I don’t normally write rehashes of other people’s journalism, but a recent edition of Economist was simply fire. They covered two of the largest topics closest to my brain space right now, solar energy and AI (though the AI bit focused on military applications, well outside my specialty). I’m a co-founder of a solar & AI company, so there was definitely some food for thought.
Aside: It’s a trope on technology forums that anyone with more than a passing familiarity with a technical subject will find any journalism about that subject laughably wrong. While there is some transmission loss when translating a technical subject to a general audience, I typically don’t find this to be the case. I certainly did not find it to be the case here in what were in-depth, well-researched articles. Good research is not cheap and this is one that was well worth the newsstand price if you happen to find it on a shelf.
The Dawn of the Solar Age
The edition sets out a bold claim, that we are at the “Dawn of the solar age.” Beyond the leader and corresponding title essay, there are also smaller articles on floating solar, China’s solar industry, and solar in the less-connected parts of Africa.
The edition is making a large claim that solar will be the largest source of electrical energy in about a decade and within three be the largest source of all energy. This goes well beyond the forecasts provided by the National Renewable Energy Laboratory (NREL). Some of the discrepancy is that NREL is focused on the US and much of the rest is on methodology. NREL primarily models the impacts of government incentive policy and goals. The Economist is extrapolating from the rate of change of installations (installed capacity doubles every three years), manufactured material costs (constantly dropping in dollars per kW), and that the raw materials (silicon-rich sand and sunlight) are abundant. Without any other advances the levelized cost of energy (LCOE), a measure that accounts for all the costs of an energy project measured against the output, is already lower than fossil fuels. Which is the true crux of The Economist’s argument. Solar is not just for climate concious; it also makes good business sense.
The Economist backs up their audacious claim that previous mainstream predictions of solar adoption have woefully underestimated the actual installed capacity. Failing to rerun models may be a general theme (potentially more on that later).
There are large benefits other than cost. For the eco-minded, solar panels do not give off toxic fumes when generating, unlike a gas plant. Once installed they generate power with no emissions and will continue to do so for decades. One can even graze animals or farm beneath a solar field.
For the NIMBY’s, solar panels are unobtrusive. I wrote much of this in Palm Springs, CA where you can see plenty of solar when flying in. From the ground, however, you have to really look while next to the field or roof with panels installed. The wind-farm is clearly visible from many points in town. In fact, solar is so unobtrusive is that the door-to-door salespeople that come through our area take some convincing that they are wasting their time since solar is already installed on our house.
In a third major benefit, for the engineering minded, solar scales up and down. Whether you are installing 1 or 1 million, it’s pretty much the same thing. Solar cells are thin squares of “doped” silicon. Contacts are attached and they are spread out into modules of varying size. The major difference between a small solar install and a large solar install in the number of these modules present.
The Headwinds for Solar
Writing this from Palm Springs, the largest issue with solar is obvious: the clear blue skies were gone well before the howling winds stopped. Solar only produces when the sun is out, which can cause weird distortions to the spot price of energy. In the last few years there have multiple occurrences when the midday price of energy was negative. There was simply more energy being produced than demand.
The Economist largely takes the view that this is a market opportunity. Battery storage also going through a cost transition and may become ubiquitous with EV’s. Beyond what we traditionally think of as batteries there are multiple examples of using huge tanks of water to store excess energy as heat. Also mentioned was a startup called Sun Train which plans to move stored solar energy via rails to where it’s needed, which is an interesting twist to the station wagon full of tapes of internet lore.
I do find that The Economist has an overly rosy view of market abilities and I didn’t find this to be too different. Unfortunately, I don’t think there are many historical situations where market solves a problem when nobody seems to be making money. The vast majority of the money spent on solar happens at the start of the project, but almost all of this is in relatively low margin, commodity-like spends.
The fierce competition in manufacturing, spearheaded by state-sponsorship in China, has lead to a decrease in cost and an increase in overall initial quality, but at the expense of negative reaction from governments that do not want be a dumping ground for China’s overcapacity. It is the type of business competition that comes from multiple manufacturers essentially making the same thing. So the differentiation comes from tariffs, which increase prices, which are then offset by tax credits. However, since they are relatively easy to manufacture, compared to something like microchips, encouraging domestic production is probably sensible and doable in the short term.
The Economist also underplays the impact of utilities. They used to have a very straightforward relationship with their customers, utilities make power, customers buy it. Now the customers can also make the power. As a result, we’ve seen massive interconnection backlogs, with some estimates stating that at least a third of planned capacity in the US will never get built. We have also seen utilities spreading misinformation to fight solar, like what is happening in Arizona. There are enough people who make enough money from the status-quo who will continue to produce barriers, even if the underlying cost is dropping drastically.
Another risk glossed over is that solar is often over sold, which can burn customers who have had a bad experience. Recent research from kWh Analytics found that solar assets are under performing by 8%. Distributed generation means distributed maintenance. While the panels themselves may last 20 years, they need to be cleaned to produce efficiently and landscaping needs to be cut back to ensure that light continues to hit them. Some of the supporting equipment, such as monitoring boxes and DC-AC inverters have a shorter lifespan and will need to be replaced over the life of the project. Which can mean the promise of free energy in the later years of the project may not come to pass.
What I think
To emphasize the disclaimer on the bottom, these thoughts are exclusively my own and shouldn’t be taken as a representation of any employers or investors.
I’m obviously bullish on solar. I’ve put my money where my mouth is by putting solar on my house and starting a company in the space. Solar feels a lot like the early 80’s when computing jumped out of institutions and into homes through the IBM PC and Apple Mackintosh.
Having abundant, increasingly inexpensive, and clean energy during the middle of the day is a game changer. Energy intensive tasks, like climate control or water desalination, will become possible even on spotty grids. Distributed generation will prevent extreme loads on grids allowing more places to remain livable. Much of these benefits have been concentrated in lower light countries in North America and Northern Europe. The lowering costs of solar are going to make this accessible to the developing world, much of which is in sun-rich areas near the equator.
Closer to my business interests, I think we’re going to see an interesting shift in the domestic solar market. We’re currently at a point where the amount of installed is overshadowed by the amount of solar in the pipeline. The way tax incentives work also benefits building over operating. This will invert as installs last decades. Installs also outlast their incentives. Long, but predictable, payback after a hefty initial investment sounds very similar to long term markets around mortgages and bonds. Similar to those markets, solar is going to have specialized data needs.
Solar may be maintenance light, but it is not maintenance free. Much of it is more standard labor; panels need to be washed, trees need to be cut back. Then there’s the more specialized high-voltage work like replacing panels and inverters. Since even degraded systems continue to produce, it may actually be a waste to fix systems. This necessitates a need for advanced back-office systems that can not only identify what maintenance is required, but what will be worthwhile for overall production versus cost.
Finally, there’s a lot to that underperformance claim. Knowing why a system underperforms helps plan future systems. It could be changing weather patterns, on-site pollution (a tractor on a field creating a dust that coats panels), or overly aggressive modeling. Customers and investors are going to demand more reliable outcomes which again suggests a need for improved back-office systems. The continual advancement of simulation abilities by computers can improve prediction outcomes for both weather and performance.
I think that it’s truly transformational technology especially when paired with the improvements in battery tech, that’s more a matter of when not if. It’s going to be interesting to see how ubiquitous clean energy will change what we think is possible.
