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Page added on April 24, 2014
Gandhi on solar energy
First they ignore you, then they laugh at you, then they fight you, then you win. (Gandhi)
We’ve seen and published many dramatic graphs about the fall in solar, such as this one tracing the fall over the past 30 years and this from Citigroup, but the following graph from investment bank Sanford Bernstein is quite stunning – not just for its simplicity but because it draws attention to the potential impact of solar to the $5 trillion global energy market.
As you can see, the cost of solar PV has come from – quite literally – off the charts less than a decade ago to a point where Bernstein says solar PV is now cheaper than oil and Asian LNG (liquefied natural gas). It does its calculations on an MMBTU basis. MMBTU is the standard unit of measure for liquid fuels, often referred to as one million British thermal units.
“For these (developing Asian economies) solar is just cheap, clean, convenient, reliable energy. And since it is a technology, it will get even cheaper over time,” Bernstein writes in a newly released report.
“Fossil fuel extraction costs will keep rising. There is a massive global market for cheap energy and that market is oblivious to policy changes” in China, Japan, the EU or the US, it writes.
This has potentially massive impacts for the oil, gas and LNG markets, and therefor the massive investments in the LNG plants in Queensland, Australia, where tens of billions of dollars have been invested by Australian and international energy majors on the assumption that the demand, and the price, of LNG will rise ever upwards.
As Bernstein notes in its report, the share of solar PV in the global energy market is currently so small (see graph to the right) that “the idea that oil and gas is the “loser” in this formulation is laughable … in 2014.”
But that’s not the case a decade hence. Solar is already eating away at the margins of oil and gas demand. Bernstein says the adoption of solar in off-grid areas in developing markets means less kerosene and diesel demand. The adoption of solar in the Middle East means less oil demand. The adoption of solar in China and developed Asia means less LNG demand. And distributed solar in the US, Europe and Australia means less natural gas demand.
And then Bernstein drops this bombshell – while solar has a fractional share of the market now, within one decade, solar PV (plus battery storage) may have such a share of the market that it becomes a trigger for energy price deflation, with huge consequences for the massive fossil fuel industry that relies on continued growth.
“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.
“And for some years, that will be the extent of the effect. We have previously calculated how large the solar sector would need to be in order to become a material share of incremental energy supply each year and therefore begin to displace high-cost oil and gas supply and start to depress prices.
“We estimate that the solar industry would need to be an order of magnitude larger than it is today to have this kind of impact. At the point where solar is displacing a material share of incremental oil and gas supply, global energy deflation would become inevitable: technology (with a falling cost structure) would be driving prices in the energy space. But even on an aggressive view, this could take the better part of a decade.”
But, the Bernstein analysts say, the risks are that they are being too conservative. The big oil and gas producers, and the investors that control the flow of capital, may not wait until energy prices do actually deflate, they will likely change their behaviour well before than in anticipation that it will happen.
“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, Bernstein says, is the hidden flaw with the idea that solar is “too small to matter”. Ultimately, it says, what may kill the energy market for equity investors is not the fact that renewable technology and battery storage will turn into behemoths, but the realisation of that future as inevitable.
http://reneweconomy.com.au/2014/solars-dramatic-cost-fall-heralds-energy-price-deflation-76250
Cassandra’s legacy by Ugo Bardi
14 Comments on "Gandhi on solar energy"
Davy, Hermann, MO on Thu, 24th Apr 2014 9:33 pm
I am all for AltE sources. I prefer the small scale, low tech, low cost, and the lifestyle that must accompany this approach. I like the idea of small distributed power sources for communities. I firmly believe we have to maintain the grid as long as possible to buy us time to prepare, mitigate, and adjust. Yet, all this happy talk about solar growth is much like what the oil industry lobbyist are doing and that is wishful thinking. The world is broke. We can barely maintain what we have there is no way in hell we can build out anything significant to replace the FF sector. This is especially true since AltE sources cannot replicate themselves not can they supply the diverse needs of a complex society. The sooner we give up on the shiny new AltE world the better. When this is done it will be an acknowledgement there is no hope for BAU. This is what is needed to motivate people towards lifeboats and lifestyle changes.
Makati1 on Thu, 24th Apr 2014 11:14 pm
If I wasn’t in the Philippines and it is 94F outside, I would think it was snowing! I actually agree with you, Davy. At least on this subject. Small AltE is good for now, but will not last forever because it cannot reproduce itself. I do favor stand alone systems, not community, but that is a small difference of opinion.
GregT on Thu, 24th Apr 2014 11:16 pm
Solar will never do anything more than replace a small percentage of fossil fuels in electric power generation. Solar is at best, a transitional energy source for a few decades.
No matter how you dice it, human beings are going to return back to living within the confines of the natural environment. Those that make it through the transition.
ulenspiegel on Thu, 24th Apr 2014 11:46 pm
@GregT
Obviously you have problems to understand exponential functions. Even if PV is only at ~1% at the moment, the time span for one doubling step is short (30%.
An when a high penetration with PV is reality it will stay because it defines/shapes infrastructure.
BTW: If you calculate with 5 GW PV = 1 GW nuclaer, fossil base load power plant or 3 GW wind = 1 GW conventional, you see, that already in 2013 more added power is provided by PV and wind than by nuclear, around 2025 the production of PV will be higher than that of NPPs, that is a relatively save bet.
ulenspiegel on Thu, 24th Apr 2014 11:51 pm
Correction:
… one doubling step is short (<5 years). Therefore, within the next three decades PV will very likely reach 30% of the electricity generation globally.
And when…
Arthur on Fri, 25th Apr 2014 2:01 am
Obviously Gandhi was refering to British imperialism, not solar panels, but his quip applies to renewable energy as well. Solar and wind have large enough eroei to carry itself and a 100% solar economy is very well possible and most major international players are actively working towards such a future, to be achieved around 2050, regardless of how many wars will be fought in between or economic crashes will occur. Cost has nothing to do with it, as long as there are hands available operating solar panel factories. The output can be used in small and large scale projects.
sunweb on Fri, 25th Apr 2014 4:18 am
Arthur said it so it must be true.
Davy, Hermann, MO on Fri, 25th Apr 2014 4:58 am
Mak, I prefer “stand alone” also but if as is usually the case because of financing, organization, and control a community based approach is preferable to the large AltE structures we see now connecting to a regional grid. The problems with these large AltE sources are the possible of stranded power in the event of grid contraction and or instability.
Art, theoretically fusion will work. You solar future is highly theoretical and IMHO wishful thinking. You are careful to interject possible so I cannot fault optimism. It is optimism and hope that push a future. I can see no evidence that solar can carry a society even at high rates of energy source penetration. There are too many negatives with power storage and solar product production. The low density of the energy means scaling up solar as a primary source means the placement area is unmanageable. Large wind farms are even more at a disadvantage to finding sweet spots and scaling up. The amount of placement area for wind would be so large that it quite possibly could affect weather patterns. The production and maintenance are the biggest issue. To scale up the solar economy will require a healthy status quo BAU economy. We don’t even have that now let along one that can have excess resources mainly FF to subsidies that scale up and run the currently energy and resource growth starved global economy. Something has to give and that will be something like your fantasy solar economy. The reason this will give is investment must be realized by investors and markets. If confidence is lost and capex and liquidity are contracted solar investments will not be made because of the high initial cost and long payouts. The financial system is teetering and cost of money has nowhere to go but up. There are no guarantees in a deflating economy of a bursting debt bubble that returns will be satisfied. Forget governments who are already broke and must be financed by bonds and taxes. Governments will be struggling just to maintain what we have let alone build out a shiny new future. One of the biggest issues with a shiny new AltE economy is diminishing returns of scale up. At some point just like FF and efficiency diminishing returns affects the return of the already low AltE energy return. So, Solar looks good when you can buy and install panels cheap but as the cost rise the payback periods increase prohibitively. The solar price renaissance will stall shortly as the debt spiral cuts capacity, increases capex cost, and shrinks liquidity. FF energy cost will rise prohibitively shortly as we repeatedly mention on PO. The grid upgrades requiring FF and smart control are suspect in a global world at the limits of growth facing diminishing returns. The last thing we need now is more complexity. It is precisely this need for more complexity that dooms your solar fantasy. For your solar fantasy to work population must half without the corresponding collapse that comes with a halving of the population. A high degree of complexity and financial health must remain in this population decline. We know that will not be the case in what will amount to a die off. “NO” we are nearly to “WHAT YOU SEE IS WHAT YOU GET”. We need to build like banchi apes as much as we can for “stand alone” solar, passive solar, and efficiency IMHO. Forget the large and complex it is the hubris of industrial modern man doomed to the ash heaps of history!!!
Arthur on Fri, 25th Apr 2014 6:13 am
Arthur said it so it must be true.
Thanks for your support, sunweb, won’t forget it!
Btw, is this family of yours by any chance?
http://www.sunweb.nl/
@Davey, that’s quite a long post. I don’t see the problem with complexity… what is so complex about mounting a handful of solar panels on your roof or feeding excess power back in the grid? It is quite possible that thin film solar will become dirt cheap. Major solar panel producers already said that economy of scale could bring the price of solar back to 40 cent/Watt. I disagree that you need a ‘healthy economy’ to set up a new energy base. Crypto commie Roosevelt and his New Deal achieved quite a lot of big infrastructure projects, including massive hydro dams during the depression. And if Chinese or Ukrainians can work for 600$/month, so can Americans and Europeans. Cost is not an issue. And if capitalism fails, expect communism to come to America and national socialism to Europe.
Perhaps you are right, but I suggest we give the solar economy a try anyway. Roll over and die is what we always can do anyway if nothing else is left.
sunweb on Fri, 25th Apr 2014 7:03 am
No Arthur http://www.sunweb.nl/ is not me. I created the name in the 70s when I manufactured a solar hot air panel and my last name is Weber. See I have walked the walk, lived off grid, installed systems, lobbied the government as chairperson of a state solar organization and don’t honest research into the possibilities.
You do understand that my comment to you was my tongue getting stuck in my cheek. I simply don’t think you understand the total system necessary to make the devices to capture the sun or wind. Nor the ERoEI involved. Or you are a troll. Regardless, last time ever commenting on what I consider thoughts on hopium and not based in material or global reality.
Davey on Fri, 25th Apr 2014 7:05 am
I like your optimism Art. He’ll, it is worth a shot and is a better investment than a nascar stadium for sure.
sunweb on Fri, 25th Apr 2014 7:06 am
No Arthur http://www.sunweb.nl/ is not me. I created the name in the 70s when I manufactured a solar hot air panel and my last name is Weber. See I have walked the walk, lived off grid, installed systems, lobbied the government as chairperson of a state solar organization and done honest research into the possibilities.
You do understand that my comment to you was my tongue getting stuck in my cheek. I simply don’t think you understand the total system necessary to make the devices to capture the sun or wind. Nor the ERoEI involved. Or you are a troll. Regardless, last time ever commenting on what I consider thoughts on hopium and not based in material or global reality.
Kenz300 on Fri, 25th Apr 2014 8:01 am
The cost of oil, coal and nuclear keeps rising and causing environmental damage.
The price of wind and solar keeps dropping and it is safe and clean.
The clean energy transition is unstoppable, so why fight it? – SmartPlanet
http://www.smartplanet.com/blog/the-take/clean-energy-transition-unstoppable-so-why-fight-it/?tag=nl.e662&s_cid=e662&ttag=e662&ftag=TRE383a915
Makati1 on Fri, 25th Apr 2014 8:21 am
Sunweb, it is obvious that a few here need to take a good systems course to know what we talk about. That PC they type on started deep in the ground in several countries, went through many high energy processes and was burped out on the store shelves looking like magic.
No thought to the hundreds of thousands of people along the way that made it possible or the energy input at every turn. I know what it takes to make a simple thing like manganese steel that is needed to get those minerals out of the ground as I worked in the lab of one of those steel foundries. Without exaggeration, there are literally millions of steps along the way to make that PC happen and each one consumes energy.