The End of Utilites

Solar power technology is reaching an inflection point.

Solar is reaching an inflection point, the cost of solar energy is getting less expensive than coal and gas. This has the potential to be world changing. It means not only will choosing solar as your energy source be the environmentally sound choice to make, it will also be the economically sound choice to make.

The importance of this is hard to ignore, it means that we will be capable of eliminating the use of coal and gas as energy sources entirely. I am sure there are a lot of naysayers out there but let’s do an analysis.

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The cost of solar has been drastically declining over the past couple years. Just a decade ago the price of solar was $5/watt, now it’s only about $0.80/watt. This has put it on a level where it can directly compete with coal and gas. In places like Hawaii, where gas and coal electricity are the highest in the country, it is already the cheaper choice. When I say cheaper, I actually mean it. No strings attached, solar in Hawaii is cheaper than other energy sources without incentives, and it is getting to this point in a lot of other places too. Not to mention the many other countries where solar is also the cheapest source of electricity.

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Not only are photovoltaic panels dropping in price but they are also getting more efficient. Three companies, Panasonic, Sharp, and Sunpower, just recently announced they broke the previous record for cell efficiency.[1] Solar City also just announced that it is acquiring Silevo in an effort to produce highly efficient solar panels at mass scale.[2] This news adds to the momentum of dropping prices. While it won’t be overnight that we get new cheap higher efficient cells, it is a great indicator that we are moving towards a future where that is true.

You might be asking yourself, if all these things are in fact happening, why hasn’t everyone switched to solar yet? Unfortunately, there are still a lot of improvements to make. Installation costs are still very high and often account for nearly half of the cost when you put solar on your home.

Another important question is what happens when the sun doesn’t shine? Solar panels don’t generate power at night and generate very little if any on cloudy or rainy days. These are valid concerns but hardly anything we can’t overcome with a little bit of thinking and a lot of work.

Where are we now?

So what does the current state of solar energy look like today?

If you were to get solar on your house today, the system would be similar to this:

  • Solar panels would be attached to a south facing roof, ideally at the correct angle in order to maximize the amount of sunlight you could capture
  • The panels would be connected with each other, then to a central inverter, and then to the existing utility grid
  • Finally, you would probably buy the solar power through a lease

Let’s look at the pros vs cons of a system like this:

Pros:

  • Cheaper installation, doesn’t take much planning and can be done relatively quickly. This is important when installation costs are almost half of the total cost
  • Easier for companies to deal with. Like mentioned above, these installations aren’t really complicated, they’re fairly straight forward and companies have been doing them for awhile now
  • Simple design. Having only panels and an inverter, theres not much complicated stuff going on
  • Instant savings. Financing through a lease can give the owner instant savings on utilities bills

Cons:

  • What about everyone else? If you don’t have a south facing roof with the right angle, you essentially don’t get solar. That leaves a lot of potential interested buyers in the dark
  • Still rely on utility companies. The current incentive structure makes it beneficial to be connected to the grid and not have to think about storage because the utilities companies by law have to pay you.
  • What happens when the laws change? Utility companies don’t want to pay you and might not soon. This is already starting to happen in states like Hawaii and California, where utility companies want to charge you a fee to put electricity into the grid.
  • Leasing model no longer ideal. Financing solar through a lease was once the hot way to finance solar projects as made popular by Solar City. However looking at the returns, solar loans are starting to look better and in some cases much better. Loans have other advantages too, like owning the power you generate.

Alright, so now that we have a better understanding of where we currently are, how might we improve it, and what does the future look like?

What the future looks like

The first step is to stop relying on an incentive structure that can easily disappear. In order for solar to be an actual competitor to coal and gas, it has to be the economical choice without incentives. If we woke up tomorrow and a new law was passed that said the utility companies no longer have to pay you for the energy you feed into the grid, a lot of people would lose out on promised money they thought they’d be getting at time of purchase.

The solution is to stop relying on the grid. We don’t need to go fully off grid just yet. In all honesty, it doesn’t make any sense to go completely off grid when the potential to have no power is a possible concern. There are solutions, however, that can give us the best of both worlds. A company called Outback Power has a combination inverter/charge controller that allows you to convert electricity from solar panels into A/C electricity for your home appliances, as well as charge a spare battery bank for when the sun isn’t shining. It also has intelligence built in to charge batteries when they are low or feed any excess power back into the grid when your batteries are full. This way, you still get paid for any excess electricity you might produce, as well as have the comfort of knowing you’re connected to the grid just incase your system doesn’t generate enough for your needs. You’ll also be able to keep the lights on when your neighborhood suffers a power outage because the inverter can prevent any electricity from going back into the grid and potentially harming a utility worker.

Another issue that needs to be addressed is only installing solar on a south facing roof. Yes, there are plenty of good reasons to only install solar where there is a south facing roof but I just can’t believe that we are unable to think of solutions to get solar on the roofs of people who not only want it but also are willing to pay for it. There have been a few positive case studies of solar installations on west facing roofs but we should also consider east facing and other alternatives. One solution that might be worth trying are dual roofs, installing panels on both east and west facing roofs where the panels would each be ideally positioned for half the day. Another solution might be to use reflection (i.e. mirrors) that could be positioned on a house in such a way to reflect light from one area to an area where panels could be placed. Finally, other alternatives to placing panels on roofs might be explored, like poles or other structures.

I think we need to figure out better financing solutions for people who want solar. The combination of leasing, loans and outright cash purchases are getting us to a good place where more and more people can get solar but its not quite far enough. This still leaves out people with lower credit scores or other financial situations. Solar provides a new income source that should be utilized to help get anyone who wants it to get it. Some really creative ideas for this are already forming. One of those is a company called Solar Mosaic. They help connect borrowers to investors in order to get solar projects done.

Problems that still exist that need to be addressed

So far I have addressed a few of the hurdles that need to be overcome in order for us to have solar energy as the primary source of electricity in the US but there are still a few more.

The first issue is regulation. It is surprising to me how difficult it is to actually install solar on your home, on your own. The technical elements of solar are not actually that complex, the hard part is all the forms you have to sign and approvals you have to get. It’s disappointing in a country whose politicians claim they want solar to do well that this is true. It might accomplish more if we forgot about the incentives and instead focused on getting rid of the regulations. In the end, this problem stems from the power of the utility companies. They want to make it difficult to get solar so they don’t have to fear losing too many customers.

Another problem that needs attention is the unfriendly aspects of solar installations. What I mean by this is the equipment, planning, and overall installation is not as easy or user friendly as it should be. I don’t see a reason why solar systems can’t come in a box and be installed by the homeowner themselves. Of course some people today actually do install their systems on their own but these are all off grid and largely done by DIYers who put in the time to figure it out. For most people this is just too much. Some of this has to do with the before mentioned issue of forms and approvals you need and the fact you need a licensed electrician (appointed by the utility companies, of course) to verify your system, but the equipment leaves much to be desired and is far from being user friendly. Manufacturers should think about creating what I will call ‘plug-and-play’ type equipment. What I mean by this is creating equipment where assembling and installing solar should be equivalent to assembling and installing an Ikea bookshelf. We should actually aim higher since installing the latter can sometimes be a major pain in the ass.

When all said and done though, solar really does have a bright future. Batteries will eventually get much cheaper, equipment will become better designed, panel efficiencies will continue to rise, and panel costs will continue to fall. We are also starting to consume less and less energy. As we get smarter and more efficient electronics, we are starting to use less energy in our homes. This is another turning point: the amount of electricity generated by solar is surpassing the amount of energy we consume in our homes. Finally, electricity will be decentralized and owned by the people who actually use it, so we can finally get away from the monopolistic utility businesses that exist today.


[1]http://www.technologyreview.com/news/528351/record-breaking-solar-cell-points-the-way-to-cheaper-power/

[2] http://techcrunch.com/2014/06/17/solarcity-acquires-silevo-to-become-a-large-scale-solar-panel-producer/

Taking Moon Shots

How Russia’s rash move of taking Crimea might actually benefit us.

Recently, as you know, Russia has gone Imperialistic on the world and decided to use the Ukrainian revolution to their advantage and take Crimea back under Russian control. While it seems the vast majority of Crimeans really want to be back under Russian rule, there are many issues with the move by Russia with the obvious one being one country claiming ownership over land by use of military force. This might infuse people with grave concern especially since Russia seems to be looking for another Cold War, and in a lot of ways you’d be right to be concerned but there is a reason to be hopeful in light of this situation.

Thomas Friedman of the NYT wrote a great article titled “From Putin, a Blessing in Disguise” , where he talks about taking this opportunity to create a clean, independent energy policy for the United States. I love this idea but would like Obama and the US to take it even further than what Friedman mentions in his article. I believe the job of the President of the United States isn’t to push policy or stand as the leader of their party or even be the military chief. The job of the President is to create a vision for the American people, a vision that gives them hope and motivates them to make that vision a reality.

This is what Kennedy did so well with the vision of putting a man on the moon. Is there possibly a grander vision than that? Obama has the chance to create his own moon shot with energy. If you really want to make Russia squirm than cut off their life line, oil and gas. As Friedman mentions in his article, we already have land with the resources to do it on our own. However, I think this is our unique opportunity to push the envelope even further. Let’s be honest, the Keystone Pipeline is not great for the environment and natural gas isn’t as clean as everyone seems to think it is. What Friedman nailed on the head though is our ability to develop technology.

We are better at building technology companies than anywhere else in the world. Obama should use this in his moon shot speech to go above and beyond to create an energy policy that aims for 100% use of clean renewable energy (i.e. wind and solar) in the US. Sure this sounds like quite the lofty goal but it would not only take care of the Russian problem, it could serve as an example for the rest of the world to finally take a real step to addressing the growing climate change problem. That is a vision even Buzz Aldrin would be impressed with.