Wednesday, November 02, 2011

CNBC Segment on Energy Economics



Facts on the cost of generating electricity (per kilowatt hour):

Natural gas: 3.5-4.5 cents
Coal: 4-5 cents
Hydro: 4 cents
Nuclear: 8 cents
Wind: 7-9 cents
Solar: 15-50 cents

Question: Why as a country are we investing billions of dollars in the most expensive option (solar) and ignoring the cheapest (natural gas), especially when the U.S. is the "Saudi Arabia of natural gas"? 

HT: Warren Smith

39 Comments:

At 11/02/2011 9:35 AM, Blogger Bret said...

Because solar is on a moore's law like exponentially declining cost trend while natural gas is not?

http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

 
At 11/02/2011 10:01 AM, Blogger morganovich said...

bret-

pretty much every single number in that blog piece is wrong.

that 1366w number is meaningless. they are taking all the sun hitting the upper atmosphere and pretending it hits the surface, which is ridiculous.

the real number is not even half that even before 30-50% atmospheric and cloud absorption/refection.


moore's law will never work for solar energy for the same reason it does not work for flat panel displays: size is a feature. who cares how small the transistor is? that just means you need more to fill a square meter.

solar is going to be about films, not transistor size.

further, you have ignored the biggest problem with solar that makes it worthless for baseline power: it only works in the daytime (and even then only at certain latitudes). there is no way to store it efficiently or in any kind of meaningful amount.

it's also highly inconsistent. cloudy days make a huge difference.

many who are uneducated in how a power grid works just say, well, we'll use it in the daytime and coal/gas/nuclear at night.

this is not true. it's impossible.

it takes days to get a large scale coal/gas/nuclear plant up to temperature and working well. you can't just turn them on and off. thus, they have to run all day anyhow and the solar doesn't save anything meaningful on a systemic basis.

this solar joke is just a special interest play. it cannot be a meaningful part of baseline power until the ability to cheaply and efficiently store the electricity in mega and petawatt quantities is crated, and we are nowhere near that, even in theory.

sorry, but barring a major storage breakthrough, solar will continue to be an overpriced bad joke.

the only system worse is wind.

 
At 11/02/2011 10:03 AM, Blogger Che is dead said...

"Because solar is on a moore's law like exponentially declining cost trend while natural gas is not?" -- Bret

That had to be one of the stupidest articles that I've ever come across. Not one single word about the regulatory cost burden responsible for the upward price trend in conventional sources, particularly coal. The authors belief that the cost per Kwh trend lines will cross "9 years from now" rests largely on two assumptions 1) ever increasing subsidies for solar power, and 2) the continued regulatory hamstringing of more conventional sources. Yet, he fails to mention either.

"Alternative energy" is one of the biggest boondoggles in modern history, siphoning off valuable resources at a time that we can little afford it in order to make a handful of politically connected leftists wealthy. This is what the Democrats are talking about when they advocate for "wealth redistribution".

We all benefit when private individuals invest risk capital in technologies that they believe will offer a societal benefit that they can profit off of, but that is not what is happening here. When the author states "It’s small wonder, then, that scientists and entrepreneurs alike are investing in solar energy technologies" he has to know that what these people are really investing in is subsidy farming. If he doesn't understand this then he should pick another topic to write about.

 
At 11/02/2011 10:04 AM, Blogger morganovich said...

ps-

fwiw, there are small scale nat gas generation facilities that can be sued for instant on, but they are terribly inefficient. they produce at 60c +/kwh.

they are used for surge periods and wind up only used 5% of the time.

such plants are not useful for baseline power. they are too small to produce cheap power.

 
At 11/02/2011 10:30 AM, Blogger juandos said...

Scientific American?!?!

Come on bret those frauds are pushing the global warming scam big time!

 
At 11/02/2011 11:02 AM, Blogger Bret said...

Y'all have remarkably little vision in my opinion.

Regarding solar costs crossing natural gas generation costs:

It doesn't matter whether or not solar is subsidized. Solar will eventually be cheaper.

It doesn't matter whether or not the costs cross in 12 years. It may well be 50 years or longer, but solar will eventually be cheaper.

You're dreaming if you think regulations on fossil fuels will decrease. Regulations will only ever increase, at least in many markets (California for example). That's what governments do.

Anyway, Mark Perry asked why solar, I gave an answer. You can (and no doubt will) believe whatever you like.

 
At 11/02/2011 11:10 AM, Blogger Buddy R Pacifico said...

"Solar: 15-50 cents"

What will be the price of energy generated by the world's largest solar plant, when completed?

Hopefully, no more than $.14-.16/ Kwh.

Five million solar panels built by First Solar will be installed at Agua Caliente in Yuma County, Arizona.

BTW, First Solar just missed loan payments on a DOE loan of $1.9 billion, for a California project. Agua Caliente is financed by $1 billion DOE loan.

 
At 11/02/2011 11:11 AM, Blogger juandos said...

"You're dreaming if you think regulations on fossil fuels will decrease. Regulations will only ever increase, at least in many markets (California for example). That's what governments do."...

Hmmm, well it seems that bret's view of the American citizen being incapable of electing intelligent politicos might possibly have some substance...

 
At 11/02/2011 11:47 AM, Blogger Mike said...

Morganovich,
Don't be such a downer. If we covered the entire surface (land) of the earth that gets sunlight 365 days a year with panels and created a world-wide grid that could power the US at night with the power from the other side of the globe. Replaced the panels every 5 or 6 years and kept all the earth's bird from crapping on them, this solar thing has a real shot.

 
At 11/02/2011 11:48 AM, Blogger morganovich said...

bret-

and we find you alarmingly credulous and uninformed.

you ignore every downside to solar.

it's intermittent and cannot be stored.

it only works at low latitudes.

moore's law will not work for solar.

then, you proclaim that it will be cheaper than gas and in the same missive, accuse others of a lack of vision, a hilarious juxtaposition as you seem to be assuming gas will run out. this belies a huge lack of vision on your part. there are lots of VIABLE alternatives. nuclear (fission, or perhaps one day fusion, which would make solar irrelevant), geothermal, tidal, wave, etc.

you have this one very narrow and uninformed vision and are, with zero sense of irony, accusing others of lacking vision because they are not deluded an myopic the way you are.

even if we had perfect solar panels at zero cost, you still could not shut down a single coal plant by building them.

it's not viable baseline power without the ability to either store it or transmit it from the sunny side of the planet to the dark on, neither of which is even theoretically possible at the moment or likely to be in your lifetime.

that is a REALLY hard problem to solve. figuring out geothermal or even fusion is easy in comparison.

 
At 11/02/2011 11:51 AM, Blogger morganovich said...

buddy-

"Hopefully, no more than $.14-.16/ Kwh."

that number is a total fiction.

even if true, it's for what, 6-8 hours a day?

thus, you need to use a factor of 3-4 on capex amortization and whoops, you're at 50c, 10 times prevailing rates.

that's not terribly useful, especially in the winter.

 
At 11/02/2011 11:56 AM, Blogger Dharm said...

The statistics are based on today's technology. As technology advances and volume of energy production by solar energy increases, generation cost will come down. Then the whole equation changes. And both natural gas and solar energy are natural resources, in long run depletion of natural gas, one can think of not solar energy.

 
At 11/02/2011 11:58 AM, Blogger Dharm said...

This comment has been removed by the author.

 
At 11/02/2011 12:01 PM, Blogger Buddy R Pacifico said...

CORRECTION:

First Solar did not miss a loan payment, but instead missed a deadline to secure financing of $1.9 billion from DOE. FSLR has $795 million in cash.

 
At 11/02/2011 12:36 PM, Blogger Mike said...

Dharm,
I think the real problem isn't current tech, it's that the sun only provides 1kW of energy per sq meter.... you can't get more than the sun puts out...under optimal conditions, with perfect efficiency and only at certain times of the day in good locations. That would have to be with no transfer loss and a world-wide power grid combined with no dust, dirt, clouds, snow cover, animal droppings, etc.

I'm not anti-solar. I think the development of durable film could coat every house and building in the world, reducing the power plant output in a great way, but it won't replace them. If you'd like to have dependable electricity, it won't even be capable of reducing power plants in size and capabilities.

 
At 11/02/2011 12:38 PM, Blogger Buddy R Pacifico said...

morganovich,

"6 to 8 hours a day"

from the First Solar most recent 10-k:

"electricity generated by PV systems mostly competes with
expensive peak hour electricity, rather than the less expensive average price of electricity. Modifications to the peak
hour pricing policies of utilities, such as to a flat rate for all times of the day, would require PV systems to achieve
lower prices in order to compete with the price of electricity from other sources."


FSLR systems seem to be competing with peak hour pricing, which in the SW would be the hours when air conditioners are running -- and the sun is generating energy.

So, this model might be make sense, but it looks like the driver is the requirement by California, that 20% of all electricity come from renewable sources.

 
At 11/02/2011 12:39 PM, Blogger Bret said...

morganovich wrote: it ... [solar power] ... cannot be stored.

There are some inventions you might want to learn about: batteries, electrolysis, etc.

Or perhaps you simply meant that it cannot be stored cost-effectively at the current time? Which of course says nothing about the cost-effectiveness of storing it a few decades from now.

morganovich wrote: "it only works at low latitudes."

Works with varying efficiency wherever there is light.

morganovich wrote: "moore's law will not work for solar."

I never said it did. I wrote "moore's law LIKE" in that the cost per watt of producing solar cells has been on an exponential decline for nearly 1/2 century. I simply threw in moore's law because part of the decline is related to dealing with silicon.

morganovich wrote: "you seem to be assuming gas will run out"

Nope. We will never completely run out of any fossil fuel. Nonetheless, one day solar (including storage) will be cheaper than natural gas.

morganovich wrote: "...there are lots of VIABLE alternatives...... even if we had perfect solar panels at zero cost, you still could not shut down a single coal plant by building them."

No. At zero cost, at minimum, one would just use the energy for electrolysis and would run generators at night off of hydrogen and over time many coal plants would be shut down.

 
At 11/02/2011 12:57 PM, Blogger Trey said...

Keeping in mind that 'economics is the study of the allocation of scarce resources with alternative uses':

'Installing grid-tied PV is not just a waste of time and money, but a waste of copper, aluminum, labor, land, and capital. We are neither ahead nor green. This wasteful activity is unsustainable, mining the materials used in these unnecessary systems is damaging the environment, and the entire endeavor is a burden on the economy. There is hardly a clearer case of special interest run amok, besides perhaps ethanol subsidies.'

From the same article:

"But to further demonstrate how nonsensical this technology is, even if PV manufacturers drove the cost to $0/watt for PV panels, the cost of the aluminum mounting structure, copper wiring, labor, inverters, and maintenance result in a LCOE [levelized cost] around 10 cents."

Translation: Moore's Law for solar is a ruse. It is a 7% improvement (watt/$) every year for solar PV. Even if it was 40% / year (as it is for CMOS integrated circuits), it wouldn't matter.

 
At 11/02/2011 1:11 PM, Blogger NormanB said...

The oil driller that 'invented' fracking and is now the 20th richest person in the US asked Obama this same question, why not go all in on natural gas?. Obama said, 'Because green is the future'. I'm guessing that its because he has to appease his base.

But there is a universal (left and right) economic truism that the most efficient economic strategy is always to pick the low hanging fruit first. Politics, though, dictates otherwise.

 
At 11/02/2011 1:13 PM, Blogger morganovich said...

brett

"There are some inventions you might want to learn about: batteries, electrolysis, etc.

Or perhaps you simply meant that it cannot be stored cost-effectively at the current time? Which of course says nothing about the cost-effectiveness of storing it a few decades from now."

you need to work on your reading skills.

inability to store it cheaply and efficiently is EXACTLY what i said.

batteries are nothing like an option. they alone would cost more than the other alternatives by several multiples.

also, there has been very little progress in batteries for nearly a century.

lithium ion is a bit better, but still terrible. you are just hoping for pie in the sky that has no basis in reality.

"Works with varying efficiency wherever there is light."

um, no. you need to overcome impedance. below X watts for any system, the output is not harvestable. do you have any physics background at all? it appears not as you swallowed those absurd statements in that blog you cited wholesale. panel efficiency drops by far more than a linear amount as solar forcing drops.

your moore's law declining cost curve is just a testament to how bad the old panels were. you clearly understand nether moore's law, not solar panels. you run into a severe asymptotic constraint in solar that does not exist in silicon.

"No. At zero cost, at minimum, one would just use the energy for electrolysis and would run generators at night off of hydrogen and over time many coal plants would be shut down."

wow. your lack of any basis in physics astounds me.

electrolysis? great idea.

let's waste half the energy.

then, we burn the hydrogen and get what, 40% efficiency tops?

congrats, you have just spent 80% of your energy on byproducts.

good work.

do you have any idea the kind of solar coverage you'd need if you ran at 80% loss even before transmission?

not even the absurd solar optimists think electrolysis is an option for electricity.

 
At 11/02/2011 1:58 PM, Blogger Junkyard_hawg1985 said...

morganovich,

There are some places where solar makes sense. My brother-in-law's family lives in the boondocks of Northern Namibia. They get electricity from diesel generators and have DC battery back-up for night-time electricity use. Solar is an ideal replacement in this case because a) there is no grid, b) the incumbent fuel is very expensive as the diesel is trucked for 6 hours, c) Namibia has plentiful sunshine and d) there is an existing battery back-up system.

While I don't think solar can replace 100% of the electricity on the grid, I think it could make some inroads in the long term. Whle solar power can't be readily stored, it can be used to allow greater flexibility with other energy sources. For example, hydroelectric production of electricity could fall during daytime hours at peak solar use and increase when solar power production is down. You can also pump water upstream during periods of cheap electricity and release it during peak demand times (see Duke Energy's Bad Creek project).

So how much government money do I want to spend on subsidizing solar power? Exactly $0.00. Let the market work it out.

 
At 11/02/2011 2:05 PM, Blogger Junkyard_hawg1985 said...

By the way, I do have a system to collect and store solar energy until I need to use it using 2012 technology. It can be used any time day or night and delivers the same energy output regardless of the time of year. I call this storage syatem: "WOOD." Yes, 2012 B.C. technology at its finest.

 
At 11/02/2011 2:13 PM, Blogger morganovich said...

jh-

"While I don't think solar can replace 100% of the electricity on the grid, I think it could make some inroads in the long term. Whle solar power can't be readily stored, it can be used to allow greater flexibility with other energy sources. For example, hydroelectric production of electricity could fall during daytime hours at peak solar use and increase when solar power production is down. You can also pump water upstream during periods of cheap electricity and release it during peak demand times (see Duke Energy's Bad Creek project). "

sure, if you are off the grid, anything looks good.

my point about solar is that it cannot be a part of baseline power on a grid.

very few places have enough hydro to do as you suggest, and if they do, it's already so much cheaper than solar, that why would they want solar?

dukes pump water uphill project is going to be a disaster.

consider the energy loss involved.

first, you get solar. then, you transmit it losing power to electrical motors that pump water. those alone will cost you 50% of your power in losses to heat and friction. pumping water has friction too.

then it evaporates.

then you lose even more power to the hydro turbines.

then you lose transmitting it again.

you'd be lucky to get back 10-20% of what you put in.

that's just never going to work.

phase changes are highly lossy.

having more than one very difficult.

having 3-4 is simply ruinous. it's just not a viable option. you will lose all your lower to friction, heat, etc.

try running an electric heater in your house and using to to boil water to drive a steam turbine to generate electricity.

if you got 10% of what you put in out, you'd be doing incredibly well.

scale does not change the physics.

 
At 11/02/2011 2:26 PM, Blogger Junkyard_hawg1985 said...

Morganovich,

Duke's Bad Creek Project is not a physics project, it is an economic project. If you buy surplus electricity at 3 c/kwh in the middle of the night and sell it for 45 c/kwh at peak demand, you overcome the problem with physics.

 
At 11/02/2011 2:56 PM, Blogger morganovich said...

jh-

there is not solar power in the middle of the night to buy, so regardless, it's irrelevant to solar.

regarding the rest of the arbitrage, i think you are using best case assumptions.

if this has any size to it, it will drive up off peak prices and drive down peak prices.

you are going to lose an order of magnitude in the phase transitions from electricity to physical potential enegry to electricity again.

thus, if you buy at 4c and sell at 40c, you are break even, not counting costs to run and amort on capx.

this thing is going to be a huge money loser.

 
At 11/02/2011 3:26 PM, Blogger Larry G said...

does anyone know how much natural gas we think we have?

do we have enough to replace the coal plants?

do we have a 5, 50, or 500 year supply?

 
At 11/02/2011 4:43 PM, Blogger PeakTrader said...

"Question: Why as a country are we investing billions of dollars in the most expensive option (solar)..."

So, Americans can buy electricity at the highest price.

 
At 11/02/2011 5:52 PM, Blogger Mike said...

Peak,

Wouldn't that only be the case if we were being dissuaded?
Our leadership wants to persuade us to use clean, miraculous solar.

We're spending billions because our current leadership is clueless and believes in the improbable (if not impossible) and thinks they can create market booms out of whole cloth.

Read the first 10 pages of Confidence Men and you'll want to eat a gun.

 
At 11/02/2011 7:27 PM, Blogger juandos said...

"do we have enough to replace the coal plants?"...

What an insane idea!! Why would we want to 'replace' the coal fired electric plants?

Coal is a beautiful thing in so many ways...

 
At 11/02/2011 7:45 PM, Blogger juandos said...

"As technology advances and volume of energy production by solar energy increases, generation cost will come down"...

O.K. dharm but can it be done without ripping off the taxpayers?

Since 1977 the DOE has been ripping off the taxpayers...

 
At 11/02/2011 8:47 PM, Blogger Larry G said...

"do we have enough to replace the coal plants?"...

What an insane idea!! Why would we want to 'replace' the coal fired electric plants?

I was not advocating that.. I was trying to get a feel for how much natural gas we think we have now - from a practical perspective... i.e. how long could it power us?

or how long could it power an all natural-gas vehicle fleet?

so I was just looking for a rough idea of how much...

any idea?

I found one source that estimates if we converted to NG for all vehicles -we'd have enough for between 20 and 50 years.

so I was curious how that calculation might work for electricity generation.. (but not advocating it).

 
At 11/02/2011 9:30 PM, OpenID Sprewell said...

morganovich, the blog Bret links to already notes that half the power of sunlight is lost before it reaches the surface, so I'm not sure why you repeat that fact as though the author isn't aware of it. Also, you keep bringing up this canard that Bret and that author are citing Moore's law for transistors, when they instead refer to a similar improvement in thin-film tech, that they clearly say has an exponential gain like Moore's law. As for energy storage, there are new technologies being developed all the time to help with that. You may be right that storage represents the biggest challenge, but there are other solutions for that, like molten salts.

As for the notion that solar energy isn't powerful enough and that you'd need panels covering everything to harvest it, average incident solar power is a couple hundred watts per square meter, while the average US customer uses about 1-2 kW on average. At 100% efficiency, you'd only need about 10 square meters of panels, not a big deal considering the size of an average roof. Of course, you don't get 100% efficiency with any system, so the key is how efficient you can get the panels. Bret's original link notes 20-40% efficiencies in the lab, so it could certainly be doable some day.

Bret is right that solar is the future, but the key question is when. He himself admits it might take another 50 years. Investing in a tech that's not going to be ready for 50 years would've been like investing in computing 100 years ago, decades before the invention of the transistor, ie just plain dumb. The govt shouldn't be getting involved in any of this energy stuff, whether solar or coal subsidies, because they are too stupid to figure it out and too fucked up an institution to make the right choices, as we saw with Solyndra. But solar could certainly work out someday, the problem is those who are likely wasting money on it now.

 
At 11/02/2011 9:43 PM, OpenID Sprewell said...

Let me also note that almost all energy ultimately comes from solar energy, whether wind, gas, hydro, with the exception of nuclear. If we can harvest solar energy directly, we can cut out the middlemen and get the energy directly from the source. Of course, we don't know how to do that efficiently yet, so we're stuck with the stored energy in the middlemen of oil, coal, etc for now. When I looked into the energy issue a little while back, algae seemed the most promising option (the algae startup mentioned in the link went bust a couple years ago though), as it can be used as a solar "panel" of sorts also, but who knows if and when algae will actually work out.

 
At 11/03/2011 8:44 AM, Blogger juandos said...

larry g says: "I was not advocating that.. I was trying to get a feel for how much natural gas we think we have now - from a practical perspective... i.e. how long could it power us?"...

Good question larry g and maybe you'll find the following a useful start...

STATEMENT OF RICHARD NEWELL ADMINISTRATOR ENERGY INFORMATION ADMINISTRATION U.S. DEPARTMENT OF ENERGY before the COMMITTEE ON NATURAL RESOURCES U.S. HOUSE OF REPRESENTATIVES

 
At 11/03/2011 9:51 AM, Blogger Larry G said...

actually your link is crap in regard to putting a practical context to how much natural gas we have.

we keep hearing that we have so many years worth of coal or gas but those estimates are related to CURRENT Usage - not increased usage.

I have been looking for a chart that shows how much reserves will be affected by increased usage.

In other words, the news says that we have a crapload of new natural gas but some numbers I've seen say that it is really about 50 years supply at current usage levels.

I've seen other numbers higher... but I was asking for polite folks like yourself if you could provide links to projected supplies related to the rate of use.

thanks for your link but it falls short.

 
At 11/03/2011 3:02 PM, Blogger Sean said...

Great dialogue. Thought I would add some simpler comments.

(i) To my knowledge, "Scientists" have not backed down from the claim that global warming does exist and is happening. That's why it's not in the news anymore - because nothing has changed. I'm not a tree hugger - you can read similar dialogue on most of the websites of large power producing companies. They acknowledge it as well, and its part of their sustainability efforts. But they're also smart enough to know that change doesn't happen overnight. If you don't agree with this assessment, then tell me why China is now the world's leader in clean coal technologies?

(ii) The U.S. needs a balanced portfolio for the next 50 years. Solar will be a part of it whether you like it or not. So will coal, nuke, NG and the others. I think solar will find its niche (on rich people's roofs and in remote areas where power lines don't go easily).

(iii) Funny how these guys use the term "technological improvements" to describe the hydraulic fracturing revolution. This technology is in no way new, or improved. What was new (in 2005 anyway) was the legislative loophole which allowed frac'ers to avoid the Clean Water act. I'm not stupid, I receive a benefit from low cost NG, and I'm glad for it. But I don't pull the blinders over my eyes and pretend that fracturing is magical. If you do, I invite you to come to my aunt's ranch near Greeley, CO (Niobrara shale). You can drink out of her well, while I drink from the tanks that Encana bought for her and refill once a week so that she can continue to live there.

(iv) Gov't support is not always bad. Look at what NASA has brought to the marketplace (and not just aerospace). But cases like Solyndra or Range Fuels are ridiculous. DOE should help w/ R&D and support scale-up, not fund entire S/U companies staffed with their buddies. Let the private sector pick the winners and losers, obviously Uncle Sam isn't capable anymore.

 
At 11/03/2011 3:26 PM, Blogger Larry G said...

sean.. you're spouting heresy here in CD.... the bouncers are on their way to deal with you.

:-)

hang in there...

:-)

 
At 11/03/2011 6:36 PM, Blogger Sean said...

Ha ha that's okay. I live in Texas so by law I'm required tp own 4 guns.

 
At 11/03/2011 8:54 PM, Blogger VangelV said...

Because solar is on a moore's law like exponentially declining cost trend while natural gas is not?

Solar has many problems other than poor efficiency. One big storm and you lose massive amounts of solar panels from roofs and solar farms.

1, 2, 3, 4.

Solar could work if there is a real breakthrough and some of the practical issues are taken care of. But it is far from there.

 

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