Saturday, December 15, 2012

The Futility of Utility

Persistence is Futile you goofy mooks
Even with decreasing PV prices, producing equipment that generates solar power at prices competitive with electricity generated from fossil fuels remains a challenge for manufacturers. This is especially true for utility-scale installations, as wholesale purchasers of electricity will compare the cost per megawatt hour of solar power directly with the cost of power from other sources. The cost-competitiveness of solar power is better in the residential and business markets, as the relevant comparison is with the delivered cost of electricity rather than with the generating cost. But even if the popularity of solar systems grows, falling equipment prices are likely to further challenge the profitability of manufacturers and interfere with efforts to sustain a solar manufacturing base in the United States.
CRS Report, U.S. Solar Photovoltaic Manufacturing: Industry Trends, Global Competition, Federal Support - Michaela D. Platzer - June 2012

These graphics are from the SunShot Solar Vision Study. The question that keeps me up at night is why has the DOE squandered so much effort subsidizing Utility projects if this is really where they see the cost structures of Residential, Business and Utility projects going? As the second graphic shows, the LCOE of utility is lower than the R&B projects but not by much. Or to put it another way, the R&B projects may be marginally more expensive than Utility projects but as previously mentioned they are competing against retail prices rather than wholesale prices. R&B projects may have a minor price disadvantage on the front end but they have a large competitive advantage on the back. As explained multiple times:
  • A properly designed and operated Residential or Commercial project will use most of its production to offset retail purchasess. Any excess power can be sold into the wholesale market at prices below those of a utility project.
So again, why subsidize Utility projects when we can see that this method of deployment will become uncompetitive and obsolete. You'd rather subsidize R&B projects exclusively because these markets reach sustainability and can be de-subsidized. To me the whole DOE Loan Guarantee program appears to be a political excercise of some sort. One slice of pork for you and you and you and you. What about me? And one for you. But I'm a Vegetarian. I know... That's Vegetarian pork. It's a mystery to me why the NREL et al. type folks go along with this plan.

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