Now can we stop subsidising solar?

By Tim Worstall , written on April 11, 2014

From The News Desk

An interesting report in the UK papers this week: solar power is coming down in price so quickly that this climate change thing is pretty much over. It should be said that this claim is from Ambrose Evans Pritchard, who is often, umm, enthusiastic about things. Things are either disasters or triumphs requiring jubilation rather than just being interesting developments in the world around us. But even with that enthusiasm Ambrose is broadly correct here. Solar has been coming down in price and it is getting very close to grid parity.

Solar power has won the global argument. Photovoltaic energy is already so cheap that it competes with oil, diesel and liquefied natural gas in much of Asia without subsidies.

Roughly 29pc of electricity capacity added in America last year came from solar, rising to 100pc even in Massachusetts and Vermont. "More solar has been installed in the US in the past 18 months than in 30 years," says the US Solar Energy Industries Association (SEIA). California's subsidy pot is drying up but new solar has hardly missed a beat.

The technology is improving so fast - helped by the US military - that it has achieved a virtous circle. Michael Parker and Flora Chang, at Sanford Bernstein, say we entering a new order of "global energy deflation" that must ineluctably erode the viability of oil, gas and the fossil fuel nexus over time. Of course solar is at grid parity in some regions and for some purposes already. And that's true grid parity, without any subsidy, feed in tariffs or other support. But it's not generally so, not just yet and it's that general price crossing that is exercising 'Brose today.

Which brings us back to Bjorn Lomborg and the excoriation he received after publishing The Skeptical Environmentalist back at the turn of the millennium. On climate change his general view was that we didn't in fact have to do very much, especially about energy. If you looked at the fall in prices of solar PV then did a straight line forecast then such electricity generation would be cheaper than fossil fuel sometime in the 2020-2025 timespan. And today we're told that we're going to get that price crossing in the, umm, 2020-2025 time span. So we might think that the vast sums that have been spent on the rollout of solar PV have been somewhat wasted given that we seem to be getting there at the same speed. The same speed that was predicted without subsidy and the same speed we're actually achieving with subsidy.

Which is a view I've a lot of time for myself, given that I work in the weird metals industry and can see some of the price drivers. For example, a large part of recent falls in solar PV pricing has been getting the cost of silicon ingot down from $450 per kg to $20 or so today. Not through any revolutionary technique it should be said, just by scaling up and applying well known metallurgical techniques to the problem. Must of the rest of the price decline has been about something akin to Moore's Law. No, not that we're doubling the number of transistors each 18 months, but something analogous. We're trying to trace circuits on a surface and this is something that we just do get better at with each iteration of our trying to do it. Throwing the subsidies at the process hasn't particularly sped up this cost reduction process. The trend has been for solar to get 20% cheaper or so each year for decades now. Sure, there have been squiggles around that trend but they have tended to be squiggles: the trend marches on.

Solving the energy part of climate change doesn't solve the entire problem: we've still got to look at land use changes and so on, making iron and steel absolutely requires the continued use of coal (because it's the carbon from the coal that makes steel steel) and cement making is, by definition, baking the CO2 out of rock. So still the carbon tax to drive incentives in those areas.

But even if you don't agree with either me or Lomborg on the idea that solar subsidies have been unnecessary, a gargantuan waste of money, perhaps we can agree on one important point. That given solar PV is about to cross that price line, become properly grid comparable, absolutely the moment that that does happen then we can stop subsidising it?

[image via wikipedia]