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Government Subsidies for Solar Power Can't Stand the Light

Still grossly expensive and unreliable.

By Will Offensicht  |  March 18, 2009

Our federal government is such an enormous multi-pound gorilla that its actions, whether by accident or by design, alter whole industries.  In "Solar power costs going down," inTech reports:

...generating power from the sun seems to be a no brainer. But the problem always comes down to cost.  Why pay more for solar power?

First Solar, a Tempe, Ariz.-based maker of photovoltaic cells, said government subsidies from Germany are helping to make the solar industry competitive.

The German government passed laws to force utilities to pay far more for solar-generated electricity than for electricity generated in other ways.  These higher costs, which were passed on to customers, made it possible to sell more solar cells than the market would otherwise demand.

First Solar claims that the subsidy increased their production volume to 50 times what it had been.  The increased volume helped them cut manufacturing costs from $3 per installed watt to just under $1 per watt.  The installed cost of $1,000 per kilowatt is comparable to the cost of building a coal-fired plant that has higher operating costs.

So far, this sounds like a case study for a successful government subsidy.  An industry was important for political reasons, but the unregulated market was unable to make it "over the hump" of mass production.

Government subsidies artificially increased the demand; economies of scale kicked in; and voila! the world is a better place thanks to government action.  Even the most ardent industrialist would agree that, all else being equal, it's better to get energy free from the sun than by having to tear apart whole mountain ranges to extract coal.

The fly in the ointment is that all else is not equal.  Coal always burns, but the sun doesn't always shine.  A study by the International Energy Agency (IEA) documents this unfortunate fact of nature:

For solar plants the availability/capacity factors reported vary from 9% to 24%.

Solar systems have lower operating costs than conventional power plants because sunshine is free, but either backup systems or high-capacity storage systems are needed to handle the 75% - 90% of the time solar systems aren't generating electricity.  High capacity electricity storage has yet to be invented, so solar systems have to be backed up by conventional power plants which are kept staffed and ready to go at a moment's notice whenever a cloud passes by or the sun sets.

Even if electricity could be stored at reasonable cost, solar power is available 25% of the time at best.  At least four times as much solar capacity is needed as conventional capacity because normal power plants run round the clock while solar cells can't.  This increases the overall cost of solar power to at least $4,000 per available kW which is four times the capital cost of coal-fired systems.

Ignoring the cost of the battery, a solar system that was available only 10% of the time would cost ten times as much as a coal plant, and so on.  Today's greens should update the old saying, "Make hay while the sun shines."

Capital costs are the largest part of total electricity cost; fuel accounts for only about 35% of the cost of coal-fired electricity.  Even with free fuel and even after the cost reductions First Solar brags about, solar electricity costs at least four times what coal-fired electricity costs and can cost up to ten times as much, not including the cost of the backup system.

Cheaper solar cells will be welcome for applications such as powering cell towers that are a long way from power mains, of course.  Despite all the hype, however, using more solar electricity will increase electricity costs until better storage systems are available and costs come down by at least another factor of four to make up for the fact that the sun doesn't always shine.

Nevertheless, the government has chosen to subsidize solar power by forcing customers to pay many times the cost of conventional power for solar electricity.  We've explained how the Carter-era tax credits for solar heating systems brought the entire solar heating industry to its knees.  Thirty years later, government subsidies continue to force customers to pay a lot more for solar electricity than for conventional power.

As long as solar systems generate only a small fraction of the electricity any given customer uses, the extra costs won't be too bad, but as solar systems multiply, electricity costs will go up.  This may cheer the greens, but until we have efficient systems for storing massive amounts of electricity, we'll still need conventional backup systems for the entire solar load or there'll be times when we'll have to freeze in the dark.

Correction: there will be times when you and I have to freeze in the dark.  Our masters in Congress, who know better, have wisely decided to hang onto a dirty but cheap and reliable electric power plant to keep the halls of the Capitol nice and comfy.

If we want to maintain our technological way of life and the high energy availability it absolutely depends on, we must follow Congress's example and stick the environmentalists, along with their dreams of mandating solar power, where the sun doesn't shine.