The Receding Horizons of Renewable Energy

[GliderGuider]

Here are some excerpts from an article in The Automatic Earth by Stoneleigh, a woman who has a very good grasp on the economic policies surrounding renewable energy. I recommend the whole article, especially for the background she provides on the problems with FIT programmes across Europe and in some jurisdictions in North America. All in all (IMO) a very balanced analysis of the situation.

http://theautomaticearth.blogspot.com/2011/02/february-27-2011-receding-horizons-of.html">The Receding Horizons of Renewable Energy

Renewable energy has become a topic of increasing interest in recent years, as fossil fuel prices have been volatile and the focus on climate change has sharpened. Governments in many jurisdictions have been instituting policies to increase the installation of renewable energy capacity, as the technologies involved are not generally able to compete on price with conventional generation. The reason this is necessary, as we have pointed out before, is that the inherent fossil-fuel dependence of renewable generation leads to a case of receding horizons. We do not make wind turbines with wind power or solar panels with solar power. As the cost of fossil fuel rises, the production cost of renewable energy infrastructure also rises, so that renewables remain just out of reach.

Others have introduced Feed-In Tariff (FIT) programmes, where a long-term fixed price is offered essentially to any project willing to accept it. Tariffs vary with technology and project size (and sometimes inversely with resource intensity) with the intention of providing the same rate of return to all projects. FIT programmes have been much more successful in bringing capacity online, especially small-scale capacity, as the rate of return is higher and the participation process much less burdensome than the RFP alternative. Under an RFP system accepted bids often do not lead to construction as the margin is too low.

Renewable energy subsidies are becoming increasingly controversial, however, especially where they are very large. The most controversial are those for solar photovoltaics, which are typically very much higher than for any other technology. In a number of countries, solar tariffs are high enough to have produced a bubble, with a great deal of investment being poured into infrastructure production and capacity installation. Many of the countries that had introduced FIT regimes are now backing away from them for fear of the cost the subsidies could add to power prices if large amounts of capacity are added.

The policy of generous FIT subsidies seems to be coming to an end, with cuts proposed in many places, including where the programmes had been most successful. The optimism that FIT programmes would drive a wholesale conversion to renewable energy is taking a significant hit in many places, leaving the future of renewable energy penetration in doubt in the new era of austerity.

[BeFree]

1. All I know is...

My first solar cell purchase was $15 a watt 20 years ago, and I can purchase the same today for $3 a watt.

And I never could afford a nuke generator or deal with its waste that lasts for maybe a thousand years. And you might inform your dear writer that nukes are the most costly and controversial technology. So what she wrote about solar is just high piled horse shit.

[GliderGuider]

2. She's actually very positive about RE.

She just thinks the policy mechanisms like FIT that have been chosen to facilitate its market penetration have been too expensive and and ill-advised, as she says here:

Widespread installed renewable electricity capacity would be a very good resource to have available in an era of financial austerity at the peak of global oil production, but the mechanisms that have been chosen to achieve this are clearly problematic. They plug into, and depend on, a growth model that not longer functions. If we are going to work towards a future with greater reliance on renewable energy, there are a number of factors we must consider. These are not typically addressed in the simplistic subsidy programmes that are now running into trouble worldwide.

Renewable energy is best used in situ, adjacent to demand. It is best used in conjunction with a storage component which would insulate consumers from supply disruption, but FIT programmes typically prohibit this explicitly. Generators are expected to sell all their production to the grid and buy back their own demand. This leaves them every bit as vulnerable to supply disruption as anyone who does not have their own generation capacity. This turns renewable generation into a personal money generating machine with critical vulnerabilities. It is no longer about the energy, which should be the focus of any pubicly funded energy programme.

Europe's existing installed renewable capacity should stand it in good stead when push comes to shove, even though it was bought at a high price. Other locations, such as Ontario, really came too late to the party for their FIT initiatives to do any good. Those who have not built replacement capacity, especially load-following plants and renewables with no fuel cost going forward, could be very vulnerable in the future. They will be buffeted first by financial crisis and then by energy crisis, and there may be precious little they can do about either one.

[madokie]

4. And smelly horse shit to boot

[GliderGuider]

5. Including her positive comments about RE above?

AS I said, her main objections are that FIT programs are a very expensive way of promoting RE, and try to shoehorn it into a centralized power-delivery model that it's not suited for. Don't assume that everything I post is a priori anti-RE.

[madokie]

7. Pretty much

Heres the link in case anyone wants to go there and read the whole shittin' shebang. http://theautomaticearth.blogspot.com/

[GliderGuider]

8. Thanks, I didn't realize the link was busted.

Are there specific aspects of her position you disagree with? It seems pretty fair to me.

[NNadir]

15. Your massive solar PV system is, um, how big?

The subsidy was how large?

How might it compare to the salary of a teacher in the backwoods?

I can't imagine that teachers make very much in Oklahoma and that some of the Oklahomans here neither know about nor care about education, having skipped the area entirely.

Here in New Jersey, assholes twits hung solar cells off of a great many telephone poles, and some of them have already fallen off, in less than a year, from snow and wind and ice.

Meanwhile libraries are closting, teachers are losing their jobs, and important historical sites are being closed.

The solar scheme here is highly visible, except when it comes to producing energy.

Apparently those whose entire intellectual breadth is contained in muttering curses and semi-psychotic snarls are incapable of grasping the deeper meaning of this awful scam which is increasingly being rejected, world wide, for what it is, a scam to benefit the rich at the expense of the poor.

Have a nice evening.

[Kolesar]

3. "conventional generation" means fully amortized plants that the ratepayers already paid for

That's why coal is rated at 3 cents/kW*hour*

That excerpt really wanders around. I don't get the thesis.

*IIRC, so please keep the fact checking ninniness in check.

[GliderGuider]

6. I understand her to mean coal, nuclear and hydro, with gas peakers.

Yes, the plants are largely amortized. That and tightening capital markets define the economic playing field for RE. The question for ratepayers is, if they are already getting the electricity they want/need from existing sources, what is the incentive to build out expensive new green sources? Motivating factors for ratepayers tend to be 1) short term economics (the next electrical bill); 2) long term economics (total life cycle cost of ownership); and 3) soft issues like the environment. We can boost the attractiveness of RE by combining 2 and 3 using advertising and policy, but if the required power is already available it's a tough sell.

If we head into a series of recessions that reduce global economic activity, the need for new electricity will fall overall and we'll see more and more reluctance to pay the sticker cost of new systems, whether they are RE or conventional.

[CRH]

12. Thank you GG for the post, ,,,

it is a very informative post. Makes me want to sell a bunch of my PV stocks, but first I'd like to become more informed in some areas.

The article mostly highlighted the problems coming to the feed in tariff subsidy model. Are you aware of any other proposed models for solar subsidy?

Also, as stated in the article, the subsidized solar portion of RE has become more or less tied into a grid buy back through centralized electric system, ignoring the localized system that wastes less generation on distribution. Are you aware of any incentives built into the tax codes that reward self generated power that reduces the demands on the general public utility? An example would be a separate meter that would measure the KW's a house or building saved through on site generation, then a reduction at the federal and state level of general obligation taxes. It seems such an approach might lessen the gaming of the system and put the subsidy on an individual level, tying in incentive for conservation at the same time.

[GliderGuider]

13. Here's what I'd do for PV subsidies

First, I think that PV is much better suited to point-of-use applications than grid-tie. So I wouldn't subsidize grid-tie installations at all. In fact, I might go so far as to prohibit private grid-ties altogether. That's not the point of PV, and it creates unrealistic expectations at this point.

Instead I'd simply provide direct purchase rebates to private buyers that would be enough to being the panel cost down to $1/watt nameplate. No hassles with power distribution companies, no getting paid for electricity that is generated for free, just encourage the uptake of the technology by lowering the sticker shock through price rebates.

Any company that wants to put together a commercial-scale PV park and grid-tie it is welcome to negotiate on their own with the power company, but they don't get the panel rebates.

Simple, to the point, hard to game.

[Statistical]

14. Nothing wrong with grid tie. The grid is the worlds cheapest battery.

Without a grid tie system you need expensive batteries and charge controllers, plus you need to oversize the system. Very inefficient.

Another way to look at GT is the grid is a fully ammortized "battery". Just need to change the incentives to encourage building GT system for the purpose of local generation not commercial scale PV park.

We need to encourage GT system. Without the grid already expensive PV becomes prohibitvely expensive.

[GliderGuider]

16. The question here is how you do the subsidies.

If you have a grid-tied system, people seem to insist on FiT, maybe because otherwise they feel they're giving other people "free" electricity. That and you're not taking full advantage of the decentralized, self-sufficient nature of small-scale PV.

The big problem with FiT is that it becomes political and seems to be open to gaming the system, problems that straight purchase rebates avoid. Whether a system is grid tied or not, I'd like to see FiT eliminated as a subsidy choice. Rebate the price of the panels and be done with it.

[joshcryer]

9. Hmm, unrec'd to hell, sorry, I tried GG.

[GliderGuider]

10. Not sure what it is with all these knees jerking around here.

I guess it's not kosher to say anything but "fluffy bunnies" about RE.

I never knew that criticizing FIT would be that upsetting. Especially when the article is very supportive of RE in general.

Oh well, as my father used to say, "You can lead a horticulture, but you can't make her think."

[joshcryer]

11. People just assume that if you're cautious on FITs you're a dirty capitalist coal loving wing nut.

Or at least, that's the impression I get. ;)