Solar electricity is growing, promoted, and most importantly, heavily
subsidized. The promoters of solar electricity claim that it is close
to being competitive with conventional sources of electricity. That is a
fantasy.
Solar electricity is expensive and impractical. If it weren’t for government subsidies,
some explicit and some disguised, the solar industry would
collapse. The many claims of competitiveness are always based on
ignoring subsidies provided to politically correct renewable power,
ignoring the costs associated with unreliability, and ignoring the cost
of backup fossil fuel plants.
An example of a hidden subsidy is the California Renewable Portfolio Standard that
mandates utilities to obtain 33% of their energy from so-called
renewable sources by 2020. This mandate forces utilities to contract
for expensive sources of energy, such as solar. The cost is passed on
to the utility customers with the connivance of the
government. Although the motivation behind the California scheme is to
reduce carbon dioxide emissions, politically incorrect sources of CO2-free electricity, such as nuclear and large-scale hydroelectric, can’t be counted as renewable.
People whose knowledge of electricity production ends at their wall
outlet are dictating national energy policy. Magical thinking by
hopelessly ignorant political activists permeates the alternative energy
universe.
How much does electricity from conventional sources cost? If I look
at my ComEd (Chicago) bill, the charge for electricity is about 5 cents
per kilowatt-hour (KWH). Additional charges for delivering the
electricity and various taxes increase the total to about 10 cents per
KWH. This is electricity mainly from coal, nuclear, and natural
gas. Electricity is available at the plant gate in much of the U.S. for
about 5 cents per KWH.
Figuring out how much solar electricity costs is tricky. Most of the
cost is the capital cost of building the plant; in favorable
situations, a solar plant costs 15 times more than a fossil fuel plant
per KWH generated. How one assigns this initial capital cost to the
electricity generated over the life of the plant depends on economic
assumptions involving interest rates. The amount of sunshine can vary
by as much as two to one, if you compare sunny Arizona locations with
cloudy European ones. Photovoltaic technology, using
electricity-generating panels, is the currently favored
technology. An alternative technology is thermal solar or plants that
use reflectors to concentrate sunlight to generate high-pressure steam,
or other high-pressure gas, to operate turbines that drive
generators. The estimates in this article refer to recently constructed
photovoltaic plants.
The cost of solar electricity at the plant gate is about 25 cents per
KWH, or about 5 times more than conventional electricity. It may be 50
cents per KWH in cloudy northern areas.
It is true that the cost of solar panels has greatly decreased in
recent years. This decrease has to do with technological improvements
and overbuilding of capacity in the Chinese panel manufacturing industry. However,
even if the panels cost nothing, solar electricity would not be
remotely competitive. The panels are only part of the cost. One also
has to pay for the land, the mounting systems for the panels, and other
infrastructure.
The cost of a solar electricity plant is usually quoted as so many
dollars per watt. For example, many large-scale plants cost about $4
per watt to build. The watts in this case refer to the maximum amount
of electricity the plant can produce when the sun shines squarely on the
panels, or, more technically, the number of watts that can be generated
when the panels are illuminated with sunlight with an energy content of
1,000 watts per square meter (approximately the energy flux of full
sunlight). In the best locations, a solar plant with fixed panels can generate the equivalent of full power 25% of the time. That is called the utilization factor.
As an example, the Agua Caliente solar
plant in Arizona, when completed in 2014, will be rated at 397 million
watts and will cost $1.8 billion. This works out to $4.53 per watt of
capacity. The cost of generating electricity from this plant has two
components: the capital cost of building the plant spread out over the
25-year life of the plant and the annual maintenance cost for such
things as periodically washing the solar panels that cover 4 square
miles of land. When a utility invests in a generating plant, it needs a
rate of return on its investment great enough to stay in business. It
must pay dividends attract capital, maintain a good credit rating, and
pay substantial taxes. Roughly an 8% return on a generating
plant investment is needed to maintain the business. This means that if
$1.8 billion is invested, the annual capital cost is similar to the
payments on a 25-year mortgage at 8% interest. This is a
higher interest rate than one might pay on a home mortgage due to taxes
and the need to attract risk capital. The utility might finance
half the cost at 4% or 5% and finance the other half with equity
capital, for which a return of 10% or 12% is necessary. The budget for
the Agua Caliente plant would look roughly like this:
This is the price at the plant gate, assuming that all the
electricity generated is purchased for 25 years. The required price of
22 cents per KWH compares unfavorably with the 5 cents per KWH that is
widely available in the U.S. But this is only half of the story. The
price of 22 cents per KWH for a plant in sunny Arizona is actually
misleadingly low.
Solar electricity is generated when the sun is up and the sky is
clear. But electricity is needed during the night and on cloudy
days. So a solar electricity plant must be accompanied by a backup plant. A combined-cycle natural gas plant can be purchased at a capital cost of
approximately $1,000 per kilowatt of output capability. Depending on
the percent utilization, electricity can be generated in the range of 4
cents to 6 cents per KWH. The natural gas fuel at current prices costs
about 3 cents per KWH. Capital costs distributed over the 30-year life
of the plant are in the range of 1-3 cents per KWH depending on percent
utilization. The percent utilization can be has high as 90%.
The bottom line is that the only saving from a solar electricity
plant is the fuel not burned when the solar is working. Most likely,
the fuel is natural gas. But the maintenance of the solar plant costs
about the same per KWH as the fuel for a natural gas plant. It most
cases, it probably makes sense to bulldoze a solar plant and use the
backup natural gas plant.
Believers in global warming alarmism will probably claim that it is
worth paying 5 times more for electricity in order to reduce CO2 emissions. But if they are really concerned about CO2, the obvious solution is CO2-free nuclear power, which is far cheaper and more practical than solar.
Wind power is the other renewable energy. The capital cost of
building wind farms is less than solar, and the utilization factor may
be higher in favorable locations. But, at best, wind energy costs 2-3 times more per KWH than conventional energy. There are doubts about
the useful life of wind turbines and many population centers have no
suitable wind energy sites near enough to economically transport the
power.
Solar energy and wind energy are nothing but a scam promoted by
ideological fanatics in environmental organizations and allied special
interests. We all pay for the scam with our taxes and with our electric
bills.
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