SolarTown went to a panel discussion at the Aid and International Development Forum held in Washington, DC earlier this week. The panel of policy analysts made a strong case for why we need to accelerate the adoption of renewable energy, including solar energy, into our energy portfolio. Otherwise, by the time that we get around to using solar energy, we may have to rely on a lot more on solar arrays floating on water. While all the panelists agreed that solutions were desperately needed, they differed in their approach to how to address the challenges of global warming. As one panelist said during his presentation, “climate change is the largest scientific experiment in the world.”
Archive for the ‘Solar Policy & Incentives’ Category
Innovation is often seen as the way to the future for solar energy. Everybody sees the value of solar panels on rooftops or in fields, but they also see the huge price tag attached to solar energy. Prices have dropped substantially in the past couple of years, mainly because of the Chinese entry and domination of the solar panel industry (and some will say unfair dumping of cheap modules onto the U.S. market). But that still leaves the question of the extent to which innovation plays a role in the developing solar industry. The Wide Lens, a recent book by Dartmouth professor Ron Adner, should be required reading for the up and coming solar equipment manufacturers.
Natural gas, Chinese manufacturing and austerity programs were the themes at a solar symposium yesterday in the Nation’s Capital. The GW Solar Institute brought together teachers, students, policymakers and the president of SolarTown to take on the subject: “Solar Energy: A Path to Energy Significance.” No one seemed to suggest that it was going to get any less dull in the solar market in the coming year, but the forecasts were few and far between as the solar market continues with its fits and starts.
Did you catch the State of the Union address last night? Hurray for renewable energy, but it is a speech that he could have given two years ago, pre-Solyndra. But a lot has happened in the last two years. In mild understatement, Obama conceded that, “Some technologies don’t pan out; some companies fail.” And some companies fail in a big way. Now the demise of Solyndra will be a big campaign issue, regardless of the merits of whether the federal government should have provided a loan guarantee to Solyndra. This accommodation of fossil fuel is simply recognition that this country will be dependent on non-renewable sources of energy for decades to come. Whether Obama’s moderate energy vision will gain any traction in an election year is a matter of considerable dispute. We shouldn’t lose hope that some energy policy will emerge, but don’t count on much progress in this election year.
I know that you may have a heck of a time trying to give up with the jargon, and your Latin may be rusty since high school. One thing if for sure: the solar industry is hoping for a minor miracle that the cash grant program will be extended. The solar energy industry is still dependent on government incentives and the cash grant is the most effective of all of government support for the solar industry. The naysayers will roll their eyes: “Handouts are for losers,” they grumble. Tell that to every other energy industry that have received generous support over the years.
Is this any way to drive an industry? The answer is a resounding no. The US has virtually no federal renewable energy policy, and almost by accident has become a major solar market in the world despite itself. Many naysayers like to frame the argument in terms of subsidies and handouts, but virtually all forms of energy get some form of governmental support, which for those industries is called policy—somehow people call it subsidies when referring to support for the solar industry and other renewable energy. What makes the solar energy industry special is the extent to which it has had to depend on a patchwork of state and local incentive structures that are as fragile as the state and local budgets to which they are beholden. As local budgets tighten, the windows close leaving many homeowners out of luck and out of patience. Only those who have been able to maneuver their way to the front of the line get the reward. As states cut back on their budgets, solar support has become precarious. Underfunded and handled on a state-by-state basis, failed incentives are leaving homeowners who want to put solar panels on their homes out in the cold and the market unstable and unpredictable. There is a clear need for a stable, long-term federal incentive structure and Congress and the Administration should see that it is in the interest of the country to forge this policy sooner than later.
The whirl of events have left even the closest market observers shaking their heads in disbelief at how much has changed in the solar industry over the past several months. The solar industry is one of the fastest growing industries in the United States. Just how much is the solar energy business growing in the US. Well, a lot if you are counting watts. If you take the second quarter of 2010, 186 megawatts was installed; 2011, 314 megawatts, or an increase of 69%. The irony is that despite this explosive growth in the solar industry and a lot more people putting solar panels on their roofs, solar companies are getting hammered. Their margins are being squeezed and they are not making much money. I am not even talking about the woes of Evergreen Solar, which filed for bankruptcy and is down 99% year-to-date. We won’t even talk about the spectacle of Solyndra, the financial problems of which may only be the least of the problems for some of the executives there. (When the FBI comes knocking on your door, they are usually not bringing gifts.) If you are or were an investor in solar energy stocks, don’t even look at your stock holdings unless you want to barf up your breakfast. But if you are a homeowner interested in a home solar panel system, you may still be smiling as prices have come way down.
SolarTown is just up the street from a local independent sporting goods store, which moved in when this area was just making a comeback from years of neglect. The service is good, the product selection is good and the prices are right. These factors should make the store a fixture in the community, but three months ago, a sporting goods chain moved in just a block away at DC USA, the largest retail complex in Washington, DC. The prices for the chain store may be slightly better, but even more than the prices, the location is much better. The small independent store saw its revenue drop by over a half in three months, and as you can see from the picture at the right, it is now going out of business. Oh, how in just a few months, the fortunes of this small store changed. So has been the effect of the tsunami of Chinese manufacturing on the solar industry. In just a couple of years, the Chinese ramped up production, lowered prices and swamped the US and other markets.
If you have a home with solar panels and next door you have a home without solar panels, you would expect that there should be a premium for the home with solar panels. So you have just sunk $20,000 for your solar panel system—and you will get some of that back from incentives, but will you be able to recoup any of your out of pocket cost if you move in a year. If the useful life of the solar energy on the home is 25 years, and we use a discount rate of 5% per year, then the economic value of the solar panel system you have on your home is $11,000. All things being equal, and assuming that the market is rational, a purchaser of your home should pay an additional $11,000 over what the house next door is selling for without solar panels on the roof. You would expect that you would recoup at least the present value of the energy savings over the next 25 years if you go sell your home. There is scant evidence out there and we at SolarTown wanted to see if this assumption was correct. Accordingly, we are now completing a study to see whether homeowners do indeed receive a premium for the “solar savings” of having a solar energy system on the home. We are about to release the results of a study on this issue. Stay tuned to the SolarTown Learning Center to see the results.
A business school professor gloomily forecast that the US will not have a comprehensive energy policy even in the next ten years. The President and CEO of the Siemens Corporation was less pessimistic, but still did not think it was possible to pass an energy policy at the national level until after the next presidential election. Business school professor predicted that eventually the US will follow the European Union and there is “no doubt that there will be a price on carbon.” He cited a study that there may have been a positive effect on GDP from the cap and trade policy in Europe. “China and India will shame the US into cap and trade.” With the global appetite for energy to burgeon over the coming years, a national policy on energy couldn’t come too soon.