Does This Shape Motivate Us To Install More Solar PV? Ken Zweibel Executive Director, GW Solar Institute The George Washin...
Society Is Investing to Cut CO2 and Gain Energy Price Stability <ul><li>This means local sources of energy that minimize C...
To First Order,  Current  PV Can Look Unaffordable <ul><li>Big systems (a few MW, ground and roof) </li></ul><ul><ul><li>1...
The History of PV Has Been Cost Reduction <ul><li>Thus there is a sense that PV is worth investing in at some level becaus...
What about that shape? <ul><li>PV runs without fuel for an indefinitely long period – almost no operating cost once paid o...
$3/W large, fixed flat-plate PV system in US Southwest sunlight (a third better than US average). Includes 0.5% replacemen...
Does Long, Low Cost Operation Provide an Opportunity? <ul><li>Does it mean PV is already cost-effective? </li></ul><ul><ul...
A Work in Progress <ul><li>We must evaluate the real comparative cost and values of the non-CO2, local sources of energy <...
Infrastructure (Lasts a Long Time, Costs a Lot at First, and Is Worth It)  <ul><li>Hoover Dam , Fluorescents, and LEDs (cl...
What Discount Rate? <ul><li>Private Discount Rate </li></ul><ul><li>At a discount rate of 2.2% or higher, coal (no CCS) wi...
Solar Annuity or Real-Estate Investment Trust <ul><li>Long lived, safe investment, valid for retirement accounts and indiv...
Possible Societal Algorithm <ul><li>Recognize this is an infrastructure and insurance issue, like roads and building codes...
Thanks
2010 Assumptions Case Loan Duration (years) Interest Rate Capacity Factor Fuel Escalation Time to 75% Replacement Fuel Cos...
Only  Society  Can Make This Choice <ul><li>Alvin Weinberg has posed this question previously in an  Energy Policy  articl...
15 c/kWh <ul><li>1 W of PV in US SW produces about 1.8 kWh/yr </li></ul><ul><li>Big systems going in for $3/W </li></ul><u...
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Zweibel - Solar Vision Forum

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Ken Zweibel, Director of the GW Solar Institute, presented on April 19, 2010 at the GW Solar Institute Second Annual Symposium. more information at http://solar.gwu.edu/Symposium.html

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Zweibel - Solar Vision Forum

  1. 1. Does This Shape Motivate Us To Install More Solar PV? Ken Zweibel Executive Director, GW Solar Institute The George Washington University [email_address] http:// solar.gwu.edu / http:// thesolarreview.org /
  2. 2. Society Is Investing to Cut CO2 and Gain Energy Price Stability <ul><li>This means local sources of energy that minimize CO2 </li></ul><ul><ul><li>Wind </li></ul></ul><ul><ul><li>PV </li></ul></ul><ul><ul><li>Nuclear </li></ul></ul><ul><ul><li>CCS (carbon sequestration) </li></ul></ul><ul><ul><li>CSP </li></ul></ul><ul><ul><li>Others (and energy efficiency) </li></ul></ul><ul><li>The question is: What is affordable? </li></ul>
  3. 3. To First Order, Current PV Can Look Unaffordable <ul><li>Big systems (a few MW, ground and roof) </li></ul><ul><ul><li>15 c/kWh in the best sunlight </li></ul></ul><ul><ul><li>20-25 c/kWh or more, most places in US </li></ul></ul><ul><ul><li>30 c/kWh in a few places </li></ul></ul><ul><li>Residential (small systems, a few kW) </li></ul><ul><ul><li>About 50% more </li></ul></ul>
  4. 4. The History of PV Has Been Cost Reduction <ul><li>Thus there is a sense that PV is worth investing in at some level because the costs have fallen consistently with such investment </li></ul>
  5. 5. What about that shape? <ul><li>PV runs without fuel for an indefinitely long period – almost no operating cost once paid off </li></ul><ul><li>Can have no moving parts or on-site labor </li></ul><ul><li>Now: 25-30 year warrantees at under 1% degradation per year </li></ul><ul><li>Discussion of 40 year warrantees </li></ul><ul><li>Conceivably could be designed to last 100 years at 0.5% annual degradation </li></ul><ul><ul><li>50% of original output in 100 years </li></ul></ul><ul><ul><li>If electricity escalation > 0.5%, revenue would rise for a century </li></ul></ul><ul><ul><li>Or could design to include enough annual replacement to keep output steady </li></ul></ul><ul><li>No known PV system has modules that are uniformly </li></ul><ul><li>dead, no matter how old it is (older than 40 years, now) </li></ul><ul><li>To do: Gather more reliability data </li></ul>PV O&M is Boring even to the Maytag Man™
  6. 6. $3/W large, fixed flat-plate PV system in US Southwest sunlight (a third better than US average). Includes 0.5% replacement per year (at 75% of today’s high prices) to offset expected system degradation (a conservative assumption since not everything will be replaced and efficiency will improve and costs drop). End of Loan Repayment Operating costs only
  7. 7. Does Long, Low Cost Operation Provide an Opportunity? <ul><li>Does it mean PV is already cost-effective? </li></ul><ul><ul><li>That we don’t have to wait for cost reductions to rapidly deploy PV? </li></ul></ul><ul><li>Does it mean that PV anywhere is almost as good as in the sunniest places </li></ul><ul><ul><li>Since operating costs only rise from 1.5 c/kWh to 2.5 c/kWh – so what? </li></ul></ul><ul><ul><ul><li>Like Germany </li></ul></ul></ul><ul><li>Structured as an annuity or real-estate investment trust, with all capital paid in, PV could be a “nearly perpetual” and dependable source of income to the owner </li></ul>
  8. 8. A Work in Progress <ul><li>We must evaluate the real comparative cost and values of the non-CO2, local sources of energy </li></ul><ul><ul><li>And this includes their role (daytime electricity versus night?) </li></ul></ul><ul><ul><li>And their limits (variability and the cost of compensating for them) </li></ul></ul><ul><ul><li>And smart grid, plug in hybrids and EVs are changing this continuously </li></ul></ul><ul><ul><li>And the way we define future value (e.g., those years at low cost) driven by discount rate assumptions </li></ul></ul><ul><ul><li>Discount rates totally change such valuations </li></ul></ul><ul><ul><ul><li>2% for government funded projects like infrastructure </li></ul></ul></ul><ul><ul><ul><li>5% for private business choices </li></ul></ul></ul>
  9. 9. Infrastructure (Lasts a Long Time, Costs a Lot at First, and Is Worth It) <ul><li>Hoover Dam , Fluorescents, and LEDs (clean; eventually cheap) </li></ul><ul><li>Haiti – building codes , public health (insurance against unacceptable risk (climate and supply)) </li></ul><ul><li>Replacing Lead pipes , asbestos (stop poisoning ourselves; rip them out even tho they ‘work’) </li></ul><ul><li>EV ( imported oil, dependable sources, without hidden expenses and potential catastrophes, like war ) </li></ul><ul><li>Water use reduction </li></ul>
  10. 10. What Discount Rate? <ul><li>Private Discount Rate </li></ul><ul><li>At a discount rate of 2.2% or higher, coal (no CCS) with 2% fuel escalation (above core inflation) is a better investment than PV despite fuel inflation </li></ul><ul><li>Yet society is exposed to unknown fuel price escalation, and owners to potential losses from lower electricity price competitors </li></ul><ul><li>Infrastructure Discount Rate </li></ul><ul><li>But at a very low discount rate (under 2.2%), PV is a better buy than coal </li></ul><ul><li>And under 5.4%, PV is a better buy than CCS (same fuel escalation) </li></ul>OMB uses 2%; The private sector, 5% or more Is there some ‘devil take the hindmost’ in the high discount rates? (financial crisis)
  11. 11. Solar Annuity or Real-Estate Investment Trust <ul><li>Long lived, safe investment, valid for retirement accounts and individuals </li></ul><ul><ul><li>Perpetual PV with 0.5%/yr additions </li></ul></ul><ul><ul><li>Safer than commercial real-estate </li></ul></ul><ul><li>Barrier </li></ul><ul><ul><li>Today’s PV Initial Costs don’t support adequate returns </li></ul></ul><ul><ul><ul><li>Existing investment tax credit (ITC) cannot be used, since initial taxes are less than the tax credit </li></ul></ul></ul><ul><ul><ul><ul><li>Tax credit is bad because about a third of ITC goes to bank fees for the deal </li></ul></ul></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Rebating ITC-equivalent to raise return to ~5% </li></ul></ul><ul><li>Rebate is a defensible exception for Treasury since it </li></ul><ul><ul><li>Goes to individuals through regulated entities (REITs and Insurance) </li></ul></ul><ul><ul><li>Safer than equivalent investments </li></ul></ul><ul><li>Result: more investment in PV and broader value for citizens </li></ul>
  12. 12. Possible Societal Algorithm <ul><li>Recognize this is an infrastructure and insurance issue, like roads and building codes </li></ul><ul><li>Decide how much of the value ( clean, cheap, here ) provided by non-CO2 sources is desirable </li></ul><ul><li>Set aside appropriate annual Federal investment for this value </li></ul><ul><ul><li>$1B/yr? $10B/y? $100B/yr?? </li></ul></ul><ul><li>Buy these sources to meet this societal need </li></ul><ul><ul><li>Government-owned, like Hoover Dam or TVA </li></ul></ul><ul><ul><li>Or incentivized, with private ownership </li></ul></ul><ul><ul><ul><li>REITs and Annuities </li></ul></ul></ul><ul><li>Enjoy a better, more responsible future </li></ul>
  13. 13. Thanks
  14. 14. 2010 Assumptions Case Loan Duration (years) Interest Rate Capacity Factor Fuel Escalation Time to 75% Replacement Fuel Cost ($/kWh) OM per kWh OM per kW Capital ($/kW) PV 20 6% 22% 0% 200 0 0 15 3000 Nuclear 20 6% 85% 0% 40 0.005 0.02 30 6000 Coal 20 6% 85% 0% 40 0.02 0.02 20 3000 Natural Gas 20 6% 85% 0% 40 0.04 0.01 20 1000 CCS 20 6% 85% 0% 30 0.03 0.03 30 5000 CSP + 25% nat gas 20 6% 37% 0% 40 0.01 0.03 80 4600 Wind 20 6% 30% 0% 20 0 0 40 1800
  15. 15. Only Society Can Make This Choice <ul><li>Alvin Weinberg has posed this question previously in an Energy Policy article: “If the [power] plants produce electricity from one of the inexhaustibles…then the cost of electricity can be expected to become very low, perhaps around 1 c/kWh . Ordinary economics discounts the future at a rate that reflects our uncertainty about the future, as well as the realities of today’s money markets. Should we discover that these gadgets last “forever,” economic doctrine would still forbid our investing in them rather than in more immediate gadgets whose lifetime, and payoff, is much shorter. Large , “immortal” energy systems might acquire much the same status as roads or bridges – part of society’s infrastructure, for which society is willing to pay more than strict economic accounting would dictate. Thus a political decision, one dictated by the broad concern for the future, may be the only way to switch to the low cost “immortal” energy system.” </li></ul><ul><li>A. M. Weinberg, 1985, “Immortal energy systems and </li></ul><ul><li>intergenerational justice.” Energy Policy 13(1):51-59. </li></ul>
  16. 16. 15 c/kWh <ul><li>1 W of PV in US SW produces about 1.8 kWh/yr </li></ul><ul><li>Big systems going in for $3/W </li></ul><ul><li>A 6% 20 yr loan on $3 is $0.26/yr in principal and interest </li></ul><ul><li>$0.26/1.8 kWh = $0.144/kWh </li></ul><ul><li>Assume added 1 c/kWh O&M </li></ul><ul><li>~15 c/kWh cost for large systems, sunny climates </li></ul>

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