We’ve talked before about the “valley of death” and the contrast between China’s funding of their clean tech and renewable industries and our own country’s more lackadaisical approach. But perhaps the situation is not quite so simple. Writing for Bloomberg news, Nathan Myhrvold, the former chief strategist and chief technology officer at Microsoft, lays out the case that it’s not the lack of financial support that’s stymied the renewable industry, but rather it’s the subsidies themselves that are the problem.
“One of the ugly secrets of the renewable-energy industry,” writes Myhrvold, “is that its products make no economic sense unless they are highly subsidized.”
Myhrvold starts off explaining “levelized” energy costs: the sum you get when you divide total investment by electricity output to get a “break-even price per kilowatt-hour.” According to Myhrvold, cost projects provided by the US Energy Information Administration show that renewable energy is “far from being economically viable.”
Breaking cost down by kilowatt-hour (kWh), at the lowest end of the spectrum you find natural gas generation (which comes out to 6.3 cents/kWh) and coal (9.5 cents/kWh). Wind is the least-expensive renewable energy source, coming in at about 9.7 cents per kWh—but that average covers a range of 8.2–11.5 cents, depending on wind conditions. Offshore wind and solar energy come in much higher, with solar averaging about 22 cents per kWh (http://nuclearfissionary.com/2010/04/02/comparing-energy-costs-of-nuclear-coal-gas-wind-and-solar/).
Myhrvold takes these levelized cost numbers and concludes, “clearly, outside of exceptional circumstances, only enormous subsidies from taxpayers can keep these technologies competitive.” He argues that rather than subsidize now with an eye on future cost reduction—“the learning curve effect”—the money spent on renewable subsidies would be better spent investing in R&D for alternative energy sources that are cheap, clean, and efficient.
“Subsidies also reward inefficiency, cultivate dependency on government largess, and promote a rush to manufacture before the hard work of perfecting a technology is done,” continues Myhrvold.
He points to the new solar cells currently under development that can reach 40% efficiency (in comparison to the solar cells currently on the market, which convert electricity at 10–15% efficiency). These more efficient cells are expensive and complicated to manufacture, but Myhrvold feels that more R&D investment could help produce a cheaper version. Unfortunately, according to Myhrvold, in order to “compete in the gold rush for government support, the solar-energy industry mainly spends its time making current-generation, inefficient cells.”
Myhrvold also attempts to debunk the myth of China as the renewable energy boogeyman. He points out that all of those cheap solar cells currently produced in China via subsidies by that government end up in US power plants, which are subsidized by the US government. Meaning that “at worst, the net effect is that the Chinese government is helping American taxpayers get more power plants for their money.”
So what do you think? Can comparing energy sources based on levelized costs effectively illustrate the economic viability of different options? What about the other costs associated with energy production—including water use, land use, and the tangential costs related to pollution, GHG emissions, and dependence on foreign oil? And does Myhrvold’s argument about moving subsidies away from current renewable energy products to R&D to produce future, more efficient technologies make sense?
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Upcoming Forester University Webinars:
Dec 7th, 2011:
Maximize Your Energy Efficiency and Savings with Lighting Solutions
Stop wasting energy and savings on your lighting! Join Gregory Davis, Chief Technology Officer at Lumetric, Inc. on December 7th at 2p.m. EST to explore lighting efficiency technology as a means to maximize your energy efficiency and increase your savings. We’ll discuss efficiency opportunities, technologies, and applications available in lighting, and compare solutions (e.g., application, maintenance, lifespan, etc.) for your best ROI.
Dec 13th, 2011:
Stormwater Inspection and Maintenance
Don’t get caught in the storm. Join Andrew J. Erickson, M.S., P.E., for Stormwater Inspection & Maintenance on Dec. 13th, a discussion of standardized stormwater inspection methods and performance assessment. Learn how to use these to assess, select, and schedule effective and financially sustainable maintenance on stormwater treatment practices (e.g., stormwater ponds, bioretention facilities, infiltration basins, swales, and filter strips).