As
this is making clear, solar energy is only now directly competitive with
conventional energy. That little secret
has been subject to long term obfuscation for the past two decades at least
while politicians were persuaded to provide subsidies to make up the
shortfalls.
I
grew really tired of looking at clearly fudged spreadsheets. Now we can get past that and it seems likely
that a massive build out will take place in the Sahara in particular.
Beyond
all that, we are also seeing the real advent of what has been dubbed free
energy but I suspect should be called free potential energy conversion that
taps our surrounding ocean of energy potential in much the same way that a
water wheel taps a moving flow of water.
This device is able to convert that potential directly into high voltage
brake horsepower using only a significantly lesser input to effectively pump
the transition.
All
that means is that it is essentially game over for big energy grids. It will still take time for this reality to
fully emerge but once apparent, conversion will be a stampede.
The
Solar Industry Has Been Waiting 60 Years For This To Happen — And It Finally
Just Did
APR. 10, 2014,
It's now a question of how and where, not if, solar becomes a dominant force in energy markets.
AllianceBernstein's Michael Parker and Flora Chang published a
note last week with the following chart showing how rapidly the cost of
solar on a real-dollars-per-million-BTU equivalent basis has, in many
instances, come to match that of conventional fuels.
Nothing else looks like this. And the title of the chart, Welcome
to the Terrordome, reflects this almost violent decline in solar
pricing.
###
The authors write:
Exhibit 2 is the chart the solar industry has been working towards
for 60 years. Solar is now – in the right conditions – cheaper than oil and
Asian LNG on an MMBTU basis. Yes, we are using utility- scale solar costs in
developing markets with lots of sun. But that describes the growth markets for
global energy today. For these markets solar is just cheap, clean, convenient,
reliable energy. And since it is a technology, it will get even cheaper over
time. Fossil fuel extraction costs will keep rising. There is a massive global
market for cheap energy and that market is oblivious to policy changes at the
NDRC, MITI, the EU or the CPUC.
Solar still makes up only a tiny fraction of overall energy usage
on an absolute basis — about 0.17%. But it's an unstoppable trend.
For now, this minuscule starting point is great for investors,
Parker and Chang say, because it will continue to be more attractive than oil
and gas prices, which are set to keep climbing.
Bernstein's notoriously bullish energy team forecasts an oil price of $150 by
2020. Parker also explains that if utilities try to respond, growth in the
storage market will accelerate.
As solar costs fall, the price that end markets will pay for solar
energy is set by oil and remains unchanged. The solar industry (upstream
and downstream) collects all of the value created by improvements in the
technology. The behavior from here seems clear: the solar industry will
expand. Retaliatory steps from distribution utilities will increase the market
for cost-effective battery storage. This becomes – initially – a secondary
market for battery technologies being developed for the auto sector. A failed battery
technology in the auto sector (too hot, too heavy, too rigid a form factor)
might well be perfect for the home energy storage market.... with an
addressable end market of 2 billion backyards.
But there's another, Terrordome-esque scenario Parker outlines,
which he calls global energy deflation. It would be great news
for consumers, but investors would get killed. He uses the crude forward curve
as a reference point:
###
He writes:
...the risk is that I am being too conservative. It may be that
oil and gas producers sitting on large reserves will not wait for deflating
energy prices a decade from now before changing behavior. Rather,
the expectation of energy deflation may be enough. If the downward
sloping forward curve is ever accepted as permanent, rational behavior from
energy producers will guarantee it is so. Sitting on oil and gas reserves for
the benefit of generations yet to come ceases to be a rational strategy if that
reserve represents a depreciating rather than an appreciating asset. This is
the hidden flaw with the "equal and opposite/ too small to matter"
formulation. Ultimately what may kill the solar sector – and every
other part of the energy market – for equity investors is not renewable
technology and battery storage turning into behemoths, but the realization of
that future as inevitable.
Actually, solar utilities seem to have been around for longer than
60 years. We dug through the Library of Congress' image archives to find
a solar water heater
dated 1929 (PDF):
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