Conservative media have denigrated solar energy by denying its sustainability, ignoring its successes, and arguing the U.S. should simply cede the solar market to China. Yet this booming industry has made great strides, and with the right policies can become a major source of our power.
- What are the environmental benefits of solar power?
- How much land does solar energy use?
- What does cloudy weather mean for solar potential?
- What is the cost of solar energy?
- How is the U.S. solar industry faring?
- Can the U.S. compete with Chinese solar companies?
- Are solar subsidies a good investment?
- Claiming that a “green future” would be “dirty,” the Taxpayer Protection Alliance's Drew Johnson wrote in a Washington Examiner op-ed that “It turns out that it takes a lot of power (and a lot of carbon) to build solar panels and wind turbines.” [Washington Examiner, 7/24/12]
- A Wall Street Journal editorial lent some credence to the claim that solar “really doesn't reduce greenhouse gas emissions” because the carbon savings from solar projects on desert land could be “negat[ed]” by disturbing caliche deposits that release carbon dioxide. [Wall Street Journal, 9/4/12]
- At the American Enterprise Institute's blog, Kenneth Green promoted a press release claiming that “Solar cells do not offset greenhouse gases” because solar cell production emits gases that “make carbon dioxide (CO2) seem harmless.” [American Enterprise Institute, 1/23/13]
FACT: Solar Energy Can Greatly Reduce Pollution
Solar Energy Emits Much Fewer Greenhouse Gas Emissions Than Fossil Fuels. A special report by the International Panel on Climate Change's Working Group III examined hundreds of estimates of greenhouse gas emissions (including the potent but rare gases that AEI referred to), and compiled the results of the most thorough studies. This chart of their results shows that renewable and nuclear energy have a substantially lower impact than fossil fuels over the lifespan of each power source:
[Intergovernmental Panel on Climate Change, 5/9/11]
NREL: 87 To 97 Percent Of Solar PV Power Will Create No Pollution. A report by the Department of Energy's National Renewable Energy Laboratory explained that producing electricity with a solar photovoltaic (PV) system produces no greenhouse gases, greatly offsetting emissions from construction:
Producing electricity with photovoltaics (PV) emits no pollution, produces no greenhouse gases, and uses no finite fossil fuel resources. The environmental benefits of PV are great. But just as we say that it takes money to make money, it also takes energy to save energy. The term “energy payback” captures this idea. How long does a PV system have to operate to recover the energy--and associated generation of pollution and CO2--that went into making the system, in the first place? Energy payback estimates for rooftop PV systems are 4, 3, 2, and 1 years: 4 years for systems using current multicrystalline-silicon PV modules, 3 years for current thin-film modules, 2 years for anticipated multicrystalline modules, and 1 year for anticipated thin-film modules[.] With energy paybacks of 1 to 4 years and assumed life expectancies of 30 years, 87% to 97% of the energy that PV systems generate won't be plagued by pollution, greenhouse gases, and depletion of resources.
NREL also found that a solar PV system can repay its “energy investment in about two years,” and that during its “28 remaining years of assumed operation,” a system that “meets half of an average household's electrical use” would avoid enough carbon dioxide emissions to “offset the operation of two cars” for 28 years. [National Renewable Energy Laboratory, accessed 10/26/12]
Carbon Savings From Solar Far Outweigh Disturbances From Development. The Wall Street Journal and others highlighted the claim that solar development on desert lands could disturb caliche deposits, leading to carbon dioxide releases. They based the claim on a University of California-Riverside report, which said that a solar plant could cause the loss of “nearly 6,000 metric tons of C” each year from this disturbance. But that report further said that the clean energy generated by the plant would “save nearly 560,000 metric tons of C per year” -- or more than 90 times more C than any losses. The report called for more research into the area. [University of California-Riverside, 1/1/11]
Expanding Solar Power Is Essential To Meet Climate Goals. The International Energy Agency illustrated what changes would need to be made in the energy sector to meet the international agreement made at the 2010 United Nations Climate Change Conference in Cancun, Mexico, to limit global warming to 2°C from the pre-industrial level, based on “the climate sensitivity of the planet” that “scientists believe most likely.” In that scenario, solar energy exhibits the “fastest growth,” providing “more than 10% of global electricity by 2050.” The IEA further found that in high renewable scenarios, solar is essential due to its “almost unlimited potential”:
More significantly perhaps, in scenarios that call for a more rapid deployment of renewables, such as the ETP 2010 “Hi-Ren” (for high-renewable) scenario, solar energy makes the largest additional contribution to GHG [greenhouse gas] emission cuts, probably because of its almost unlimited potential. Solar electricity tops 25% of global electricity generation by 2050, more than either wind power or hydro power. By contrast, most other renewables - with the possible exception of wind power - may meet some kind of intrinsic limits. If this is the case, in a carbon-lean world economy solar energy would continue to grow faster than any other energy resource long after 2050. Solar energy is particularly available in warm and sunny countries, where most of the growth - population, economy, and energy demand - will take place in this century. Warm and sunny countries will likely contain about seven billion inhabitants by 2050, versus two billion in cold and temperate countries (including most of Europe, Russia and parts of China and the United States).
This chart illustrates these scenarios, with solar PV (photovoltaics) and CSP (concentrated solar power) in yellow and light orange making up a significant amount of the energy mix if we are to meet our international goals to limit climate change:
- A Wall Street Journal editorial stated: “The dirty secret of solar and wind power is that they are extremely land intensive, especially compared to coal mining, oil and gas drilling or building a nuclear power plant.” [Wall Street Journal, 8/13/12]
- In a New York Times op-ed, Manhattan Institute fellow Robert Bryce claimed that using solar or wind energy “requires vast amounts of natural resources -- most notably, land.” [New York Times, 6/7/11]
- An Investor's Business Daily editorial claimed solar power “needs a large -- and ugly -- footprint that creates its own environmental issues.” [Investor's Business Daily, 8/1/12]
- Los Angeles Times reporter Julie Cart exaggerated the amount of land that would be “scraped clear” for a local solar project, in an article titled “Sacrificing the desert to save the Earth.” [Ivanpah Solar, 2/7/12] [Los Angeles Times, 2/5/12]
FACT: Modest Amount Of Desert Land Could Supply All Our Power
DOE: 90% Of U.S. Power Could Be Supplied By Abandoned Industrial Sites. A 2003 fact sheet by the Department of Energy's National Renewable Energy Laboratory noted that a “100-by-100-mile area of Nevada could supply the United States with all of its electricity” and that much of this electricity could come from abandoned industrial sites:
[W]ith today's commercial systems, the solar energy resource in a 100-by-100-mile area of Nevada could supply the United States with all of its electricity. If these systems were distributed to the 50 states, the land required from each state would be an area of about 17 by 17 miles. This area is available now from parking lots, rooftops, and vacant land. In fact, 90% of America's current electricity needs could be supplied with solar electric systems built on the estimated 5 million acres of abandoned industrial sites in our nation's cities.
The Bureau of Land Management and the Environmental Protection Agency have programs to find disturbed and abandoned lands that are suitable for renewable energy development, partially funded by the 2009 stimulus. Groups concerned with minimizing the impacts of energy development on wildlife prefer prioritizing these areas for development. [National Renewable Energy Laboratory, January 2003] [Defenders of Wildlife, accessed 1/14/13]
EIA: Putting Solar On 4% Of The World's Desert Areas Could Provide All The World's Electricity. The nonpartisan Energy Information Administration's primer on solar energy states: “Covering 4% of the world's desert area with photovoltaics could supply the equivalent of all of the world's electricity. The Gobi Desert alone could supply almost all of the world's total electricity demand.” [Energy Information Administration, 12/19/11]
Study: “In Most Cases” Solar PV In Southwest Uses Less Land Than Surface-Mined Coal. A seminal study in 2009 found that “in most cases” solar photovoltaic (PV) ground installations in areas with plenty of sunlight use “less land than the coal-fuel cycle coupled with surface mining.” These estimates did not include the “secondary effects” that fossil fuel use has on land use “including contamination and disruptions of the ecosystems of adjacent lands, and land disruptions by fuel-cycle-related accidents.” The study, which was published in Renewable and Sustainable Energy Reviews by Professors Vasilis Fthenakis and Hyung Chul Kim, further found that, while “estimates vary with regional and technological conditions, the photovoltaic (PV) cycle requires the least amount of land among renewable-energy options.” This chart created from their results and subsequently published in Current Science illustrates that solar PV in the Southwest is estimated to use less land over 30 years than surface mined coal on average:
These images from a presentation by Vasilis Fthenakis show the difference in land impact between a solar photovoltaic plant in Springerville, Arizona, and a mountaintop removal coal mining site in Rawl West, Virginia:
[Renewable and Sustainable Energy Reviews, August-September 2009] [Current Science, July 2012] [Presentation by Vasilis Fthenakis, “Sustainability of Very Large Deployment of Photovoltaics,” George Washington University's Solar Institute]
NREL: Land Needed To Deploy Solar Is “Modest” In Part Due To Available Rooftops. A 2004 fact sheet by the Department of Energy's National Renewable Energy Laboratory stated that if the U.S. applied solar photovoltaics (PV) to just 7 percent of cities and residences “on roofs, on parking lots, along highway walls, on the sides of buildings, and in other dual-use scenarios,” we could supply all of our energy needs. A 2008 report by NREL further found that “The land-use requirements for wide-scale deployment of PV are modest when considering both the large area of rooftop availability and when compared to other uses of land in the United States.” [National Renewable Energy Laboratory, February 2004] [National Renewable Energy Laboratory, May 2008]
Land Occupied By Solar Panels Can Sometimes Be Used For Multiple Purposes. A Current Science article noted that solar PV “promises the usage of land for multiple purposes, i.e. the same land can be utilized for grazing, power generation and shading purposes.” The article included this picture of a solar plant installed by Concentrix Solar, showing this versatility:
[Current Science, July 2012]
- On Fox News, JunkScience.com founder Steve Milloy claimed that “Half the time solar panels don't even work. Half the time they do work they produce expensive electricity. This is just lose, lose, lose, for America. We can't do it here.” [Fox News, Your World with Neil Cavuto, 8/31/11, via Media Matters]
- The O'Reilly Factor mocked an attendee of the Power Shift Conference for noting that solar energy could be stored for times when there is no sunlight. [Fox News, The O'Reilly Factor, 4/20/12]
- A Washington Times editorial claimed “the left promotes the power sources of the past,” offering as evidence the fact that “solar panels don't generate any electricity after sundown.” [Washington Times, 7/27/12]
FACT: U.S. Has Great Solar Potential Aided By New Technologies
U.S. Has More Solar Potential Than Current World Leader In Solar Generation. While areas that have more intense direct sunlight due to clear skies and low humidity have more solar generation potential, even northeastern states in the U.S. have greater solar potential than Germany, as can be seen in this map by the National Renewable Energy Laboratory:
[National Renewable Energy Laboratory, 5/30/2008, via Thurston Energy]
Yet Germany is currently the world leader in solar power generation, as illustrated in this chart of current solar PV operating capacity by country:
[Renewable Energy Policy Network for the 21st Century, 6/11/12]
Solar Potential For Southwest U.S. Is Among The Highest In The World. A report by GTM Research prepared for efinity noted that the Southwest has “among the best photovoltaic resources in the world” due to high insolation -- the amount of solar energy that reaches a given area and time:
Three factors provide the U.S. with enormous long-term potential for sustainable market growth. First, the U.S. is home to an excellent photovoltaic resource. Average daily insolation in the U.S. ranges from 3.5 kWh/m2/day in the Northeast and upper Midwest to as high as 8.5 kWh/m2/day in the Southwest. In these regions, insolation reaches levels that are among the best photovoltaic resources in the world. While the Southwest provides the highest insolation, even northeastern states offer insolation that is, at a minimum, equal to or greater than the resources of Germany. Second, there is ample availability of land for PV development. The Western states in particular have large tracts of open land that could support large PV installations.
Third, electricity demand in the U.S. is the highest in the world. [GTM Research, 2011]
IEA Study: Increase In Solar PV “Does Not Significantly Increase The Need For Electricity Storage.” The International Energy Agency notes that “all electric systems already have flexibility to meet variable demand” and power station breakdowns. They can meet this variability by adding more generation, using any storage capacity, interconnecting with another electric system or demand-side management (for instance, by having large buildings agree to temporarily reduce air conditioning or refrigeration use). Renewable energy is more variable, but the use of a variety of technologies can help reduce the effect of this. As the IEA explains, “if there is no wind in one area, there might be some in another area; if the sun does not shine one day, the wind may blow instead; and if clouds in one region reduce solar electricity generation to a minimum, other roofs or regions might enjoy better weather.” As a result, an IEA study found that if solar PV made up 10 to 12 percent of the energy supply (10 percent is IEA's estimate for PV penetration if climate obligations are met), it “does not significantly increase the need for electricity storage.” The study further found that “the variability of PV, which matches demand peaks better than wind power and is relatively predictable, is unlikely to raise substantive issues for managing grids.” And the use of back-up energy to manage this variability does not eliminate the climate benefits of solar energy:
Contrary to common belief, the introduction of variable renewable generating capacities does not require a “megawatt for megawatt” back-up, but rather holistic planning of flexible resources to cover net system variability. The addition of more flexible generating capacities as back-up might still be needed, but it is important to realise that such capacities will be run only rarely, and this is what makes building them fully compatible with low GHG emission scenarios. [International Energy Agency, 2011 (executive summary only), full version via George Washington University's Solar Institute]
“Smart Grid” And Storage Solutions Can Help Solar Scale Up. Through planning based on weather forecasts, innovation in storage technology and adjusting demand through solutions like “smart meters,” renewable power can continue to scale up in the future as we maintain electric reliability, as an article by Professor Jenny Nelson and Dr. Robert Gross of the Imperial College of London, and The Guardian's Duncan Black explained:
Connecting grids over large geographical areas allows renewable power from a variety of climates to be combined, reducing overall variability and sharing out 'backup' fossil fuel power stations more widely. Storing electricity tends to be expensive, but innovation in storage technologies could make electrical backup systems cheaper. Finally, changes in consumer behaviour can help balance renewable electricity supply and demand. For example, the introduction of 'smart' meters will allow prices to be changed across the day to encourage people to shift consumption towards times of abundant supply. Householders in the UK have already been found to reduce their overall power use and shift towards daytime consumption after installing solar on their homes. [Guardian, 5/29/12]
Obama Has Made Significant Investments In Smart Grid Technology. In determining that President Obama kept his promise to invest in a “smart grid,” the nonpartisan PolitiFact wrote that the stimulus provided $4.5 billion toward smart grid initiatives -- not enough to create a fully smart grid, but a significant step. PolitiFact noted that a smart grid facilitates the adoption of more renewable energy, along with several other benefits:
Obama's vision for a smart grid had two primary components. The first was updating the parts of the electricity grid that handle transmission and distribution, so that the systems are efficient and can detect and respond to power outages. The second part was modernizing electricity on the customer's end, ideally so that people could make decisions to use energy at off-peak times when it's less expensive.
The end goal, according to a Government Accountability Office report, is an energy grid “that is more reliable and efficient; facilitates alternative forms of generation, including renewable energy; and gives consumers real-time information about fluctuating energy costs.”
Massoud Amin, a professor of electrical and computer engineering at the University of Minnesota, said one reason the U.S. needs to upgrade its grid is that other countries are doing it -- and if we don't, it could “reshuffle the world pecking order. Emerging markets could leapfrog other nations.”
Data shows that power outages have been increasing in recent years, and the costs are substantial. Amin estimated that current power outages cost the economy between $80 billion and $188 billion annually. He projects that “a smarter, stronger grid” would reduce power outage costs by $49 billion and would increase system efficiency by enough to save another $20.4 billion. A smarter grid would also reduce carbon dioxide emissions by 12 to 18 percent, he said. [PolitiFact, 12/13/12]
IEA: Solar May Produce One-Third Of World's Power By 2060. Bloomberg reported: “Solar technologies such as photovoltaic panels, water heaters and power stations built with mirrors could provide a third of the world's energy by 2060 if politicians commit to limiting climate change, the International Energy Agency said.” That IEA report further stated that some areas could potentially produce all their electricity from renewables:
According to a recent study by PriceWaterHouse Coopers, Europe and North Africa together could by 2050 produce all their electricity from renewables if their respective grids are sufficiently interconnected. While North Africa would consume one-quarter of the total it would produce 40% of it, mostly from onshore wind and solar power. CSP plants would form the core of the export capacities from North Africa to Europe. [International Energy Agency, 2011 (executive summary only), full version via George Washington University's Solar Institute] [Bloomberg, 12/1/11]
- JunkScience.com founder Steve Milloy said on Fox News, “I think that given the fact that solar is really expensive, even when it`s made in China, it just goes to show that even if this stuff is made for free, with slave labor, economically, it still doesn't make sense. Nobody can really afford to do this.” [Fox News, Your World with Neil Cavuto, 9/1/11 via Media Matters]
- T. Boone Pickens said on Fox News: “I`m telling you that wind and solar, you can`t make it work because it is too expensive.” [Fox News, Your World With Neil Cavuto, 3/26/12, via Nexis]
- Donald Trump said on Fox News: “solar is weak and has not been effective and is very, very expensive.” [Fox News, Your World With Neil Cavuto, 3/15/12, via Nexis]
FACT: Solar Costs Are Dropping Rapidly
Solar Panel Prices Have Fallen Dramatically Over The Last Few Decades. The following chart generated by the nonpartisan Energy Information Administration shows that the price of both solar cells and solar panels, or “modules” (an array of solar photovoltaic cells), fell significantly from 1989 to 2010:
[Energy Information Administration, 9/27/12]
The trend is even more dramatic when reductions from the 1970's to present are included, as can be seen in this chart of solar cell prices from The Economist based on data from Bloomberg New Energy Finance:
[The Economist, 12/28/12]
Bloomberg New Energy Finance: “Further Price Reductions Are Likely To Occur In Coming Years.” A research paper by Bloomberg New Energy Finance found that manufacturers were able to reduce the price-per-watt of solar energy by 50 percent from 2008 to 2009 due to cost reductions from “scale and advances in wafer, cell and module manufacturing processes, as well as to improved performance resulting from better cell efficiencies and lower electrical conversion losses.” The report further found that “technological advancements, process improvements, and changes in the structure of the industry suggest that further price reductions are likely to occur in coming years.” [Bloomberg New Energy Finance, 3/16/12 (pdf), via Forbes]
Solar Is On Track To Be As Cheap As Our Current Electricity By 2020. Computer scientist Ramez Naam created the following graph on plummeting solar prices based on a report by the Department of Energy's National Renewable Energy Laboratory:
Naam found that if solar prices continue to decline at that rate, solar will be as cheap as our current electricity by 2020:
Naam further found that the cost of solar photovoltaics has been declining at a logarithmic scale. Similarly to “Moore's law,” a specific learning curve for computer hardware documenting the steady and rapid decline in costs, solar has its own fairly predictable learning curve leading to cost reductions. The National Renewable Energy Laboratory states that “For many years, the price of modules has followed a well-documented learning curve of a 20 percent reduction for every doubling of global module shipments” based partly on “shared knowledge and experience.” [Scientific American, 3/16/11] [National Renewable Energy Laboratory, February 2012]
DOE Lab: Price Of Solar Installations Has “Fallen Precipitously” And Can Continue To Fall. A report by the Department of Energy's Lawrence Berkeley National Laboratory found that “Since 2009, installed prices have fallen precipitously” and that initial data for the first half of 2012 indicated that these prices would “continue to decline.” The report further stated “Notwithstanding the significant installed price reductions that have already occurred in the United States, international experience suggests that greater near-term reductions may be possible.” The report noted that several countries have lower installed solar prices than the U.S. and that reductions in installed solar prices in the U.S. have come largely from the decline in solar panel prices, while “soft costs,” the costs of installing solar beyond the hardware, have remained relatively high. In Germany, for instance, the soft costs of solar are lower in part because solar installations are effectively exempt from sales taxes, permitting requirements are more streamlined, and the market benefits from greater economies of scale. [Lawrence Berkeley National Laboratory, “Tracking The Sun V,” November 2012] [Lawrence Berkeley National Laboratory, “Why Are Residential PV Prices In Germany So Much Lower Than In The United States?”, September 2012]
IEA: Solar Electricity “Is Already Competitive In Some Markets, And Will Be Soon In Much Larger Ones.” The International Energy Agency explained that globally solar energy is “already competitive in some markets” and that they are not simply “niche markets” but multi-billion dollar markets:
[S]olar electricity (whether PV [Photovoltaic] or CSP [Concentrated Solar Power]) is already competitive in some markets, and will be soon in much larger ones. Solar electricity is competitive off grid, whether for rural electrification, telecommunication relays or isolated houses. Rooftop PV is close to grid parity in several markets (for example if PV systems are installed in Italy at the price they are installed today in Germany). PV and CSP plants are close to fuel parity at peak demand times. In sunny regions, when oil products are burned at demand peaks, PV or CSP plants are competitive when oil prices are above USD 80/bbl. These are not “niche markets” anymore, as telecommunication relays and rural electrification might have been at the end of the last century. Rather, they are leading or opening markets with a value measured in billions. [International Energy Agency, 2011 (executive summary only), full version via George Washington University's Solar Institute]
- Fox Nation claimed the “ENTIRE Solar Industry” was on the “Brink Of Collapse.” [Media Matters, 12/2/11]
- Discussing solar power on Fox News, syndicated columnist Charles Krauthammer said: “If it comes the market will tell us. The market says these companies are worthless.” [Fox News, Hannity, 9/16/11]
- Fox's David Asman claimed: “solar energy has crashed over the past year.” [Fox Business, Power And Money, 1/25/12, via Nexis]
FACT: Solar Installations Are Booming
WSJ: “U.S. Is On Pace To Install As Much Solar Power [In 2012] As It Did In This Century's Entire First Decade.” In September 2012, the Wall Street Journal reported: “The U.S. is on pace to install as much solar power this year as it did in this century's entire first decade: at least 2,500 megawatts, the equivalent of more than two nuclear-power plants.” The Journal created this chart based on data from GTM Research:
A report by the nonpartisan Energy Information Administration similarly found that “2011 was a record year for solar PV growth.” [Wall Street Journal, 9/9/12] [Energy Information Administration, 10/31/12]
Brookings Report: Solar Jobs Grew More Than Twice As Fast As The Rest Of The Economy. A Brookings report on the clean economy found that between 2003 and 2010, jobs in the solar thermal industry expanded by 18.4 percent annually and jobs in the solar photovoltaic industry grew 10.7 percent annually, compared to a 4.2 percent growth rate in the national economy. [Brookings Institution, 7/13/11]
Energy Expert: Consolidation Of Solar Industry Is A Sign Of “Maturation, Not Collapse.” In an emerging industry, it is common for the industry to consolidate as it matures, meaning some companies go bankrupt, while others succeed. For instance, hundreds of early automobile manufacturers went out of business or were taken over by larger companies as the automobile industry took off, as can be seen from this chart from the Howard H. Baker Jr. Center for Public Policy:
Shayle Kann, the managing director of solar research at GTM Research, told Media Matters in 2011 that this consolidation is a sign of “maturation, not collapse.” [CBS News, 8/17/11] [Phone conversation, 12/1/11]
Amid This Consolidation, Some Solar Companies Have Benefitted. CNNMoney explained that while some solar manufacturers in the U.S. have gone bankrupt due to lower silicon prices, the consolidation in the industry “isn't necessarily a bad thing for solar power,” and the lower prices mean that “more people are likely to go solar” benefitting companies that generate and install solar energy:
Two high profile companies have gone bankrupt in the United States -- government-backed Solyndra and Evergreen -- and analysts anticipate more failures ahead.
“Solyndra was just the beginning,” said Jessie Pichel, head of clean energy research at the investment bank Jefferies & Co. “We're going to see a lot of companies go bankrupt.”
Just how many? Of the few hundred or so solar panel makers worldwide, just 20 to 40 are expected to remain standing in a few years time, said Mark Bachman, a renewables analyst at Avian Securities.
This isn't necessarily a bad thing for solar power. Bachman noted that many young industries go through this phase -- think of all the auto makers at the beginning of the last century or television makers 40 years ago. As the market matures, the stronger companies survive.
- Fox contributor Tamara Holder said “we tried to compete in a market that we shouldn't be competing in -- solar energy. We are sending--or, we're trying to compete with China.” [Fox News, Hannity, 9/19/11, via Nexis]
- Fox Business' David Asman said “I don't want to enter into a losing business venture. If the Chinese have this market all wrapped up, as they clearly do, or at least part of the market, I'm not for competing.” [Fox Business, America's Nightly Scoreboard, 10/26/11, via Nexis]
- Fox News' Eric Bolling asked co-host Dana Perino: “Why do you think solar industry is robust? We're getting our tail handed to us by the Chinese.” [Fox News, The Five, 11/17/11, via Nexis]
FACT: U.S. Can Be A Solar Powerhouse With Right Policies
U.S. Solar Industry Has A Positive Trade Balance With China. A GTM Research study prepared for the Solar Energy Industries Association in August 2011 found that the U.S. had net exports of solar energy products of $1.9 billion in 2010, and net exports of $247 million to $540 million to China. This chart of PV imports and exports in 2010 shows that the U.S. is a net exporter of solar technology overall and when compared with China:
While the U.S. had net imports of solar panels in 2010, it had net exports of polysilicon (the raw material used to create panels) and solar factory equipment. The report also found that in 2010, “U.S. solar energy installations created a combined $6.0 billion in direct value, of which $4.4 billion (75%) accrued to the U.S.” [GTM Research, August 2011]
However, China Has Outpaced The U.S. In Solar Panel Production In Part Due To Better Government Incentives. While the U.S. has competed well with China in several sectors of the solar industry, China is ahead in solar cell and panel production. A capital investor said that this was not due to cheaper labor costs -- solar cell production is not particularly labor-intensive -- but rather due to government incentives for solar, according to a September 2011 New York Times report:
Loans at very low rates from state-owned banks in Beijing, cheap or free land from local and provincial governments across China, huge economies of scale and other cost advantages have transformed China from a minor player in the solar power industry just a few years ago into the main producer of an increasingly competitive source of electricity.
“There is no question that renewable energy companies in the United States feel pressure from China,” said David B. Sandalow, the assistant secretary for policy and international affairs at the United States Energy Department. “Many of them say it is cheap capital, not cheap labor, that gives Chinese companies the main competitive advantage.”
[K. K. Chan, the chief executive of Nature Elements Capital, a Chinese clean energy investment company based in Beijing] attributed the Chinese industry's low costs not to inexpensive labor in China -- high-technology solar panel manufacturing is not labor-intensive -- but rather to free or subsidized land from local governments, extensive tax breaks and other state assistance.
[New York Times, 9/1/11, emphasis added]
China Has Sent Long-Term Signals About Its Investments In Renewable Energy. A Brookings Institution report explained how Chinese policies have helped its clean technology industries:
A huge part of the [reason for China's clean economy success] has to do with China's ability to channel vast sums of affordable capital into innovative large-scale deployment projects--something that the U.S. continues to struggle with. The numbers speak for themselves. In 2010, China put into place a staggering $54.4 billion in clean energy investments. Of this, asset financing--funding for hard assets like wind farms and solar arrays--accounted for more than $47 billion of the total. By contrast, U.S. private investment in clean energy totaled $34 billion, with just $21 billion or so in asset finance. Now the gap is widening further, with Chinese asset finance investment in Q1 2011 clocking in $10.9 billion as compared to just $2 billion in the United States.
What is China's secret in ensuring deployment finance? China has been inordinately successful in mobilizing large volumes of low-cost capital through its state-owned banks and other financial institutions. Clean energy projects have received preferential access to bank loans at interest rates far below what is available in other countries. Moreover, state-owned enterprises, especially the “Big Five” power companies, have been major investors across a broad range of energy conservation, pollution control, and renewable energy projects. For instance, China Guodian Corporation--one of the Big Five--recently announced a plan to invest $3 billion over the next five years in a variety of clean energy projects, including thermal, wind, natural gas, and biomass power stations in southwest China.
But that is only part of the story. Critical to China's success is its articulation of a comprehensive and long-term state clean energy build out policy that sends clear signals to investors. Through its 12th Five Year Plan, China has identified “new energy” as one among seven “strategic emerging industries” and will invest $760 billion over the next 10 years in this sector alone. A range of complementary policies will guide these investment decisions, including the Renewable Energy Law, national demand-side management regulations, and pilot carbon taxes, among others. China has swiftly made itself a clean energy power, in large part by ensuring the availability of copious, affordable capital at a time it has been short in the United States.
The following chart compares asset financing available to U.S. and Chinese solar companies:
[The Brookings Institution, 2011, emphasis added]
Chinese Solar Imports Fell By More Than A Fifth Over The Last Year. According to a review of federal data, imports of crystalline silicon solar cells and panels from China fell to their lowest levels in November 2012 to $50.5 million, down from $278 million in October 2011. The review was conducted by the Coalition for American Solar Manufacturing, a group that supports tariffs on Chinese solar manufacturers -- a controversial issue in the solar industry. [Coalition for American Solar Manufacturing, 1/21/13]
- In a segment on Solyndra's bankruptcy, Fox News correspondent Jim Angle asked “So if the solar industry is thriving in a free market, why should taxpayers be subsidizing it[?]” [Fox News, Special Report With Bret Baier, 9/27/11, via Nexis]
- Discussing solar power, Charles Krauthammer said: “the government [is] basically throwing $30 trillion in the industry that clearly is not viable industry or it would be able to raise money on its own, the markets have spoken on this.” [Fox News, Hannity, 10/14/11, via Nexis]
- Criticizing clean energy subsidies, a Wall Street Journal editorial said “The problem is that wind and solar still can't make a go of it without subsidies.” [Wall Street Journal, 8/17/12]
- In an op-ed, Holman Jenkins wrote that there is not “the slightest reason to believe that only the absence of government spending stands between us and a solar revolution,” arguing the industry does not need subsidies [Wall Street Journal, 9/29/11]
FACT: Solar Subsidies Are Helping An Emerging Technology
Subsidizing Solar Fits With Historical Role Of Helping Adoption Of Early Technologies. A report by the Howard H. Baker Jr. Center for Public Policy stated that “Solar energy technologies are currently in the rapid growth stage between early adoption and the chasm that comes before majority adoption where government incentives can be most critical in helping new energy technologies become significant sources of energy production.” It reviewed the history of public funding for energy and other areas and found that solar incentives are similar to those that have been historically provided:
Incentives provided to the solar industry are consistent with those provided in the developmental stages of all other energy sources that the federal government has chosen to incentivize for public policy purposes. Evidence from recent years' deployment of solar power suggests that solar incentives are working. Under these circumstances, the solar power industry can provide employment benefits, global market opportunities, and a resource to meet peak power demand at minimal marginal cost.
That report found that the federal investment tax credit for solar is a “long-term stable instrument that could help solar energy cross the 'chasm' to early majority adoption.” But it warned that “Incentives in the mature industries effectively raise the overall cost of government incentives needed to bring new resources up the adoption curve.” This chart included in the report shows that we continue to subsidize several mature industries that compete with solar, including natural gas, coal, and nuclear energy, at rates similar to our subsidies to solar:
[The Howard H. Baker Jr. Center for Public Policy at the University of Tennessee - Knoxville, 5/1/12]
Report: U.S. Clean Tech Has Grown Rapidly “Due In Large Part To A Substantial Increase In Federal Investment.” In an April 2012 report, energy policy experts at the Breakthrough Institute, Brookings Institution and World Resources Institute noted that federal support has driven a recent expansion in U.S. clean tech sectors. The report warned that federal support “is now poised to decline precipitously ... raising the possibility of market turmoil ahead,” and recommended policy reforms to provide more stable and effective incentives that fossil fuel industries have historically enjoyed. From the analysis:
In recent years, US clean energy technology (“clean tech”) sectors have grown rapidly, despite the economic turmoil gripping the nation. By the end of 2010, installed wind power capacity in the United States stood 60 percent above 2008 levels, while solar power capacity had increased 120 percent over the same period. The United States regained global market share in advanced battery and vehicle segments, and construction commenced on the first new US nuclear reactors in decades. Robust expansion can be observed across virtually all segments of the clean tech sector, with total employment across clean technology segments growing 11.8 percent from 2007 to 2010, a period when overall US employment was stagnant (Figure 1). US renewable energy and energy efficiency segments alone attracted $48 billion in investment in 2011, up 42 percent from 2010 and over twice as high as 2009 levels. This recent expansion of clean tech segments is due in large part to a substantial increase in federal investment and policy support.
Though current subsidies could be better optimized to drive innovation (see discussion in Part 3), many clean tech companies have nonetheless achieved significant technology improvements in recent years, often with the assistance of these federal programs. Federal support for clean energy technologies has fostered market competition and improvements in technology and/or manufacturing efficiencies in areas like advanced batteries and vehicles, solar panels, and wind turbines, and other technologies [Breakthrough Institute, Brookings Institution, World Resources Institute, April 2012]
Oil And Gas Have Received The Majority Of Federal Support Historically. An analysis by Management Information Services for the Nuclear Energy Institute, an organization affiliated with the nuclear industry, found that oil and gas have received almost 60 percent of federal spending to support energy since 1950:
[Nuclear Energy Institute, October 2011]
Fossil Fuel Subsidies Greater During Crucial Development Period. According to a 2011 study from venture capital firm DBL Investors on inflation-adjusted energy subsidy spending, “federal commitment to [oil and gas] was five times greater than the federal commitment to renewables during the first 15 years of each subsidies' life,” a crucial period where government support can aid long-term success. The report included this chart showing that oil and gas subsidies have helped that industry for centuries, while renewable subsidies are helping the emerging industry scale up:
[DBL Investors, September 2011]
Fossil Fuel Costs Do Not Fully Account For Their Pollution Damage. The costs of many of the energy sources that solar is competing with do not fully account for the damage that they do to the economy through pollution and other environmental harms. For instance, a study published by the American Economic Review concluded that “coal-fired power plants have air pollution damages larger than their value added” to the economy and coal-fired electric generation is “the largest industrial contributor to external costs.” [American Economic Review, August 2011] [Media Matters, 10/12/11]
Private Sector Overlooks The Value Of Solar's Longevity. Ken Zweibel of George Washington University's Solar Institute noted in a study that solar photovoltaic “has an unusual, overlooked value: systems can last for a very long time with almost no operating costs.” But, Zweibel says, “We should not expect the private sector to invest in PV until PV meets its usual expectations for fast returns,” and until that happens governments have to invest in solar if they want more rapid deployment of solar PV. Zweibel notes that this fits a role of government: “Governments already invest in long-lived assets like bridges and highways; and at one time, they invested in TVA and Hoover Dam--these all emphasize long life and dependability, not immediate return on investment.” He calculates that solar's long life “make[s] it among the most competitive choices for the long term, even based on today's prices for large systems. These prices are expected to drop with future progress.” [Energy Policy, 7/19/10]
Brookings Fellow: Subsidies Can Help Solar Break Into An Entrenched Market. Mark Muro, a senior fellow and the policy director at the Metropolitan Policy Program at the Brookings Institution, wrote in an op-ed for the Wall Street Journal that subsidies for renewable energy are working and need to be extended, with some reforms, in order to help solar and wind break into the entrenched energy market:
The ultimate reward [for temporary subsidies] is cheaper, cleaner energy and greater energy diversity, which will help guard against price shocks, keep energy costs down through competition and lessen the damage our energy consumption does to the environment, among other things. The benefits are well worth the cost of temporarily extending these subsidies, which are a trivial portion of the federal budget.
Wind and solar need the help because the barriers for new technologies in the energy industry are tougher than those in any other industry in this country. Fossil fuels, with the help of their own government subsidies over the years, are thoroughly entrenched, with trillions of dollars' worth of infrastructure in place. At the same time, utilities tend to favor established business models and are required by regulators to provide the lowest-cost power, all of which steers them toward fossil fuels. [Wall Street Journal, 10/8/12]
UMass Study: Clean Energy Produces More Jobs Per Dollar Than Military Or Fossil Fuel Investments. A 2009 University of Massachusetts-Amherst study estimated that on average, stimulus investment in clean energy creates 17 jobs per $1 million of expenditure -- a higher employment return than spending in the oil and gas industry and the military. From an NPR report:
There are reasons to believe that clean energy is a good investment, though. This part of the economy is small and growing fast. So far, it gets a good bang for the government buck.
“If you took the government's stimulus program on green activities, you get 17 jobs more or less per $1 million of expenditure,” said economist Robert Pollin of the University of Massachusetts Amherst, whom the Commerce Department hired to run the numbers.
For comparison's sake, Pollin calculates that the military creates about 11 jobs for every $1 million; the oil and gas industry produces about five jobs per $1 million.
Pollin said clean energy gets a better payoff because kick-starting a new industry requires a lot of manpower.
“There's way more jobs in clean energy because essentially there's a lot more construction jobs, there's a lot more manufacturing jobs, there's a lot more transportation jobs,” he said. “So it's really the process of building the new industry that makes it a good generator of jobs.” [National Public Radio, Morning Edition, 6/13/11]
Max Greenberg contributed to this report.