Monday, December 19, 2011

Solar power: a fringe electric source no more

Solar power, which was once laughed off as a fringe electricity source for true believers who lived far off the grid, is running rampant through renewable energy discussions.

Used to be, it was horrendously expensive—appropriate for satellites and mountain cabins that needed little more than lighting.

It was only in the 1970s that solar photovolaic cells dropped in price from $100 a watt to $20 a watt.

That still meant that an average Hawai`i home using 500 kilowatt-hours monthly needed more than $80,000 in $20/watt panels ($20,000/kW) alone. Here’s how we came to that: 500kW/30days/5hours/.8efficiency x 1000 (to convert kW to watts) x $20. With installation, costs were approaching the century mark.

By 2005, panels were down to $3-$4 a watt. And in 2009, First Solar announced it could manufacture photovoltaic cells at less than $1 a watt. And if you buy enough of them, the retail price for quality panels today is about $1.25.

You can get the very cheapest panels in bulk even now at $1, and the consulting firm Ernst & Young predicts retail prices generally at $1 within two years. New science is promising even better results.

And the prices are still falling.

This means extreme disruption in the solar business. Deciding when to buy and install is like trying to catch a falling knife. It might be way cheaper next month. Do you buy now or wait...and if the latter for how long?

More than one solar firm has gotten into trouble with a business plan based on building $3/watt panels, when global prices suddenly drop to $1.50.

“Research and development spending is high and this is driving the development of different photovoltaic technologies to lower cost points and higher efficiencies. In the foreseeable future, photovoltaic electricity will become cheaper than grid electricity in an increasing number of markets, creating further demand,” said Ernst & Young in this report.

Not long ago, the biggest chunk of your solar installation cost was the panels. The racks, wiring and inverters (to change panel DC power to grid AC) were the smaller portion. Now, that has been turned upside down. An installer recently told me that with $1.25/Watt panels, he was putting in large systems at about $3/Watt complete. (Home systems, being smaller, have higher per-watt installation costs—maybe their total is around $5/Watt—and it could be more depending on site issues.)

Let’s say you put 2 kilowatts of solar on your roof for $10,000, take state and federal tax credits totaling 65 percent, your cost is $3,500. You’re producing 240 or so kilowatt-hours a month at 5 hours of useful sunshine a day and 80 percent efficiency (including passing clouds, wire losses and such—the dirty truth is that you never achieve useful AC electricity anywhere near your system’s rated capacity.)

At $.35 per kilowatt-hour, you’d pay the utility $84 for that power. That pays back the $3,500 in less than four years. If you produce more than you need, utilities in Hawai`i through various programs will buy the power for roughly $.20 per kilowatt-hour. The payback is longer if you’re selling power rather than displacing your own usage. If you do a good job of shifting load to sunlight hours, you save more money.

It’s still challenging to make a case for going entirely off-grid—since battery prices have not yet taken the same dive that photovoltaic panels have taken. But there may be specialized situations—remote locations, significant daytime loads and so forth—in which the economics work out.

But one of the interesting features of the current situation is that with high oil prices, utilities in many cases are buying solar power from developers at slightly cheaper than their cost of diesel-fired power. The Kaua`i Island Utility Cooperative is setting up a subsidiary to produce its own power, and company CEO David Bissell figures he can make it for significantly less than oil-fired power.

And that, as Ernst & Young suggested above, can do something about Hawai`i’s outsize power bills—even if oil prices remain stable at current levels.

© Jan TenBruggencate 2011

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