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Everything They Tell You About Solar Is Wrong - Travis Bradford

by: Hard Assets Investor August 15, 2008 | about stocks: GEX / TAN    
Hard Assets Investor

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Travis Bradford thinks that the solar energy industry is going to change the world ... and soon. The founder and president of the Prometheus Institute, a nonprofit dedicated to accelerating the deployment of sustainable technology, Bradford is author of Solar Revolution: The Economic Transformation of the Global Energy Industry, which confidently predicts solar energy will become a dominate energy source over the next 10 years.

He spoke recently with the editors of HardAssetsInvestor.com.

HardAssetsInvestor.com (HAI): You say in your book that solar energy is going to change the way the energy industry works, and that it will become a dominant player in the field. It's such a niche player right now. What's going to change that?

Travis Bradford, founder and president, Prometheus Institute (Bradford): The thing that determines the energy choices we make are both the cost of generation and the cost of getting electricity from where it's made and to where it's needed. Solar is going to end up being cheaper in both regards.

By putting energy nearer to the point of use, solar is going to change the electricity network from a very centralized network - almost like a mainframe computer - to a very distributed network; more like wireless laptops, where a lot of the processing power is at the end of the network instead of in the middle. It has the ... ability to change the way the electricity architecture functions.

The economic and the system repercussions of that change are going to allow solar to become a dominant player in the energy architecture. In fact, it's the only technology that can do these things. Everything else is limited by the way the networks are built today.

HAI: Not wind?

Bradford: The amount of wind you can use, or the amount of or way of tidal energy you can use, are limited by the costs and source availability in the first place, and also by the network that's needed to take that energy from where it's generated to where it's needed. Solar is the only thing that can solve the limitations that the current network creates.

HAI: But solar's nowhere near cost-competitive? What do you say to the people who say it's just too expensive?

Bradford: Well, just that it's not true. Just because people say it, that doesn't mean it's true. [Right now] it's cost-effective for lots and lots of applications, and the industry is growing at 40%-50% per year.

But regardless of how expensive it is today, I'm talking about an evolution over the next decade or decades. Ten years from now, solar will be half the cost or less of what it is today, and grid prices will be at least the cost they are today or substantially higher. What is today marginally economic will become wildly economic over the next 10 years.

That's not to say that we have to wait 10 years from now until the industry takes off. Every day, more and more applications are becoming cost-effective.

HAI: But the numbers people cite on a per-kilowatt/hour basis are far higher than for other types of energy.

Bradford: When people say solar is too expensive, they make two fundamental errors. The first is that they compare the cost of generating solar to the cost of generating other forms of energy. The difference is that solar can be generated where it is used, while the other forms have costs that have to be sent back to the user. It's not an apple-to-apple comparison.

Anytime someone uses the cost of generating electricity to talk about solar, they're already using the wrong model. What matters is the cost of delivered electricity.

The second error people make is that they compare solar to the wrong thing. They compare solar generation to the average cost of displaced electricity. But solar doesn't displace average electricity - it displaces middle-of-the-day electricity, which is the most expensive electricity of all.

When you make the correct calculations with the correct assumptions, solar is not really as expensive as people might lead you to assume.

HAI: What percentage of total energy costs are generation vs. distribution?

Bradford: Fifty-fifty, across the broad energy portfolio.

HAI: What are the risks to solar's success?

Bradford: I don't really see a lot of risk to the forecast that solar is going to get a lot cheaper. It's a pretty powerful trajectory that it's on, and the road map to get to half the price of today is well within reach over the next 10 years. It might even be in the next five.

The only other risk might be that grid electricity prices get dramatically cheaper in the near term. But it would have to get cheaper faster than solar does, in order for grid electricity not to continue to lose economic ground to solar. Solar's prices are falling 5% per annum. The odds that electricity prices will drop 5% per annum over the next 10 years are extraordinarily low.

HAI: There's a feeling that the U.S. is losing its leadership position in the solar industry to overseas competitors. Why is that?

Bradford: The other countries have had much stronger demand support programs, so they've installed a lot more solar capacity. Their local companies have been faster to make investments as a result, as they look to benefit from that. Also, Chinese manufacturers are very good at cost-engineering electronic devices, and they have been able to raise capital in the U.S. capital markets to scale up production.

That said, the reality is that the next generation of solar technology - both photovoltaic (PV) and non-PV, such as solar thermal and solar-concentrating technologies - are predominantly supported by the U.S. private equity and venture capital industries. So the next generation of technologies is going to be driven a lot by American industry.

HAI: What do you think about thin-film technology?

Bradford: I love it. We've written two comprehensive reports about thin-film technology, and the second one is coming out this month. Our optimism about the economic offering of thin-film PV continues to grow every time we do another report. We track 135 thin-film companies around the world, and while not all of them are going to be successful, enough of them are likely to succeed that they will have a major impact on the solar industry and the energy industry in general.

HAI: Who loses when solar wins?

Bradford: The traditional belief is that solar creates a competing offering to electric utilities, and therefore utilities might lose if solar wins. But my firm belief is that getting involved in rolling out the solar architecture is a huge business opportunity, including utilities if they are foresighted enough to take it.

HAI: If you were an individual investor, how would you invest in the solar boom?

Bradford: The problem is that picking individual winners and losers is very hard. Unless you have a lot of expertise, it's going to be difficult to determine the real success stories from those that don't make sense. Perhaps a diversified sector play is the best bet for an individual or nonexpert investor.

HAI: One last question: Do you have solar photovoltaics on your roof?

Bradford: No, they're not practical in my case. I rent an apartment in a very tall building in Chicago.

One point I make is that solar shouldn't end up everywhere; it just should end up in relatively more places than it is today. Solar maps very well to the suburban living patterns of modern society. I've chosen to reduce my carbon footprint by living in an urban apartment. That said, I do hope they put a solar farm up in Chicago soon to help take advantage of clean energy ...

HAI: Thank you.

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This article has 33 comments:

  •  
    Aug 15 03:48 PM
    Nothing new here. Not enough details to be of value to investors. Would Make a nice fluff article in a newspaper (if anyone reads those anymore).
    Reply
  •  
    Aug 15 04:00 PM
    His book, if I'm thinking of the right one, is pretty substantive, though I haven't read all of it.

    I'd say the stuff about grid parity and how to consider solar cost is not fluff. Though the overall tone of the piece swerves between the informative and the out and out promotional.
    Reply
  •  
    Aug 15 04:04 PM
    I think that the info on distribution costs and the peak usage costs were something new to me.
    Reply
  •  
    Aug 15 04:20 PM
    Travis looks very young in his picture and his outlook on solar is just a green, no pun intended. Do some simple math take your current total electric bill including energy, fuel, taxes, franchise fees and divide it by the KWH you used it should be between 7 cents and 18 cent per kwh. That total includes transmission and distribution costs. Now what Travis didn't tell you that is that the most efficient solar technology today is 12 times more expensive per kwh than the most expensive current utiltiy cost. With govt grants and tax breaks the payback on a residential installation on that cost differential is 28 years. One other minor problem he doesn't mention is with solar you need storage capacity,under the best of conditions the sun only shines 12 hours per day. Now if you follow the electric car industry you know battery technology is very limited. Oh one last little problem with his theory, and it is just that. There is not enough manufacturing capacy for photovoltaics to replace the load he is projecting with current solar, and thin film technolgy won't be capable of mass production on that scale for many years. There is no magic solar bullet even in the distant future.
    Reply
  •  
    Aug 15 04:29 PM
    Take the promotional fluff out. Here are the main numbers/facts:

    * The solar industry is growing at about 40%-50% a year. I assume he means total revenues of the solar companies. The 50% sounds a bit like hyperbole to me. 40% matches most sources.

    * Solar prices are dropping about 5%/year. Not clear what this refers to: generated power cost? The cells? Anyway, a good general item to keep in mind.

    * Generation and Transmission cost about 50%/50% - this is new to me and significant

    * Solar cuts the middleman, power can be produced whare it is used. Good insight.

    * Middle of the day energy is most expensive, and this is where solar is most effective. This means cost comparisons are sqewed.

    All in all, I agree. Given the 2.7B (?) invested in alternative energy in 2007 alone that we are at the point of no return in getting rid of our fossil-fuels addiction and dependency.
    Reply
  •  
    Aug 15 04:38 PM
    solar energy is not stored in batteries. The storage component is in the
    kinetic energy of compressed air.
    Reply
  •  
    Aug 15 04:40 PM
    the air is released and runs generators for power on demand
    Reply
  •  
    Aug 15 05:13 PM
    seekingalpha.com/artic...
    Reply
  •  
    Aug 15 05:22 PM
    Great article. Yup, alot of people don't understand that solar is not going to end up on people's rooftops. Instead, companies like PG&E will be building out solar and attaching it to the grid (as they announced today).

    And you could certainly store solar engery or any energy for that matter in a battery or flywheel. What you are storing is a different form of energy of course (whether that be in the form of heat, battery, etc.) So I think people are just splitting hairs on that subject. You are able to store energy which was originally produced from solar but the stored form is not solar.

    Lastly, yes, Solar is happening. Lots of great articles out there on its potential as a local energy source which frees us from the geo-political factors around oil.
    Reply
  •  
    Aug 15 05:56 PM
    I must disagree with the title - this article is exactly "everything they are telling me about solar".

    Agreed with most posters, nothing new.
    Reply
  •  
    Aug 15 06:12 PM
    It's disingenuous to claim that wind can only be aggregated and that there are somehow more limits on it's effectiveness than solar. It all depends upon local conditions, which is why all the new technologies will prosper with the right products in the market. The central problem for the future is whether energy industries will win or lose the fight to keep individual homeowners with wind, solar/photovoltaic and solar/radiant equipment from escaping the grid with household power setups...
    Reply
  •  
    Aug 15 08:19 PM
    I don't think large arrays taking up tons of square miles of open land is what the future holds. We will eventually be able to use more than just the small sliver of the spectrum which currently gives about 200W/m2 to get 500W/m2 using coatings that maximize photon capture at a wider angle spread without needing tracking devices. Then an entire building will become the generating (capture) mechanism. The storage problem will be solved similarly to electric cars which need to store similar amounts of energy as a household before the next days chargeup. I expect tens years is enough to see these things happen.
    Reply
  •  
    Aug 15 09:30 PM
    This guy gets it. He is a professional and you can tell that he understands the industry. Read Earth: The Sequel by Fred Krupp. He says lays out the same argument for the development of an solar energy industry infrastructure and the benefits it will bring. Mr. Krupp is the president of the Environmental Defense Fund, the group that convinced George Bush One to deal with acid rain using a cap and trade system.
    Reply
  •  
    Aug 15 10:32 PM
    Solar, wind, nuclear, clean coal, hydro - we need all these technologies to replace oil and gas. It is not a either-or situation.

    Oil and gas needs to be reserved for transportation fuel.
    Reply
  •  
    Aug 16 08:54 AM
    Alternative energies will have arrived when you routinely see them in every commercial and residential building designer's and architect's building plan. It will take the form of building coatings required by energy codes yet developed, utilizing a broader spectrum of light to improve efficiencies, capturing wind from it's vibrations produced not just huge turbines, storing the energy in many forms, and being connected to existing distribution grids to "feed" or "load" as needed. Storage is in itself a new industry. Roof systems on every new building need to be better developed to become local utility sources. We are only at the "Model T" stage for these products.

    Once the resistance provided by existing capitalization and the industries supported and jobs provided by current technologies wains and their participation ensues, these new systems for capturing energy from renewable sources will really take off. Infrastructure is not only "Pipelines" and "High Voltage" distribution, but also the people trained around technologies that work in new building design that will bring the alternative energies to a reality. Its not going to happen in 10 years with out the "Man on the Moon" political will by government. Children being born today will be the engineers and designers transforming residential and commercial uses of these new technologies in the future.
    Reply
  •  
    Aug 16 12:01 PM
    Thankfully, more light in this discussion than heat. It's human nature to 'gloss' the merits or demerits of any argumentation. We've all heard the stirring cases for the present realities and developmental projections as well as sweeping dismissals for significant PV implementation. Most of us want to see relevant numbers in context with checkable references.
    Reply
  •  
    Aug 16 12:47 PM
    Nothing new. Solar will never compete with with nuclear. Nuclear works at night , on cloudy days and in fact all the time at a fraction of the cost of solar.
    Reply
  •  
    Aug 16 01:11 PM
    His comments are qualitatively in the right direction. But unfortunately his book is extremely light on substance (you basically just read the information in the book), and as with 90% of analysts, he never provides numbers and analysis to back up his claims. This is unfortunately, because the people who need to be persuaded - investors, policymakers - can't make decisions on the basis of fluff. Its rare to see a business where claims can be floated and repeated so often, without anyone ever asking to see a calculation. Fortunately, Photon and some others (even solar skeptics) have done some much better work laying out the quantitative case.
    Reply
  •  
    Aug 16 02:06 PM
    Travis Bradford makes some excellent points about the cost model for comparing solar vs other sources. This is the kind of artice that policy makers need to see. Nuke plants do not make economic or environmental sense. A nuclear plant costs billions , takes 10 years to plan and build and leaves radioactive waste for generations , no 10,000 years. A solar farm can provide clean energy FOREVER as long as people maintain it and upgrade it over the years and the sun still shines. And a PV solar farm can be constructed quickly as well as on peoples homes. But it takes the right planning and we need motovated leaders. Therein lies the problem. The leaders are too tied to knee jerk republican energy oil drill heads. The windfall profits of large oil Co's should be taxed to get the thing started in the US. We need change and the planet depends on it or I should say life as we know it , depends on it. The head of NASA even says we have ONE last chance to change the path of climate change and it has to be over the next ten years.

    Regarding investments, I think SOLF and ESLR are two long term stocks to go long. SOLF is a Chinese ADR and ESLR has a highly efficient solar panel that gets much more juice than the thin film panels. Both are very undervalued at present levels, in my humble opinon
    Reply
  •  
    Aug 16 04:19 PM
    Residential PV has no T&D cost. roughly 50%. check.
    Residential PV is for peak load generation, not base load like nukes / hydro. Any time-of-use customer knows peak rates are much higher. roughly 350%. check.
    Excess PV gets fed back into the grid. no storage. check.
    Utility pays wholesale price for this power, not peak rate. needs fixing.

    This is a nice calculator for residential PV that illustrates some of these concepts:
    sharpusa.cleanpowerest...

    Hopefully, costs of PV panels will come down aided by increased volume due to govt subsidy and utility PV farms. As with any subsidy or tax credit, it gets sucked up before the consumer sees it and the payback period is still long. Luckily, HOA's have been told to back off.
    Reply
  •  
    Aug 16 04:27 PM
    About a month or so ago, I saw a movie with the interior of China as the background. The area is remote, no electricity wires, etc. Still, these people, with solar panels, are able to use electrical appliances. I was impressed -- this is the market we need to focus our attention on.
    Reply
  •  
    Aug 16 05:09 PM
    Solar radiation in southern USA is about 1 MW / A , something less that that can be delivered by PV or other means. What is see is the problem for solar is the huge land area that it must cover to generate its power. Even

    How do solar cells hold up in a hail storm?

    Nuclear plants only take 10 years because of environmental wackos suing all the way.

    Nuclear rods can be reprocessed and basically used over, if it weren't for the US Congress banning the practice. Other countries using much more nuclear that us do not have a storage problem because of the reprocessing.
    Reply
  •  
    Aug 16 07:56 PM
    Where can I find global statistics on solar industry? i.e. is there a site that has up to date market information on solar power, including contracts, politics, etc... ?
    Reply
  •  
    Aug 16 09:14 PM
    "The storage component is in the
    kinetic energy of compressed air. "

    Some think thermal storage is the way to go.

    "4 Utilities Seek N.M. Solar Plant
    Giant Facility Could Serve 52,000 Homes

    By Michael G. Murphy
    Journal Business Editor

    New Mexico's four largest electric utilities on Monday issued a request for proposals for a large-scale solar generating plant that could provide electricity for up to 52,000 homes.

    Public Service Company of New Mexico, El Paso Electric, Xcel Energy and Tri-State Generation and Transmission Association jointly issued the request, seeking detailed plans from solar developers for construction of a solar parabolic trough generation plant to feed power to each of the utilities by 2012.

    In a small-population state like New Mexico, it makes sense for utilities to join forces on such a project to seek economies of scale and to meet alternative energy mandates from regulators, PNM spokesman Jeff Buell told the Journal late Monday.

    "The four of us directly or indirectly provide electricity to almost every customer in the state," Pat Vincent, PNM Utilities president, said in a statement.

    El Paso Electric spokesman Henry Quintana said it is not unusual to work together with other utilities on shared power projects, noting that El Paso and PNM both went into the Palo Verde Nuclear Generating Station together.

    "This (the solar plant) is just a project all four of us were interested in," he said.

    RFP requirements include:

    · Locating the plant in New Mexico.
    · Using parabolic trough technology.
    · Encouraging thermal, energy storage.
    · Being able to deliver between 211,000 and 375,000 megawatt-hours per year (enough to power between 29,000 and 52,000 average New Mexico homes).

    "Each of the utilities has shown tremendous leadership by coming together as partners for renewable energy," Vincent said.

    None of the utilities had an idea what such a plant might cost, but each utility would financially support it through some sort of purchased power agreements for the electricity generated. "All the costs would be rolled into that," Buell said.

    The cost of the plant eventually would go into customer rates pending regulatory approval, he said.

    The RFP follows a feasibility study performed by the Electric Power Research Institute last year that found that the most feasible solar technology currently available for a large-scale plant here is parabolic trough.

    It utilizes a series of trough-shaped mirrors to focus sunlight onto an oil-filled tube, and then uses the hot oil to generate steam. The steam is used to turn a generator, producing electricity. When combined with thermal energy storage, this solar technology is capable of generating electricity at night, as well as during cloudy periods, the utilities said in a joint news release.

    The parabolic trough technology technology looks the most promising and most economically feasible, in part because it has been field tested the most, Buell said.

    The study also mentioned that potential locations could be near Albuquerque or Lordsburg in southwest New Mexico, although no more specific information on potential sites was available, Tri-State spokesman Jim Van Someren said.

    If the RFP process is successful, the utilities plan to have a contract negotiated by the end of 2008, and the solar facility could be generating electricity by 2011.

    Tri-State, which is the primary electric provider for most electric cooperatives in New Mexico, said partnering with the other companies was the best way to meet renewable mandates but also because "our board has made a commitment to balanced (energy) resource planning and development. Solar in certain parts of our service territory holds a lot of promise," Van Someren said.

    Buell added, "We are very hopeful we can find a project that works technologically and economically."

    El Paso Electric primarily serves southern New Mexico, including the Las Cruces area. Xcel serves the Clovis area and other portions of eastern New Mexico, and Tri-State handles most of the co-ops in central, western and northern New Mexico.

    PNM has 487,000 electric customers, mostly in the Albuquerque and Santa Fe areas.

    Albuquerque Journal Tuesday July 1, 2008 "

    www.prosefights.org/pn...

    We, of course, don't kown.

    Not are exptise.


    www.prosefights.org/nm...

    Reply
  •  
    Aug 17 12:18 PM
    I live in a condo in Dallas that has large space to put solar paanels but cannot find any us based company that has some serious equipment (large) to handle even our outside lighting applications . it i a all about one house at a time .
    Reply
  •  
    Aug 17 04:42 PM
    great article!
    Reply
  •  
    Aug 18 07:27 AM
    thin film? yeah right.- only that the raw materials required for that will not go down in price, but up - if they are available in the needed quantities at all. thin film in its current form will be dead 5 years from now. not to mention that it is one of the least efficient solar tecnologies out there.
    also the guy doesn't address at all the major problem with solar: cloudy skies and night time.

    regarding nuclear: listen mororns, like rdasher: storage is a HUGE problem - everywhere, Europe included. What most people and many analysts don't note and see is that the PUBLIC already SUBSIDISES NUCLEAR to the hilt! In germany, for inctance, exploration, closure of nuclear powers after thelifecycle ended, nuclear waste treatment and storage already costed more than 16 BILLION euros! And most storage problems and the costs for it will continue for well over THREE THOUSAND YEARS more!! Got that? NUCLEAR IS THE MOST DANGEROUS AND COSTLIEST ENERGY TECHNOLOGY EVER DEVISED. If the private companies running nucklear plants and making billions in profits would have to pay the true costs (that so far society is bearing) not one cent would ever be invested there, because it will néver ever be economical.
    Reply
  •  
    Aug 18 05:08 PM
    User 206257,,, do you have any sites / info to refer wrt utilizing compressed air as a storage mechanism? my company used to own a leading air compressor company and i'm interested in researching this.

    thanks in advance.
    Reply
  •  
    Aug 26 02:26 PM
    Nuclear would become much more practical, safe, and cost-effective, and it could last hundreds of years longer if we could perfect breeder reactors. These reprocess the waste into more fuel for further nuclear reactions, so they dramatically reduce the waste that needs to be stored and also stretch the limited supply of uranium much farther. In addition, they can allow the use of thorium, which is more abundant than uranium.

    It is true that nuclear is subsidized by the public, but as energy costs rise all around, it becomes more cost-effective, especially as newer approaches are perfected as noted above. France successfully generates more than half of its electricity from nuclear, so it is clearly feasible.

    That having been said, I much prefer renewable sources of energy such as solar. I am very enthusiastic about solar's potential. I just think that realistically speaking, we will need every source of energy we can get.
    Reply
  •  
    Sep 03 07:29 PM
    Wake me up when solar is more than 2 or 3% of the total power consumed in the country. Until then, it's still pie in the sky. And don't include the government-forced purchases of solar power by utilities.

    I invested in the GEX ETF because I know the heavy heel of government will funnel billions of dollars in to solar power, despite the limited utility of it. I hope to make back some small portion of what governement takes from me and my business.
    Reply
  •  
    Sep 06 02:23 AM
    Some practical aspects of solar (and also for comparison to wind) were omitted in the article:
    1) The energy availability or capacity factor, which ranges from 10-20% (25-45% for wind), i.e. a nominal 10 kW(peak) solar-PV will only output 1-2 kW(average) power
    2) The land area needed for solar-PV power. It presently happens to be about 10 times smaller than for wind farms, but the latter allow agriculture and other human activities to proceed on the same land. If we were to generate all US energy needs of ~ 100 quad Btu/y via solar-PV, we would need to devote ~ 10-20% of US area to solar.
    3) It would have been helpful to provide some exemplary solar-PV costs, relative to other renewable energies. The data I have seen indicate a ~ 10x higher cost of installed, average power of solar-PV than for wind-power, which is between 3-4 $/W, wwith ~ 15% lower costs for thin-film solar-PVs.
    Reply
  •  
    Sep 24 06:14 PM
    Topical analysis for perspective, using numbers from Wiki and a solar panel manufacturer web sites: How much land area would be needed to replace all ~23 Qbtu of US annual coal consumption with currently-available thin-film solar panels? How much would it cost at $2/watt installed i.e., many times less than today's lowest prices.
    Assumptions: insolation of 6.5kWh/m2/day; 10.5% efficient 75 watt panels; 7% BOS loss; transmission loss 7%; 8 acres/MWp (for panel spacing; access roads etc.), we would need ~41,000 square miles of land, or one third of Arizona's total land area. If we install one panel every second, starting now, we will replace all US coal in ~1,300 years at a cost of ~$6.5 trillion dollars (assumes $2/watt installed...) or about $22,000 per person in the U.S.
    Reply
  •  
    Sep 24 06:32 PM
    Big correction to above -- forgot to account for these assumptions: all coal is used for power generation, and 25% efficient coal plants. This quarters all results above. In other words, we'd need 9% of Arizona's land area, $1.6 trillion and 343 years.
    Reply
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