Thursday, August 27, 2009

Going Solar

Leah Nash for The New York Times

A worker at SolarWorld in Hillsboro, Ore., fills a container with polysilicon, which is then melted to make a solar crystal.
I've seen a number of articles regarding the price drop of solar panels; this is in large part due to Chinese plants that are manufacturing, at lower prices, key materials that go into the panels. An article in the NYT states that the prices have dropped 40% since the middle of last year. I'm dubious about the economic viability of these devices at the current time, but am optimistic that as their efficiency increases and their prices fall, they will eventually be truly competitive with traditional electricity generation.

That last sentence needs a little teasing out. Currently there are government subsidies for installing solar panels. In other words, the government recognizes that while the benefits to society at large of increasing solar power are substantial, the costs to the individual investor are not met or exceeded by the value of the electricity thus generated. In the article, one of the subjects spent $77,000 on fitting his house with solar. In addition to that up-front cost, you also need to account for the foregone income he might have made by saving or investing that money over the time it will take to recoup his expenditure- an estimated 16 years. So when I say the economic viability is dubious, I mean that without government subsidies, I'm not confident that the panels will actually pay for themselves in the value electricity generated.

Nevertheless, their value to weakening our dependence on carbon fuel is powerful. In this case, the subsidies balance out a cost that electricity generators and suppliers have externalized: the cost to our planet of dumping CO2 exhaust into the atmosphere. In other words, traditional sources of electricity ought to be more expensive; the price of power does not take into account all the costs of generating them.

However, the thing in this article that really jumped out at me was at the end: a way of paying for this investment that is new to me, and very sensible in my opinion.
Danita Hardy, a homeowner in Phoenix, had been put off by the prospect of spending $20,000 for solar panels — until she spotted a news item about a company called SunRun that takes on the upfront expense and recovers its costs gradually, in a lease deal, essentially through the savings in a homeowner’s electric bill.
I hope that SunRun is a great success. This sounds like a very smart way of funding the up-front costs for many people who otherwise couldn't pull it off, and weaning those who choose to invest in solar off of government subsidies. I think subsidies, as in this case, are sometimes justified, but they should always have sunset clauses, and a sharp eye kept open for opportunities to end the unbalances that justify them in the first place.

No comments: