Posted by: bmeverett | January 5, 2012

More solar power myths


The New York Times is starting out the year with another attempt to reanimate the corpse of solar energy. Matthew Wald’s January 2 piece entitled “Storehouses for Solar Energy Can Step In When the Sun Goes Down” misses the point entirely. Wald states that “If solar energy is eventually going to matter — that is, generate a significant portion of the nation’s electricity — the industry must overcome a major stumbling block, experts say: finding a way to store it for use when the sun isn’t shining.” This statement is technically correct. The problem is that energy storage for solar power is “a” stumbling block, but not “the” stumbling block. The real problem with solar energy is that it costs too much and produces too little.

The basic principle of Mr. Wald’s piece is that solar electricity will be worth more if it can be stored and provided at times of peak power, such as late on a hot August afternoon. At such times, businesses are still operating, but many people are at home preparing for dinner. Air conditioners are running full-blast, and utilities are straining to meet demand. As a result, electricity available at peak times commands a premium.

Let’s just have a quick look at the economics of electricity generation. Some electric-power generating technologies, such as nuclear, have a very high capital cost and a very low fuel cost. According to the Energy Information Administration (EIA), a new state-of-the-art nuclear plant would cost about $5.34 per Watt of capacity – quite expensive. If we assume that the utility can obtain 80% financing at 8% for 20 years (a very optimistic assumption), it would need about 9.5¢ per kilowatt-hour (kWh) to earn a 15% return on its 20% equity share of the project. That’s fairly high, given that (a) the average price of residential electricity in the US is around 12¢/kWh and (b) there are additional costs and losses involved in moving electricity from the power plant to the consumer.

How about solar thermal, the subject of Mr. Wahl’s article, in which large mirrors focus the Sun’s rays on tower that heats water – either to generate electricity or to melt salt to store the heat for future power generation? The EIA estimates the cost for such a system at $4.69 per Watt of capacity – a little cheaper than nuclear. Furthermore, the fuel for the solar system is free, and the operating cost is less than the nuclear plant’s. Sounds great, right? The problem is that the nuclear plant can run 24/7, shutting down only for periodic maintenance, inspections and refueling. On balance, nuclear plants run about 91% of the time. In other words, one kW of nuclear power can generate about 8,000 kWh of electricity each year. Solar thermal plants, on the other hand, run on average about 22.5% of the time, generating only about 1,970 kWh per year for each Watt of installed capacity. Storage doesn’t change that limitation. As a result, under the same assumptions, an investor in a thermal power plant would need to earn on average 33¢/kWh – nearly three times the average retail price.

How does this situation change when we add storage? Mr. Wahl’s article suggests that storage capacity would add about 5% to the capital cost, and the laws of physics suggest that there would be some losses in storage and recovery – let’s say 5%. These two changes would raise the average required revenue from 33¢ to 36¢ per kWh.

The good news for solar fans is that peak power may actually be worth 36¢/kWh – perhaps even more. The bad news is that other power generation technologies could provide peak power at much lower cost. Natural gas combined cycle – a highly efficient system – can generate power for less than 5¢/kWh if it’s allowed to run 90% of the time. Even if a natural gas plant were operating only 10% of the time, it could still generate electricity profitably for 16¢/kWh – less than half the cost of thermal solar. Why? Because the capital cost of natural gas combined cycle plants is very low – only $0.98 per Watt according to the EIA. At this low cost, only about one-fifth the cost of solar, the plant can afford to sit idle most of the time and still make money – particularly with today’s low natural gas prices.

If the market were allowed to function, there would be virtually no solar electricity generated in the US other than a few small off-grid applications. Governments, however, at the federal and state levels, both mandate renewable energy and subsidize its use. Power companies are forced into a position where they must evaluate not the lowest cost way to generate power for consumers, but the lowest cost way of generating RENEWABLE power. Investors may find solar thermal power plants attractive in this sense, but consumers certainly won’t.

Mr. Wahl is trapped in a circular argument. He seems to be saying that solar power is becoming commercially viable because he sees investors building these plants. Investors build them, however, only because they are both forced to and paid to do so. Solar energy is hitting constraints in physics – limitations that are particularly difficult to overcome by political means.

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Responses

  1. Solar water air heaters are fairly cheap projects compared to solar electricity, will repay the investment over a few years.


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