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How cheap can solar get? Very cheap indeed

If current rates of improvement hold, solar power will be incredibly cheap by the time it’s a substantial fraction of the world’s electricity supply, writes famous author and thinker Ramez Naam. According to Naam, electricity cost is from now on coupled to the ever-decreasing price of technology. That is profoundly deflationary and disruptive.

It’s now fairly common knowledge that the cost of solar modules is dropping exponentially. I helped publicize that fact in a 2011 Scientific American blog post asking “Does Moore’s Law Apply to Solar Cells?” The answer is that something like Moore’s law, an exponential learning curve (albeit slower than in computing) applies. (For those that think Moore’s Law is a terrible analogy, here’s my post on why Moore’s Law is an excellent analogy for solar.)

 Solar electricity cost, not solar module cost, is key

But module prices now make up less than half of the price of complete solar deployments at the utility scale. The bulk of the price of solar is so-called “soft costs” – the DC->AC inverter, the labor to install the panels, the glass and aluminum used to cover and prop them up, the interconnection to the grid, etc.  Solar module costs are now just one component in a more important question: What’s the trend in cost reduction of solar electricity? And what does that predict for the future?

Let’s look at some data.  Here are cost of solar Power Purchase Agreements (PPAs) signed in the US over the last several years. PPAs are contracts to sell electricity, in this case from solar photovoltaic plants, at a pre-determined price. Most utility-scale solar installations happen with a PPA.

In the US, the price embedded in solar PPAs has dropped over the last 7-8 years from around $200 / MWh (or 20 cents / kwh) to a low of around $40 / MWh (or 4 cents per kwh).

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The chart and data are from an excellent Lawrence Berkeley National Labs study, Is $50/MWh Solar for Real? Falling Project Prices and Rising Capacity Factors Drive Utility-Scale PV Toward Economic Competitiveness

This chart depicts a trend in time. The other way to look at this is by looking at the price of solar electricity vs how much has been installed. That’s a “learning rate” view, which draws on the observation that in industry after industry, each doubling of cumulative capacity tends to reduce prices by a predictable rate. In solar PV modules, the learning rate appears to be about 20%. In solar electricity generated from whole systems, we get the below:

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This is a ~16% learning rate, meaning that every doubling of utility-scale solar capacity in the US leads to a roughly 16% reduction in the cost of electricity from new solar installations. If anything, the rate in recent years appears to be faster than 16%, but we’ll use 16% as an estimate of the long term rate.

Every industrial product and activity gets cheap

This phenomenon of lower prices as an industry scales is hardly unique to solar. For instance, here’s a view of the price of the Ford Model T as production scaled.

 

 

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Like solar electricity (and a host of other products and activities), the Model T shows a steady decline in price (on a log scale) as manufacturing increased (also on a log scale).

The future of solar prices – if trends hold

The most important, question, for solar, is what will future prices be? Any projection here has to be seen as just that – a projection. Not reality. History is filled with trends that reached their natural limits and stalled. Learning rates are a crude way to model the complexities involved in lowering costs. Things could deviate substantially from this trendline.

That said, if the trend in solar pricing holds, here’s what it shows for future solar prices, without subsidies, as a function of scale.

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Again, these are unsubsidized prices, ranging from solar in extremely sunny areas (the gold line) to solar in more typical locations in the US, China, India, and Southern Europe (the green line).

What this graph shows is that, if solar electricity continues its current learning rate, by the time solar capacity triples to 600GW (by 2020 or 2021, as a rough estimate), we should see unsubsidized solar prices of roughly 4.5 c / kwh for very sunny places (the US southwest, the Middle East, Australia, parts of India, parts of Latin America), ranging up to 6.5 c / kwh for more moderately sunny areas (almost all of India, large swaths of the US and China, southern and central Europe, almost all of Latin America).

And beyond that, by the time solar scale has doubled 4 more times, to the equivalent of 16% of today’s electricity demand (and somewhat less of future demand), we should see solar at 3 cents per kwh in the sunniest areas, and 4.5 cents per kwh in moderately sunny areas.

If this holds, solar will cost less than half what new coal or natural gas electricity cost, even without factoring in the cost of air pollution and carbon pollution emitted by fossil fuel power plants.

As crazy as this projection sounds, it’s not unique. The IEA (International Energy Agency), in one of its scenarios, projects 4 cent per kwh solar by mid century.

Fraunhofer ISE, the German research institute, goes farther, predicting solar as cheap as 2 euro cents per kwh in the sunniest parts of Europe by 2050.

Obviously, quite a bit can happen between now and then. But the meta-observation is this: Electricity cost is now coupled to the ever-decreasing price of technology. That is profoundly deflationary. It’s profoundly disruptive to other electricity-generating technologies and businesses. And it’s good news for both people and the planet.

Is it good enough news? In next few weeks I’ll look at the future prospects of wind, of energy storage, and, finally, at what parts of the decarbonization puzzle are missing.

Source: reneweconomy


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Alternatives to drive SA’s energy mix for optimum development

The raging debate over the suitability of nuclear energy is typical of South Africa’s flawed approach to energy policy. We are driven by desperation to consider alternatives rather than being proactive and acting strategically to optimise outcomes.

The Eskom debacle has forced the government to consider other options such as gas in addition to nuclear – just like the sale of state assets is driven by the need to bail out Eskom rather than economic policy. Invariably, we ask the wrong questions and then proceed to provide the most precise answers to them.

The strategic energy policy question is not whether nuclear energy is better than renewable energy or vice versa. The question is: what is the optimal energy mix for South Africa that will best address our economic development challenges? Any optimisation problem relies on the formulation of the objective function and the constraints imposed on it. While some are fuzzy on the objective function, they seem clear that we can either have nuclear, wind or solar, and nothing else.

My argument is that there are other alternatives to be considered in the energy mix. Firstly, the strategic envelope for the analysis of our energy policy should be the Southern African Development Community (SADC), not the Republic of South Africa, given that there are significant energy sources outside South Africa, with South Africa being a massive energy sink. The DRC has hydro energy resources, Botswana has coal resources, Mozambique and, to a lesser extent, Namibia have significant natural gas resources. It is also unclear why our own coal resources are not in the future energy mix, given our relative size to massive coal burners such as China and India.

Back to the objective function: what do we want to achieve through our energy policy? The goals of an energy policy should include competitively priced energy, energy security, supply stability, minimal environmental impact, employment creation, and positive transformative impact on the overall economy. One could use the current energy mix as a base case to compare alternative mix options, including all the energy sources mentioned above.

We have not even considered importing Liquefied Natural Gas (LNG) as an alternative or local hydraulic fracking. We could divert all our thermal energy demand to LNG and simultaneously use LNG to provide feedstock to the PetroSA GTL plant. That would reduce our electricity demand and also make sure we sweat an existing investment at the Mossgas plant.

At face value, it seems a nuclear plant investment will have less positive transformative effect on the overall economy.

We need a breath of fresh air in this energy policy debate. This is too important an issue for South Africa’s future to be driven by sector specific interests.

Source: IOL


 

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No Easy Answers When Disposing of Oil and Gas Wastewater

We all want easy answers. And often times the harder the question, the easier we want the answer to be.

Increased natural gas use, for example, can help decrease U.S. greenhouse gas emissions as it has a lower carbon content compared to coal or oil. Natural gas also can help transition our energy mix to more renewable energy sources. This is because properly designed, gas-fired generation can respond quickly to pick up the slack if the wind suddenly dies or clouds unexpectedly roll in. But, these benefits mean nothing if the communities where gas is produced suffer air and water pollution, or if methane – a powerful global warming pollutant that is the primary ingredient in natural gas – is allowed to leak into the atmosphere unchecked.

We all should be worried about global warming and the role that sloppy oil and gas production and distribution practices contribute to the problem. But communities where oil and gas development is taking place are also worried about how oil and gas drilling is impacting their water supplies. This is a key issue and one aspect of the groundwater contamination concerns, rightfully gaining attention in these communities, is how and where toxic wastewater is disposed of that is produced along with oil and gas. But here, too, the answers don’t come easy.

The basic regulatory framework

More than 25 percent of the country’s approximately 700,000 injection wells handle produced water from oil and gas operations. The quantities are huge – at least 2 billion gallons per day. And this fluid is not harmless. Produced water from oil and gas operations is usually much saltier than sea water (it will kill plants and can ruin soil) and is often laced with heavy metals and radionuclides that are naturally present in the formation being drilled.  In addition, this produced water can contain hundreds of toxic chemicals – anti-freeze to name just one example.  The current standard practice for addressing this potential environmental hazard is through injection of the water into geologic formations suited to permanent disposal.

The 1974 Safe Drinking Water Act gave the EPA oversight of underground wells injected with chemical-laden fluids for disposal and other purposes. In most cases, EPA delegates the authority to state agencies, but in some states, such as Pennsylvania, EPA regulates the wells itself.

EPA’s Underground Injection Control (UIC) program generally has received high marks. In fact, many environmental advocates believe it is important to expand the program to include hydraulic fracturing of oil and gas wells, which was largely excluded from UIC regulation by the “Halliburton loophole” passed by Congress in 2005.

Challenges with existing methods

For all its high marks, the UIC program also has its problems. For starters, it is uncertain whether all states are following EPA’s definition of “Underground Source of Drinking Water”– the water that is supposed to be protected.

Leaks sometimes occur from storage tanks at UIC wells.

Other challenges include: inadequate investigations in some jurisdictions of the surrounding disposal area to make sure no unplugged wells or natural faults allow wastewater to migrate into water supplies; not always assuring that pressures during injection are held low enough to avoid breaks in caprock that protect aquifers;  failing to make sure that injection is always limited to permitted intervals;  and responding to the  increasing number of small and medium size earthquakes that are linked to injections.

Underfunding of regulatory programs compounds the problem, making it harder to provide the public with assurance that their water quality is protected from oil and gas development.

Wastewater Recycling: Buyer Beware

Recycling oil and gas wastewater for reuse in hydraulic fracturing operations is on the rise. The challenge, however, is that recycling requires storage and transport, and almost always requires some sort of treatment. How new residual waste streams are dealt with that carry far more toxic and concentrated substances than the water treated is a major environmental concern as companies jump on the recycling trend. Growing interest in the Appalachian Basin to treat oil and gas wastewater and discharge it into surface streams has heightened attention on these matters. Right now, these discharges are subject to EPA’s National Pollutant Discharge Elimination System (NPDES), but as EPA recently noted in its Preliminary 2014 Effluent Guidelines Program Plan, “current regulations may not provide adequate controls for oil and gas extraction wastewaters.”

Recycling wastewater does reduce the need for freshwater and reduce the volumes that need to be disposed, but it can make disposal much more challenging – particularly when we don’t know enough about the treatment process and resulting waste products.

Diligent oversight needed

Permanent storage using underground injection wells remains by far the most common disposal method. At this point, it also appears to be the least risky, not to be confused with “unrisky”.

But there are things that can be done right now to help us begin to minimize these risks, such as updating requirements for the installation and maintenance of pits and tanks, assessing risks posed by new forms of transport and adopting appropriate risk controls, and doubling down on efforts to identify and remediate leaks and spills.

Bottom-line: none of this is simple. And questions about management of this produced water from drilling operations further demonstrates why we need to stay vigilant in better understanding the environmental impacts of oil and gas development. Having worked most of my career on these issues, it is clear to me that incremental but near-constant improvements are essential to minimize risks and protect communities.

Source: The Energy Collective