Via Mark Perry. This issue came up in the debates, when Obama claimed that he tried to take credit for the recent oil and gas boom, when in fact all of the boom is occuring on public lands (oil and gas production on federal lands is actually falling during this boom). Here is one reason whyL
Archive for the ‘Energy’ Category.
Hardcore Keynesian theory says that even paying someone to dig a hole one day and fill it in the next is stimulative. This has always seemed insane to me -- how could it possibly be a net gain in growth and wealth to shift resources from productive activities to unproductive ones? But in line with this theory, the Keynesians in the Obama Administration have hit on the perfect stimulus:
A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars... The companies “made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.” Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.”
It is interesting to me that the government has chosen to subsidize the least desirable actions
via Zero Hedge
I saw this at Flowing Data -- this is apparently a chart prepared by some sustainability group at MIT to map solar potential of different sites in Cambridge, MA
Look at all the sites marked "excellent". I have news for the brilliant folks at MIT. Even the best, flattest roof facing south in Cambridge, MA still rates a "sucks" for solar potential. (source)
Even with massive state and Federal subsidies, those of us who live in the bright red areas find that roof-top solar PV is still an - at best - marginal investment with very long payback times. We all hope to change this in the future, but there is no way a city like Cambridge with approximately half the solar insolation we get in AZ is going to have "excellent" roof top solar PV sites.
Quick - in your last fill up, how much did you pay for gas? About how many gallons did you use?
If you are like most people, you can probably come pretty close to this. I paid somewhere just north of $4.00 for about 18 gallons.
OK, second set of questions: On your last electric bill, how much did you pay per KwH? How many KwH did it take to run your dishwasher last night?
Don't know? I don't think you are alone. I don't know the answers to the last questions. Part of the reason is that gas prices are posted on every corner, and we stare at a dial showing us fuel used every time we fill up. There is nothing comparable for electricity -- particularly for an electric car.
I understand some inherent appeals to electric cars. They are fun to drive, kind of quiet and stealthy like KIT from Knight Rider. They are really torquy and have nice acceleration. There is no transmission and gear changing. All cool and awesome reasons to buy an electric car.
However, my sense is that the main appeal of electric cars is that because we don't see the fuel price on the corner, and because we don't stare at a spinning dial as electrons are flowed into the car, we pretend it is not costing us anything to fill up. Out of sight is out of mind. Heck, even experienced car guys who should know better take this attitude. Popular Mechanics editor Jim Meigs wrote to Glenn Reynolds, re: the Volt:
Others might like the notion of going a month or two without filling the tank
This drives me crazy. Of COURSE you are filling the freaking tank. You are just filling the lead-acid (or lithium-ion) one with electrons rather than filling the hollow steel one with hydrocarbon molecules. The only difference is that you don't stand there watching the meter spin. But that should not mean that we pretend we are not filling the car and paying a cost to do so.
By the way, if you have read me before, you know I also have a problem with the EPA equivalent mileage standards for electric cars, which basically inflate the numbers by a factor of three by ignoring the second law of thermodynamics. This fraudulent mileage number, combined with the EPA's crazy-high new mileage standards, represents an implicit subsidy, almost a mandate, for electric cars that gets little attention. And that will have zero effect on energy usage because the numbers are gamed.
...you will love this too. Solyndra used cylindrical solar cells nested inside a u-shaped mirror to concentrate sunlight to get more power per square inch of solar cell. The problem is that all that extra shaping and mirrors added cost, and only made sense if solar cells were expensive. After all, if solar cells are cheap, if one wants 20% more output, it's easier to just increase the solar cell area by 20% than to add all the concentrator rigmarole.
Well, dreams die hard, and here is the latest idea -- spherical concentrators. These things have huge spheres and tracking motors, all for a 35% increase in efficiency. Methinks that just adding 35% more PV cell area is going to be cheaper, but this could well be yet another flytrap for Obama Administration officials, who are to sexy-looking new technologies like a degenerate wagerer at the track is to a hot tip.
Just days after the Export-Import Bank approved a multi-million dollar federal loan guarantee to benefit a mostly foreign-based wind-energy outfit, the company pink-slipped more than 200 American workers.
The Export-Import Bank, a federal agency that promotes and finances sales of U.S. exports to foreign buyers, approved a $32 million loan guarantee on Aug. 2 for a Brazilian firm to purchase wind turbines from LM Wind Power. According to itswebsite, LM Wind Power is headquartered in Denmark.
“Ex-Im Bank’s financing, which guarantees a Bank of America loan, will support approximately 250 permanent American jobs at the company’s Little Rock, Ark., and Grand Forks, N.D., manufacturing facilities,” the bank said in a release.
The company maintains a manufacturing presence in Arkansas and North Dakota—but the company laid off 234 of the Arkansas plant’s roughly 300 workers just two days after its loan was approved.
“We have this week told our workforce that we are re-sizing our workforce and business to fit our plans for 2013,” Adam Ruple, human resources director for LM Wind Power, told the City Wire of Arkansas.
A spokesman for LM Wind Power referred the Free Beacon to the company’s website.
When LM Wind Power came to Little Rock, Arkansas, in 2007, it said it would employ 1,000 people by 2012. But the global economic crunch led to diminishing demand. Three months before its loan guarantee was finalized, LM Wind Power announced its profits had fallen 41 percent last year.
It really takes some amazing stones to grab a $32 million subsidized government loan on the promise to add 250 jobs just days before a planned 234-person layoff.
Every single time that wind power installations are evaluated based on their actual performance, they turn out to make no economic sense. Consumer Reports comes to the same conclusion for their wind power trial (and this does not even include the issues of standby power that make even small wind power savings irrelevant to CO2 production).
But if you're considering a wind turbine to supplement your home's power, consider our experience with one product, the Honeywell WT6500 Wind Turbine, a cautionary tale....
A tool on Windtronics' website had calculated we'd get 1,155 kWh per year at the 12-mph average it predicted for our area of Yonkers, New York. And the authorized installer, during his initial visit, didn't say the roof of our headquarters might generate any less, but that rating is at a height of 164 feet, not the 33 feet WindTronics requires for rooftop installations.
In the 15 months since the turbine was installed, though, it has delivered less than 4 kWh—enough only to power a 12,000 btu window air conditioner for one afternoon. A company representative in charge of installations worldwide recently visited our offices and confirmed that our test model was correctly installed. What's more, he told us that while the WT6500 should start generating power at about 3 mph, the initial juice goes just to power the system's inverter, which must be running before it supplies any AC power elsewhere. The true wind speed needed to start producing AC while the inverter is on is 6 mph, not far from the 7.5 mph needed by a traditional gearbox wind turbine....
At the rate the WT6500 is delivering power at our test site, it would take several millennia for the product to pay for itself in savings—not the 56 years it would take even with the 1,155 kWh quote we received.
In the past I have been critical of First Solar, like I have most solar companies, for having business models that were almost entirely dependent on huge government subsidies, particularly in Europe. When these go away, the businesses start to crash.
I have not had time to dig into their financials to look for shenanigans, and to parse out how much is still dependent in some way on either direct subsidies of solar projects or incentives that cause utilities to buy solar electricity at above market rates, but First Solar reversed their large losses to a profit in the last quarter. I am not sure if this is BS or not, but I like this attitude if true:
The company's cost per watt is the lowest in the industry, but it increased slightly during the quarter, to 72 cents per watt, because of the under utilization of its factories. If the factories had run more, the cost would have gone down, officials said.
Hughes said First Solar is making headway on its plan to target regions of the world with ample sunshine and a need for electricity, where solar power can compete without subsidies that make it cost-effective when compared with traditional energy sources.
Those places include Australia, India, the Middle East and other regions, he said.
That would be terrific. I would love to see a solar boom driven by real economics and not taxpayer largess.
The Environmental Protection Agency has slapped a $6.8 million penalty on oil refiners for not blending cellulosic ethanol into gasoline, jet fuel and other products. These dastardly petroleum mongers are being so intransigent because cellulosic ethanol does not exist. It remains a fantasy fuel. The EPA might as well mandate that Exxon hire Leprechauns.
As a screen shot of EPA’s renewable fuels website confirms, so far this year - just as in 2011 - the supply of cellulosic biofuel in gallons totals zero.
“EPA’s decision is arbitrary and capricious. We fail to understand how EPA can maintain a requirement to purchase a type of fuel that simply doesn’t exist,” stated Charles Drevna, president of American Fuel & Petrochemical Manufacturers (AFPM), the Washington-based trade association that represents the oil refining and petrochemicals industries.
I will remind Republicans thought that ethanol is a bipartisan turd, this particular requirement having been signed into law by President Bush.
For years, one of the problems I have had with the way CO2 cap and trade systems were structured was a fear that these systems would devolve into cronyism, with the companies best able to lobby the government getting allocations while less connected companies had to pay. It seems this is already occuring in California:
The California Air Resources Board (ARB), the regulator of the forthcoming program, held a workshop in Sacramento on Monday where it discussed plans to give away more free permits to prevent leakage in “trade-exposed” industries like cement production, oil refining and food processing.
Over the first three allowance auctions, which begin in November, the state will sell 48.9 million allowances and give away 53.8 million allowances, according to ARB.
Any company deemed to have either a high, medium or low risk of leaving the state will receive all the allowances they need to comply with the program during the first two-year compliance period, from 2013-2014, rather than have to buy the permits at regular auctions.
But those in the low and medium risk groups are currently scheduled to see their allotment of free allowances start to decline in 2015 by as much as half.
ARB officials on Monday said they are conducting studies examining the leakage risk of companies based on their historical energy costs and trade flows.
Don't be fooled by the quasi-scientific-sounding language here about categories of "trade exposure." The reality will be that companies with political clout will get the permits, and companies without such clout will not. This is a system that will favor large manufacturers over smaller companies. It will also, oddly, apparently shift the burden of compliance from large manufacturers to service companies (since service companies are the least likely to be "trade exposed.") Of course, any manufacturer still operating plants in California is crazy anyway.
In a report from the DOE Inspector General, which said that $500,000 of equipment bought with stimulus money was missing at a battery company:
“It would not be appropriate to release the name of stimulus-money recipient where the $500,000 worth of equipment could not be located.”
But it is A-OK to excoriate by name any number of corporations that create value legally if doing so advances this Administration's re-election prospects.
So, why do we have all these "dirty" coal plants? Market failure? Industry greed? Nope -- Carter-era government policy. For you younger folks, here is a law you may have never heard of:
The Powerplant and Industrial Fuel Use Act (FUA) was passed in 1978 in response to concerns over national energy security. The 1973 oil crisis and the natural gas curtailments of the mid 1970s contributed to concerns about U.S. supplies of oil and natural gas. The FUA restricted construction of power plants using oil or natural gas as a primary fuel and encouraged the use of coal, nuclear energy and other alternative fuels. It also restricted the industrial use of oil and natural gas in large boilers.**
In other words, all new fossil fuel-powered boilers had to be coal-fired (which in a year or so, after Three Mile Island, translated to all new boilers since nuclear was essentially eliminated as an option). Yes, this may seem odd to us in an era of so much environmental concern over coal, but something coal opponents don't tell you is that many of the exact same left-liberal-government-top-down-energy-policy types that oppose coal today lobbied hard for the above law several decades ago. Here is a simplified timeline:
1. Government energy policy sets price controls that create artificial shortages of oil and gas
2. Government-created shortages of oil and gas lead to this law, with government demanding that all new fossil fuel-powered electric plants and boilers be coal powered.
3. Government mandates on coal use create environmental concerns, which lead to proposals for taxes and bans on coal power.
4. The need for government action against coal is obviated by a resurgence of oil and gas supply once government controls were removed. However, in response, government beings to consider strong controls on expansion in oil and gas production (e.g. fracking limits).
** I got involved with this because I worked in an oil refinery in the 1980's. We had to get special exemptions to run our new boilers on various petroleum products (basically byproducts and waste products of the refining process). Without these, the law would have required we bring in coal to run our oil refinery furnaces.
John Stossel has a great link-filled round up of failed and failing solar and green energy programs funded by the Obama Administration with our money. Check out the extensive list.
Here, for laughs, is Ray Lane of Kleiner Perkins rhapsodizing about Obama as the greatest government venture capitalist ever, and using for his prime example ... Solyndra!
I suppose at one point Kleiner Perkins used to take private risks with private money, but it seems to have found out it can make higher returns leveraging its investments with taxpayer money, and then using political influence to mandate business for the companies in which it invests. Thus the hiring of Al Gore, among other moves, to the KP board. Lane, by the way, is Chairman of serial government trough-feeder Fisker automotive, which make admittedly very cool-looking cars that require a lot of taxpayer subsidies.
Certainly Mr. Lane knows something about marketing, including that age-old tactic the "bait and switch." The taxpayer subsidies of Fisker were made on the theory that electric cars were somehow greener than gasoline cars because they use less energy. But looking at the fuel at the power plant it takes to make the electricity that goes into a Fisker Karma, the car gets worse gas mileage than an SUV (only an EPA equivalent MPG standard that breaks the second law of thermodynamics hides this fact). Congratulations Mr. Lane, green subsidies for sub-SUV gas mileage. All those checks KP partners wrote to Obama in the last election certainly got a good return.
Why should we worry about 5c or 10c on a gallon of fuel down the local gas station when the US Navy (in all her glory) is willing to pay a staggering $26-a-gallon for 'green' synthetic biofuel(made we assume from the very same unicorn tears and leprechaun nipples that funded the ESM). AsReuters reports, the 'Great Green Fleet' will be the first carrier strike group powered largely by alternative fuels; as the Pentagon hopes it can prove the Navy looks just as impressive burning fuel squeezed from seeds, algae, and chicken fat (we did not make this up). The story gets better as it appears back in 2009, the Navy paid Solazyme (whose strategic advisors included TJ Gaulthier who served on Obama's White House Transition team) $8.5mm for 20,055 gallons on algae-based biofuel - a snip at just $424-a-gallon.
In its defense, the Navy Secretary said, ""Of course it costs more. It's a new technology. If we didn't pay a little bit more for new technologies, we'd still be using typewriters instead of computers." Of course, the switch from typewriters to computers proceeded without government mandates (or taxes, as they are called now) and in fact was led by the private sector -- the government trailed in this transition. Further, people paid the extra money for a computer because they found real value in it (document storage, easy editing, font flexibility). What real value is the Navy getting for the extra $22 a gallon? How much better will this task force perform? The answer, of course, is zero.
The EPA allows plug in vehicle makers to claim an equivalent miles per gallon (MPG) based on the electricity powering the cars motors being 100% efficient. This implies the electric power is generated at the power station with 100% efficiency, is transmitted and distributed through thousands of miles of lines without any loss, is converted from AC to DC without any loss, and the charge discharge efficiency of the batteries on the vehicle is also 100%. Of course the second law of thermodynamics tells us all of these claims are poppycock and that losses of real energy will occur in each step of the supply chain of getting power to the wheels of a vehicle powered with an electric motor.
Finally! For months I have been writing about this and have started to believe I was crazy. I have written two Forbes pieces on it (here and here) and numerous blog posts, but have failed to get much traction on it, despite what appears to be near-fraudulent science. I wrote
the government wants an equivilent MPG standard for electric cars that goes back to the power plant to estimate that amount of fossil fuels must be burned to create the electricity that fills the batteries of an electric car. The EPA’s methodology is flawed because it assumes perfect conversion of the potential energy in fossil fuels to electricity, an assumption that violates the second law of thermodynamics. The Department of Energy has a better methodology that computes electric vehicle equivalent mileage based on real world power plant efficiencies and fuel mixes, while also taking into account energy used for refining gasoline for traditional cars. Using this better DOE methodology, we get MPGe’s for electric cars that are barely 1/3 of the EPA figures.
The linked articles provide much more detail on the calculations. As a result, when the correct methodology is applied, even in all-electric mode the heavily subsidized Fisker Karma gets just 19 MPG-equivalent.
Do you want to know the biggest energy advantage of electric cars? When you fill them with energy, you don't stand there at the pump watching the cost-meter spin, as you do in a gas station. It's not that the energy cost is lower, it's just better hidden (which is why I suggested the Fisker Karma be renamed the Fisker Bastiat, after the French economist who wrote so eloquently about the seen and unseen in economic analysis). It's why, to my knowledge, no electric car maker has ever put any sort of meter on its charging cables.
I don't really want to ridicule Kevin Drum here for thinking out loud. I really hate partisan Conservative and Liberal team-politics blogs, but I read a few to stay out of the echo chamber, and Drum is smarter and incrementally more objective (a relative thing) than most.
These two things together reminded me about an energy factoid that's always struck me as slightly odd: virtually every form of energy seems to be almost as efficient as burning oil, but not quite.
For example, on either a power/weight basis or a cost basis, batteries are maybe 2x or 3x bigger and less efficient than an internal combustion engine. Not 50x or 100x. Just barely less efficient. And you see the same thing in electricity generation. Depending on how you do the accounting, nuclear power is maybe about as efficient as an oil-fired plant, or maybe 2x or 3x less efficient. Ditto for solar. And for wind. And geothermal. And tidal power.
I'm just noodling vaguely here. Maybe there's an obvious thermodynamic explanation that I'm missing. It's just that I wouldn't be surprised if there were lots of ways of generating energy that were all over the map efficiency-wise. But why are there lots of ways of generating energy that are all surprisingly similar efficiency-wise? In the great scheme of things, a difference of 2x or 3x is practically invisible.
First, we have to translate a bit. He mentions power to weight ratios for batteries in the second paragraph. In fact, batteries have terrible power (actually energy storage) to weight ratios vs. fossil fuels, much worse than 2-3x for energy storage per unit of weight or volume. That is why gasoline is still the transportation energy source of choice, because very few things short of plutonium have so much potential energy locked up in so little volume. But I will assume he is comparing an entire electric drive system compared to a gasoline drive system (including not just energy storage but the drive itself) and in this case the power to weight ratios are indeed closer.
But here is the problem: in engineering, a 2-3x difference in most anything -- strength, energy efficiency, whatever -- is a really big deal. It's the difference between 15 and 45 MPG. Perhaps this is Moore's Law corrupting our intuition. We see electronic equipment becoming twice as powerful every 18 months, and we start to assume that 2x is not that much of a difference.
But this is why Moore's Law is so much discussed, because of its very uniqueness. In most fields, engineers tinker for decades for incremental improvements, sometimes in the single digit percentages.
The fact that alternative energy supporters feel like their preferred technologies are just so close, meaning they are only 2x-3x less efficient than current technologies, explains a lot about why we skeptics of these technologies have a hard time getting through to them.
1. They want to say something about themselves. This is the Leonardo DiCaprio buyer, using the electric car to pronounce that he cares about his carbon footprint. And it looks great parked next to his Gulfstream V.
2. There is no meter on the electric line you plug into the car. When you fill your car up with gas, you get to stand there watching the spinning money dial. There is no parallel experience for plugging in an electric car. The costs and fossil fuel use of an electric car are not necessarily less than the same size (e.g. subcompact) gasoline-engine car, they are just better hidden.
Owners of electric cars are not smarter about managing the energy costs of their driving, they are substantially more ignorant. I know exactly how many dollars of gas I have put in my car this month. How many electric car owners have the first idea how many dollars of electricity they put in theirs?
This is terrific, if true. My fear, of course, is they are getting subsidized through a back door somewhere, but if they really think they can make subsidy-free solar work financially, that's awesome:
Two German solar energy developers are planning to build photovoltaic plants in southern Spain that will earn a return without government subsidies.
Wuerth Solar GmbH & Co. intends to build a 287-megawatt plant in the Murcia area for 277 million euros ($363 million), according to the regional authority. Gehrlicher Solar AG said it plans to develop a 250-megawatt solar park in the Extremadura region for about 250 million euros.
The projects, about three times larger than any European solar plant, may be the first that don’t rely on feed-in tariffs and compete with wholesale power prices. All plants in the region so far depend on fixed premium rates for solar power, which can be several times higher than wholesale prices.
Spain suspended the tariffs on Jan. 27 as part of government austerity measures, threatening the survival of the industry. Tariffs for large-scale solar were set at 121 euros per megawatt-hour. Developers now look to build plants without this support, helped by falling equipment prices.
Professor Rizzo was keen that I check out the $12,000 solar picnic table at University of Rochester
Most kids use this to hook up their laptops. Here are a few assumptions
- 3 hours of use per day (heroic, I am pretty sure it is less than this)
- 65 watt draw from one laptop
- 160 days with sun (Rochester is apparently in the top 10 US cities for number of heavy cloud days)
- 10 cents per kw-hour
This means the table would produce 31,200 W-hr per year or 31.2 KW-hr per year. This yields an annual electricity savings of $3.12, giving the table a payback time on its investment of 3,846 years. If one assumes a cost of capital anywhere north of 0.026% per year, then the sun will go dark before this table pays itself off.
Another solar company which received $2.1 billion in loan guarantees from the Obama Administration has gone bankrupt. The good news is that it has not spent much of that taxpayer money, and its bankruptcy is probably due more to the bankruptcy of its German parent, which in turn is likely related to the huge cuts Germany has made in its feed-in tariff subsidies.
The big asset possessed by Solar Trust is the Blythe solar project, a planned 1000MW facility that apparently has all of its permitting in place. The Blythe facility was originally going to be a solar-thermal facility, with adjustable mirrors focusing the sun on a central boiler that would in turn power turbines. This plan was scrapped last year in favor of a more traditional PV technology, and I know local company First Solar has been hoping to save itself by getting the panel deal (First Solar also has been hammered by the loss of German subsidies).
If we take the cost of this planned 1000MW facility as the stated $2.8 billion (of which 2.1 billion would be guaranteed by US taxpayers), we see the basic problem with solar. A new 1000MW natural gas powered electric plant costs no more than about $1 billion. It produces electricity 24 hours a day. This solar plant, to be the largest in the world, would produce 1000 MW for only a few hours of the day. That area of desert gets about 7 peak sun hours per day (the best in the country) so that on a 24 hour basis it only produces 292 MW average. This gives it a total capital cost per 1000 MW of $9.6 billion, making it approximately 10 times costlier than the natural gas plant to build. Of course, the solar plant has no fuel costs over time, but solar is never able to close the gap over time, particularly with current very low natural gas prices.
Update: Apparently the $2.8 billion was just for the initial 484 MW so you can double all the solar costs in the analysis above, making the plant about 20x costlier than a natural gas plant.
A few years ago I was asked to give a presentation in front of a group of Phoenix business leaders on climate and alternative energy. I can't remember what particular group it was, but it was some public-private group that was heavily invested in advocating for local subsidies to promote strategic businesses - the sort of local MITI that most large cities have, that has this delusion that they can ramp up the city's growth by focusing public and private investment into a few selected industries (that they select, of course).
I told them that I thought their focus on solar manufacturing was dumb. First, the whole idea that because Arizona is a good solar market meant that it should have some advantage in solar manufacturing made absolutely no sense. This only makes sense for products with high transportation costs or a particular input cost that can be gotten more cheaply in one particular area (the location of aluminum manufacturing near cheap electricity in the Northwest comes to mind). By the same logic all car manufacturers would be located in LA.
Second, I said that the whole solar business was completely driven by subsidies. If the subsidies were to go away, the heart of the business would go away faster than pets.com. I specifically mentioned First Solar in a positive context here, saying that though they where wholly dependent on subsidies for their revenues, they at least acknowledged as a corporate strategy they needed to get costs low enough to compete without subsidies. (Someday, solar will get to that point, I hope, but I am skeptical that current approaches will yield the breakthrough, but that is another discussion).
If you want to understand the financial problems First Solar is having, let me show you four items.
Geographic Risk. Our solar modules are presently predominantly sold to our customers for use in solar power systems concentrated in a single geographic region, Germany. This concentration of our sales in one geographic region exposes us to local economic risks and local public policy and regulatory risk in German.
This is way back in the notes on page 133. By the way, I took a whole course in business school on reading financial reports. Here is the key lesson for those not in the financial industry: read them from the back. Skip all the glossy crap at the front, go straight to the notes.
OK, here is the second bit of information. Here is a world map of solar insolation, which is essentially the total solar energy available to produce power in a location when adjusted for atmosphere, weather, latitude, etc.
See Germany? I won't insult your geographic knowledge by pointing at it, but much of Germany is in that yellow-green color which, for solar potential, means (in scientific terms) "it sucks." Let's zoom in, and compare it to the US to get a feel for it (combined from two charts here)
Apparently the better sites in Germany have the same solar potential as ... Seattle! The sliver of absolute best sites in Germany have approximately the same solar potential as Buffalo, NY.
So we have a company whose fortunes are dedicated almost entirely to selling solar panels into one of the most unpromising solar sites in the world. Why is Germany buying so much solar?
OK, here is the third bit of information. For years Germany had enormous feed-in tariffs (mandated above-market minimum prices) for solar electricity:
The German feed-in tariff scheme has been in operation since 1991 and is regarded as one of the most successful in the world. In Germany, feed-in tariff rates are differentiated according to the source of the renewable energy. Separate tariffs are determined for biogas, biomass, hydroelectric, geothermal, solar and wind energy sources. The tariff paid for solar generators varies between EUR 45.7c/kWh and EUR 57.4c/kWh, depending on the capacity of the system and other design features. The tariff is greater for generators that are attached to the roof of a building or structure and greater again for generators that are attached to another part of a building. In Germany, the feed-in tariff is paid for a period of 20 years
Note the language from several years ago where "most successful" is determined without references to costs.
0.574 Euros per kWh is equal to about $0.75 today and even more several years ago when exchange rates were higher. Remember this is a wholesale price, and should be compared to a $0.04 to $0.06 wholesale electricity price in the US (I use US numbers to as its not clear to me Europe has a particularly competitive wholesale market. The French have some sort of fixed price system set around $0.06).
However one wants to look at it, these are enormous subsidies. People putting up solar panels in Germany were getting paid 10-15x what a market price for the same electricity might have been.
Finally, here is the fourth piece of evidence leading to First Solar's woes. In 2010 and 2011 Germany, whose consumers began to balk at paying the highest electricity rates in the world in order to subsidize the method of electrical generation least suitable to Germany, began substantially cutting these tariffs. In 2012 they will cut them even further:
German Environment Minister Norbert Roettgen and Economy Minister Philipp Roesler are set to hold a press conference on Thursday to outline the government's new approach on subsidies. However, the indications are that the cuts will be heavier than the market has been expecting:
- a 30% cut in the feed-in-tariff (FIT) to 13.5 cents per kilowatt hour for new large solar installations
- and a 20% cut in the FIT to 19.5 cents for new small plants
The market has of course been expecting cuts in the German FIT system. However, this news is decidedly worse than expected and likely to continue to pressure solar stocks - particularly those such as Yingli (YGE) with a significant exposure to German solar demand.
From a peak of $0.75 per kWh, Germany will now pay $0.255 per kWh for smaller installations, still four times the market price for wholesale electricity but only a third of what they paid during First Solar's boom years. As I wrote yesterday, Germany was essentially paying $2 for milk from brown cows and $25 for milk from black cows. This can't be sustained.
If one assumes a wholesale electricity price of 6 cents, First Solar's German customers were getting a 92% subsidy. Sure, First Solar now faces other problems like Chinese competition and they have shot themselves in the foot on quality, but at the end of the day the only way they can survive is to convince some other government to turn on the taxpayer money spigot to keep them in business. I am hoping we in Arizona and the US will not be the suckers, but I fear that we will. One can argue the projects I discussed the other day, including the one where we taxpayers loaned First Solar the money to sell its solar panels to its own subsidiary, are evidence of this. My guess is that First Solar will be throwing a lot of money and time towards Obama, praying for his re-election.
Update: I found a bit more time to give some more background on First Solar and German feed in tariffs here.
If I had the time, I would love to try to research and list every subsidy recieved by a company like First Solar. Here are just a few:
First Solar is an Arizona-based manufacturer of solar panels. In 2010, the Obama administration awarded the company $16.3 million to expand its factory in Ohio -- a subsidy Democratic Gov. Ted Strickland touted in his failed re-election bid that year.
Five weeks before the 2010 election, Strickland announced more than a million dollars in job training grants to First Solar. The Ohio Department of Development also lent First Solar $5 million, and the state's Air Quality Development Authority gave the company an additional $10 million loan.
After First Solar pocketed this $17.3 million in government grants and $15 million in government loans, Ex-Im entered the scene.
In September 2011, Ex-Im approved $455.7 million in loan guarantees to subsidize the sale of solar panels to two solar farms in Canada. That means if the solar farm ever defaults, the taxpayers pick up the tab, ensuring First Solar gets paid.
But the buyer, in this case, was First Solar.
A small corporation called St. Clair Solar owned the solar farm and was the Canadian company buying First Solar's panels. But St. Clair Solar was a wholly owned subsidiary of First Solar. So, basically, First Solar was shipping its own solar panels from Ohio to a solar farm it owned in Canada, and the U.S. taxpayers were subsidizing this "export."
But this is just a few of them, even on this deal. For example, the Canadian solar farm very likely picked up federal and provincial subsidies from Canada, and even more likely gets some kind of subsidized feed-in tariff (meaning that an above-market wholesale rate is paid for its electricity). This sort of feed-in tariff, which is paid by electricity consumers, is wholly un-transparent and likely makes up the large bulk of solar subsidies. I know the state of Arizona threw a lot of money at First Solar as well (which is headquartered in the Phoenix area.)
During First Solar's boom years, the company was mainly supported by sales to Germany, probably one of the worst solar sites in the world after perhaps Seattle. But the German government mandated feed-in tariffs for solar that were five times (or more) the market price for electricity. It was like saying that, while milk generally goes for $2 a gallon, the government mandated that milk from brown cows could be sold for $10 a gallon, and what's more, consumers had to buy it.
Have fun resetting all those clocks this weekend. Sorry about the hour you lose.
PS- we have to have something to make up for Sheriff Joe, and not farting with DST eases the pain a bit. See my article here about why DST is an outdated concept that no longer saves energy -- it turns out that the nature of electricity demand has changed over the last 100 years since DST was first tried. Who would have thought? Anyway, this research essentially demonstrates that Arizona is at the forefront of modern, science-based environmentalism.