Continuing on from yesterday’s “Renewable Energy Big Pic” post, here’s Renewable Energy Big Pic: Part 2. As noted yesterday, this two-post series is basically a presentation I gave to a class of renewable energy graduate students this week. Enjoy this second part, and chime in below if anything interesting or useful comes to mind.
German Solar vs US Solar
As noted yesterday, German solar and US solar have both been growing at a fast pace for several years now, and the price of solar in both countries has been dropping steadily. However, looking at the solar power capacity of each country in a relative manner, Germany has over 21 times more solar installed per capita than the US (301.47 MW per million people compared to 13.973 MW per million people).
That’s not the only big difference between US and German solar, though. The price of solar power in the US is also a lot different than the price of solar power in Germany. We had an article back in June noting that installed solar power in Germany was at about $2.44/watt, while it was $4.44/watt in the US. The price of solar in both countries has dropped a bit since then, but the general difference remains.
And the difference exists across all solar power project sizes, as this Lawrence Berkeley National Laboratory (Berkeley Lab) chart from November’s Tracking the Sun report shows:
So, why is solar so much cheaper in Germany?
A number of people have looked into the matter in a bit of depth. For example, CleanTechnica contributor John Farrell has produced a chart showing by how much the various costs of solar vary in the two countries, as part of his report on the matter, “Cut The Price Of Solar In Half By Cutting Red Tape.” Here’s that chart:
Here’s another chart on the split, this one from Berkeley Lab:
Some comments from Berkeley Lab: “ German installers reported average soft costs of $0.62/W in 2011, which is roughly $2.70/W lower than the average soft costs reported by U.S. installers…  Customer acquisition costs averaged just $0.07/W in Germany, or roughly $0.60/W lower than in the U.S.”
Soft costs, red tape, acquisition costs — this is where the party’s happening (or not). But now that we’ve nailed down where the price difference is occurring, how about a bit of reflection on why it’s occurring?
One noticeable cause, I think, is simply that Germany has a much more mature market. (Again, it has over 20 times more solar power installed per capita than the US.) As a market matures, competition increases, there are more economies of scale, and costs come down.
And… if we’re going to talk about creating greater market penetration, we have to look at what policies actually do so. For solar (and other clean energy technologies), nothing has worked better than the rather simple feed-in tariff. As John noted about a year ago, the large majority of the world’s solar power and wind power has come through feed-in tariffs:
Another very interesting factor worth noting is the negative effect subsidies can have on mature or maturing technologies. This is something one of the premier solar policy and finance experts in the world, Jigar Shah, focused on in an exclusive guest article for CleanTechnica a couple months ago. His article, “Are Subsidies Holding Back U.S. Solar Deployment?,” noted that solar subsidies in the US are manipulated by investors in order to get a higher return on investment. In other words, by claiming that solar systems cost more than they do, investors are able to gain more in tax credits.
Jigar noted that “solar is now cost-effective without subsidies for ideal customers in 300 utilities in 30 US states.” Thus, he advises that we cut the subsidies and watch the price of solar fall.
Another thing worth noting is that many people (including schools, government buildings, and nonprofit organizations) can’t take advantage of solar power subsidies in the US. So, it’s imperative that we not inflate the cost of solar for those potential customers with unnecessary subsidies.
I’m sure this is a controversial topic, and there’s a lot more detail to get into on that matter, but we’ll leave this summary at that for now.
Wind power may be in a different boat, since it doesn’t lend itself to decentralized deployment as well as solar. While it is the cheapest option for new electricity in many places, pulling its subsidies or threatening to pull them has resulted in big “bust” years for US wind (and “boom” years right before those bust years). Here’s an Energy Information Administration chart on the matter:
However, I wonder what wind energy developers and investors would do if there was one day no hope of subsidies ever coming back. By bet it that they’d develop and invest a lot more than they do in non-subsidy years. If you’re missing a big tax credit one year but are hopeful it will be back the next year, why not wait it out and invest your capital in more supportive regions or countries in the meantime? (That’s probably what I’d do.)
Dirty Energy Subsidies
I don’t want to focus on this too much, since this is a post on renewable energy, not non-renewable energy (that’s catchy, isn’t it?). But the fact of the matter is, dirty energy sources have a huge bias fiscally because of the decades of massive subsidies they have been granted. This is a matter that I’ve tackled at length on a number of occasions. One key thing to note is that societal externalities (such as $500 billion a year in health costs from coal… in the US alone) are massive subsidies to the fossil fuel industries. But even beyond that, here are a couple charts from one of our Wind Power resource pages that indicate the completely imbalanced government subsidies for various energy sources:
And our German writer Thomas Gerke passed this riddle on to me just before my presentation:
“What energy related number has a similar proportion:”
“Government support for conventional and renewable energy between 1970-2012 in Germany in billion Euros:”
I’m sure the same is more or less true across the world. In my opinion, the key at this point with regards to subsides is that dirty energy subsidies need to finally be cut, for once and for all. And as part of that, pollution and other externalities need to be adequately priced. Of course, if this were done, fossil fuels would be considerably more expensive. But the fossil fuel industry is fighting such a change tooth and nail… and (so far) winning, for the most part.
Merit Order Effect
Another very interesting topic to cover when looking at the “renewable energy big picture” is the merit order effect.
For a more detailed look at this matter, check out the posts in the link above, but here’s a quick summary:
When utilities need more electricity, they buy it from competing electricity producers. Those producers make bids to offer up their electricity for purchase. To produce extra electricity, of course, coal power plants need to input more coal and natural gas power plants need to input more natural gas, which costs money. Wind and solar power producers, however, have the sun shining and the wind blowing for free. Nothing really needs to be done to take advantage of that, so the extra cost to send more electricity to the grid is essentially nil. That means that solar and wind project owners can bid down to $0 (or even lower in some instances, due to subsidies).
That has one rather huge effect: it drives down the price of electricity on the wholesale electricity market.
We’ve seen this happen in Germany:
And plenty of other places.
I think something especially worth noting here is that solar power is often most abundant during peak power demand. Providing electricity during peak demand is typically more expensive. That’s been the case for so long that it almost seems engraved in stone. However, due to this symbiosis above (and the merit order effect) solar power is chopping off high peak power prices. Here are two graphs from Germany showing this happening:
Notably, in that second graph, you can see that the price of electricity is so low in the middle of the day that it’s practically as low as electricity in the middle of the night. Typically, middle of the day electricity should be very high. But, get enough solar on the grid, and the world turns upside down.
Unfortunately, as we’ve pointed out on a couple occasions, the wholesale electricity price reductions from the merit order effect (i.e. renewable energy) aren’t always passed on to consumers via reductions in the retail price of electricity.
One would hope that’s the exception rather than the norm.
While market penetration, economies of scale, and good policies are key components of a bright, clean energy future (as well as making the price of coal and natural gas more accurately line of with the true cost of coal and natural gas), technology advancements and breakthroughs aren’t bad, either. The good news is that we’ve got news on such advancements and breakthroughs pretty much every day. Here are some recent ones regarding wind turbines:
- Gamechanging Vestas V164 Wind Turbine Continues Groundbreaking Development (8MW Wind Turbine!)
- GE Developing New Wind Blades Made Of Fabric To Reduce Wind Energy Costs
Some regarding solar:
- Solar-Cell Fabrics May Soon Be A Reality
- Nano-Flowers Could Help Create Next-Gen Energy Storage & Solar Cells
- Thin Film Solar Cell Degradation Prevented with New Method
- Artificial Butterfly Wing Material To Improve Solar Panels
- Rainbows From Nanotechnology To Improve Solar Cells
- Biohybrid Solar Cell Breakthrough: Spinach Protein Combined with Silicon in New Way that Greatly Boosts Performance
- New High-Efficiency Quantum Dot Solar Cells Developed
- Bandgap Engineering Aims To Double Solar Cell Power Generation Using Nanowires
- Color Vision At The Nanoscale, New Tool Developed To See In Color At The Nanoscale And Improve Solar-Energy Technology
- Organic Solar Cell Efficiency Tripled Thanks To Nanostructure Sandwich
- Ultra-Efficient Side-Illuminated Solar Cell Architecture Created By Researchers
- New Solar Module Efficiency Record Set, 33.5% Efficiency
Black silicon is a particularly interesting one to me:
- Black Silicon Solar Cell Efficiency Doubled
- Black Silicon Solar Cell Efficiency Raised to 18.2% by NREL Scientists
As are solar windows:
- Solar Cells for Windows Take Another Step Forward
- Solar Power Generation from the Windows — See-Through Solar Cells from Sharp
- Power-Generating Windows Offer New Horizons for Office Energy Efficiency
- One Step Closer to Invisible Solar Cells in Our Windows
One area where we really could use some breakthroughs is energy storage. Solar and wind’s biggest downsides are that they are not controllable… and sometimes not available.
It’s true (and quite underacknowledged) that the two energy sources is that they are very complementary:
Also, the sun is always shining somewhere and the wind is always blowing somewhere. With a well-connected and large grid, the issue of running out of electricity is minimized or even moot.
Nonetheless, based on what we have today, cheaper energy storage could be a huge boost. It is probably the topic I’m most keen to see big news on every day. And a lot of top scientists and engineers are aware of that (not the bit about me, of course, but the bit about cheap energy storage’s huge potential). Here are a handful of companies working on what might be breakthrough energy storage technologies:
- Ambri — liquid-metal batteries
- Aquion — sodium-ion batteries
- Eos — zinc-air batteries (from ground up)
- Envia — high-capacity lithium-ion batteries
- IBM — lithium-air batteries
I wouldn’t expect them all to achieve their aims, but I wouldn’t be surprised at all if one of them led us forward into a new era of energy storage… and a new era of energy, in general.
Additionally, there are already some companies looking to bring home energy storage systems to mass market. For example, Panasonic. As stated yesterday, mass market production and market penetration themselves help tremendously to bring technology costs down. If Panasonic or others start producing mass market energy storage solutions, watch out.
Another potential energy storage solution is simply using the batteries in electric vehicles to help balance energy supply and demand.
Mass market electric cars are growing fast and seem to be the future. Cars sit parked, out of use, approximately 95% of the time. Their batteries could be of some use while parked. I’ve heard utility company CEOs talking enthusiastically about this. Though, I’ve also seen some convincing arguments against this idea taking off. We’ll see. I don’t think it will be a silver bullet, but it could be part of the solution. And, of course, if you’ve got solar power and a plug-in electric vehicle, you could already start using your battery a bit for non-vehicle purposes.
The Potential Is Huge (Renewable Energy Is Tremendously Abundant)
I often start with this image in such presentations, but I’ve decided to end with it this time. This chart above shows that solar energy potential each year is several times more than the potential from finite energy reserves of any type of fossil fuel or nuclear power (and wind energy also has tremendous potential). Yes, for renewable energy sources, annual potential is represented, while it is only potential from finite energy reserves for the other energy sources.
To close, here are a couple videos on some of the things mentioned in this post and in Renewable Energy Big Pic: Part 1, as well as some things not covered in these posts:
I'm the director of CleanTechnica, the most popular clean energy website in the world, and Planetsave, a leading green and science news site. I've been covering green news of various sorts since 2008, and I've been especially focused on solar energy, electric vehicles, bicycling, and wind energy for the past few years. You can also find my work on Scientific American, Reuters, Think Progress, GE's ecomagination site, several sites in the Important Media network, & many other places. To connect on some of your favorite social networks, go to zacharyshahan.com or click on some of the links below.