Archive for June, 2009

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Innovations in solar inverter technologies, and their economic impact

June 4, 2009

Lynne Kiesling

Following up on Mike’s solar policy post from last week … one of the sub-areas in which development is occurring that I consider thoughtful, and unheralded, is in inverter technologies. When an array of photovoltaic panels generates electricity, it generates a direct current, but for use in conjunction with our alternating current distribution network, that DC flow has to be inverted into AC in a way that matches the “sinusoidal phase” of the network into which it is interconnecting. “Sinusoidal phase” just means that it has to match the shape of the sine wave of the AC flow, but it’s just such a silky and elegant phrase that I had to use it …

The inverter is probably the most important piece of electronics in a solar PV system. The standard inverter technology is, at least in my simple-minded way of analogizing this to something to which we can all relate, essentially a serial processor; you hook up the panels to “series strings”, and at least to me it looks kind of modular — the larger a PV array you want, the more inverter strings you include. Apparently, though, this parallel inverter technology is a bit of a weak link in the system; they fail more and sooner than the panels, and typically only have 5-to-10-year warranties, so will need to be replaced several times during the life of the rest of the array. Those replacement costs are part of what makes solar so expensive relative to other generation methods.

Eric Wesoff at Greentech Media is predicting a coming disruption in the solar inverter market, arising from some innovations in the architecture of the inverter. In addition to enumerating the downsides of the existing technology, he points toward different inverter architectures that may perform better, leading to longer asset lives, more electricity generation for a given size of array, and thus more attractive economics of solar power:

Two new and potentially disruptive “distributed inverter architectures” are being applied to solar deployments:

•    Microinverter or parallel architectures
•    Distributed MPPT or DC-DC bus architectures

They are very different approaches but both methods potentially offer substantial benefits including:
•    Anywhere from 5% to 25% improved energy harvest
•    Easier installation – reduced system engineering
•    Cheaper installation – less time spent on the roof and reduced wiring cost

One way of doing distributed inverter architecture essentially scales down the inverter so that each panel has one, instead of hooking several panels together serially. In a separate article, Wesoff provides some more insights into the economics of why solar inverters matter, and who are the innovators working on these potentially disruptive technologies:

First mover advantage belongs to Petaluma, Calif.-based Enphase and its miciroinverter.  The company has already shipped tens of thousands of units for hundreds of PV installations. You can look at every PV installation in California under the California Solar Initiative here. It’s not the most elegant spreadsheet but the data is there and you can sort by inverter vendor.  It looks like Enphase has about 400 PV installations in California using their microinverter.

But SolarBridge, (formerly known as SmartSpark) is also going after the microinverter market and has a slightly different take on the distributed inverter endgame (see SolarBridge Seeks up to $15M).

Whereas Enphase’s current inverter design mounts on the panel racking equipment, SolarBridge envisions a fully integrated AC PV panel where the inverter is incorporated into the panel itself.  SolarBridge sees this as a superior solution and is partnering with module manufacturers to develop AC module solutions.

The rest of the article provides more details on these two firms and their products. Enphase also has a slick solar array monitoring tool using broadband connectivity. Most people who don’t work in solar don’t think much about the electronics in solar, the inverter, and how they can affect the economic competitiveness of solar. But these types of disruptive innovations in an unsung role in the product have the potential to change the relative costs and energy efficiency of solar arrays, and thus bear watching over the next few years.

Note also some potential for cross-pollination — the technologies are different, but plug-in electric vehicles are going to require inverters too, if PEV-enabled building owners are going to be able to sell power to others. So these inverter innovations may have implications for the future of PEVs too.

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Economic experiments on growth policy

June 4, 2009

Lynne Kiesling

Tim Kane at the Kauffman Foundation is going to do some experimental economics research (with Dan Houser at George Mason) on some questions of growth and entrepreneurship:

The experiments are for the study of work and entrepreneurial behavior under different policy regimes, including taxation, welfare, and social insurance. I’ll share a link to the preliminary literature review / experimental design working paper in a future post. Questions on my mind are:

1. Will higher federal taxes reduce entrepreneurship and growth, or are those fears overblown?
2. What’s the best way to design an experiment for work under different policy regimes? Once we nail that down, what is the best way to design the choice of riskless versus risky (entrepreneurial) work?
3. Is there research already in existence informing this topic?

Tim’s post summarizes some of that literature and provides some insights into why he thinks an experimental approach will expand our understanding of these questions. I look forward to seeing this research.

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KP convergence in Chicago

June 2, 2009

Lynne Kiesling

For once, both erstwhile KP authors are in the same place! I’ve organized a research roundtable at the Searle Center on Law, Regulation, and Economic Growth at Northwestern University, and Mike’s in town to attend. The event’s called Energy, Technology, and Institutions, and you can read the working papers to be discussed if you are interested:

Combined Issues of Climate Policy and Energy Policy: Reducing Greenhouse Gas Emissions while Meeting Increasing Global Energy Demand
Daniel H. Cole, Indiana University School of Law

The Political Economy of Energy and Its Implications for Climate Change Legislation
Jim Rossi, Florida State University School of Law

Beneficial Complexity: A Field Experiment in Technology, Institutions, and Institutional Change in the Electric Power Industry
Lynne Kiesling, Department of Economics, Northwestern University
David Chassin, Pacific Northwest National Laboratory

The Challenges of Valuing Carbon
Rick Mattoon, Federal Reserve Bank of Chicago
Margrethe Kearney, Latham & Watkins LLP

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Tim Haab: Michael Moore is a bad economist

June 2, 2009

Lynne Kiesling

Sorry, Tim, but that’s not really earth-shattering news, is it? Anyway, Tim’s post critiquing Michael Moore’s recommendations to the Obama administration as majority shareholder in GM is highly entertaining. A taste to whet your appetite, but please do read Tim’s foment in all its glory:

And as the end days of oil approach us, get ready for some very desperate people willing to kill and be killed just to get their hands on a gallon can of gasoline.

I’m going out tonight to rent Mad Max and learn how to handle this.  On second thought, that would mean driving my evil-machine of death and destruction, er I mean car.  Better, I’ll use my HDTV and video on demand to learn how to save the planet Mel Gibson style.

President Obama, now that he has taken control of GM, needs to convert the factories to new and needed uses immediately.

Because government knows best.

2. Don’t put another $30 billion into the coffers of GM to build cars. Instead, use that money to keep the current workforce — and most of those who have been laid off — employed so that they can build the new modes of 21st century transportation. Let them start the conversion work now.

Slight rewrite: Don’t put another $30 billion into the coffers of GM to build cars. Instead let them sink or swim on their own. You know, like any other business that hasn’t been bailed out recently.

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Health care policy

June 2, 2009

Lynne Kiesling

We don’t write much about health care economics here, but in many respects it does raise some of the same issues that I find fascinating in electricity, telecom, and technology industries. David Zetland has a good post today about how third-party payer health care rules lead to cost increases and overconsumption of health care. I heartily endorse his conclusion:

My main suggestion on medical care is that we cut out the employer. The employer will instead transfer insurance payment money to employees, who are then required to buy insurance.* The patient can buy high or low deductible insurance.** …

Bottom Line: Incentives matter, even with incomplete and asymmetric information. The way to improve your health care is by putting you in charge of it.

[You'll have to click through to his post to see what his asterisks signify :-) ...] I could say the same about electricity consumption, information technology, and dynamic pricing — the way to improve your value for money from electricity consumption is by enabling you to make the decisions, not leaving the decisions in the hands of regulators or a regulated utility in the form of regulated pricing.

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Predictable consequences of anti-price gouging laws

June 1, 2009

Michael Giberson

West Virginia Governor Joe Manchin released a statement last Thursday indicating his disappointment with Marathon Oil’s decision to temporarily halt sales to independent gasoline retailers in a part of the state affected by flooding and a May 9 declaration of emergency. The May 9 emergency declaration triggered the state’s price gouging law, and Marathon told Convenience Store Petroleum Daily News that it would lose money on sales made under the capped prices. (Marathon continues to supply independents with whom they have supply contracts, they are only suspending sales to customers lacking such contracts.)

The governor’s statement notes that the state’s “anti-price-gouging laws allow businesses to increase prices to recoup costs if the increase is directly attributable to additional costs imposed on the business.” I wonder if the phase “directly attributable to additional costs imposed on the business” has been well clarified in the courts. Several states seemed to have ramped up prosecution of price gouging – for instance, this report on Georgia notes that fines have ranged up to $20,000 plus restitution for price gouging during supply disruptions last September. Since wholesale gasoline costs have increased over the three weeks since the declaration of emergency, clearly Marathon’s costs have gone up. But how much of the cost increase is “directly attributable to additional costs imposed on the business”?  In such an environment, Marathon may have reasonably decided not to risk a lawsuit by pursuing the opportunity to “recoup costs” under the law.

Two comments. First, no surprise that a price control would limit supply. Economists often go on about unintended consequences, but this kind of effect is so predictable as to not fall into that category.

Second, this practical case serves to illustrate a philosophical position advanced by Matt Zwolinski in his articles on the ethics of price gouging, namely, his “non-worseness” claim. Zwolinski has argued that if you grant that a seller could ethically refuse to sell a product during an emergency, say by closing shop rather than remaining open, and that buyers are no worse off if a seller instead decides to stay open but raises prices, then it cannot be unethical for the seller to stay open but raise prices.

In the instant case, while Marathon continues to make sales under pre-existing contracts, they have decided to suspend sales to other potential customers in order to avoid triggering a legal complaint. Those potential customers – retail gasoline stations in the affected area – now have to search out new sources of supply due to the operation of the states anti-price gouging laws. Can we agree that every one is behaving legally, and the law is making people worse off?

NOTE: Zwolinski’s articles are cited and related comments are available in my prior posts on price gouging.

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