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Fuzzy Math
No, Solar Isn’t Competitive Yet

Prices for solar panels have come down in recent years, leading many greens to think the renewable energy source’s days in the sun has finally arrived. In fact, recent analysis from the consulting firm Lazard suggests that the levelized cost—a metric used to compare the price to produce a given amount of electricity across multiple energy sources—of utiltiy-scale photovoltaic solar panels ranges between $72 and $86 per megawatt-hour, making it competitive with the vast quantities of natural gas currently enjoying a renaissance in the United States. But as the Breakthrough Institute reports, Lazard’s estimates don’t stack up with the energy experts at the Intergovernmental Panel on Climate Change or the Energy Information Administration:

Solar costs have plummeted in recent years. But unfortunately, as costs have come down, it’s only become more difficult to get reliable estimates of what the costs actually are today. This is what happens when analysts cherry-pick from among the most successful projects and emphasize the subsidized costs of energy, ignoring incentives like tax credits, portfolio standards, and net energy metering. What the most comprehensive data show is that, when all costs and available project data are taken into account, solar remains significantly more costly than fossil fuel competitors.

The fact is, solar is a viable option only after it’s received generous government support. That’s true for photovoltaic panels, and it’s also true for a different kind of solar technology. The NYT explains:

[E]xisting solar thermal plants have benefited from heavy government support in the form of loan guarantees — $1.2 billion in the case of the Mojave plant — but that program is no longer active. As a result, utility-scale development, which accounted for almost two-thirds of the nation’s solar capacity installed last year, according to industry estimates, could drop off.

It doesn’t make sense for governments to pour resources into subsidy regime schemes designed to prop up technologies—no matter how green—that are incapable of competing on cost on their own merit. There’s a huge opportunity cost here that few environmentalists seem to acknowledge: the money that’s gone to incentivize the production and installation of today’s generation of solar panels could have been better spent on the research and development of tomorrow’s technologies. Instead, green advocates have squandered billions of dollars and plenty of political capital setting up subsidies for inefficient energy sources. What a waste.

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  • wigwag

    Solar energy may not be competitive yet, but it is disingenuous for Via Meadia to point out the significant subsidies that solar receives while failing to point out the massive subsidies that facilitate oil and gas exploration, production and distribution.


    • Anthony

      Massive indeed! I think some have defined it as “monopoly regulation” (subsidization of select industries).

    • MartyH

      Subsidies are different than credits and deductions. For example, the link you give states that deductions are available for costs like labor, drilling rig time, drilling fluids, etc. These deductions occur in other businesses, too. For example, rent, labor, utilities, supplies, etc. are all deductible for a store. The costs of doing business-any business- are deductible. That is not a subsidy. Even depletion allowances (which are unique to extraction) are a percentage of the revenue.

      Imagine I take $100K, and start a company to explore for oil. The company spends all the money but ends up with no oil and goes bankrupt. If the credits and deductions did not exist, when they filed for bankruptcy they’d owe tax on that $100K. The cost to the government is zero. Contrast this will Solyndra, which received subsidies and went out of business-the cost to the government was half a billion dollars or so.

      The difference between credits, deductions,and subsidies is as follows:

      -To earn a deduction money has to be spent.
      -To earn a credit money has to be earned.
      -To receive a subsidy money has to be given by the government.

      They are three different events and should not be conflated.

      • Jon

        If the company files for bankruptcy, how is it going to pay the taxes owed on that $100k? And how often does that actually happen with oil and gas companies receiving these credits/deductions, then paying it back (either due to bankruptcy or other causes)?

        • Government Drone

          There are no taxes owed on that $100K; these were expenses of the business (wages, rents, etc.), the same as any other commercial enterprise, & are deducted from taxable income. And that money wasn’t even originally income; it was starting capital, presumably fronted by the owners, investors, or a bank, & is presumably post-tax money from their own incomes. Would you tax money that someone has been saving for years (the money, not any interest it may have accrued), simply because he decided to buy or start a business of some kind?

        • MartyH

          As the Drone mentions in his/her reply, there are no taxes owed on that $100K, because the routine business expenses can be deducted. If routine expenses were not deductible, then any company that was formed would have to raise more money to get started in order to provide a tax reserve.

          Again, this is the normal accounting procedure for any business-except when it applies to the oil and gas industry. Then it is a “massive subsidy that facilitates oil and gas exploration, production, and distribution.”

    • Allan Theobald

      wigwag immediately regurgitates the completely incorrect talking points. The left knows this is untrue but believes if they say it enough most voters will be fooled. All businesses just like Apple have the exact same deductions.

  • Wayne Lusvardi

    As economist Tom Sowell has stated there is no such thing as a solution, only tradeoffs. So solar energy is clean for 6 to 12 hours per day at a cost two to three times what newer combined cycle natural gas power plant can produce. But the European experience has been that natural gas power prices just double as a result of solar power because Nat Gas power plants have the same fixed operational and financing costs but generate half the time. Those higher natural gas power prices are not calculated into even Lazard’s annual surveys of electricity costs. And neither are the extraordinary load balancing costs to the power grid.

    • Frank Natoli

      Are you saying that the Europeans are building gas fired electric plants to provide power at night? When the solar cells are catching zzzs?

      • f1b0nacc1

        No, the EUnicks are using coal, and very dirty coal (lignite) at that…

      • Wayne Lusvardi

        Right. From discussions by Europeans over at the Energy Collective website they are shifting back to coal power.

  • Frank Natoli

    “The fact is, solar is a viable option only after it’s received generous government support.”
    Don’t forget that fossil fuels are getting the reverse government treatment. Costs of electricity generated by coal are “necessarily skyrocketing” because of government interference not because of market factors. Costs of oil for gasoline, diesel, home heating and jet-A for decades were much higher than free market rates because the government will not allow exploration and drilling in Alaska ANWR, Pacific, Gulf and Atlantic coasts.
    Plus there’s this nagging problem of …darkness, both by the time of day and by atmospheric conditions, neither of which affect fossil or nuclear plants.
    It’s a ripoff mandated by environmental religious maniacs.

  • Boritz

    If solar panel manufacturers could use only energy from solar panels in their manufacturing process how many panels could they produce at what cost? The fossil fuel industry would do just fine limited to their product for energy needs.

  • rlhailssrpe

    Black Jack pays at 21. It does not pay at 15, or 32. The electricity market is the same. If you are willing to hit the switch and nothing happens, you can get a cheaper deal on juice. Maybe your cell phone does not work. Maybe your toilet does not flush. With the new green technologies, different characteristics, and costs are inevitable. Solar needs sunlight, and wind gen needs wind. Thus on a calm night neither works; the best typically work “full power” about 1/4 of the time. Both are hard to dispatch, mix in the other suppliers to make the sale able fungible juice at your house meter. All of these characteristics must be factored into the price. On top of that, government may tax or subsidize, give or take from some body. (Government moves money around but never directly creates wealth.)

    The term in the industry is”All -In” price. Solar costs, all – in, are more than their competitors, carbon combustion and uranium fission. Solar costs must drop more, perhaps a factor of 5+ to be competitive for continuous base loaded supply.

    And yes, our government wastes oceans of money (moves it to the chosen few.) Every American, infant or ancient one, owes somebody else $60,000 for the good ideas made in Washington D.C. This is sovereign debt, meaning it takes 1 st place before all of your decisions, if there is full faith and credit in that green paper in your wallet.

    Funding honest R&D is good, funding your buddy is not.

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