The High Costs of Solar Electric Power

Promotion of solar power generation is booming. After analyzing a few of these announcements one is left with quite a few questions. Why are solar farms built when financial data clearly show that solar power is still the most expensive electricity generation technology available?

Solar power plant developers and marketers obviously know that they need to lower costs. Cost reduction is, however, expensive and takes time. Many new enterprises have been formed and want to become profitable when the big construction boom in solar power plants will hit the road. In the meantime they must pay bills, advance their technologies, and stay alive.

There are two major technologies for solar energy conversion. One approach is based on the conversion of sunlight into heat and using the heat for the generation of steam. This concept has progressed to a relatively high readiness level. Electricity production with steam is a very mature technology. Remaining technical risks, therefore, relate exclusively to the design of the thermal concentrators or parabolic mirrors that optically transfer thermal radiation to a heat transfer medium and to the design of the heat receiving transfer and steam containment surfaces.

The other technology is the direct, photovoltaic conversion of sunlight into electricity. This technology will most likely become the dominant solar electric power generating technology - eventually. The big question for investors and for marketers is the uncertain duration of "eventually". Converting sunlight directly into electricity is much more elegant and will almost certainly become less expensive than thermal conversion - eventually.

Very recently, IBM proposed a third concept, a kind of a hybrid approach. In this concept, the sunlight is concentrated onto a solar panel. This approach reduces panel area and saves lots of expensive silicon. But it generates another problem. The concentrated sunshine creates very high surface temperatures on the solar panel. To save solar panel area and make the solar panel price competitive, one must cool the surface of the solar panel very efficiently to prevent it from melting and destruction.

Installing highly effective cooling loops and providing a low temperature cooling medium presents a new set of technical challenges and costs. We will have to wait and see how IBM will solve these issues.

Present production costs for generating electricity with solar panels are hovering around $0.50 per kWh. This compares with an average US retail price for electric power of $0.095/kWh. Right now, solar power does not yet make economical sense.

All renewable energies share this distinction. None of the available technologies using renewable energy can compete with the cost of electricity generation from coal.

This is also one of numerous examples where free markets perform poorly. The technologies for generating electricity with solar power, wind power, marine power, and geothermal power are very well understood. What is missing is the industrial hardening of these processes and related hardware. This process of moving a technology from the demonstration plant stage to a more dependable and less costly mature system status is the most critical, costly, and dangerous step when developing industrial systems, which must operate uninterrupted 24/7 for thousands of hours on end.

The US cannot reduce its carbon dioxide emissions and cannot achieve energy independence without employing renewable energies for electric power generation and for the critical production of liquid transportation fuels.

At present, a respectable number of windmill farms and solar panel farms are being installed. Forward thinking industrial and public entities take the liberty to impose hidden taxes on the consumers of electric power in industry, in commercial enterprises, and in homes.

Solar power does not make economical sense, yet. However, by providing an income guarantee for investors, the crucial hardening and cost reduction phase of full size solar farms will be shortened tremendously.

There is one inherent danger in this approach. The consumers of electricity pay for this most crucial development phase while other participating parties make out handily. Effective controls for avoiding unproductive duplication of certain types of solar farms are sorely missing.

Duplication of experience is much less valuable than gaining broad experience from competing technologies and installations. Well engineered solar power farms can indicate their readiness for more widespread applications after a couple of uninterrupted, full capacity, generation campaigns. At completion, qualified technology leaders can begin to compete and can drive down total system installation costs by a variety of cost reduction measures.

Where are we now? A random sampling of recent announcements of solar farm installations reveals that system installation costs are in the $3000 to $7500 per kW installed capacity. These plant costs loosely translate into a cost of producing electric power at $0.30 to $0.60 per kWh. This very unfavorably compares to the cost of electricity generation by any other technology.

These figures do not yet contain the costs of energy storage. As long as solar power constitutes only a very small fraction of overall electric power generation, the additional costs of storing intermittently produced electric power are not yet of concern. If the US is going to depend significantly on the intermittent production of electricity from solar power and wind power, it must begin to develop storage technologies for huge amounts of electric energy. Frequent brownouts due to lack of wind and sunshine are unacceptable in advanced economies. Intermittent, renewable energies and electric energy storage are inseparable. This is a technology field where inventors, entrepreneurs, and venture capitalists still can shine.