By Michal Bacia
It really is a really big deal. Before you know why it’s such a big deal, you have to know the big secret. Ready? OK, here it is: ENERGY IS FREE! That’s right. It is. Not only solar and wind energy, but oil and/or coal are also basically free.
The gas and/or electric bill you pay are costs that are only related to the harnessing and using of the energy. Traditionally, Big Utility works like this: the facility extracts energy in the form of fossil fuel (but also renewable energy – think about a huge dam), converts it into electricity, and then transmits it to consumers. All of these activities require large capital investments, because traditional power plants are incredibly expensive, $300 million and more. Utility business models were able to convert those costs into fairly affordable monthly payments for thousands of consumers. So, these facilities recover their money from you, by sending you a monthly utility bill. My question is, how old is your power station? Are you still paying for infrastructure that was paid off long ago?
Distributed generation also requires capital investment to purchase technology. However, the investor is also the consumer. Instead of sending money to finance another investor’s return, the consumer recovers his own capital expenditure and invests in his own assets.
Costs related to harvesting energy are typically monopolized, concentrated, and managed by global organizations. Energy prices are then controlled by the global market and influenced by factors such as currency exchange rates, the stock exchange, and global politics. Because these costs are operating expenses, they are generated continuously and infinitely.
On the other hand, a distributed energy harvesting technology, like solar, can be localized and owned by the consumers. Once installed, the costs related to the energy systems are defined and fixed. Your energy bill is now part of your capital expenses and energy becomes an asset, not a liability. Once fully paid, the energy systems continue to harvest energy, making the energy to run your business and/or home ABSOLUTELY FREE.
Here is the Big Deal: instead of supporting energy companies with your money, you now have the opportunity to support yourself and to make your money start working for you!
Sounds very nice and kinda Star Trek, but it’s too expensive… isn’t it?
No, it’s not. In 2013, rooftop solar energy reached grid parity in several markets in the world; or, to put it another way, the cost of energy generated by rooftop solar was the same or lower than the cost of energy delivered by the utility company. Moreover, costs of solar will continue to drop while the grid energy costs will continue to rise.
A major driving force to this is a phenomena called “peak oil.” “Peak oil is the point in time when the maximum rate of petroleum extraction is reached.” The only debate now is when peak oil will or did occur. Some researchers claim it was in 2005 or 2006. Others claim it will happen by 2020. Nevertheless, peak oil is a fact. Growing oil demands from emerging economies (China, India, Brazil) and a falling supply will definitely result in rising energy prices. The only questions are how big of an increase and how soon will that increase occur? Some reports suggest “the increasing price of oil… is likely to reach $500 a barrel by 2040….” (Note that this primarily matters in developing countries and on islands, but it also becomes relevant if someone switches to an electric vehicle.)
Another driving force is the economies of scale. Mass production allows for substantial reduction of the unit cost (and price) of goods. The same economic principle responsible for cheaper, more powerful computers each year, is now driving the efficiency and pricing of solar panels. Because solar panels are standardized, easy to transport and install, they can be purchased from any place in the world and delivered to site. So the supply of panels is a globally competitive market, just like microchips or LCD monitors. The more a company manufactures and sell panels, the cheaper the unit price can be. Consequently, the cheaper the price, the more it can sell.
Previously, solar energy required heavy government support because it couldn’t compete with grid electricity. Panel and inverter technology was not efficient enough and unit costs and prices were to high. Now, thanks to support programs, like the one in Germany for example, a substantial market has been created, allowing solar technology to mature and expand rapidly. These support programs got the ball rolling and now solar energy is a cost-efficient alternative in several markets. As solar prices continue to fall while grid energy rises, more and more energy markets will adopt solar.
Solar energy might still be more expensive than the energy generated by a coal-fired or nuclear power plant. But, this energy then has to be delivered from the power station to consumers. Once those costs are included in the electric bill, solar can already be a cost efficient solution. Installing rooftop solar does not require using transmission or distribution power lines and covering related costs.
The above excerpt is from “How to choose the best solar system and financing offer for you,” a solar energy book explaining the ins and outs to the every day user. It is a step-by-step guide showing people how solar is beneficial for them, the process of going solar, and the key aspects of solar financing.
The ebook is available on Amazon. More information, including reviews and a free chapter, can be found here.
About the Author: Michal Bacia is a solar energy project manager and consultant as well as an author. He recently completed 3 solar sites in the UK (20MWp in total) and published this book about solar energy for anyone who uses electricity.
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