The Pixie Dust Energy Source – John Ransom – Townhall Finance
August 4, 2012
Solar is the power of the future and the power of the past. What solar isn’t, is the power of the present. That’s because using solar power to generate electricity is expensive. Still. And that’s not going to change anytime soon, no matter how many political fundraisers are held by solar advocates.
According to Bloomberg, recent price decreases in solar equipment have driven costs from about 25 cents per kwh to 17 cents per kwh for photovoltaic (PV) powered solar energy, the least expensive form of solar power deployable at scale. But that’s a far cry from the average retail price for electricity as of June 2011. In May, according to the US Energy Information Agency, customers paid 9.70 cents per kwh for electricity generated by conventional means, nearly half of solar’s cost.
For decades, solar’s advocates have predicted that economies of scale, technological advances and pixie dust will soon kick in allowing the world to hold hands, sing songs and enjoy the “free,” and limitless power of the sun.
The amount of energy available through solar is astonishing and bewitching, true. Because of the huge mass of energy available through solar, there’s no doubt that solar has potential to solve many of the earth’s energy problems. It just doesn’t do so right now. Nor will it ever be “free.” Heck, it might not ever even be cheap.
The sun does provide quite a bit of energy. According to NASA we use an equivalent of 1/10,000 of the sun’s available energy here on earth in fossil fuels. While 30 percent of solar energy that reaches us is reflected back into space, what’s left over is more energy in one year than all the energy that can be created by fossil fuels combined, ever.
Capture, conversion, storage and transmission of solar energy at costs close to fossil fuels however remains elusive.
So, the reality of the sun’s “free” energy continues to fall far short of the promise year after year despite rosy predictions. Devotees from Bloomberg New Energy and the IEEE have predicted that soon solar energy will compete with coal-the cheapest of all the energy sources- in price. Even assuming sunshine and salad days for solar, BrightEnergy.com says that “[b] y 2050, it is expected that solar PV will provide 11 percent of global electricity production, corresponding to 3,000 gigawatts of cumulative installed capacity.” That seems like a pretty modest target for an energy source that competes with coal for price. And it underscores the uncertainty of solar’s future.
The truth is that no one really knows what the future for solar is, in part because government is muddying the waters.
Take, for example, the world’s biggest publicly-traded solar company, First Solar, with a market capitalization of roughly $1.4 billion as of August, 2012. Last year at this time, the company was worth $6 billion.
First Solar makes photovoltaic solar panels and does a very good job of it. Their revenues have climbed from $500 million to $3.12 billion since 2007. But the stock has tumbled from a high of over $300 as Obama was elected to around the $17 range by the end of July. Why would a company that has seen its revenues grow six-fold, see its share price tumble $283?
Mostly the stock price volatility reflects on-again-off-again government support for solar company winners and losers. Europe has cut back subsidies while the federal government continues to muck up its loan guarantee program. First Solar won’t be as attractive to investors in the marketplace without generous subsidies provided by governments, especially those governments in Europe.
“We believe that First Solar remains well positioned to flourish in a market with low or no subsidies once the market consolidates,” says brokerage firm Cantor Fitzgerald, “and we suggest that investors wait for a more opportune time to accumulate shares.”
Consolidation is broker-eese for “a lot of these companies are going out of business.”
Government money has been put into converting customers to solar rather than into primary research aimed at brining costs down so that the marketplace can convert customers on the basis of economics. That because it’s been cheaper for solar companies to beg for government money than it has been to do research; and in the sort-term government money has been much more lucrative to shareholders and to consumers lucky enough to cash in on subsidies especially in Europe.
As to jobs? Forget about it. It’s a net negative.
“In principle, tens of thousands of jobs have been created in the German PV industry,” says the leftist UK Guardian, a supporter of solar, “but this is gross jobs, not net jobs: had the money been used for other purposes, it could have employed far more people. The paper estimates that the subsidy for every solar PV job in Germany is €175,000: in other words the subsidy is far higher than the money the workers are likely to earn. This is a wildly perverse outcome. Moreover, most of these people are medium or highly skilled workers, who are in short supply there. They have simply been drawn out of other industries.”
That isn’t to say that research into cost cutting and innovation isn’t being done by solar companies today. But no one really knows how the solar market will survive if the governments- Europe, US, China- cut off life-support.
The patient might survive or it could be brain dead already.
It’s time to pull the plug solar and find out.