With this being an election year, I thought it might be interesting to look into renewable/sustainable energy and the possible political ramifications. Political parties’ constituents have different ideas about the need for renewable energy. Do you feel it possible to unite the political leaders on renewable energy legislation?
I think we’ve seen that happen with the recent ITC extension, to some extent. Still, I believe that legislators recognize that there are a lot of tax-based incentives that span the entire energy industry. It is hard to justify cutting off a developing technology while continuing to subsidize century-old industrial segments. This is particularly true since utility-scale solar has clearly become an affordable component of the energy mix.
Each political party strives to differentiate itself in terms of platform and policy. Liberals tend to emphasize environmental aspects of solar and renewable energy, while conservatives like to encourage market forces for job creation and consumer choice. Both of these are great reasons to support solar, and that is why we see an opportunity for bipartisan support of this technology.
Different incentive programs will attract different groups of people. We’ve seen that the ITC has been very successful at attracting large investment bankers for utility-scale projects. In the residential sector, it is quite possible that some homeowners will exhaust their ability to fully utilize the tax credit, because the ITC program will not pay out more than actual tax liability.
Smart money invests in the future. Space travel was once relegated to governmental organizations because the cost of development combined with the risk of commercial benefits could not then attract private investment. Now hundreds of space-based systems span a commercial spectrum from entertainment to security, and several private companies are actively competing in that arena.
Taxpayer investment in solar has already reduced the cost of utility scale installations to below most fossil fuels. Contrary to what some critics claim, the addition of solar on the grid, and on rooftops, will prove beneficial to grid security. Meeting the engineering challenges of adding more solar to our mainstream energy mix will stimulate new technology and business opportunities, much in the same ways as did the publicly funded development of space enterprises and the Internet. Solar may even be bigger. Everyone on the planet uses energy, and energy is the most important factor that determines a community’s health, education and prosperity.
I believe the best place to invest taxpayers’ money is on the system demand side, although some funding for research and development is still warranted. By demand side, I’m including everything from the demand for residential solar through utility-scale solar. The cost structure of utility scale solar is already considerably more favorable than residential, but rooftop demand helps to stabilize panel manufacturing lines, and reduces boom-and-bust manufacturing cycles that could be driven by large-scale development projects. Improvements in demand stability will drive economy of scale, and overall costs will decrease even further. I expect that if we can just get the nascent solar industry over the hurdle of current capitalization, much more of R&D expense will be funded privately.
It is important to note that every energy sector is subsidized to one degree or another. If solar were to lose all subsidies, nuclear and natural gas would have subsidies while solar would not. Depending on where solar is in the parity curve, that would give natural gas and nuclear a significant subsidy advantage and could adversely impact the growing solar space.
We are at a critical juncture. Many solar panel companies have invested heavily to reduce costs and improve performance. A sag in demand now caused by market instability could destroy companies with excellent technology, but weak balance sheets. Once demand growth stabilizes and production lines mature, the traditional market forces can take over, and we will see value-added consolidations and partnerships.
Others in the solar supply chain are in similar situations. There has been a lot of investment in the inverter, power optimizers and solar tracker markets. As these market components mature and economy of scale kicks in, we will see further reduction in the cost of solar across the board.
The notorious failures in publicly funded solar will always be raised as evidence by shortsighted people who want to quash solar for a variety of reasons. In their minds, they’ve done the math and it just doesn’t add up. We may never be able to convert them, and they are at risk of just falling behind, like DVD rentals and typewriters with ribbons.
We have great evidence that solar incentives provided by taxpayers have not only paid off, but have far exceeded the investment. A study from North Carolina just this year revealed that the state incentive program stimulated almost two billion dollars in new revenue from the solar component alone. With this kind of cash flow it doesn’t take long to deliver a return on taxpayers’ investment directly, not to mention the increased economic activity surrounding the growth of a new industrial base.
We are not just developing solar energy. We are building a new industry. This industry will need a supply chain, including manufacturing, development, legal and education services. The job creation in this supply chain will produce income to individuals that will filter out into the personal goods and services sectors like housing, transportation and entertainment. Of course there are jobs held by traditional energy industry segments, like electric energy produced by coal. This industry has been around for a long time, and has served the nation well. Similarly, did we really need the Internet? Traditional information services like newspapers, magazines and home mail delivery served all our needs, and employed hundreds of thousands of people. With the growth of the Internet some traditional jobs were lost, but the growth of the new industry more than compensated for that, and relatively quickly.
Those in the political arena should be beholden to their constituents. I have great faith in the American people to grasp the implications of energy policy and to understand the significance in their lives. Average citizens see the near monopolistic control of their electric supply, and many relish the opportunity to have more choice. Recent polls show that three-quarters of Americans are in favor of more solar energy production, the largest percentage of any other option, including traditional sources. They recognize the simplicity of turning sunlight into electricity, and yet fully appreciate the intermittent nature of solar generation. Even so, sunlight is a valuable and tangible resource to them, and they want to exercise their freedom to utilize it.