Posts Tagged ‘The economics of solar’


Monday, December 22nd, 2008

“It is more blessed to give than to receive.” — -Jesus’ Sermon on the Mount.

“Greed, for want of a better term, is good.” — -Gordon Gekko’s speech to the shareholder’s meeting of Teldar Paper, Inc. (played by Michael Douglas in the movie, “Wall Street”).

These two statements define the polar bookends within which humanity has sought to advance from the campfires of the Stone Age to the skyscrapers of the Modern World.  Today, we stand beneath the victory arch of Capitalism, its competing rivals lying discarded along the road of history — -Communism, National Socialism, even the humble commune of the 1960’s.  But if you look closely, you will see that today, we are also standing in the rubble of Gekko Gone Wild — -we are being  treated to the spectacle of  a shattered world economy that has been brought to its knees by exploding greed.   The problem is that the infant seeds of renewable energy must hope not just to germinate in this rubble pile, but to take hold and prosper.  As a nation, as a planet, and as a species, we must ask ourselves the critical question:  Can we afford to place solar, and wind, and all of the other renewable seeds in Gordon Gekko’s hands?

The answer is:  “Not a good idea.”

I first began my involvement with solar energy in the spring of 1974.  I was part of a small group of dreamers (Solar Steam, Inc.) that thought we could solve much of the world’s ills by creating a cost-effective solar energy collector.  To that end, we built a 28 foot solar concentrating dish which was completed in 1979.

 (Note the 30 year-old version of yours truly, complete with brown hair and beard).

A second, larger 40 foot dish was completed in 1985.  The dish was highly innovative and effectively converted sunlight into high grade industrial process steam. 

(That’s high-grade, industrial quality steam pouring out the end of that hose — -a very marketable product for which millions of dollars are paid annually by American industry.)

We unveiled our marvelous invention to the world that same year and stood back, waiting to sign up the investors and customers.  No one came.  The investors were too busy making larger profits elsewhere, and the customers needed the cost savings of “economy of scale” production (which required investors to achieve).

In April, 1988 I created United Solar Technologies.  My goal was just what the name implies: an attempt to unite a number of competing solar companies into a single effort so that investors would recognize that somewhere within the company’s participants there was a true winner.  Our first project was to establish that solar energy could compete with any source of energy on the planet, whether it be coal, oil, or even natural gas.  To this end we went looking for a suitable site for our demonstration.

We settled upon Tehachapi Prison in California.  With laudable assistance from both the California Energy Commission and the California Department of Corrections, we were able to enter into a long-term (30 year) energy purchase agreement with the DOC.  Under its terms, we would be paid 95% of the money the state would have paid for the same energy from burning natural gas.  This point cannot be stressed enough:  Tehachapi has demonstrated that solar energy IS CHEEPER THAN BULK-RATE NATURAL GAS (THE CHEAPEST OF THE CHEAP)!

The entire purpose of the Tehachapi project was to demonstrate to the FINANCIAL COMMUNITY (the Gordon Gekkos of this world), that they could make a very respectable return on their investment by installing solar projects.  We were able to show that Tehachapi could return more money than an equal amount invested in the U.S. Treasury “long bond” (the 30-year bond — -then at 8.3%!) by competing directly with bulk rate natural gas (then at $4.30/MMBTU).  Right out of the starting gate we established ourselves as the world’s cheapest source of energy!

Once again we turned around to take the orders from the investing community.  Once again, no one was there.  As one high-roller explained to me later, “Why would I want to tie my money up for 30 years when I can get 20% a year or better right now?”  Remember those heady days of the mid-90’s?

We tried to do follow-on projects with the DOC, but the initiative eventually fell victim to bureaucratic red tape, and no further prisons were ever solarized.

Taking my cue from the Tehachapi experience, United Solar reloaded and dove into the creation of the ultimate solar collector, the PVT (photovoltaic/thermal concentrator).  The upshot of this unique collector is that it produces both electricity and industrial process heat simultaneously.

Again, with the help of the California Energy Commission, our first prototype was unveiled in the spring of 1995.  It held the clear promise of amortization in under 5 years (sooner, if the electricity is used to displace gasoline in an electric car like Sparky).  For a detailed examination of the PVT and the ECONOMIC thinking that went into it, see the final report to the California Energy Commission.

Once again we turned to the line-up of investors.  Gone — -off to lay their money on, Inc.

All of this brings the focus to the impact of the investment community on the whole issue of renewable energy, and solar in particular.  Right now, you can hear the sound of a stampede heading our way as people are waking up to the realities of a world caught on the dual horns of a global climate crisis and a finite oil supply.  Let me share with you some of my concerns as the Gekkos approach:

1.  The price of the land:  Right now, the best solar land is virtually worthless — -it’s made up of hard-scrabble desert land that nobody wants and no one can use.  That is going to change once solar energy rises to its feet.  Gordon Gekko is going to see “gold in them thar hills”, and he will buy huge tracts of land at pennies an acre only to turn around and wring agregious profit from his far-sited investment.  My point here is simple: solar can rise to meet all of our planet’s needs if it is carefully and thoughtfully deployed.  DO NOT SADDLE SOLAR WITH THE BURDEN OF BUYING THE LAND IT SITS ON, especially at inflated Gekko prices.  In my mind, it is imperative that government act to acquire prime solar land (by eminent domain if need be).  It must be held for the common benefit of all of us.

2.   “Return on Investment”:  At the heart of Gekko’s world is the concept of “return on investment”.  It is this single concept that has hobbled solar energy from its very inception:  “Why should I invest in solar when I can make 20% on something else?”  Over the course of the last several blogs, I have tried to raise an awareness of the true power of solar energy as the path to energy freedom.  In “Suggestion No. 5: Try Solar Alchemy”, I pointed out that a solar device starts to produce real capital the very minute it is deployed — -dollar bills drop to the pavement the moment the sun rises.  But the problem is:  where  are the dollar bills going to go?  My personal experience from Solar Steam, through Tehachapi, and finally the PVT is that Gordon Gekko is going to want the first dollar…and the second…and the third.   In fact, Gekko is going to want assurances that he is going to have a guaranteed return on his investment BEFORE HE EVEN AGREES TO INVEST HIS MONEY.   It is this very fact that has prevented solar energy from rising to take its place as the primary energy source for the planet.  The real truth is that solar cannot effectively come to our rescue as a species if it has to do it by riding through the Valley of Gordon Gekko.  The greater the demands that you put on those infant solar collectors, the less able they are to rise to their feet.  When you ask a collector to pay off the land it sits on and then satisfy the demands of “greed is good” Gekko, you will find that, like the Solar Steam dish, the Tehachapi trough, and the PVT, it will never come into existence in the first place.

Yet there is another way.  Plug in the Sermon on the Mount.  To give, for want of a better word, is good.

I touched on this in my last blog, “Suggestion No. 7: Pennies from Heaven”.  If I were to buy a solar collector and place it in the desert, and just let go of it, those dollars that drop to the ground when the sun rises CAN GO TO CREATING MORE SOLAR COLLECTORS.  It is as simple as that.  Just imagine if every man, woman and child in this country were to GIVE a solar collector to the cause — -a mighty field of collectors would begin to rise up like a conquering army, producing more soldiers by the minute, each of which would go to work immediately producing more soldiers.  We would become awash in energy.  Eventually, there would be more energy produced than we could use, and all of those solar dollars would have to find a new purpose — -like cleaning up the earth of all of the petro-pollution that has taken place over the past century, or, perhaps, providing free health care.

And all of this because we choose to sit on the slopes of the Mount of Olives as opposed to the boardrooms of an island beside the Hudson.