Three Major Trends Driving Accelerating Change In US Energy System
Originally published on RMI Outlet.
By Jules Kortenhorst
Earlier today, the Obama administration issued its Clean Power Plan setting out a clear direction for greenhouse gas emissions reductions from the U.S. power sector. The plan, long under way and the subject of the most extensive consultations the EPA has ever undertaken, is a bold step to overcome congressional inaction to address climate change. In my view, although a federal cap and trade or carbon tax combined with strong efficiency regulations and measures to support renewables would have been preferable, the Clean Power Plan is a huge and important step in the right direction.
However, not everyone shares the arguments supporting the urgent need for this plan. Republicans, the fossil fuel industry, and coal-producing states argue that the plan will lead to a massive increase in electricity prices, that it will put the reliability of our electricity grid at risk, and that it will costs jobs and hurt the competitiveness of the U.S. economy. Nothing is further from the truth. This plan will help the U.S. embark on an energy transformation putting it on the path towards a clean, prosperous, and secure low-carbon future.
The pace of change in our energy system is rapidly accelerating. Three major trends are driving that change: 1) rapidly falling costs for renewables, 2) vehicle electrification, and 3) the explosion in big data and information technology (IT).
RAPIDLY FALLING COSTS FOR RENEWABLES
Over the past five years, we have seen a boom in solar resulting from the rapidly falling costs of PV modules. Solar photovoltaics have a learning curve of 24 percent, meaning that their costs come down by 24 percent every time installed capacity doubles. But solar is not the only clean energy technology that shows a pattern of such dramatic cost improvements. For onshore wind the rate is 14 percent, and for battery storage more recently the cost reduction trend appears to be above 20 percent. We often struggle to imagine the long-term impact of consistent compounding. With compounding reductions in costs, renewable technologies become cheaper year after year after year, and as a result their competitiveness vis-a-vis fossil fuels in the very near future is no longer in doubt.
VEHICLE ELECTRIFICATION TAKING HOLD
A second major trend is only just emerging but doing so rapidly. Electric cars are quickly becoming sexy and soon they will be cheap as well. Tesla’s next model—the forthcoming Model 3—promises to be as fast as a Porsche 911, with a range of 300 miles, and a cost of $35,000 but with very little in fuel and maintenance costs. And the trend is not just towards electrification. In fact, the breakthroughs under way in autonomous (self-driving) cars, integrated mobility-as-a-service concepts, and new business models in the shared economy are likely to have an even bigger impact on the automotive sector, moving us quickly away from gasoline-powered internal combustion engines.
AN IT-ENABLED ENERGY SYSTEM
The last trend may well be even more key. For a very long time, RMI has argued that our most-cost-effective energy resource is in fact energy efficiency. Efficiency is now being combined with big data and IT to make our energy demand not just leaner but also smarter. As we deploy IT to manage our energy demand, we will see massive opportunities to integrate renewables, smart appliances, and electricity-based HVAC technologies into intelligent and responsive electrical grids. This newly efficient and responsive demand system will be able to match to supply when it is available and if need be store energy when required.
A CLEAN ENERGY REVOLUTION
Together these three trends are setting off a profound energy revolution. When solar-generated electrons become ubiquitous, abundant, and cheap; are stored more easily; are driving a new mobility world; and are matched by smarter on-demand energy use, then economic competitiveness is no longer based on simply burning cheap fossil fuels, but rather on innovation, on the integration of the IT and energy arenas, and on the faster deployment of new integrated solutions at scale. This is in fact the energy future that the Clean Power Plan helps to bring about.
Loud protests that accelerating the transition to the energy technologies of the future will increase electricity bills will soon be recognized as a fallacy of the past. In fact, not only has the EPA estimated that the average household will spend $80 less under its plan, there are now two independent studies (from Georgia Tech and Synapse Energy Economics) that point in the same direction. Their findings are in line with RMI’s analysis in Reinventing Fire, which found that a clean energy future could yield a $5 trillion net present value savings.
Now of course, if your bottom line, your current job, or your PAC contributions depend on carrying on with the fossil-fuel-based technologies of the past, then this is not an appealing outlook. In fact, you can see why some would want to oppose the shift to a better, cleaner, and more-cost-effective energy future. But what that perspective ignores is the long-term impact on competitiveness of sticking too long with outdated industries. In fact, Europe has made a massive bet that over the long run an energy-efficient, renewables-based future will be the winner. And China is investing massively in positioning itself to be the leader of the solar, wind, and efficiency technologies of the future.
So we have a choice. We could extend the life expectancy of a fossil-based energy system that is rapidly loosing momentum, or we can bet on the future of a smart, efficient, and renewable future. The Clean Power Plan will undoubtedly turn out to be a crucial legacy when it comes to climate change. But equally important, one day we will also recognize the wisdom and courage of the Clean Power Plan for America’s economic competitiveness.
Image courtesy Everett Collection / Shutterstock.com
Reprinted with permission.
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It seems better to describe the progress made so far in order to provide solid evidence of the difference that renewable energy and electric vehicles have and can make. Promises of a brighter future and percentage increases do not have the same effect.
The UK’s Department of Energy and Climate Change (DECC) response to this?
http://www.bbc.co.uk/news/science-environment-33774890
or No Comment to all the relevant questions put to them by the BBC.
e.g. “[The Spokeswoman] declined to say why renewables were deemed affordable by the US but apparently unaffordable in the UK.”
Do you ever get that feeling you voted wrongly?
Even more galling when you didn’t vote for them! I found that article yesterday and it would be hilarious if it wasn’t so serious. DECC come across as completely out of touch with reality.
Highly recommended reading 🙂
Totally agree!
I agree with this. I’ve enjoyed listening to Amory Lovins (RMI founder) in the past. His hydrogen economy ideas with H2 cars was kind of nuts. But that was the late 1990s. He seems to have moved on.
The following is kind of not true (copied from above) in terms of real politics:
“Republicans, the fossil fuel industry, and coal-producing states argue that the plan will lead to a massive increase in electricity prices, that it will put the reliability of our electricity grid at risk, and that it will costs jobs and hurt the competitiveness of the U.S. economy.”
Republicans just love to be against everything Obama is for. Regardless of merit. It’s their shtick. Fossil fuel is 2.5 out of 3 in favor of CPP. Oil loves it because it has nothing to do with its business. CPP gives it cover to continue producing oil like we’ve never before. CPP is also a bargaining chip, oil and gas is expecting one from Obama. That is they’ll keep mum on CPP, if he opens up more federal land and offshore for oil and gas development.
Gas could not be more happier about CPP. The cornerstone behind the plan is to move forward with natural gas as a replacement fossil fuel. We will hear a lot of people suggesting environmentalist should not worry about shale fracking, because it’s fighting climate change. I get that here all the time. This means cities won’t be able to ban fracking and have to simply suck up the fact its groundwater has been contaminated. It’s already happening. See Denton, TX, DJ basin Colorado towns and pretty much all of Marcellus shale towns of Pennsylvania. There’s a lot of alternative water supply going on in the oil patch. That ain’t cool. But groundwater isn’t a subject for cleantechnica so I’ll leave it alone for now.
Coal is crying alligator tears about all of this. Sure coal is losing out. It’s losing out because of economics. Efficiency, natural gas, and renewables making it less attractive as an investment. This is more technical than political. But coal is able to use environmental protection as a boogieman to stir up big government haters. Coal states like Wyoming, Kentucky and others love secretly love this plan. They are given license to emit carbon compared to states like California and Washington. Wyoming has a permitted carbon intensity of more than twice that of California. This would allow Wyoming to build coal plants for either solid burning or burning via in situ retorting coal seams for gas and gas liquids.
There’s a provision in CPP allowing for re-evaluation of economics should electrical prices rise. This allows for operating plants to put off pollution control and mothballed plants to be restarted. Economics drive everything in America. Natural gas prices will rise. The US simply doesn’t have all that much in reserve with respect to our current production. And even less in reserve with respect to project domestic use and exports of LNG.
Renewables will be fine with CPP. They already have been fine, without the plan. CPP could simply be another major argument and cluster &%#$ for forward movement on the overall endeavor of cutting emissions. CPP could be more of an annoyance. And give republicans ammo to cut grants, subsidies, tax breaks and incentives for renewables R&D, commercialization, deployment and operations. Republican hold the purse. They could also hold the presidency in 2017.
I saw a poster for Wyoming the other day “mother natures fortunate son” and the parable of the prodigal son from Luke:15 popped into my head. Wyoming burning it’s wealth in an orgy of self destructive consumption fits pretty good.
Wyoming starts selling wind power to SoCal and things will change.
Lean heavily on coal. That gives us double benefits – CO2 reduction and reduced health damage.
Hope for rising NG prices. That will lead to faster solar and wind installation and lower the threshold for storage additions.
Let the market take care of gasoline for personal transportation. We have just now seen GM lower the price and increase the range on its Volt. Tesla has recently announced range increases for the ModS. Renault recently increased range. More range for less money is a gas station killer. And we can’t ‘regulate’ gasoline away unless there is an alternative.
What we now need from the federal government is some tighter regs on natural gas. Deal with the fracking chemical issue. Stop (as much as possible) methane leaks associated with both drilling and distribution. Find and plug abandoned gas wells.
If we had a Democratic Congress what would really be a huge help is a fee on NG sufficient to cover leak regulation enforcement and abandoned well capping. I don’t know if the Administration has the ability to set the fee.
Speaking of the market. Why would Tesla worry about a low price EV? Why not let the majors build that kind of vehicle. Like Honda Civic of EVs. Tesla could supply batteries and software. Maybe do some marketing things. As I see it from observing parking lots at places I can’t afford or country clubs that wouldn’t want me as a member, Tesla Model S is getting really popular. And this is Chicago suburbs. Not an assumed “tech savy” place like SV or Seattle. So keep the car brand more upscale – but make a lot of money selling stuff that nobody sees, but cares about. Like Intel Inside style branding.
Tesla’s goal from the start has been to push ICEVs off the road. IIRC their end goal was to produce a low cost EV. They started ‘at the top’ as an (very smart) economic strategy.
If other companies jump in and produce a high quality long range EV for around $20k Tesla may not bother. But only they know for sure….
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So what you are saying is that Obama’s Power plan that was issued today is irrelevant.
The big three items you discussed.
1. Rapidly Falling Renewable costs.
2. Vehicle Electrification.
3. IT enabled Energy System.
Are already happening.
The states don’t have to submit their plans for compliance with the issued clean power plan until 2022.
Yes, but they have to start planning now: it’s the law. Companies have to take it into account to protect their shareholders. In a sense, the plan is softball: no net costs when you take objective health impacts into account, and doesn’t try to push the envelope on technology. But Obama has always taken the long view. He has given a strategic fillip to an evolution that was happening anyway, and embedded the energy transition (a phrase taken up by HRC) in policy and expectations. The war on coal is not “Die, evil coalman!” (zaps with phaser) but “We will make you irrelevant in ten years”.
Good post.
Getting off fossil fuels is a process, not something that can be done overnight or even over a couple of decades.
If states realize that they are going to need to be ‘cleaner’ a few years from now they are going to make different decisions today.
They’ll look at new/replacement capacity in terms of whether it will help or hurt them later on.
They’ll be more receptive to projects that bring renewables and needed transmission online.
Bending the curve….
Granted its a process. My point is that many changes are already in progress and will continue with or without the ‘plan’.
The only benefit to the plan I can see is that it implies no back tracking to old power generation methods in the future (under a new administration for example). The plan is not so much progressive but anti-regressive if that makes any sense.
Greasing the skids may be all that the Administration is able to do. The purse strings are held by Congress.
Congress seems to be moving quietly toward extending wind subsidies. Solar subsidies need to be addressed next year.
The nation, IMO, would not accept a federal price on carbon at this point in time. If California and a couple of other states implement one and can demonstrate that arms don’t fall off little babies then we might be able to get a federal price on carbon in a few years. If we actually need one.
Watching at what is happening to wind, solar and storage prices I’m about convinced that all the federal and state governments need to do is just to not get into the way. Don’t allow The Koch to get anti-renewable legislation enacted.
Agree that getting out of the way is the govts best position right now.
I don’t support a ‘price on carbon’ which is another name for a tax or fee. The reason I don’t favor this approach is that its like a ‘sin tax’. The govt soon becomes reliant on the new source of income and becomes invested in the continued sale of carbon rich fuels to keep the money coming in.
I’d choose an incentive over a ‘price’ any day of the week. Encourage what you want rather than penalize what you don’t.
Incentives have to come out of tax dollars.
A price on carbon can be revenue neutral. Tax coal and NG as it goes into the electricity plant. Use the revenue at the sales level to remove the cost to consumers. No burden on the economy, no bite out of government coffers.
I agree incentives come out of tax dollars which will ensure incentives are reviewed and eventually phased out when no longer necessary. “Temporary” taxes for some reason perpetuate. It’s naive to think 100% of the money will go where we are told it will, politicians will be tempted to siphon it off as the genuine need diminishes.
Another reason not to impose a carbon tax is that it will inevitably increase the cost of energy to business and consumers. Our economy thrives on cheap energy, economic activity will be impaired by more costly energy. The goal here is to foster cheap renewable energy to sustain our economy and negate the effects of burning fossil fuels.
The best way to keep renewable energy cheap is to subsidize it with incentives until it is cheap enough on its own merrits, which is clearly going to happen.
It’s not as naive as you think. So far, the British Columbia carbon tax has indeed been revenue neutral (even slightly revenue negative, actually) and it was enacted in 2008:
http://www.fin.gov.bc.ca/tbs/tp/climate/carbon_tax.htm
In Georgia, where I live, the HOPE scholarship funds–which come not from taxes but from lottery proceeds–has been successfully defended from legislative revenue grabs for 20 years. (An outcome that surprised me, actually.)
A price on carbon is temporary. As soon as we quit using fossil fuels the price disappears.
Think through the price on carbon system that has been suggested. The money collected via the price is reinserted at the consumer (business and retail) level to nullify the cost higher in the supply stream.
Politicians skimming off money is a red herring.
I don’t know the ‘best’ way to speed the installation of renewables. But I do know that it’s likely to become harder and harder to get a subsidy program for wind and solar as they become clearly our two least expensive new capacity technologies.
If we can’t subsidize wind and solar then we’re likely to see coal and NG hang on longer simply because paid off plants will be competitive. We need to find ways to tip the scales against paid off FF plants.
The Clean Power Plan is relevant to the extent that it pushes the big three to happen faster than they would happen by themselves. The question is no longer “Will the world change over to renewable energy?” The question is now “Will the world change over to renewable energy fast enough to prevent catastrophic climate change?”
Also hoping Ohio’s Public Utility commission looks at this and throws out First Energy’s request to bail them out. FE made up some story about how their 50 year old coal plant and 40 year old nuke will eventually save rate payers money. Well, with this clean air plan, the coal plant story won’t fly. If they do consider it, then it will be relevant.
On present form, the answer to your second question–which I agree is the relevant one–is “No.” But there is reasonable grounds for hope of acceleration. In that regard, the plan can’t hurt and will probably help.
I think we have a very good chance to avoid catastrophic climate change. I’d say “excellent” because there could be a climate forcer about which we aren’t aware or some “political” event like a very major war could throw us off track.
But as long as there aren’t boogeymen hiding in wait it’s looking good to me. We have adequate technology and our technology is improving rapidly. We’ve got the process started and we’re accelerating. Prices continue to fall and this is a critical element.
(For the black-cloud-overhead folks among us. Yes, we’ve already changed the climate and it’s hurting us. Things will almost certainly get worse. But we have hope of stabilizing before we hit “DOOM!!!”,)
You’re confusing a couple of different things about the climate plan:
“State plans are due in September of 2016, but
states that need more time can make an initial submission and request
extensions of up to two years for final plan submission. The compliance
averaging period begins in 2022…”
https://www.whitehouse.gov/the-press-office/2015/08/03/fact-sheet-president-obama-announce-historic-carbon-pollution-standards
Sadly, I couldn’t find a brief explanation of “compliance averaging period.”
Thanks for the clarifications.
Economics and the market are going to sink fossil fuel make renewables rule not central planning. I’m support incentives but their is a point where they begin to hinder market adoption of new tech and facilitate a kinda unhealthy codependency.
I agree. I think most people here would agree that:
carbon tax is better than
incentives is better than
regulation is better than
nothing.
The irony, of course, is that Republican obstructionism has had the effect of shifting effort into regulation rather than either carbon taxes or incentives–about which they are the most, er, agitated. In that respect, and from their own perspective, they can congratulate themselves on a job very poorly done.
Europe needs to up its game as the USA is waking up.
I thought Europe’s targets are higher?
eg 40% less CO2 on 1995 levels across all sectors by 2030 compared to 32% less CO2 on 2005 levels from power plants.
Extrapolating the learning factors for win and solar and their current market shares ~1% and ~4% out to 32% each would yield a solar price about 1/4th of the current price and a wind price of about 1/2. This would put the costs around $35 MW/h for each.
Wind should have no problem hitting 3.5c/kWh. It averaged just under 4c in 2013. 2014 numbers should be out any day now.
Recently people have been talking about solar getting down to 2c/kWh. I assume in sunny locations. I have some trouble believing that but I was skeptical of $1/watt and that is being achieved.
I was going off the LCOE values, unsubsidized from this report
http://www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf
The min values for each were indeed much lower, dramatically so for solar. Also not considered are the transmission costs on wind because it is by nature far from load, while solar can be placed literally on-top of the load.
Main thrust of my thinking is, learning curve can’t continue forever because at some point Renewables hit ceiling of our actual total energy consumption and the reasonable fraction of that which they can supply. Solar can do 5 more doublings, wind just 3.
At that point which is cheaper, looks to be solar. But I am ignoring many things, first off world wide install base is probably more relevant for each rather then US market share percentage. This would raise number of doublings but this will just compound solar advantage because of higher learning rate.
Those EIA 2020 predictions are just plain bizarre. The EIA is predicting that in 2020 wind and PV solar will cost about twice what they now do. You might wish to read this –
http://cleantechnica.com/2014/01/10/horrible-eia-forecasts-letter-cleantechnica-readers/
That post is about installation rates not costs. (I agree the rates are garbage)
I’m using these EIA numbers only as snapshot of present costs as that’s basically all their analysis is good for because theirs no learning curve in their model.
But their numbers look good to me as a present snapshot. Your claim that present costs are half as much is from two things. First use of PPA’s include subsidies, second cherry-picking of best PPA’s due to regional differences, these numbers are national averages but they also have high-low numbers that show the regional spread and they match what we would expect. Solar at parity with coal, wind crushing everything else.
Your comment was about LCOEs. The estimated cost of electricity from a source.
Here are the most recent summary costs for wind and solar.
Wind = $0.025/kWh average 2013 PPA (subsidized).
DOE “2013 Wind Technologies Market Report”
http://energy.gov/eere/wind/downloads/2013-wind-technologies-market-report
Solar = $0.05/kWh PPAs (subsidized) being signed in the US Southwest. Working backwards through a LCOE calculation extrapolates a cost of about $0.02 higher for the less sunny Northeast.
Lawrence Berkeley National Laboratory entitled “Utility-Scale Solar 2013: An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States”
http://emp.lbl.gov/sites/all/files/utility-scale-solar-2013-report.pdf
Note that both a DOE numbers.
PPA prices for wind and solar are lowered about 1.5 cents by PTC (Production Tax Credits). Both wind and solar are eligible for 2.3 cent/kWh tax credits for each kWh produced during their first ten years of operation. Half of 2.3 is 1.15, but getting ones money early has value. That means that the non-subsidized costs of wind are a bit under 4 cents and solar is running 6.5 to 8.5 cents/kWh.
http://energy.gov/savings/renewable-electricity-production-tax-credit-ptc
The EIA is predicting onshore wind at 7.1c (not including transmission in 2020. The actual cost in 2013 was under 4c unsubsidized. Expect it to be lower when the 2014 Wind Tech Market Report is released in a few days.
The EIA is predicting PV solar to be 12.1 (without transmission) in 2020. It is now selling for about 6.5c unsubsidized in the sunny parts of the US. If you use average solar hours you’ll find the national average would be about 7.5c. And that is also data that is a bit stale. Prices are falling annually.
Bob, read the report, their is hardly any daylight between it and your numbers, and what is can be explained mostly by your cherry picking.
Your saying solar unsubsidized is $65 to $85 per MW/h EIA says it is $97 in sunny areas. This is a difference that would result from a being a year further along the learning curve. The wind value your claiming of $40 MW/h is absolute rock bottom price predicated on the idea that no-one would EVER take all their feed-in-tariff upfront so in reality it’s more like $50, and look what the EIA has as their low end estimate $61, again hardly any daylight.
And remember any report take some time to collect data, your extrapolating from SINGLE PPA’s that were inked only months ago, that’s just not a sound basis to claim that estimates that are based on a wide industry survey are staggeringly wrong, these are intended to be average cost estimates.
And please stop harping on the 2020 date on the report, I have explained already that EIA clearly dose NO learning curves on anything, that is wrong but it doesn’t invalidate their numbers as a present snap-shot. In 2020 I expect we will be much further along on cost declines.
$65 is from last year (2014). $97 is what the EIA is claiming for 5 years from now.
$97 is 50% higher than $65.
Hardly any daylight?
$40 is a “rock bottom price”
“predicated on the idea that no-one would EVER take all their feed-in-tariff upfront so in reality it’s more like $50”?
The average PPA in 2013 was 2.5c/kWh. That’s half your pulled out of your hind quarter 5c/kWh.
Previous year prices in a rapidly dropping cost pattern.
Hardly any daylight? Are you out of your friggin’ mind?
Did you read my links?
Did you even read your own link? Your EIA is a prediction of 2020 numbers. Right at the top of the chart it says “U.S. Average Levelized Costs (2013 $/MWh) for Plants Entering Service in 2020″
Their numbers are no ” present snap-shot”.
Geeze…..
Your tone is getting insulting, go harangue the EIA directly if you find them so despicable.
PPA for wind were 3 c/kWh in the year 2004 before climbing to nearly 10 c/kWh and then falling, so explain how the industry went through a -233% learning curve only to rediscover what they had lost a few years later if PPA’s are perfect lenses to underlying costs.
http://energy.gov/sites/prod/files/2014/08/f18/2013%20Wind%20Technologies%20Market%20Report_1.pdf
(page 70)
PPA’s are simply too dependent on complex supply & demand issues to be naively converted into underlying costs as your trying to do.
You accuse me of cherry-picking data and try to tell me that there’s hardly any daylight between two numbers when one is 2x the other and then you expect me to be all roses and sugar kisses?
You aren’t reading the links I gave you. We did harrang the EIA. Read it.
I didn’t “try” to make something out of PPAs. I gave you DOE links for wind and solar sites in which they put together annual PPA numbers.
There was a short term price spike for wind due to a shortage of turbines as demand grew. Prices went up for a while. And then they came back down. Below what they had been before the price bump.
I notice you didn’t bother to point out that 2013 prices were lower than 2003 prices.
And now prices are going down further.
I read your link, and I’ve read the EIA thread and comments, it looked very similar to what were doing here. I meant you should write to the EIA directly rather then harangue me for not have the same level of disgust with them that you think I should.
You seem to have to keep inflating the difference so that you have something to rail against, you said it was 50% difference just two posts ago (but it’s now 100%?) and that was comparing your 65 number to 97, but you specified a range which of up to 85 which is what I was EXPLICITLY referring too when I said their was little daylight as that’s only a 14% difference.
If your willing to admit that PPA prices in the past were skewed due to turbine shortages and market forces it makes all the sense in the world for the ‘crash’ now to be below sustainable levels or for it to be followed by a long period of stagnant prices. We have seen this scenario already in solar, the learning curve is a multi-decade long average after all and actual data is more stair-step then smooth curve.
I did write to the EIA, more specifically I wrote the Secretary. I gave you the link. (I was one of the three authors of the letter.)
—
“You seem to have to keep inflating the difference so that you have something to rail against….”
I gave you the $65 to $85 range for sunny to not-sunny parts of the US. Then you posted this – “Your saying solar unsubsidized is $65 to $85 per MW/h EIA says it is $97 in sunny areas .”
Emphasis mine.
I then compared the $65 DOE number for sunny areas with the $97 EIA number.
You set the “sunny area” parmeter. I responded to your comment.
—
I “admit” that the price of wind went up due to turbine shortage? I informed you why there was a raise in wind prices.
And I let you get away with this inaccurate statement “PPA for wind were 3 c/kWh in the year 2004 before climbing….”
Read the graph. The average PPA in 2004 was not 3c. That’s you cherry-picking.
—
“We have seen this scenario already in solar, the learning curve is a multi-decade long average after all and actual data is more stair-step then smooth curve.”
Let’s look at the data –
—
Really Bob, your trying to dispute me with that graph? I’ve seen some dishonest graph attempts before but that really takes the cake.
First off you’ve gone out of your way to find a graph with the LONGEST x axis at 63 YEARS while including what looks to be no more then 4 or 5 years of solar history. We both know solar wasn’t invented 5 years ago so you intentionally avoiding the ‘multi-decade’ trend I’m talking about. Not to mention the underlying dishonest of comparing electrical energy with thermal though that doesn’t have any bearing on the point at hand.
Second you have used a graph with a linear Y axis, again you would have had to actually go out of your way to find such a bad graph. Any legitimate graph trying to examine solar price decline is logarithmic or else the lines are impossible to read, even the graph you found has no excuse for not be logarithmic on the Y axis as it makes all the non solar curves nearly unreadable squiggles, aka it is a choice done to hide information rather then show it.
A real graph would look like this
http://reneweconomy.com.au/wp-content/uploads/2013/04/citi-solar-three-speed.png
https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcS7-Pk-LuFyjDz5PX7GsPvVRkULp7-7fZFDv3Yh85COAVbZAZyATw
The changing learning curve values are clearly evident, a period of 10 years with a 10% curve is quite a period of stagnation compared to what came before and after and is what I’m talking about when I say stair-step. Their are even brief instances of ABSOLUTE price increases such as in 1998, though these are always a regression to the mean, aka they follow a period of rapid price declines that took us below trend. Sometimes it’s the start of a new paradigm as was the case post 2008, but sometimes its a zip that is corrected by a zag, that’s why we should extrapolate from the long term trend not simply the latest year or newest PPA.
I gave you that graph so that you can see that a few years back the economics of solar power changed and since then there has been a rapid decrease in prices.
As for using the latest/current PPA prices – those are what things cost now.
If you want to dilute current conditions/prices by mixing in historical conditions/prices you will not understand what is likely to happen next.
When it comes to the price of wind, solar and batteries history is not a good predictor of future prices. The process has been distorted by the vastly greater emphasis on dealing with climate change.
Are you trying to claim that I’m unaware that prices are dropping? The recent price declines have been entirely consistent with a learning curve that goes back decades, current rapid declines in solar are exactly what we would expect after the decade long stagnation, we are simply returning to the curve. Their is no paradigm shift.
If by ‘mixing in historic prices’ you men the LEARNING CURVE then yes that is exactly what we need to know to understand what will happen next, both what the curves decline rate is but if we are above or below curve. Deviation from the learning curve have always corrected, so if your argument is that we can simply take the current PPA and apply the learning curve rate to it without consideration of if current prices are running ahead or behind the long term curve then your going to be a lot less accurate then you could be.
Look at the curve you posted.
Something happened around 2008 that changed the slope of the curve. Returning to the curve after a period of stagnation? That’s sort of magical thinking.
A less magical explanation would be that Germany and Spain artificially created a much larger market and competition for market share kicked in. https://uploads.disquscdn.com/images/7fbdacf7472c336a969a5872e37a3f98b46b0ef00d3ed0d6dc416b2ea815f730.png
The cause of the slowdown was a silicon and manufacturing capacity shortage. After massive investment (arguably over-investment) their was a collapse in prices. This is not magic, it is the normal activity of a market.
German PV purchase acceleration is a RESULT of the price drop, not the cause. An increase in demand absent a change in supply makes prices rise, not fall.
The only magic here is your stubbornness.
Well, it does look like the reason that the curve slope shifted abruptly was not magic, er, “returning to the curve” but access to cheaper silicon.
Along with a reduction in silicon per watt from 15 grams per watt in 2000 to around 5.2 grams per watt today. And other manufacturing efficiencies.
http://www.greentechmedia.com/articles/read/Solar-and-Silicons-Shifting-Relationship-in-Charts
Yes that article is spot on, this little article gives an account of how profound the price spike was.
http://www.wikinvest.com/commodity/Silicon
Form $24 to $450 per kg. No wonder the per watt consumption has been driven down so much.
Also it is noteworthy that silicon for solar can have x10 more impurities then for use in chips (99.9999% pure vs 99.99999%) that makes a lot of difference and we now have a whole supply chain that is designed to produce to that standard.
As for the learning curve of panels going into the future, I don’t think it can remain at 40% for very long, further drops in silicon prices can’t impact total costs much as they are so trivial now. We know balance of system cost is becoming dominant and talent/investment will start flowing there. The graph I showed earlier has a 25 c/W in 2020 and this looks too aggressive, something more like 50 c/W is more reasonable. It would be interesting to graph the total system cost learning curve, I think it would be quite a bit smoother, in the past panel prices practically equated with system costs but not anymore.
This type of temporary bottle-neck is common in any industry, you expand until you hit some strong barrier and then their is a period of slow or no growth while all minds are directed at overcoming the barrier. Storage has now been clearly declared the new barrier that must be tacked and we will expect a big surge in market growth once it falls.
Since lowest module prices are already lower than 50c/W I would expect something lower than 35c by 2020.
http://pvinsights.com/
First Solar is talking about being at 35c by 2018.
http://cleantechnica.com/2014/03/26/average-manufacturing-costs-solar-halve-gas-prices/
It was flint, then bronze, then iron, steel, plastics, transistors, computers, now carbon fiber. Leaders will rule.