Investment in solar energy

A Wall Street Journal editorial criticizes a new Interior Department plan to make it easier for utilities to get permits to build solar electric plants on public land and help them link up with transmission lines.

Response:

Investments in solar and wind electricity make sense. Some government encouragement for clean energy will help the industries mature, compete, and provide us with many benefits. Most people, whether or not they are concerned about global warming, want to see clean energy developed.

The solar and wind industries are growing, costs for consumers are dropping, and design discoveries are increasing their potential.  The export potential is large and we can produce this technology in the U.S.

Renewable energy grew even in 2009 when many other businesses were shrinking, according to  Renewable Energy Policy Network’s 2011 report.  By early 2011, one quarter of global power capacity came from renewables.  During 2011, half the new electricity generation capacity added in the world was renewable.

In the U.S., photovoltaic projects have grown by 58% a year since 2004, according to a Bloomberg New Energy Finance report. Now, new financing mechanisms are being developed, including third party financing structures, solar-backed securities, master limited partnerships, investment trusts, and publicly listed ownership funds.

Another Bloomberg paper, Re-considering the Economics of Photovoltaic Power, explains reasons for the recent rapid drops in the cost of photovoltaics (PVs). Renewables have demonstrated that they can work, that manufacturing materials are available, that the industries can expand, and that they can provide fair returns on the high initial installation costs.

Feed-in tariffs, and concern about energy security and climate change stimulated PV production between 2004 and 2008 in Germany and Spain, but shortages of the raw material for PVs, polysilicon,  held it in check. Then polysilicon manufacturing expanded, and although incentives for PV production in Spain ended in 2008,  prices for PVs fell from $4.00/W to $2.00/W, with investors still making profits.

The cost of the raw material, silicon, which is about 20% of the cost of modules, has dropped from $450/kg in 2008 to less $27/kg.

There are export opportunities now in many areas. Solar PVs are a clearly a cheaper alternative where diesel generators provide electricity, as in parts of Africa, the Persian Gulf area, and India. In many other areas, solar and wind can provide electricity at the same price as electricity from coal or natural gas fired plants.

Right now, there is no uniform way of measuring all the costs that go into producing power.  Analysts use, and sometimes confuse, price-per-watt, levelized cost of energy (LCOE), and grid parity. Better metrics will help investors see even more opportunities in these alternative technologies.

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