensive to provide a sustainable energy alternative to homes and businesses already connected to the electric utility grid. The solar industry and solar jobs are artificial and only exist because of large government subsidies. The industry is similar in many ways to the housing market bubble created by easy mortgages. When the subsidies end, the solar bubble will burst and most of the jobs and industry will vanish overnight. This is because the underlying economics of Solar PV are not viable.
In sunny Arizona, the true cost of a typical 1,000-watt solar system is approximately $5,000. This 1,000-watt system will produce 1,650 kWh/y and save our state about $65 per year in fossil fuel. This 77-year payback exceeds the life of the equipment and ignores the maintenance and eventual disposal cost of the hardware.
Despite idealistic claims that solar PV can allow Arizona to avoid construction of new power plants, it will not. Solar is not consistent enough to meet the utility's reliability requirements for dispatchable generation. In addition to intermittency, the peak output of solar panels is at noon, but the peak electrical demand is in the late afternoon.
For PV to be economically feasible, the installed cost would need to be equal to or less than $1/watt. This is the holy grail of the industry and consistent with the statements of Dr. Chu, the Secretary of Energy. Very large-scale PV systems are reaching $4/watt today, which is admirable, but still four times too expensive to be a credible solution.
Can we get to $1/watt any time soon? At present, solar panels are about half of the total system cost. The remaining cost is mounting hardware for the panels, the inverter to make AC power, wiring, labor and permitting. Therefore, even if it were possible to manufacture panels free, the balance of system cost is still about $2 per watt and the industry would continue to be non-sustainable without substantial subsidy.
So why do we continue to subsidize solar power? There are many reasons, but mostly because of myths propagated by the solar industry and some naive public officials.
Perhaps the most egregious myth is the claim we are helping our economy and creating jobs. This is false. Money for the solar subsidies comes from taxpayers and ratepayers. As this money is taken from us, spending for other goods and services must fall. This causes economic and job losses in other segments of the economy, such as in restaurants, stores, and service and manufacturing companies.
There is no free lunch, but it is easy to be fooled into thinking we are creating jobs. This is because the newly created solar jobs can be seen and counted. But the job losses in other segments of the economy are diffuse and difficult to see unless one knows to look for them. Many politicians take credit for the solar jobs, but never mention the job losses caused by reduced spending in the balance of the economy. Even worse, the new solar jobs are not as productive as the jobs that were lost, because of the poor economics of solar. This is one reason why total unemployment remains high even with all the new solar jobs.
Another fallacy is that solar power provides energy security against interruptions in oil supplies. But using solar does not reduce oil imports because we do not make electricity with oil. We make electricity with coal, nuclear, natural gas, and hydro, all domestic energy supplies with more than 200 years of known reserves.
But the most ironic fallacy is the idea that solar is an effective means to help the environment by reducing CO2. Conservation and other technologies reduce CO2 for a cost of $20/ton. But saving CO2 with solar costs at least $150/ton. The writing of one respected economist strongly suggests that subsidies to renewable energy, on net, actually generate more CO2 than they save.
One day, solar PV might be economical, and if that happens, we will still have great sunshine in Arizona and a competitive advantage. The market will come to us. But if we insist on subsidies to the industry on the hope it will drive the price of solar to $1/W, let's at least ship the panels to developing countries where they are needed and would make a difference in the lives of millions. To install them here on our homes does nothing except makes us feel good and drains our economy of productive jobs.
By David Bergeron, Special to The Explorer
Published: October-27-2010
It's Saturday, and I am at work testing a new solar-powered vaccine refrigerator that uses ice packs rather than batteries to store energy and maintain cold temperatures. This is a key component of the distribution chain for vaccines and part of a global effort to eradicate polio and other preventable diseases.
Solar energy is my passion, field of study, and occupation. For me, it started when I was 13 and the U.S. experienced the Arab oil embargo and subsequent long lines at the gas station. Only later did I realize that the long lines were caused by misguided government price controls.
Today, our government is likewise engaging in misguided policies to address similar energy concerns, policies that mandate inappropriate solutions, such as grid-tied solar panels, which fail to address our energy security or environmental concerns. These mandates will ultimately stifle creativity and generate false solutions to our energy dilemma.
Solar Photovoltaic (PV) electric panels are far too expensive to provide a sustainable energy alternative to homes and businesses already connected to the electric utility grid. The solar industry and solar jobs are artificial and only exist because of large government subsidies. The industry is similar in many ways to the housing market bubble created by easy mortgages. When the subsidies end, the solar bubble will burst and most of the jobs and industry will vanish overnight. This is because the underlying economics of Solar PV are not viable.
In sunny Arizona, the true cost of a typical 1,000-watt solar system is approximately $5,000. This 1,000-watt system will produce 1,650 kWh/y and save our state about $65 per year in fossil fuel. This 77-year payback exceeds the life of the equipment and ignores the maintenance and eventual disposal cost of the hardware.
Despite idealistic claims that solar PV can allow Arizona to avoid construction of new power plants, it will not. Solar is not consistent enough to meet the utility's reliability requirements for dispatchable generation. In addition to intermittency, the peak output of solar panels is at noon, but the peak electrical demand is in the late afternoon.
For PV to be economically feasible, the installed cost would need to be equal to or less than $1/watt. This is the holy grail of the industry and consistent with the statements of Dr. Chu, the Secretary of Energy. Very large-scale PV systems are reaching $4/watt today, which is admirable, but still four times too expensive to be a credible solution.
Can we get to $1/watt any time soon? At present, solar panels are about half of the total system cost. The remaining cost is mounting hardware for the panels, the inverter to make AC power, wiring, labor and permitting. Therefore, even if it were possible to manufacture panels free, the balance of system cost is still about $2 per watt and the industry would continue to be non-sustainable without substantial subsidy.
So why do we continue to subsidize solar power? There are many reasons, but mostly because of myths propagated by the solar industry and some naive public officials.
Perhaps the most egregious myth is the claim we are helping our economy and creating jobs. This is false. Money for the solar subsidies comes from taxpayers and ratepayers. As this money is taken from us, spending for other goods and services must fall. This causes economic and job losses in other segments of the economy, such as in restaurants, stores, and service and manufacturing companies.
There is no free lunch, but it is easy to be fooled into thinking we are creating jobs. This is because the newly created solar jobs can be seen and counted. But the job losses in other segments of the economy are diffuse and difficult to see unless one knows to look for them. Many politicians take credit for the solar jobs, but never mention the job losses caused by reduced spending in the balance of the economy. Even worse, the new solar jobs are not as productive as the jobs that were lost, because of the poor economics of solar. This is one reason why total unemployment remains high even with all the new solar jobs.
Another fallacy is that solar power provides energy security against interruptions in oil supplies. But using solar does not reduce oil imports because we do not make electricity with oil. We make electricity with coal, nuclear, natural gas, and hydro, all domestic energy supplies with more than 200 years of known reserves.
But the most ironic fallacy is the idea that solar is an effective means to help the environment by reducing CO2. Conservation and other technologies reduce CO2 for a cost of $20/ton. But saving CO2 with solar costs at least $150/ton. The writing of one respected economist strongly suggests that subsidies to renewable energy, on net, actually generate more CO2 than they save.
One day, solar PV might be economical, and if that happens, we will still have great sunshine in Arizona and a competitive advantage. The market will come to us. But if we insist on subsidies to the industry on the hope it will drive the price of solar to $1/W, let's at least ship the panels to developing countries where they are needed and would make a difference in the lives of millions. To install them here on our homes does nothing except makes us feel good and drains our economy of productive jobs.
Ocean Acidification
About 1/4 of the CO2 we emit into the atmosphere is absorbed by the ocean. Once absorbed, the CO2 forms carbonic acid and lowers the pH of the ocean. The linked paper provides a good overview of the issue.
Click on Image to enlarge
Dissenting views of the impact of ocean acidification can be found MasterResource & SPPI.
Water and Energy
Nuclear power and other thermal cycle power plants are often dismissed as impractical solutions for Arizona because of their alleged high water use. Here are the facts.
The Palo Verde nuclear plant produces about 1/4 of Arizona's electrical energy and uses about 1% of Arizona's water. More specifically, the plant consumes 65 million gallons a day of water and the state uses about 6.5 billion gallons a day.
The real water consumer in Arizona is agriculture. We use ~70% of our water growing plants in the desert.
Why not build 4 new plants and sell power to California, or use the low cost power to help transition our 'oil' powered cars to electric and save more CO2 and reduce oil imports as well?
But at a minimum, Arizona could go almost 100% CO2 free in electricity generation if we built 3 more Palo Verde plants which will use 3% of the state's water.
The Palo Verde nuclear plant produces about 1/4 of Arizona's electrical energy and uses about 1% of Arizona's water. More specifically, the plant consumes 65 million gallons a day of water and the state uses about 6.5 billion gallons a day.
The real water consumer in Arizona is agriculture. We use ~70% of our water growing plants in the desert.
Why not build 4 new plants and sell power to California, or use the low cost power to help transition our 'oil' powered cars to electric and save more CO2 and reduce oil imports as well?But at a minimum, Arizona could go almost 100% CO2 free in electricity generation if we built 3 more Palo Verde plants which will use 3% of the state's water.
Are we not willing to trade a little less cotton or a few less golf courses for a nearly CO2 free energy supply?
Water and Energy, Continued
Artificial pricing and farm water subsidies greatly complicate the problem of choosing between water and energy discussed in the above post.
The free market sets prices of goods and services so these resources are used where most needed. The question of where water is used; the golf course, the power plant, or for growing cotton can be answered in 2 fundamental ways.
In a communist country, government bureaucrats allocate the water as they deem best, or worse, where it buys them more political power.
In a capitalistic system, the willingness to pay determines the best use of the water. If the golf course is willing to pay the most, they get the water.
If we have learned anything from history and the study of communism and capitalism, it’s that free market pricing systems allocate resources far better than government can. One caveat is if there are costs of using a resource that are not reflected in the price, such as pollution. In this case the capitalistic system will over use the resource. The corrective mechanism is to limit the use or to tax the resource to account for the cost of the pollution. Taxing such externalities is a difficult job and is reasonably done through a centralized government.
But in the case of Arizona water and energy resources, there is no significant negative externality associated with using water, so the price system should work well. But in Arizona the price of water is highly distorted due to farm subsidies and tiered water pricing structure. If we are to let the market dictate the optimal use of water, as I suggest we should, then the competing entities should all be on a level playing field.
It causes an inefficient allocation of resources for the farmers to pay 0.1 cent per gallon, while the golf course or the power plant pay 0.2 cents per gallon (example numbers only). Both must have access to water at the same price for the market to function correctly. Otherwise, the farmers will use more than the optimal amount and the other industries will use less. This will cause the prices of goods and services to be higher than they otherwise could be and will make us all live at a lower overall standard of living. The lower price we pay for food or clothing will be more than off-set by higher prices for electricity and a round of golf.
I’m writing this post because I see too many things in print here in Arizona were communistic approaches are being discussed for rationing water between competing industries and we need to let the market decide, not the politicians, or worse, the lobbyist bending the ears of the government leaders. This non-sense economic approach is being used to dismiss the use of more Nuclear or solar thermal energy as though no substitution is possible between competing users of the water. This is absurd. The free market can allocate the water very well, if we can squelch the special interests.
The free market sets prices of goods and services so these resources are used where most needed. The question of where water is used; the golf course, the power plant, or for growing cotton can be answered in 2 fundamental ways.
In a communist country, government bureaucrats allocate the water as they deem best, or worse, where it buys them more political power.
In a capitalistic system, the willingness to pay determines the best use of the water. If the golf course is willing to pay the most, they get the water.
If we have learned anything from history and the study of communism and capitalism, it’s that free market pricing systems allocate resources far better than government can. One caveat is if there are costs of using a resource that are not reflected in the price, such as pollution. In this case the capitalistic system will over use the resource. The corrective mechanism is to limit the use or to tax the resource to account for the cost of the pollution. Taxing such externalities is a difficult job and is reasonably done through a centralized government.
But in the case of Arizona water and energy resources, there is no significant negative externality associated with using water, so the price system should work well. But in Arizona the price of water is highly distorted due to farm subsidies and tiered water pricing structure. If we are to let the market dictate the optimal use of water, as I suggest we should, then the competing entities should all be on a level playing field.
It causes an inefficient allocation of resources for the farmers to pay 0.1 cent per gallon, while the golf course or the power plant pay 0.2 cents per gallon (example numbers only). Both must have access to water at the same price for the market to function correctly. Otherwise, the farmers will use more than the optimal amount and the other industries will use less. This will cause the prices of goods and services to be higher than they otherwise could be and will make us all live at a lower overall standard of living. The lower price we pay for food or clothing will be more than off-set by higher prices for electricity and a round of golf.
I’m writing this post because I see too many things in print here in Arizona were communistic approaches are being discussed for rationing water between competing industries and we need to let the market decide, not the politicians, or worse, the lobbyist bending the ears of the government leaders. This non-sense economic approach is being used to dismiss the use of more Nuclear or solar thermal energy as though no substitution is possible between competing users of the water. This is absurd. The free market can allocate the water very well, if we can squelch the special interests.
Schools Wasting Tax Dollars on Solar
We read every day about a school installing solar panels to save money on electricity, but there is a huge error in this logic from the viewpoint of public good.
The cost of solar electricity is very high and the school is just hiding the true cost by pushing it on to the taxpayers through a back door. The credits and rebates they use are funded through higher electric bills and taxes. There is no free lunch. The Tooth Fairy does not pay this, we do.
There is no magical way to get around the simple truth that PV electricity is expensive and we will fully pay these costs in the long run. Maybe the school saves money, but collectively we pay more.
So the School is ahead by 2 cents a kWh, but we all pay the 20 cent premium for every 2 cents they save. So who’s ahead?
The best move is to fund the schools directly though the front door and cut out the solar middle man who is pocketing most of the public funds.
The cost of solar electricity is very high and the school is just hiding the true cost by pushing it on to the taxpayers through a back door. The credits and rebates they use are funded through higher electric bills and taxes. There is no free lunch. The Tooth Fairy does not pay this, we do.
There is no magical way to get around the simple truth that PV electricity is expensive and we will fully pay these costs in the long run. Maybe the school saves money, but collectively we pay more.
So the School is ahead by 2 cents a kWh, but we all pay the 20 cent premium for every 2 cents they save. So who’s ahead?
The best move is to fund the schools directly though the front door and cut out the solar middle man who is pocketing most of the public funds.
Dr. Joseph Kalt speaks to Tucson
Dr. Kalt, a native Tucsonan, Ph.D. economist, professor at Harvard, and someone with no vested interest in Solar technologies, recently recommended we focus public spending on making Arizona a desirable place to live in order to attract business. Education, basic infrastructure maintenance, and beautification projects were mentioned as ways to attract the CEOs that bring businesses to the state. Various subsidies and hand-outs to companies were not recommended and studies indicate these are ineffective means to grow the local economy.
So when a Harvard professor, Ph. D. economist, and native Tucsonan does not recommend, for example, subsidies for solar, why do we do it? Why not use the money for education or infrastructure maintenance as he suggests? Is he a wrong? Is solar different?
I think he's right and we're making the mistake, I also think that many of the law makers have been fooled by highly paid solar lobbyist. Solar Electric technology clearly fails any reasonable cost-benefit test, and is the worst option, dollar-for-dollar, to reduce CO2 among the major renewables; wind, geothermal, and biomass, yet the ACC continues to push it.
The failure of our system in this case is caused by two key factors. First, the ACC members do not have the technical and economic backgrounds to not be fooled, and second, the lobbyist are smooth enough to fool even fairly well trained lawmakers. But as it is now, the ACC has no hope to sort through truth from fiction and they’ve put us on a course of higher unemployment and long term damage to the state’s economy.
So when a Harvard professor, Ph. D. economist, and native Tucsonan does not recommend, for example, subsidies for solar, why do we do it? Why not use the money for education or infrastructure maintenance as he suggests? Is he a wrong? Is solar different?
I think he's right and we're making the mistake, I also think that many of the law makers have been fooled by highly paid solar lobbyist. Solar Electric technology clearly fails any reasonable cost-benefit test, and is the worst option, dollar-for-dollar, to reduce CO2 among the major renewables; wind, geothermal, and biomass, yet the ACC continues to push it.
The failure of our system in this case is caused by two key factors. First, the ACC members do not have the technical and economic backgrounds to not be fooled, and second, the lobbyist are smooth enough to fool even fairly well trained lawmakers. But as it is now, the ACC has no hope to sort through truth from fiction and they’ve put us on a course of higher unemployment and long term damage to the state’s economy.
CO2 and Global Warming
The institute for Energy Policy has no expertise in planetary science and accepts the position of "An Open Letter to Congress from U.S. Scientists on Climate Change" dated Dec 4, 2009.
“Observations throughout the world make it clear that climate change is occurring, and rigorous scientific research demonstrates that the greenhouse gases emitted by human activities are the primary driver. These conclusions are based on multiple independent lines of evidence, and contrary assertions are inconsistent with an objective assessment of the vast body of peer-reviewed science. … If we are to avoid the most severe impacts of climate change, emissions of greenhouse gases must be dramatically reduced.”
We can only assume the effects will be extraordinary.
http://globalchange.mit.edu/
http://globalchange.mit.edu/files/document/LetterToCongress-ClimategateControversy.pdf
“Observations throughout the world make it clear that climate change is occurring, and rigorous scientific research demonstrates that the greenhouse gases emitted by human activities are the primary driver. These conclusions are based on multiple independent lines of evidence, and contrary assertions are inconsistent with an objective assessment of the vast body of peer-reviewed science. … If we are to avoid the most severe impacts of climate change, emissions of greenhouse gases must be dramatically reduced.”
We can only assume the effects will be extraordinary.
http://globalchange.mit.edu/
http://globalchange.mit.edu/files/document/LetterToCongress-ClimategateControversy.pdf
A 'Different' Gas Tax Proposal
Lieberman and Kerry have proposed an additional 15 cent per gallon federal gas tax. Currently, the federal gas tax is 18 cents and states, on average, add another 27 cents, for a total of about 40 to 50 cents per gallon.
By comparison, Europe’s gas tax averages more than $5 per gallon, and today they drive smaller, more efficient cars. The idea of such a large gas tax in the US is politically more difficult, but there is a win-win approach if it can be done.
Taxation is a means for government to raise revenue and to discourage certain behavior. With this in mind, it is unfortunate that we tax income as this, to some degree, discourages labor.
If the government were to put a $1/gallon tax on gas and reduce the payroll tax appropriately, it could be a revenue neutral move that creates 2 useful incentives, that is, to encourage earnings and to discourage imported oil and CO2 production.
By comparison, Europe’s gas tax averages more than $5 per gallon, and today they drive smaller, more efficient cars. The idea of such a large gas tax in the US is politically more difficult, but there is a win-win approach if it can be done.
Taxation is a means for government to raise revenue and to discourage certain behavior. With this in mind, it is unfortunate that we tax income as this, to some degree, discourages labor.
If the government were to put a $1/gallon tax on gas and reduce the payroll tax appropriately, it could be a revenue neutral move that creates 2 useful incentives, that is, to encourage earnings and to discourage imported oil and CO2 production.
Bloom Energy
Bloom Energy has developed a natural gas/air fuel cell. This is an important development if it can be made low cost and reliable. However, most reports covering this technology distort the benefits to the point of making it sound like some type of free energy machine, which it is certainly not.
Fuel cells are great technology because they can convert fuel directly into electricity at very high efficiency (60-80%). This is much better than an automobile engine (20-25%) or a power plant (40-50%). The down side is that the power is direct current (DC) and one needs an inverter to generate the AC power commonly used. This inverter costs about 40-50 cents a watt, so its cost cannot be ignored in a cost benefit analysis, nor the inverter or fuel cell reliability.
Assuming we get past all this and the fuel cell is low cost and reliable, the device becomes an attractive technology for homes or cars. A home can now use natural gas for heating AND electricity generation and may have a lower total bill. The bill should be lower as compared to a central utility burning natural gas for 2 important reasons. First, the fuel cell is converting natural gas to electricity at a higher efficiency. Second, the cost of the transmission lines from the utility to the home are avoided. This is distributed generation at its best. If cost and reliability targets are met, this fuel cell technology should have a very good market and will save a considerable amount of natural gas and utility infrastructure. But here is the down side:
This country only has 10 years of "known" reserves of natural gas and 234 years of coal. A significant investment in fuel cells to power homes and businesses will cause the price of natural gas to rise much faster than it would otherwise. Before long, the total cost to power a home could be higher with this fuel cell than by buying electricity from coal fired plants, since coal is very inexpensive. A homeowner might buy this product today and then regret the decision if the price of natural gas increases dramatically.
The other natural markets for this technology is in transportation or off-grid applications. A natural gas or hybrid vehicle using this fuel cell might achieve a remarkable "MPG." And the fact that the fuel cell produces DC power is no penalty in an electric or hybrid since its main bus is also DC. This technology would play very well with T. Boone Pickens' plan to use wind machines to save natural gas for vehicles, rather than burn it in power plants.
This is a great new technology and should help extend our natural gas resources and make biogas a more viable alternative. Best of luck to Bloom Energy in achieving a low cost and reliable product.
Fuel cells are great technology because they can convert fuel directly into electricity at very high efficiency (60-80%). This is much better than an automobile engine (20-25%) or a power plant (40-50%). The down side is that the power is direct current (DC) and one needs an inverter to generate the AC power commonly used. This inverter costs about 40-50 cents a watt, so its cost cannot be ignored in a cost benefit analysis, nor the inverter or fuel cell reliability.
Assuming we get past all this and the fuel cell is low cost and reliable, the device becomes an attractive technology for homes or cars. A home can now use natural gas for heating AND electricity generation and may have a lower total bill. The bill should be lower as compared to a central utility burning natural gas for 2 important reasons. First, the fuel cell is converting natural gas to electricity at a higher efficiency. Second, the cost of the transmission lines from the utility to the home are avoided. This is distributed generation at its best. If cost and reliability targets are met, this fuel cell technology should have a very good market and will save a considerable amount of natural gas and utility infrastructure. But here is the down side:
This country only has 10 years of "known" reserves of natural gas and 234 years of coal. A significant investment in fuel cells to power homes and businesses will cause the price of natural gas to rise much faster than it would otherwise. Before long, the total cost to power a home could be higher with this fuel cell than by buying electricity from coal fired plants, since coal is very inexpensive. A homeowner might buy this product today and then regret the decision if the price of natural gas increases dramatically.
The other natural markets for this technology is in transportation or off-grid applications. A natural gas or hybrid vehicle using this fuel cell might achieve a remarkable "MPG." And the fact that the fuel cell produces DC power is no penalty in an electric or hybrid since its main bus is also DC. This technology would play very well with T. Boone Pickens' plan to use wind machines to save natural gas for vehicles, rather than burn it in power plants.
This is a great new technology and should help extend our natural gas resources and make biogas a more viable alternative. Best of luck to Bloom Energy in achieving a low cost and reliable product.
Henry Hazlitt's Wisdom
I started reading "Economics in one lesson" by Henry Hazlitt and found it to be amazing. Can you guess what year he wrote this?
The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief in the long run they do not increase overall national production but encourage malinvestment.
The first publication of this book was in nineteen forty-six and the last in nineteen seventy-nine. The rest of the book is equally 'prophetic' and has many insights that apply well to government subsidies for renewable energy projects. As he pinpoints errors in arguments for government subsidies, his terms are almost verbatim to the current pro-subsidy dialog. I'd swear he wrote this within the last 12 months. He has a great way to make clear the "unseen" results of government policies. This should be required reading for all government leaders! Click on the blog title to go to a website with the entire text of Henry's book.
Here's more great insight:
We remarked at the beginning of this chapter that government “aid” to business is sometimes as much to be feared as government hostility. This applies as much to government subsidies as to government loans. The government never lends or gives anything to business that it does not take away from business. One often hears New Dealers and other statists boast about the way government “bailed business out” with the Reconstruction Finance Corporation, the Home Owners Loan Corporation and other government agencies in 1932 and later. But the government can give no financial help to business that it does not first or finally take from business. The government’s funds all come from taxes. Even the much vaunted “government credit” rests on the assumption that its loans will ultimately be repaid out of the proceeds of taxes. When the government makes loans or subsidies to business, what it does is to tax successful private business in order to support unsuccessful private business. Under certain emergency circumstances there may be a plausible argument for this, the merits of which we need not examine here. But in the long run it does not sound like a paying proposition from the standpoint of the country as a whole. And experience has shown that it isn’t.
The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief in the long run they do not increase overall national production but encourage malinvestment.
The first publication of this book was in nineteen forty-six and the last in nineteen seventy-nine. The rest of the book is equally 'prophetic' and has many insights that apply well to government subsidies for renewable energy projects. As he pinpoints errors in arguments for government subsidies, his terms are almost verbatim to the current pro-subsidy dialog. I'd swear he wrote this within the last 12 months. He has a great way to make clear the "unseen" results of government policies. This should be required reading for all government leaders! Click on the blog title to go to a website with the entire text of Henry's book.
Here's more great insight:
We remarked at the beginning of this chapter that government “aid” to business is sometimes as much to be feared as government hostility. This applies as much to government subsidies as to government loans. The government never lends or gives anything to business that it does not take away from business. One often hears New Dealers and other statists boast about the way government “bailed business out” with the Reconstruction Finance Corporation, the Home Owners Loan Corporation and other government agencies in 1932 and later. But the government can give no financial help to business that it does not first or finally take from business. The government’s funds all come from taxes. Even the much vaunted “government credit” rests on the assumption that its loans will ultimately be repaid out of the proceeds of taxes. When the government makes loans or subsidies to business, what it does is to tax successful private business in order to support unsuccessful private business. Under certain emergency circumstances there may be a plausible argument for this, the merits of which we need not examine here. But in the long run it does not sound like a paying proposition from the standpoint of the country as a whole. And experience has shown that it isn’t.
New CAFE Standards
Here is a clear example of the government dictating a politically correct, but economically suboptimal solution to externalities associated with using oil.
Today the DOT’s National Highway Traffic Safety Administration (NHTSA) and EPA, establish increasingly stringent fuel economy standards under NHTSA’s Corporate Average Fuel Economy program and greenhouse gas emission standards under the Clean Air Act for 2012 through 2016 model-year vehicles.
Starting with 2012 model year vehicles, the rules together require automakers to improve fleet-wide fuel economy and reduce fleet-wide greenhouse gas emissions by approximately five percent every year. NHTSA has established fuel economy standards that strengthen each year reaching an estimated 34.1 mpg for the combined industry-wide fleet for model year 2016.
The EPA standards require that by the 2016 model-year, manufacturers must achieve a combined average vehicle emission level of 250 grams of carbon dioxide per mile. The EPA standard would be equivalent to 35.5 miles per gallon if all reductions came from fuel economy improvements.
The government’s stated purpose can be seen in the following statement from the press release:
The rules could potentially save the average buyer of a 2016 model year car $3,000 over the life of the vehicle and, nationally, will conserve about 1.8 billion barrels of oil and reduce nearly a billion tons of greenhouse gas emissions over the lives of the vehicles covered.
The economically optimal way to conserve oil and reduce greenhouse gas pollution is to tax it, but this is less politically acceptable. The political problem is that the tax is visible, but the regulation costs are hidden. Sadly, we will all pay more to meet this oil and CO2 objective with this new CAFE standard than with a direct tax. If everyone could easily assess the hidden costs of this regulation, then the tax would seem cheap and we’d all agree to accept it. But how can we make the hidden cost of the regulation more clear?
The other significant mistake of this policy is that the increased fuel economy results in consumers driving farther and more often so the savings are overstated. A report by the NAS pointed out many such unintended and suboptimal results of the 1975 CAFE standards.
Here is an excerpt from a 2002 AEI-Brookings Joint Center for Regulatory Studies which drew similar conclusions:
In particular, a long-run 3.0 MPG increase in the CAFE standard would impose social welfare losses of $5.556 billion per year and save 5.1 billion gallons of gasoline per year. This amounts to a hidden tax of $1.09 per gallon conserved. An 11 cent per gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost of $275 million per year. The 3.0 MPG increase is thus 20 times more expensive than the gas tax increase. The marginal welfare costs of long-term increases in the CAFE standard amount to $1.26 per gallon and exceed by a factor of five recent estimates of the marginal societal benefits from avoided externalities. Increasing the CAFE standard is therefore neither cost-effective nor cost-beneficial.
Somehow we must find the political will to address our CO2 and oil concerns with cost effective policies (taxes).
Today the DOT’s National Highway Traffic Safety Administration (NHTSA) and EPA, establish increasingly stringent fuel economy standards under NHTSA’s Corporate Average Fuel Economy program and greenhouse gas emission standards under the Clean Air Act for 2012 through 2016 model-year vehicles.
Starting with 2012 model year vehicles, the rules together require automakers to improve fleet-wide fuel economy and reduce fleet-wide greenhouse gas emissions by approximately five percent every year. NHTSA has established fuel economy standards that strengthen each year reaching an estimated 34.1 mpg for the combined industry-wide fleet for model year 2016.
The EPA standards require that by the 2016 model-year, manufacturers must achieve a combined average vehicle emission level of 250 grams of carbon dioxide per mile. The EPA standard would be equivalent to 35.5 miles per gallon if all reductions came from fuel economy improvements.
The government’s stated purpose can be seen in the following statement from the press release:
The rules could potentially save the average buyer of a 2016 model year car $3,000 over the life of the vehicle and, nationally, will conserve about 1.8 billion barrels of oil and reduce nearly a billion tons of greenhouse gas emissions over the lives of the vehicles covered.
The economically optimal way to conserve oil and reduce greenhouse gas pollution is to tax it, but this is less politically acceptable. The political problem is that the tax is visible, but the regulation costs are hidden. Sadly, we will all pay more to meet this oil and CO2 objective with this new CAFE standard than with a direct tax. If everyone could easily assess the hidden costs of this regulation, then the tax would seem cheap and we’d all agree to accept it. But how can we make the hidden cost of the regulation more clear?
The other significant mistake of this policy is that the increased fuel economy results in consumers driving farther and more often so the savings are overstated. A report by the NAS pointed out many such unintended and suboptimal results of the 1975 CAFE standards.
Here is an excerpt from a 2002 AEI-Brookings Joint Center for Regulatory Studies which drew similar conclusions:
In particular, a long-run 3.0 MPG increase in the CAFE standard would impose social welfare losses of $5.556 billion per year and save 5.1 billion gallons of gasoline per year. This amounts to a hidden tax of $1.09 per gallon conserved. An 11 cent per gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost of $275 million per year. The 3.0 MPG increase is thus 20 times more expensive than the gas tax increase. The marginal welfare costs of long-term increases in the CAFE standard amount to $1.26 per gallon and exceed by a factor of five recent estimates of the marginal societal benefits from avoided externalities. Increasing the CAFE standard is therefore neither cost-effective nor cost-beneficial.
Somehow we must find the political will to address our CO2 and oil concerns with cost effective policies (taxes).
Learning from Others' Mistakes
Here is the summary of an October 2009 report from the Rheinisch-Westfälisches Institut für Wirtschaftsforschung titled: "Economic impacts from the promotion of renewable energies: The German experience"
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Although renewable energies have a potentially beneficial role to play as part of Germany’s energy portfolio, the commonly advanced argument that renewables confer a double dividend or “win-win solution” in the form of environmental stewardship and economic prosperity is disingenuous. In this article, we argue that Germany’s principal mechanism of supporting renewable technologies through feed-in tariffs, in fact, imposes high costs without any of the alleged positive impacts on emissions reductions, employment, energy security, or technological innovation.
First, as a consequence of the prevailing coexistence of the Renewable Energy Sources Act (EEG) and the EU Emissions Trading Scheme (ETS), the increased use of renewable energy technologies triggered by the EEG does not imply any additional emission reductions beyond those already achieved by ETS alone. This is in line with Morthorst, who analyzes the promotion of renewable energy usage by alternative instruments using a three-country model. This study’s results suggest that renewable support schemes are questionable climate policy instruments in the presence of the ETS.
Second, numerous empirical studies have consistently shown the net employment balance to be zero or even negative in the long run, a consequence of the high opportunity cost of supporting renewable energy technologies. Indeed, it is most likely that whatever jobs are created by renewable energy promotion would vanish as soon as government support is terminated, leaving only Germany’s export sector to benefit from the possible continuation of renewables support in other countries such as the US. Third, rather than promoting energy security, the need for backup power from fossil fuels means that renewables increase Germany’s dependence on gas imports, most of which come from Russia. And finally, the system of feed-in tariffs stifles competition among renewable energy producers and creates perverse incentives to lock into existing technologies. Economic impacts from the promotion of renewable energies
Hence, although Germany’s promotion of renewable energies is commonly portrayed in the media as setting a “shining example in providing a harvest for the world” (The Guardian 2007), we would instead regard the country’s experience as a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits. As other European governments emulate Germany by ramping up their promotion of renewables, policy makers should scrutinize the logic of supporting energy sources that cannot compete on the market in the absence of government assistance. Such scrutiny is also warranted in
the US, where there are currently nearly 400 federal and state programs in place that provide financial incentives for renewable energy.
History clearly shows that governments have an abysmal record of selecting economically productive projects through such programs. Nevertheless, government intervention can serve to support renewable energy technologies through other mechanisms that harness market incentives or correct for market failures. The European Trading Scheme, under which emissions certificates are traded, is one obvious example. Another is funding for research and development (R&D), which may compensate for underinvestment from the private sector owing to positive externalities. In the early stages of development of non-competitive technologies, for example, it appears to be more cost-effective to invest in R&D to achieve competitiveness, rather than to promote their large-scale production.
In its country report on Germany’s energy policy, the International Energy Agency recommends considering ‘‘policies other than the very high feed-in tariffs to promote solar photovoltaics.’’ This recommendation is based on the grounds that ‘‘the government should always keep cost-effectiveness as a critical component when deciding between policies and measures.’’ Consequently, the IEA proposes policy instruments favouring research and development. Lesser and Su concur with this viewpoint: ‘‘Technologies that are theoretically promising, but unlikely to be competitive for many years, may be best addressed under other policies, such as publicly funded R&D.’’ This reasoning is particularly relevant for solar cells, whose technological efficiency is widely known to be modest and, hence, should be first increased substantially via R&D.
Instead of a policy instrument that aims at pushing technological improvements, however, Germany’s support scheme of renewable energy technologies resembles traditional active labour market programs, which have been demonstrated in the literature to be counterproductive. It bears particular noting that the long shadows of this economic support will last for another two decades even if the EEG were to be abolished immediately.
*********
Although renewable energies have a potentially beneficial role to play as part of Germany’s energy portfolio, the commonly advanced argument that renewables confer a double dividend or “win-win solution” in the form of environmental stewardship and economic prosperity is disingenuous. In this article, we argue that Germany’s principal mechanism of supporting renewable technologies through feed-in tariffs, in fact, imposes high costs without any of the alleged positive impacts on emissions reductions, employment, energy security, or technological innovation.
First, as a consequence of the prevailing coexistence of the Renewable Energy Sources Act (EEG) and the EU Emissions Trading Scheme (ETS), the increased use of renewable energy technologies triggered by the EEG does not imply any additional emission reductions beyond those already achieved by ETS alone. This is in line with Morthorst, who analyzes the promotion of renewable energy usage by alternative instruments using a three-country model. This study’s results suggest that renewable support schemes are questionable climate policy instruments in the presence of the ETS.
Second, numerous empirical studies have consistently shown the net employment balance to be zero or even negative in the long run, a consequence of the high opportunity cost of supporting renewable energy technologies. Indeed, it is most likely that whatever jobs are created by renewable energy promotion would vanish as soon as government support is terminated, leaving only Germany’s export sector to benefit from the possible continuation of renewables support in other countries such as the US. Third, rather than promoting energy security, the need for backup power from fossil fuels means that renewables increase Germany’s dependence on gas imports, most of which come from Russia. And finally, the system of feed-in tariffs stifles competition among renewable energy producers and creates perverse incentives to lock into existing technologies. Economic impacts from the promotion of renewable energies
Hence, although Germany’s promotion of renewable energies is commonly portrayed in the media as setting a “shining example in providing a harvest for the world” (The Guardian 2007), we would instead regard the country’s experience as a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits. As other European governments emulate Germany by ramping up their promotion of renewables, policy makers should scrutinize the logic of supporting energy sources that cannot compete on the market in the absence of government assistance. Such scrutiny is also warranted in
the US, where there are currently nearly 400 federal and state programs in place that provide financial incentives for renewable energy.
History clearly shows that governments have an abysmal record of selecting economically productive projects through such programs. Nevertheless, government intervention can serve to support renewable energy technologies through other mechanisms that harness market incentives or correct for market failures. The European Trading Scheme, under which emissions certificates are traded, is one obvious example. Another is funding for research and development (R&D), which may compensate for underinvestment from the private sector owing to positive externalities. In the early stages of development of non-competitive technologies, for example, it appears to be more cost-effective to invest in R&D to achieve competitiveness, rather than to promote their large-scale production.
In its country report on Germany’s energy policy, the International Energy Agency recommends considering ‘‘policies other than the very high feed-in tariffs to promote solar photovoltaics.’’ This recommendation is based on the grounds that ‘‘the government should always keep cost-effectiveness as a critical component when deciding between policies and measures.’’ Consequently, the IEA proposes policy instruments favouring research and development. Lesser and Su concur with this viewpoint: ‘‘Technologies that are theoretically promising, but unlikely to be competitive for many years, may be best addressed under other policies, such as publicly funded R&D.’’ This reasoning is particularly relevant for solar cells, whose technological efficiency is widely known to be modest and, hence, should be first increased substantially via R&D.
Instead of a policy instrument that aims at pushing technological improvements, however, Germany’s support scheme of renewable energy technologies resembles traditional active labour market programs, which have been demonstrated in the literature to be counterproductive. It bears particular noting that the long shadows of this economic support will last for another two decades even if the EEG were to be abolished immediately.
Triage
You're an ER doctor and three patients enter the waiting room at once. One is having a heart attack, one has a broken arm, and one has the flu. Whom do you treat first?
If you think it's the heart attack patient, I'm with you.
It's time we face the fact that resources are limited and we must triage our energy problems in a logical order.
People talk about competing priorities in addressing the national energy situation; clean air, global warming, and dependence on imported oil. It's useful to look squarely at this issue first, and there appears to be an elephant in the room.
If one compares the total known reserves of oil in the U.S. to our rate of use, we have about 20 billion barrels of known reserves (source EIA), and we use about 20 million barrels a day. So, we have about 1000 days of oil reserves (2.7 years) if we were forced to supply all our daily need with only our current proven reserves. The same calculation for natural gas yields about 10 years of known reserves (BP Review of World Energy 2009) but we have a whopping 234 years of coal!
We have lots of coal and not a lot of oil or gas. Now consider what we do with coal, oil, and gas. In very general terms, we use oil to run our transportation system, and we use gas and coal to make electricity. We are critically low on the fuel needed to operate our planes, trains, and automobiles, but we have lots of fuel to make electricity.
So what problem is more important to work on first, electricity or transportation? I vote for the transportation/oil issue. I trust you agree.
So why are we spending a lot of money in subsidies to promote the use of expensive solar power to make electricity? I'm not sure. It seems to me that electricity is not the problem and if it were, solar is not the answer (See post titled "Grid Tied Photovoltaics") We have enough coal, nuclear energy, and hydro to make electricity for centuries to come. Our electrical problem is like the patient with the flu. Our pending transportation trouble is like the guy having the heart attack. I'm concerned about the guy with the flu and the guy with the broken arm, but let's treat the problems in a logical order. Transportation first, then electricity. Am I not concerned about CO2 from burning coal? Yes, but we have a bigger near term problem that left unaddressed will cause us much more pain and suffering. If our oil situation becomes desperate, we will collectively cast off any concerns for the environment in favor of simple survival. So let's steer clear of those rocks.
As our oil supply depletes, oil prices will rise, potentially in a disruptive way. Policies that anticipate the pending oil/transportation paradigm shift would be wise. But subsidies to make electricity with PV are treating the wrong patient with the wrong medicine.
If you think it's the heart attack patient, I'm with you.
It's time we face the fact that resources are limited and we must triage our energy problems in a logical order.
People talk about competing priorities in addressing the national energy situation; clean air, global warming, and dependence on imported oil. It's useful to look squarely at this issue first, and there appears to be an elephant in the room.
If one compares the total known reserves of oil in the U.S. to our rate of use, we have about 20 billion barrels of known reserves (source EIA), and we use about 20 million barrels a day. So, we have about 1000 days of oil reserves (2.7 years) if we were forced to supply all our daily need with only our current proven reserves. The same calculation for natural gas yields about 10 years of known reserves (BP Review of World Energy 2009) but we have a whopping 234 years of coal!
We have lots of coal and not a lot of oil or gas. Now consider what we do with coal, oil, and gas. In very general terms, we use oil to run our transportation system, and we use gas and coal to make electricity. We are critically low on the fuel needed to operate our planes, trains, and automobiles, but we have lots of fuel to make electricity.
So what problem is more important to work on first, electricity or transportation? I vote for the transportation/oil issue. I trust you agree.
So why are we spending a lot of money in subsidies to promote the use of expensive solar power to make electricity? I'm not sure. It seems to me that electricity is not the problem and if it were, solar is not the answer (See post titled "Grid Tied Photovoltaics") We have enough coal, nuclear energy, and hydro to make electricity for centuries to come. Our electrical problem is like the patient with the flu. Our pending transportation trouble is like the guy having the heart attack. I'm concerned about the guy with the flu and the guy with the broken arm, but let's treat the problems in a logical order. Transportation first, then electricity. Am I not concerned about CO2 from burning coal? Yes, but we have a bigger near term problem that left unaddressed will cause us much more pain and suffering. If our oil situation becomes desperate, we will collectively cast off any concerns for the environment in favor of simple survival. So let's steer clear of those rocks.
As our oil supply depletes, oil prices will rise, potentially in a disruptive way. Policies that anticipate the pending oil/transportation paradigm shift would be wise. But subsidies to make electricity with PV are treating the wrong patient with the wrong medicine.
Cost of Various Electricity Options
Click on chart to enlarge
This analysis has a few important caveats. First, a CO2 penalty was imposed on the cost of the coal and gas technologies. The penalty was applied as a 3-percentage point increase in the cost of capital. The report stated this was equivalent to a $15/ton cost for CO2. Why not just add the CO2 penalty directly to the fuel cost? That would be easy to grasp and analyze. Why increase the cost of capital?
Second, the fact that PV and wind energy is worth less due to its intermittency is NOT captured in the cost data.
In summary, solar PV is shown to cost about 3-4 times more than traditional generation methods, but without the CO2 penalty on coal and with a correction for the intermittency of PV energy, the real price of PV is about 10 times more than traditional alternatives and several times higher than other renewable alternatives.
A more intuitive and fair comparison, would include externalities clearly and separately. The structure of the analysis, makes it difficult to apply the lower value of intermittent power. Perhaps a simple $/kWhr would be a better approach, if clarity on the cost of renewables is an objective.
PV Vs. CFL Bulbs
Someone is given $10,000 to spend on either a grid-tied PV system or on compact fluorescent lights. Their goal is to save energy, reduce CO2 output, and delay the building of more power plants. Which option is better, PV or CFL?
Here are a few assumptions. The CFL is replacing a 75W incandescent light which runs, on average, 4 hours a day. Also assume that the CFL draws 15 watts, 1/5 the power of the incandescent bulb for the same lumens. Finally, assume that you install the PV system in sunny southern Arizona with a net production output of 1,650 kWh/y for each kW of installed rated power.
With the $10,000 one can buy a 2kW grid-tied PV system ($5/w), which will produce about 3,300 kWh/y of usable power. If the PV energy is offsetting energy from a coal plant (like in Tucson), about 3.3 tons of CO2 will be saved a year. But it will not help reduce peak load much since the utility can't count on its availability with the level of certainty they demand. (see post "Grid Tied PV and Peak Demand").
If one chooses the CFL, then the $10,000 will buy about 5000 lamps. Each lamp saves 60W for 4 hours a day (75W - 15W). 60W x 4 hr x 365 days x 5000 lamps = 438 MWh/y. This reduced CO2 by about 438 tons a year. But also very important, efficiency gains reduce peak load requirements and can delay or avoid the construction of a power plant.
So the CFL options saves 132X more energy, reduced 132X more CO2 per dollar, and easies the burden on the utility grid and generation loads.
So why don't utilities give away free CFL bulbs to anyone that asks rather than subsidizing grid-tied PV?
The point is that there are many things which can and should be done in the areas of energy efficiency before one spends any significant money promoting grid-tied PV. But it is not happening and the reason is a mystery.
Here are a few assumptions. The CFL is replacing a 75W incandescent light which runs, on average, 4 hours a day. Also assume that the CFL draws 15 watts, 1/5 the power of the incandescent bulb for the same lumens. Finally, assume that you install the PV system in sunny southern Arizona with a net production output of 1,650 kWh/y for each kW of installed rated power.
With the $10,000 one can buy a 2kW grid-tied PV system ($5/w), which will produce about 3,300 kWh/y of usable power. If the PV energy is offsetting energy from a coal plant (like in Tucson), about 3.3 tons of CO2 will be saved a year. But it will not help reduce peak load much since the utility can't count on its availability with the level of certainty they demand. (see post "Grid Tied PV and Peak Demand").
If one chooses the CFL, then the $10,000 will buy about 5000 lamps. Each lamp saves 60W for 4 hours a day (75W - 15W). 60W x 4 hr x 365 days x 5000 lamps = 438 MWh/y. This reduced CO2 by about 438 tons a year. But also very important, efficiency gains reduce peak load requirements and can delay or avoid the construction of a power plant.
So the CFL options saves 132X more energy, reduced 132X more CO2 per dollar, and easies the burden on the utility grid and generation loads.
So why don't utilities give away free CFL bulbs to anyone that asks rather than subsidizing grid-tied PV?
The point is that there are many things which can and should be done in the areas of energy efficiency before one spends any significant money promoting grid-tied PV. But it is not happening and the reason is a mystery.
Grid Tied Photovoltaics Economics
The cost of a typical grid-tied PV system is about $5/watt installed (for a large system). Such a system located in sunny southern Arizona will actually generate power for about 1650 net sun-hours a year. A 1kW system will produce about 1,650 kWhr/year. This system will cost about $5,000 to install. So what is the value of the electricity it produces?
If 100% of the power could be used real-time by the end user, then one might say it’s worth the real time retail rate (See post titled “The town of Coalville” to appreciate the pitfalls of such an assumption). In my town I pay about 11 cents/kWhr. So making 1650 kWhr * $0.11 = $182. This has a simple payback of 27 years. But what if I can't use the power during the day when it is being produced and I have to sell it back to the utility?
In Arizona and in many states there are 'Net Metering' laws which require the utility to buy power back from the end user at full retail rates. This is unfair to the utility and is a subsidy for the PV user (which we all pay in the form of higher utility rates and fees). It is extremely important to have a firm grasp on the concept of "no free lunch." It is very easy to confuse real economic returns with artificial returns in a heavily subsidized environment.
Forcing the utility to buy back power at retail rates is unfair because they are required to provide power 24/7, install and maintain generation equipment and transmission lines and provide service and billing. The actual value to the utility of this intermittent power (PV) is much closer to the fuel avoidance cost.
For reasons explained in the Coalville post I think the value of homeowner produced PV is close to the fuel avoidance cost which is about 2.7 cents/kWh in my area. So the real payback of PV is about 111 years.
But what if PV costs fell substantially? Well it has, especially in the last 18 months. The $5/watt figure is based on the new current lower prices (Mar 2010). But what if they fall more? How cheap do they need to be to make systems break even without subsidies. If PV panels were available free, the cost to install the panels, including the inverter, wire, breakers, enclosures, conduit, and panel mounting structure would be about $2.50/watt. So the free 1 kW panels would cost $2500 to install and connect to the grid, and will produce about $45 worth of power a year, for a 56 year simple payback.
If 100% of the power could be used real-time by the end user, then one might say it’s worth the real time retail rate (See post titled “The town of Coalville” to appreciate the pitfalls of such an assumption). In my town I pay about 11 cents/kWhr. So making 1650 kWhr * $0.11 = $182. This has a simple payback of 27 years. But what if I can't use the power during the day when it is being produced and I have to sell it back to the utility?
In Arizona and in many states there are 'Net Metering' laws which require the utility to buy power back from the end user at full retail rates. This is unfair to the utility and is a subsidy for the PV user (which we all pay in the form of higher utility rates and fees). It is extremely important to have a firm grasp on the concept of "no free lunch." It is very easy to confuse real economic returns with artificial returns in a heavily subsidized environment.
Forcing the utility to buy back power at retail rates is unfair because they are required to provide power 24/7, install and maintain generation equipment and transmission lines and provide service and billing. The actual value to the utility of this intermittent power (PV) is much closer to the fuel avoidance cost.
For reasons explained in the Coalville post I think the value of homeowner produced PV is close to the fuel avoidance cost which is about 2.7 cents/kWh in my area. So the real payback of PV is about 111 years.
But what if PV costs fell substantially? Well it has, especially in the last 18 months. The $5/watt figure is based on the new current lower prices (Mar 2010). But what if they fall more? How cheap do they need to be to make systems break even without subsidies. If PV panels were available free, the cost to install the panels, including the inverter, wire, breakers, enclosures, conduit, and panel mounting structure would be about $2.50/watt. So the free 1 kW panels would cost $2500 to install and connect to the grid, and will produce about $45 worth of power a year, for a 56 year simple payback.
Grid Tied PV and Peak Demand
Does installing grid-tied PV really reduce the power company's peak generating or transmission requirements?
I often hear that PV can be used to delay or even avoid building a new power station.
In my town we have our highest annual electrical loads in the mid to late summer. We also have some great afternoon thunderstorms. We call them monsoons. In the last 3 of 5 years, at the moment of peak annual load, our town was covered by clouds. You may think this is impossible. If there are clouds, then the electrical loads (air conditioning) should be lower. I admit this sounds a bit bazaar.
But the real world is often stranger than fiction. In our case, we were having a typical hot sunny day. Then in a 10 minute period of time, our town which is about 10 miles by 10 miles square was overshadowed by one of those great monsoon rain clouds. The interesting part is that the electric demand of the town continued to rise for 15 more minutes. It seems that there is a delay between the time the building get shadowed and when the ACs respond to the lower load. Or maybe everyone just started turning on their lights. It does get dark when these clouds roll in.
So this actually happened 3 of the last 5 years! For the power company to depend on a power source like PV, their reliability guidelines only allow 1 such event every 10 years. So this means they must build in the generation capacity for the case that the PV is cloud covered when the annual peak demand is occurring. It happens too often for them to ignore it. The only relief the PV offers is that even under dark cloud cover it can still produce 10% of its rated output.
One last point. Your town might have much different weather patterns than mine and distributed PV might have a better chance to be illuminate at the moment of annual peak power demand 9 of 10 years or whatever the utility demands for reliable service. The drawback is that peak demand occurs at 4:30 to 5:00 pm where I live and it might be the same for you. This is several hours past solar noon. PV output is down 30-50% by then. You can face the panel more southwest to try to synchronize the peak PV output with peak energy demand, but you then lose in total energy output and burn more fossil fuels annually. But all this can be a fun optimization problem.
So in my town, PV only marginally helps reduce peak generation requirements for the utility and if we grow and need to add more generation capacity, adding PV will not delay this much.
I often hear that PV can be used to delay or even avoid building a new power station.
In my town we have our highest annual electrical loads in the mid to late summer. We also have some great afternoon thunderstorms. We call them monsoons. In the last 3 of 5 years, at the moment of peak annual load, our town was covered by clouds. You may think this is impossible. If there are clouds, then the electrical loads (air conditioning) should be lower. I admit this sounds a bit bazaar.
But the real world is often stranger than fiction. In our case, we were having a typical hot sunny day. Then in a 10 minute period of time, our town which is about 10 miles by 10 miles square was overshadowed by one of those great monsoon rain clouds. The interesting part is that the electric demand of the town continued to rise for 15 more minutes. It seems that there is a delay between the time the building get shadowed and when the ACs respond to the lower load. Or maybe everyone just started turning on their lights. It does get dark when these clouds roll in.
So this actually happened 3 of the last 5 years! For the power company to depend on a power source like PV, their reliability guidelines only allow 1 such event every 10 years. So this means they must build in the generation capacity for the case that the PV is cloud covered when the annual peak demand is occurring. It happens too often for them to ignore it. The only relief the PV offers is that even under dark cloud cover it can still produce 10% of its rated output.
One last point. Your town might have much different weather patterns than mine and distributed PV might have a better chance to be illuminate at the moment of annual peak power demand 9 of 10 years or whatever the utility demands for reliable service. The drawback is that peak demand occurs at 4:30 to 5:00 pm where I live and it might be the same for you. This is several hours past solar noon. PV output is down 30-50% by then. You can face the panel more southwest to try to synchronize the peak PV output with peak energy demand, but you then lose in total energy output and burn more fossil fuels annually. But all this can be a fun optimization problem.
So in my town, PV only marginally helps reduce peak generation requirements for the utility and if we grow and need to add more generation capacity, adding PV will not delay this much.
Chasing your Tail
In college, I made an important mistake and learned a valuable lesson. I was working on a solar thermal cooling system and made a cost/benefit analysis. I determined this technology would break even if the price of oil exceeded $50 per barrel. Adjusting for the CPI, this is $121/barrel today. Well, oil exceeded that recently, but this technology did not come to market. My error was that as oil becomes more expensive, so do solar technologies. There's a lot of energy embedded in the cost of things. When energy prices rise, so do the cost of these items. There is a multiplier in each product, such that a 1% increase in energy prices results in a fraction of 1% increase in cost. Some things are energy intensive (like food or aluminum) and some things are not. Although, at the moment, I have trouble naming anything that is not.
If something has an energy cost factor of 25%, it means that a 1% increase in energy prices causes a 0.25% increase in price. Imagine an alternative energy technology that can produce power for 20 cents/kWh at today's energy cost of 10 cents/kWh. Also assume the technology has an embedded energy cost factor of 25%. So when energy prices rise to 20 cents/kWh, the cost of the energy produced by the alternative supply also increases to 22.5 cents/kWh. So it's not quite at break even yet.
In general, the price of energy might need to rise more than one might think before alternative technologies break even, because these technologies have an energy content that increases in cost. If the energy content is too high, then you can chase your tail, so to speak, and not reach break even for a very long.
If you know any good papers about the impact of energy prices on food prices, please comment. Thanks.
If something has an energy cost factor of 25%, it means that a 1% increase in energy prices causes a 0.25% increase in price. Imagine an alternative energy technology that can produce power for 20 cents/kWh at today's energy cost of 10 cents/kWh. Also assume the technology has an embedded energy cost factor of 25%. So when energy prices rise to 20 cents/kWh, the cost of the energy produced by the alternative supply also increases to 22.5 cents/kWh. So it's not quite at break even yet.
In general, the price of energy might need to rise more than one might think before alternative technologies break even, because these technologies have an energy content that increases in cost. If the energy content is too high, then you can chase your tail, so to speak, and not reach break even for a very long.
If you know any good papers about the impact of energy prices on food prices, please comment. Thanks.
Subsidies = Taxes
Which sounds better?
Subsidies and rebates are available to pay for much of the cost of your grid tied PV systems.
OR
If your neighbor installs a PV system on his house we'll make you and the other neighbors pay for most of it via higher taxes and higher electric bills.
Both statements are true and equivalent. The truth is there is no free lunch in this situation. Every dollar in subsidies and rebates is paid for with taxes and electric bill fees we will pay. It's a zero-sum game and creates what economist call "dead weight losses."
The point is that 'subsidies' sound good and 'taxes' sound bad, but they are just different sides of the same coin.
Subsidies and rebates are available to pay for much of the cost of your grid tied PV systems.
OR
If your neighbor installs a PV system on his house we'll make you and the other neighbors pay for most of it via higher taxes and higher electric bills.
Both statements are true and equivalent. The truth is there is no free lunch in this situation. Every dollar in subsidies and rebates is paid for with taxes and electric bill fees we will pay. It's a zero-sum game and creates what economist call "dead weight losses."
The point is that 'subsidies' sound good and 'taxes' sound bad, but they are just different sides of the same coin.
A Penny Saved
Ben Franklin once said a penny saved is a penny earned. It also applies to our current energy situation. A kWh saved is a kWh generated. In fact a kWh saved probably reduces more CO2 emission and is generally better for the planet than using renewable energy to make energy.
The problem is that saving is not sexy. At a recent solar conference a speaker was talking about a PV system he installed at his house and how he also installed a high efficiency pool pump. It turns out that he saved just as much energy with his pool pump as he made with his PV system but for a fraction of the cost. Everyone laughed, yet few left the room determined to focus on energy efficiency. Yet this is the low hanging fruit, and the fact that we don't diligently pursue efficiency instead of subsidies for grid-tied PV systems says something fundamental about our reasoning or possibly our motives. Are we really interested in using our resources wisely? Have we lost the ability to reason or calculate?
The problem is that saving is not sexy. At a recent solar conference a speaker was talking about a PV system he installed at his house and how he also installed a high efficiency pool pump. It turns out that he saved just as much energy with his pool pump as he made with his PV system but for a fraction of the cost. Everyone laughed, yet few left the room determined to focus on energy efficiency. Yet this is the low hanging fruit, and the fact that we don't diligently pursue efficiency instead of subsidies for grid-tied PV systems says something fundamental about our reasoning or possibly our motives. Are we really interested in using our resources wisely? Have we lost the ability to reason or calculate?
The Town of Coalville
There once was a town named Coalville. Each house in the town used exactly $100 per month in electricity. One day they elected a new mayor who promised to clean up the town. They passed a law requiring everyone to install enough PV on their house to cover exactly 1/2 of their electric use. Once everyone had done this what was the new household electric bill in Coalville?
This is actually a very complex question to answer. The answer is not likely $50.
Here are some reasonable assumptions one might make about the situation in Coalville and its implications to the new electric bills.
If 1/3 of the electric bill were fuel cost and 2/3 were fixed cost (not a bad assumption for many towns), the electric bill would only decrease by 1/6, since we cut the fuel use in 1/2, but it was only 1/3 the total cost. So the new bill is $83.33/month as long as the other non-fuel cost remained constant.
If however, if 1/2 of their electric bill was fuel, possibly because they were buying some expensive power from the neighboring town of Gasville, then they saved 1/2 of 1/2 of their bill, so the new bill would be $75/mo.
If however they were growing and they were on the verge of having to build a new power plant then the total savings could include both the fuel savings and plant capital cost savings. But can peak demand be lowered effectively by installing PV panels? Not in my town, see post "Grid Tied PV and Peak Demand"
This example is also meant to demonstrate that in the financial analysis of PV systems, even the power used "real-time" by the home owner is not necessarily worth retail price, because the utility may have to raise rates on everyone to cover their fixed cost. In my town, we are all starting to pay a noticable renewable energy fee on our bills. My home and office RE fee is aproaching $1000 a year.
It's tricky to consider the big picture. Net metering and subsidies really muddy the waters. Without net metering laws, each utility could consider it's marginal cost and price electricity appropriately. Areas with the highest marginal cost might have better economic justification for PV, while utilities with low marginal cost will not. Unfortunately net metering laws will encourage PV installations in all situations equally.
This is actually a very complex question to answer. The answer is not likely $50.
Here are some reasonable assumptions one might make about the situation in Coalville and its implications to the new electric bills.
If 1/3 of the electric bill were fuel cost and 2/3 were fixed cost (not a bad assumption for many towns), the electric bill would only decrease by 1/6, since we cut the fuel use in 1/2, but it was only 1/3 the total cost. So the new bill is $83.33/month as long as the other non-fuel cost remained constant.
If however, if 1/2 of their electric bill was fuel, possibly because they were buying some expensive power from the neighboring town of Gasville, then they saved 1/2 of 1/2 of their bill, so the new bill would be $75/mo.
If however they were growing and they were on the verge of having to build a new power plant then the total savings could include both the fuel savings and plant capital cost savings. But can peak demand be lowered effectively by installing PV panels? Not in my town, see post "Grid Tied PV and Peak Demand"
This example is also meant to demonstrate that in the financial analysis of PV systems, even the power used "real-time" by the home owner is not necessarily worth retail price, because the utility may have to raise rates on everyone to cover their fixed cost. In my town, we are all starting to pay a noticable renewable energy fee on our bills. My home and office RE fee is aproaching $1000 a year.
It's tricky to consider the big picture. Net metering and subsidies really muddy the waters. Without net metering laws, each utility could consider it's marginal cost and price electricity appropriately. Areas with the highest marginal cost might have better economic justification for PV, while utilities with low marginal cost will not. Unfortunately net metering laws will encourage PV installations in all situations equally.
Energy Storage
The central problem of renewable energy is its intermittent nature, which leads to discussions of technologies needed to store renewable energy. These concerns are overstated, however, as this will not be necessary for many years. What is most needed instead are adaptive loads; the many significant common loads that can effectively use power when it is available, such as running the hot water heater, pool pump, dishwasher, washer and dryer, or even charging an electric vehicle. With thermal storage, even refrigeration, heating, and cooling can be done on a schedule compatible with an intermittent power source.
One solution is appliances that respond to a simple broadcast signal from the power company. AM or pager frequencies could be implemented quickly at low cost and allow electricity usage to more closely correspond to electricity supply. Such adaptive loads would also help manage peak power requirements. I'm unsure what the "Smart-Grid" guys have in mind, but all we really need is something simple with basic security protocols.
One solution is appliances that respond to a simple broadcast signal from the power company. AM or pager frequencies could be implemented quickly at low cost and allow electricity usage to more closely correspond to electricity supply. Such adaptive loads would also help manage peak power requirements. I'm unsure what the "Smart-Grid" guys have in mind, but all we really need is something simple with basic security protocols.
Solar and Wind
I often see articles about renewable energy where "solar and wind" are grouped as the main alternatives. This is misleading as there is a big difference in the underlying economics. Wind is about 5x more cost effective at producing electricity than solar PV. Wind has a real chance of making a meaningful contribution to our energy situation over the next couple of decades, PV does not. It's misleading to mention them together in the same sentence as though they were somehow equivalent.
Large wind cost about $1.8 per watt to install and will produce power (in appropriate locations) for about 9-10 hours a day. Solar PV cost about $5-6/watt to install and will produce power for about 5-6 hours a day.
A modest US home uses an average continuous power of about 2000 watts. Using wind, this will cost about $10,000. Using solar, this will cost around $50,000.
Plus the wind equipment is more reliable since it directly drives a generator, whereas the solar PV produces DC power which must be inverted to tie into our electric grid.
Solar PV has its competitive advantage powering off-grid loads, such as remote cabins or school crossing signs.
The point of this post is to try to prevent the baby from being tossed out with the bath water. Wind is viable and might get a black eye if it is too closely associated with Solar PV which is non-viable.
Large wind cost about $1.8 per watt to install and will produce power (in appropriate locations) for about 9-10 hours a day. Solar PV cost about $5-6/watt to install and will produce power for about 5-6 hours a day.
A modest US home uses an average continuous power of about 2000 watts. Using wind, this will cost about $10,000. Using solar, this will cost around $50,000.
Plus the wind equipment is more reliable since it directly drives a generator, whereas the solar PV produces DC power which must be inverted to tie into our electric grid.
Solar PV has its competitive advantage powering off-grid loads, such as remote cabins or school crossing signs.
The point of this post is to try to prevent the baby from being tossed out with the bath water. Wind is viable and might get a black eye if it is too closely associated with Solar PV which is non-viable.
Solar Humor
How many tax payers does it take to install a solar panel?
Ten, 1 to install it and 9 of us to pay for it.
Sadly, the combined utility rebates, federal and state credits, and net meter subsidies make this about right.
Ten, 1 to install it and 9 of us to pay for it.
Sadly, the combined utility rebates, federal and state credits, and net meter subsidies make this about right.
Electric Cars and CO2
Some say that electric cars will produce as much or more CO2 as gas cars, but I doubt this is true.
It is true that much of the electricity used to charge electric cars will come from burning fossil fuels, but not all. Here is how we made electricity in 2009 in the US:
Coal: 46%
Gas: 24%
Nuclear: 20%
Hydro: 7%
Renewable: 3%
It will depend on what part of the country you live. The worst scenario might be it you lived were they burn mostly coal, such as my town, Tucson, Arizona. Here, my electric vehicle batteries would be charged from a coal burning power plant. But there are offsetting factors. First, the efficiency of a car engine is about 25%, were a coal power plant is about 40%. But storing energy in batteries means a storage loss of about 20% thus requiring more coal to be burned. But I think the most dominate effect will be the naturally higher overall efficiency of transportation for electric vehicles. Electric cars should be lighter, smaller, slower, and will probably all have regenerative braking so the effective "MPG" might be quite high. Also, because of the speed and range limits of electric vehicles, I think most drivers will drive smarter by combining trips and simply driving less.
If the electric vehicle drove the same speed and range as a gas auto, the CO2 output would be more level, but I don't think this will be the case.
So at the end of the day, I think electric vehicles in regions were power is from nuclear, hydro, or renewables will result in much less CO2 output, and even in areas were coal is burned, I think total CO2 output will be reduced as well.
It is true that much of the electricity used to charge electric cars will come from burning fossil fuels, but not all. Here is how we made electricity in 2009 in the US:
Coal: 46%
Gas: 24%
Nuclear: 20%
Hydro: 7%
Renewable: 3%
It will depend on what part of the country you live. The worst scenario might be it you lived were they burn mostly coal, such as my town, Tucson, Arizona. Here, my electric vehicle batteries would be charged from a coal burning power plant. But there are offsetting factors. First, the efficiency of a car engine is about 25%, were a coal power plant is about 40%. But storing energy in batteries means a storage loss of about 20% thus requiring more coal to be burned. But I think the most dominate effect will be the naturally higher overall efficiency of transportation for electric vehicles. Electric cars should be lighter, smaller, slower, and will probably all have regenerative braking so the effective "MPG" might be quite high. Also, because of the speed and range limits of electric vehicles, I think most drivers will drive smarter by combining trips and simply driving less.
If the electric vehicle drove the same speed and range as a gas auto, the CO2 output would be more level, but I don't think this will be the case.
So at the end of the day, I think electric vehicles in regions were power is from nuclear, hydro, or renewables will result in much less CO2 output, and even in areas were coal is burned, I think total CO2 output will be reduced as well.
Commuter Electric Vehicle
In my post titled "Triage" I explained why I thought we should focus efforts on reducing our dependence on oil. Here is a way to take a big step in that direction.
Create a CEV class of electric vehicle (Commuter Electric Vehicle) which:
1) Has a maximum speed of 45 mph,
2) Can be driven using a restricted driver's license,
3) Does not require mandatory liability insurance, and
4) Has reduced safety feature requirements.
We should consider letting people that have lost their licenses drive these cars, mainly because at the reduced speed and weight, they are not nearly the road hazard as typical heavier and faster US cars.
This would be an ideal car for many young people. I like the idea that my kids are in cars which only go up to 45 mph and have limited range. Using lead acid batteries, these vehicle should cost less than $10K.
Given this new vehicle class, these vehicles would fly off the sales lots, and this would make measurable progress towards reducing our dependence on oil. Notice that this policy requires no direct subsidies, but encourages EVs by removing government administrative restrictions which apply to our current cars.
Create a CEV class of electric vehicle (Commuter Electric Vehicle) which:
1) Has a maximum speed of 45 mph,
2) Can be driven using a restricted driver's license,
3) Does not require mandatory liability insurance, and
4) Has reduced safety feature requirements.
We should consider letting people that have lost their licenses drive these cars, mainly because at the reduced speed and weight, they are not nearly the road hazard as typical heavier and faster US cars.
This would be an ideal car for many young people. I like the idea that my kids are in cars which only go up to 45 mph and have limited range. Using lead acid batteries, these vehicle should cost less than $10K.
Given this new vehicle class, these vehicles would fly off the sales lots, and this would make measurable progress towards reducing our dependence on oil. Notice that this policy requires no direct subsidies, but encourages EVs by removing government administrative restrictions which apply to our current cars.
The Energy Opportunity Cost of Non-Energy Inputs
This is a tough concept to grasp, but very important in understanding the economics of renewable energy. Many in the PV industry like to claim that the energy payback of the PV panel is quick, but this is misleading since the value of the energy opportunity costs of the non-energy inputs is ignored. Let me try to explain. I hope you can take the time to understand this concept, I had to hear it a few times before it sank in to my thinking.
The non-energy inputs required to make a solar panel can include; aluminium (frame), glass, copper, labor, and capital. But all of these non-energy inputs could be used to make or save energy in other ways. The aluminum in the frames could be used to make vehicles lighter and save fuel. The labor making the panel could be used to change an air filter in a car or air up its tires, or add insulation to a house. The copper could be used to increase the efficiency of an electric motor or reduce the electrical losses in a transmission line.
When non-energy inputs such as labor, materials, capital, and land are used to make PV panels, they are no longer available to be used to save energy in other ways and their opportunity to make or save energy is lost. This is the energy opportunity cost of non-energy inputs.
The next logical question is "how can all the inputs be used in a more energy optimal way?" Should we use the copper in an electric motor or in wiring? An engineer might be tempted to calculate the marginal efficiency gain in the motor or in the wire and determine which is more optimal, and she might be correct. But maybe the analysis forgot to consider copper's use as a conductor in a heat exchanger to improve the efficiency of a refrigeration system, or even copper's use as a decorative object? How is this trade-off made? The answer is surprisingly simple; who will pay the most for the copper? This determines its optimal use.
So how does this apply to solar panels? If the sum of the costs of the inputs to make a solar panel are less than the value of the power it produces, a market should develop for producing solar panels. But what if the return is negative, which is the case with PV panels without any subsidies? Then the numbers tell us the labor, copper, aluminum, glass, energy, capital, and other resources used to make the panel could have/should have been used to save or make more energy had they been allocated to other activities, like making compact fluorescent light bulbs, or wind machines.
The other result of this logic can be the most disturbing, that is we will deplete our resources of oil and put more CO2 in the air faster by making panels than if we did not. Or even worse, given the negative net present value of PV systems not including the cost of the panels, we would be better off having made the panels to simply take them directly to a land fill rather than using the additional resources to actually connect them to the grid.
The non-energy inputs required to make a solar panel can include; aluminium (frame), glass, copper, labor, and capital. But all of these non-energy inputs could be used to make or save energy in other ways. The aluminum in the frames could be used to make vehicles lighter and save fuel. The labor making the panel could be used to change an air filter in a car or air up its tires, or add insulation to a house. The copper could be used to increase the efficiency of an electric motor or reduce the electrical losses in a transmission line.
When non-energy inputs such as labor, materials, capital, and land are used to make PV panels, they are no longer available to be used to save energy in other ways and their opportunity to make or save energy is lost. This is the energy opportunity cost of non-energy inputs.
The next logical question is "how can all the inputs be used in a more energy optimal way?" Should we use the copper in an electric motor or in wiring? An engineer might be tempted to calculate the marginal efficiency gain in the motor or in the wire and determine which is more optimal, and she might be correct. But maybe the analysis forgot to consider copper's use as a conductor in a heat exchanger to improve the efficiency of a refrigeration system, or even copper's use as a decorative object? How is this trade-off made? The answer is surprisingly simple; who will pay the most for the copper? This determines its optimal use.
So how does this apply to solar panels? If the sum of the costs of the inputs to make a solar panel are less than the value of the power it produces, a market should develop for producing solar panels. But what if the return is negative, which is the case with PV panels without any subsidies? Then the numbers tell us the labor, copper, aluminum, glass, energy, capital, and other resources used to make the panel could have/should have been used to save or make more energy had they been allocated to other activities, like making compact fluorescent light bulbs, or wind machines.
The other result of this logic can be the most disturbing, that is we will deplete our resources of oil and put more CO2 in the air faster by making panels than if we did not. Or even worse, given the negative net present value of PV systems not including the cost of the panels, we would be better off having made the panels to simply take them directly to a land fill rather than using the additional resources to actually connect them to the grid.
Energy Payback
Several studies have be done to calculate the embodied energy in a PV panel and to then demonstrate that the energy investment is paid back in a short period of time; 1-4 years is commonly claimed. But this does not ring true in light of the very poor economic return. As discussed in "PV Economics", the price of installed grid-tied PV systems need to fall almost by a factor of 10 to make them truly competitive with fossil fuels. These papers use a bottoms up analysis which traditionally underestimated total energy inputs, and they are written by people that are strong solar advocates. Such bottoms up analysis are extremely difficult to make complete.
One reliable way to know the real energy content is to observe the change in price of the panel as energy prices change. If energy cost increased 10% and the panels increased 2%, then we could say the embodied energy is 20% of the total cost. This method automatically captures 100% of the embodied energy cost. Of course, asking all other variable to stay constant during the test is a tall order.
One reliable way to know the real energy content is to observe the change in price of the panel as energy prices change. If energy cost increased 10% and the panels increased 2%, then we could say the embodied energy is 20% of the total cost. This method automatically captures 100% of the embodied energy cost. Of course, asking all other variable to stay constant during the test is a tall order.
Zero Carbon Footprint
The best way to reduce your carbon footprint is to reduce your spending. China is building a lot of coal plants.
Live frugally!
Live frugally!
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