Tuesday, January 24, 2012

Why Solar Power is Permanently Inefficient

The above was produced more than 30 years ago by Petr Beckmann, a professor of electrical engineering at the University of Colorado. The intervening decades have not altered the validity of what he wrote and depicted here because it is based on immutable physical and mathematical realities. Those realities are not altered by any amount of laws, subsidies, mandates requiring green energy usage, tax breaks, regulations, political promises, good intentions or democratic voting.

From the above illustration, you can readily grasp that solar power is extremely inefficient for automobile use, compared to the familiar fossil fuel (gasoline). Solar energy is similarly inefficient for other uses of fossil fuels.

Solar power cannot be made competitive by spending more money, hiring more scientists and conducting more research to find a technological breakthrough. Please note the caption on the above illustration assumes “unlimited progress in technology.” The illustration is based on 100 percent of the energy in sunlight, and no technology can ever extract more than that. In practice, one can utilize only a small fraction of it.

The inescapable fact is that sunlight is extremely dilute, has always been so, and will always be so. Solar energy, wrote Beckmann,

comes in at the rate of 1 kilowatt (kW) per square meter (about eleven square feet) at the best of times—when the sun shines unobstructed and perpendicular onto the collecting area. That 1 kW/m2 is a value that will never change upward; no level of technology, no amount of money, no genius of human inventiveness can ever change it....

To get an idea of how concentrated the energy is in coal, and how dilute it is in sunshine, consider a lump of coal needed to make 1 kilowatt-hour of electricity. It weighs a little under a pound, and when held in the sun, its shadow (which is the intercepted cross-section of the sunbeam falling upon it) would measure perhaps 15 square inches. How long would the sun have to shine on those 15 square inches to bring 1 kilowatt-hour of energy?

For 1,000 hours of pure sunshine. In the Arizona desert, where the sun is out 12 hours a day, that is almost 3 months. For the average location in the US, our little lump of coal would have to be out for almost half a year to be struck by a total energy of 1 kWh. But only struck by it; if we wanted to get 1 kWh out from that sunbeam, we would have to divide by the conversion efficiency [10 percent, at the very best.] So our 15-inch sunbeam would have to be harnessed for five years to yield the same amount of energy as the little lump of coal blocking it will yield almost immediately. That is how concentrated the energy is in coal, and how dilute it is in sunshine.

The solar collecting area on the roof of a house may be enough to heat or perhaps cool a house, but residential heating is only about 13 percent of US energy consumption. And the payback time, verified more recently by Dr. Arthur B. Robinson, and others, does not equal the expected life of solar residential heating systems. Government subsidies only make it seem so for the buyer—and “green” voters.

Stephen Moore reports that under the Obama administration the feds supplied almost $300,000 for installing solar panels on the roof of a local library in Arlington, Virginia. The project is claimed to save $14,000 annually in electricity costs, but the panels have a life span of no more than 10 to 15 years. So the project will pay back no more than about half of its investment. Some 3,000 counties across the U.S. have received federal grants for these money-losing investments.

Solar panel maker Solyndra was the first company to get an Energy Department loan guarantee as part of the Obama administration's $787 billion economic stimulus package. The Los Angeles Times reported the company received that loan guarantee in “late 2009.” It filed bankruptcy in August 2011. Two other solar manufactures, Evergreen Solar Inc. and Spectrawatt Inc. filed bankruptcy in the same week. None of this should have come as a surprise.  In late 2009—the time when Solyndra received the loan guarantee—Bloomberg reported just how uneconomic and unrealistic solar power was, as shown below. (While production prices have since come down substantially, so have selling prices, leaving operations still unprofitable and resulting in a string of bankruptcies.)

      Cost of Producing Energy per Megawatt Hour
                    Before Subsidies

       Energy Source                             Cost Range      Likeliest Cost
     Wave Power                       $257 – 508               $380
     Solar, crystalline silicon panels       215 – 420                 285
     Solar, thin-film panels                   160 – 285                  215
     Wind, offshore                             132 – 245                 167
     Biomass                                71 – 213                  104
     Wind, onshore                               68 –116                    88
     Landfill Gas                           44 – 88               72      
     Geothermal                            53 – 84                    62
     Natural Gas                             53 – 63                   58
     Coal                                       53 – 59                   56

As of third quarter 2009, from Bloomberg New Energy Finance 
There were further warnings that Solyndra was not likely to succeed, but these were ignored by the man who was going to “transform America”—apparently into a fantasy land where economics didn't matter. Two plus two didn't have to equal four any more. Solyndra's tubes cost $4 for every watt of power output produced, but it could sell them for only $3.24 per watt. Its U.S. rival First Solar Inc. was making panels for less than a quarter of Solyndra's cost. In December 2009, Brad Jones of Redpoint Ventures emailed then-National Economic Council Director Larry Summers: “The allocation of spending on clean energy is haphazard; the government is just not well equipped to decide which companies should get the money and how much.”

In March 2010, Solybndra's auditor PriceWaterhouseCoopers questioned whether the company could survive. The White House shrugged this off. When the company's IPO failed, that was a signal the smart money didn't consider it worthwhile, but the White House shrugged off this indicator, too.

Arno Harris, chief executive of Recurrent Energy, said his company considered purchasing Solyndra panels several times but decided that neither the economics nor the technical design made sense.

The Office of Management and Budget expressed doubts. One OMB staffer said the Department of Energy “has one loan to monitor and they seem completely oblivious.” Another said it was”terrifying” to consider that some of DOE's next projects would make Solyndra look “better.”

At least one member of DOE was concerned about Solyndra. Among the emails released by the House Subcommittee on Oversight and Investigation is one of August 29, 2009. A DOE staffer asks “how can we advance a project...that generates a working capital shortfall of $50 [million] when working capital assumptions are entered into the model?” Nevertheless, Solyndra's federal loan guarantee was approved the next month.

Brushing aside all the red warning flags about Solyndra, Obama visited the company headquarters in May 2010. It would be an opportunity for the news media to identify him with this “successful” venture in the eyes of the public. He proudly proclaimed “companies like Solyndra are leading the way toward a brighter and more prosperous future.” He touted the thousands of jobs that the stimulus money would create, because, “The true engine of economic growth will always be companies like Solyndra.”

There may have been another reason for Obama's support of Solyndra besides his dream of clean energy and his ignorance of economics and the physical limitations of sunlight. Billionaire George Kaiser was a contributor to Obama's 2008 presidential campaign. He also bundled together campaign contributions from multiple sources for Obama's campaign. The George Kaiser Family Foundation owned about 36.7 percent of Solyndra, and Kaiser made 16 visits to the White House since 2009, according to the White House visitor logs.

Joel Cannon, CEO of tenKsolar, Inc. said, “[Solyndra's] product cost was far too high and its performance far too low, and everyone who knew the solar business knew this.

Government did not know the solar business. The problem was not that Solyndra was just one bad call. It was the government being totally wrong about solar energy and making a string of bad calls throughout the industry. On January 13, 2012, CBS News reported 12 clean energy companies are having trouble after collecting more than $6.5 billion in federal assistance. Besides Solyndra, four others have already filed for bankruptcy, Beacon, Evergreen Solar, SpectraWatt and Eastern Energy.

Others are having problems. SunPower landed a $1.2 billion loan guarantee—twice the size of Solyndra's. On its last financial statement, it owed more than it was worth. First Solar was the Standard & Poor 500's biggest loser in 2011. The taxpayers are on the hook here for a $3 billion federal loan guarantee. Energy Conversion Devices, whose stock sank 95 percent in 2011, has suspended factory operations. Of the ten largest publicly traded solar companies by market capitalization, six had debt on their balance sheets that exceeded their market capitalization. Willard & Kelsey Solar Group received more than $15 million in local government aid. Its CEO had said it would be employing 250 employees by the end of the year. Instead, he now announced it was laying off about half its workforce.

Solar energy problems are not confined to the U.S. Germany is an economic powerhouse and has spent more money on solar energy (100 billion euros) and installed more solar panels than any country on earth. But in recent months two important German solar manufacturers, Solar Millenium AG and Solon SE, have gone bankrupt. Schott Solar shut down a plant producing solar cells in Frankfurt, eliminating 276 jobs.

German solar farm operators and homeowners with solar roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated was only about 3 percent of the nation's total power supply. Peak demand for electricity in northern Europe in winter is about 6 pm—when the sun is no longer shining—according to Der Spiegel. On January 16, 2012, it reported:

For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast. As is so often the case in winter, all solar panels more or less stopped generating electricity. To avert power shortages, Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic.

Last week, the German government announced it will make quicker cuts in subsidized rates for solar power and phase out all support for the industry by 2017. In June 2011 Germany voted to close the last of its 17 nuclear power stations by 2022. It will be interesting to see what happens to Germany's economic powerhouse when faced with a reduced supply of electricity and higher prices for it. (Incidentally, wind energy is even more dilute than solar energy.)

What about all those green jobs that President Obama promised? A report by the Labor Department's Office of Inspector General in late 2011 examined a $500 million grant under the stimulus program to the Employment and Training Administration. It was to “train and prepare individuals for careers in 'green jobs.'” Of the $162.8 million spent, only 53,000 were “trained,” only 8,035 found jobs, and only 1,033 were still on the job after six months. Many of these jobs were not green or even new jobs. They included jobs “relabeled as green jobs by the BLS [Bureau of Labor Statistics].” These included bus drivers, EPA regulators, university professors teaching ecology, and Washington lobbyists working to procure green energy government loans. The House Committee on Oversight and Government Reform put the cost of each of these green jobs at $157.000.

In Spain, the Study of the Effects on Employment of Public Aid to Renewable Energy Sources found that 2.2 jobs were destroyed for every green job created by the government's investment in solar energy. The study concluded the government spent €571,138 ($753,778) to create each new "green job." 

The assumption that government can make better economic decisions than the private sector is ludicrous. The government makes economic decisions on the basis of politics or ideological policy. Private companies—when free of political distortions of the market—make decisions on the basis of economics.

If the government makes bad decisions about the economy, everyone suffers. Not only are all the taxpayers—even future generations—forced to pay for government's mistakes; but the whole society, not just the taxpayers, suffers from the retarded growth of the economy. It is free markets that produce economic growth that creates prosperity—and which limits losses from bad economic decisions to those involved. No private company or individual has the power to make mistakes that can produce the economically adverse consequences on a scale that only governments can create. Only the government could misallocate capital to entice—and virtually create—an entire industry of malinvestment in solar power. Fortunately, the solar industry is nowhere near as large as the housing industry, where Fannie Mae, Freddie Mac and the federal Community Reinvestment Act caused such colossal malinvestment of trillions of dollars by thousands of banks, tens of millions of home buyers and countless home construction companies that it threw the entire economy into deep recession. Only a government has that kind of destructive power. It's a good reason to leave economic decisions to the free market, not government.