The failure of solar photovoltaic policy
Aleks Atrens | 13th January 2009 | Energy | 4 Comments »Ineffective environmental policies affect both the economy and environmental causes detrimentally. They damage environmentalism through the harm to public opinion, and the false image that aiding the environment is more costly than it truly is. They slow economic growth through their inherent costs, which decreases our future potential to affect the world in beneficial ways. Solar photovoltaic (PV), or solar cells, are a power source more expensive than equally green alternatives (it is perhaps the least cost-effective of currently deployable renewable energy technologies). Government subsidisation and direct funding of solar PV is in general misguided, and should be redirected to either support other green power sources, or focus on research to improve the future potential of PV technologies.
Solar PV policies are an example of policymakers moving quickly (and laudably) in support of sustainability, renewable energy and the environment, but unfortunately neglecting to appropriately weigh up the competing options. Even in countries such as Australia, which both are particularly sunny, and have low population density, solar PV is overshadowed by other power generation technologies such as wind power, or even concentrated solar thermal power. For countries with lower solar flux, such as Germany, the comparison is far starker.
As a quick illustration of the ineffectiveness of this particular policy, the Australian Government’s solar homes and communities plan is a good example. This program is aimed at using 150 million AUD to subsidise small-scale distributed solar implementation through a rebate of 8000 AUD for the first kilowatt of installed capacity. This would support a total of 18.75 MW of installed capacity over the lifetime of the plan. Generally wind power costs on the order of 2000 AUD per kilowatt of capacity. It’s pretty clear from this cost discrepancy that if renewable energy generation is the goal, government funding would be much better spent directly on other sources. This is even excluding the cost to the citizens deploying the solar PV panels on their homes – even with the government rebate scheme, and generous feed-in tariffs for electricity fed to the grid (which are an almost equally misdirected piece of policy), solar PV tech in Australia can take longer to pay itself off than the lifetime of the equipment.
All of this is not to say that solar PV is completely useless – it is a great technology for locales that are sunny, remote, and geographically (or otherwise) isolated. There are many opportunities for effective use of solar PV in remote towns powered by diesel generators, and regions where the delivery of electricity from the grid is insecure. Examples of the latter scenario are the usage of solar PV in US military bases, and for power in Baghdad. Photovoltaics are also an appropriate technology for mobile electricity sources. Consider though, that for these implementations, solar PV is either more cost effective or convenient than both fossil-fuel-based power and other renewables, so subsidies are not necessary. The problematic policy is subsidisation of solar PV in large urban areas, where the cost is much higher than other renewable energy, without any other significant advantages.
There are two common reasons that are often presented as the benefits of solar PV subsidies: their ability to spark a market for the technology; and their encouragement of innovation and development. Creating a market for the technology is credited with causing an economy-of-scale effect, where the cost rapidly decreases as more people buy solar panels and the cost of manufacturing them in large factories goes down. Unfortunately current commercial solar PV panels rely on polycrystalline silicon as a raw material, the supply of which is reasonably inelastic. Because of this, subsidies for solar panels around the world have caused a demand spike in silicon, leading to a rise in the cost of solar panels, instead of a decrease. The other argument, that demand caused by subsidies will encourage innovation and development of the technology is partially true. It is, however, a misleading selling point for government subsidisation of the technology. If additional development of the technology is the goal, government spending would be much more effectively targeted at supporting research and development efforts, instead of subsidising the technology itself.
Solar PV will have an important place in any future energy mix (particularly as it becomes more cost-effective over time), but current government subsidies of commercial and residential implementations are a dangerous trap. The government resources would be better allocated to other, more cost-effective renewable technologies (the obvious contender is concentrated solar thermal power), or on increased research and development spending on solar PV to make the technology more broadly economically competitive in the future. As a more general consideration, government policy should not just pursue admirable goals, but needs to do so in a manner that maximises the benefits.
Wonderful critique of PV policy, however I would add a couple of points.
When considering PV in a rational sense, it does not stack up against other forms of RE, e.g. wind. So the question is why is it so popular?
PV has the ability to change energy use behaviour because it is visible, if it is sitting on top of a house. It is an instigator of conversation and makes people aware of the way their behaviour impacts energy use. Wind may do this, but it is not practical to install wind farms on houses.
The passive nature of PV also appeals to people. The idea that sunlight can hit a panel and the energy is transformed into electricity with no moving parts resonates with people.
PV also allows people to be responsible for their own energy production.
Governments recognise these points and they are added to the list of reasons why PV is and should be subsidised.
I’d be interested to hear about why residences feeding energy to the grid is bad policy. Is it because the rate is disproportionate to the that charged by large power stations? Something to do with economies of scale?
[...] more general aims, and can make changes in the future difficult. In my previous discussion of the flaws in policy for distributed solar photovoltaic power, I touched on some of the problems with government subsidisation. It may be useful to explore the [...]
There seems to be a disconnect between the generation and residential consumption of electricity in Australian capital cities. For the residential consumer, the concept of electric power is cut short at the three pin wall socket. Most consumers never see a power station or coal mine and hence are in a difficult position to make any intellectual inroads into electric power production.
I believe that the purpose of the governments PV scheme was primarily to increase awareness of renewable energy in the community, which may one day be reflected in the eventual support for cleaner energy sources. The goal was not to generate power. PV panels are currently expensive, energy intensive to manufacture and relatively inefficient, but they are modular, quiet an can be installed onto the roof of suburbia.
I am concerned that some home owners are choosing to install solar PV before first installing a solar hot water systems. Solar hot water, in contrast to PV has the potential to make enormous electricity/gas savings in a cost and resource effective way.