Monday, November 14, 2011

Krugman's Solar and Gas Column Draws Conservative Attacks

Few things upset regularly movement conservatives more than Paul Krugman and solar power, while "fracking" has drawn many missiles from environmental organizations and the political left. As soon as I read Krugman's November 7th column arguing the solar revolution is near and sprinkling a few poorly aimed shots at  natural gas, I went for the popcorn, knowing that the reaction from the right would be big and fun.

The smartest Knight for the Conservative Roundtable proved to be Robert Bryce who is a regular conservative energy commentator and who published a piece in National Review Online that tore into Krugman entitled, "Krugman's Solar Eclipse."

While on solid ground when discussing Krugman's superficial knowledge about shale gas, Bryce predictably made 6 mistakes in his solar analysis, since it is conservative gospel that solar is uneconomic and loved only by lefties. Here are the 6 mistakes in Bryce's attack on the current competitive status of solar and its immediate future:

First, Bryce used one-year-old solar pricing data from the EIA as his principal source for attacking solar and Krugman's view that it is nearly competitive. One year in the solar business is more like 5 years in the general economy, because the pace of change is so rapid. Solar panel prices for example have fallen by about 25 per cent in 2011. Hence, Bryce's numbers are already badly out of date.

Second, Bryce featured the average solar cost, as stated in the 2010 EIA data, and ignored the minimum solar price in that data. The minimum solar price was $158 per megawatt-hour, while the average cost was $210. It is the minimum price that is important in determining whether or not solar is cost competitive and not the average or maximum numbers, since the minimum price reflects the most competitive companies and applications.  The minimum price is on the margin of the market and is the cutting edge of the solar revolution.

Third, Bryce compared the prices of central station solar to other forms of central station power plants, neglecting the key fact that solar is increasingly being built at the premises of power consumers. Solar can be and is distributed generation. Simply put solar can avoid large transmission and distribution costs that a coal or nuclear plant cannot. Transmission and distribution costs can add $30 to $70 per megawatt-hour to the cost paid by retail consumers for coal, natural gas, and nuclear generation.

Fourth, distributed solar is competing against the full grid electric rate retail electricity customers pay. The national residential average rate is about $120 per megawatt-hour for generation, transmission, and distribution. Millions of consumers pay the equivalent of $140 to $180 per megawatt-hour. Distributed solar is already within that range. Moreover, some electricity consumers in Connecticut, Hawaii, Alaska have paid $200 to $300 per megawatt-hour.

Fifth, since Bryce did not analyze the competitiveness of distributed solar, he also neglected to include the increase in home values that result from solar installations when costing out distributed solar. Home values increase when solar is installed by about an amount equal to 30% of the solar system.

Sixth, a solar distributed system locks in the electricity price for 25 years for the electricity it produces. No local electric utility will offer to do the same for grid power.

While Bryce is largely right about shale gas, he is wrong on solar. The reverse is true of Krugman. The Bryce-Krugman dialogue also underlines the growing, silly tendency for the right to bash solar and the left to attack fracking.  The same political divide has been apparent on nuclear power and discussions about it for decades.  This political polarization sadly injects a whole level of misinformation into energy discussions.

1 comment:

  1. Concerned ScientistNovember 14, 2011 at 9:29 AM

    Couldn't agree more with this analysis