The Solar-Induced Death Spiral

A Wall Street Journal analyst recently wrote that PV solar installations could result in the demise of the grid, with PV solar thrusting it into a “death spiral” caused by an ever increasing amount of electricity being generated by roof top PV solar installations.

The presumption is that distributed generation of electricity could revolutionize how electricity is produced.

If there is a death spiral, it will be the result of tax payer and customer dollars being used to subsidize PV solar installations.

PV solar is uneconomic without subsidies, or what amount to subsidies.

There are direct subsidies, such as tax credits for PV solar installations.

There are indirect subsidies, the most insidious of which is net metering, where the owner of a PV solar installation is paid for the electricity he sells to the grid at the same rate he pays when buying electricity from the grid. Forty-four states have adopted net metering laws.

There is an indirect subsidy in the form of renewable portfolio standards (RPS) requiring utilities to provide a percentage of electricity from renewable sources, i.e., solar or wind. RPS laws in 30 states require as much as 33% of electricity to come from renewables by 2025¹.

The ultimate subsidy occurs when third-party leasing companies install PV solar on homes, and the home owner pays the leasing company a low fixed amount for the electricity he uses, while the leasing company sells excess electricity to the utility at net metering rates. In addition, the leasing company can take advantage of accelerated depreciation and all the other tax advantages and subsidies offered by the state and federal government.

One writer refers to this array of subsidies as the “solar swindle”.

 

Here’s a factual analysis of PV solar.

Under the best of conditions, PV solar rooftop panels can produce 0.75 kWh of electricity per square yard of panel per day.

A two-story, 3,000-square-foot home will have a total roof top area of approximately 1,500 square feet. But, since only half can face the sun, the available area is 750 sq ft.

With electricity costing 11 cents per kWh, this installation can save $6.88 every day the sun shines. If the sun shone 365 days every year in every city in America, there might be some small justification for these investments.

However, the sun does not shine every day and this is one reason why the economics are bad.

In Phoenix, Arizona, where the sun shines 211 days each year, an installation on a two-story, 3,000-sq.-ft. home would save $1,451.

According to a Wired Magazine article, an installation now costs $20,000, where a few years ago it would have cost $45,000. The lower price is primarily due to the low cost of panels from China. While the future cost of panels may come down slightly, the cost of installation is not going to change very much.

Dividing $20,000 by $1,451, we arrive at a payback period of nearly 14 years. This is a bad investment that only gets worse as we look at the results in other cities.

In Atlanta, GA, the payback would be greater than 26 years.

In Lincoln, NE, it would be 25 years.

In Washington DC, it would be nearly 32 years.

In Albany, NY, it’s greater than 42 years.

The results for a ranch-style house with more roof area would, of course, be better.

In many instances, PV panels might only last for 20 to 25 years, so homeowners might never recover their investment.

It’s true there would be partly sunny days that might improve the picture, but offsetting that possible benefit is that few homes can have their roofs aimed directly at the sun, and this would reduce the efficiency of the rooftop PV panels. (Equipping rooftop panels to follow the sun during the day and as the sun travels north and south during the seasons would substantially increase costs.)

Even with panels now costing half of what they did a few years ago, installing them makes no economic sense.

The story for utility sized solar installations is similar.

Utility sized PV or concentrating solar installations produce electricity at a cost of at least 22 cents per kWh versus 5 or 6 cents per kWh for electricity generated by natural gas or coal. This excludes transmission and distribution costs. This is something First Solar should comment on.

These calculations do not include the added cost of providing back-up power during the day when the sun doesn’t shine or the added cost of constructing dedicated transmission lines used solely for bringing electricity from utility sized solar plants to where it can be used.

Factually, distributed generation is a scam being fostered by subsidies that can lead to serious consequences for the grid.

The grid is essential for providing electricity from traditional power plants since solar only generates electricity when the sun is shining, and there is no practical way to store electricity for use at night or on stormy days.

There is no benefit to the country from undermining the grid or the utility business by forcing them into a “death spiral”, as postulated by the Wall Street Journal analyst.

Solar is uneconomic.

Distributed generation, as a concept, is destructive and undermines grid reliability².

 

 

1. Illinois 25%, California 33%, as examples.
2. The use of back-up for hospitals etc., uninterruptable power and cogeneration are not part of the distributed generation concept. Some micro grids can make sense, but not as a part of distributed generation.

 

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