Well, not free-free, but subsidy-free. Maybe.
When I read a headline promising “Solar Power to Hit Cost Parity Next Year,” it reminds me of the sign above the bar promising “Free Beer Tomorrow.” Like tomorrow, “next year” is always approaching and never here.
RP Siegel begins his Triple Pundit article, “Solar Power to Hit Cost Parity Next Year,” in full solar triumph mode:
They said it couldn’t be done. They tried to tell us that renewable energy could only survive if it were propped up with government subsidies. Never mind that our whole system of economic development, beginning with the patent office, is predicated on the idea that fledgling, underfunded industries need special protection for a limited time until they are strong enough to go it alone. Never mind that the fossil fuel industry, which can hardly be considered fledgling or underfunded, is still receiving billions in taxpayer subsidies.
But like the little engine that could, or the middle aged rock star that, after twenty years of struggling in sleazy dives has suddenly become an overnight sensation, solar power, having now surpassed the 100 GW threshold, has finally arrived and is good to go, in many places, without subsidies.
Great, so can we now pull the plug on solar power subsidies? And, by all means, yank the fossil fuel subsidies too.
(I’m passing over the wildly off-the-mark claim about “our whole system of economic development.” Not credible enough to take seriously. As it turns out, neither is the “grid parity” claim credible yet. But let’s at least explore the triumphant claims of success.)
Curiously, the article follows the “has finally arrived and is good to go … without subsidies” declaration with accounts of subsidized success. Apparently one-third of the 100 GW of world solar power capacity has been installed in Germany because of its generous feed-in tariff policies. Installations in China are growing fast. India and then Spain are mentioned. Spain built a lot of solar with subsidies, but recently stopped the subsidies. I’ll come back to India, but let’s look closer at the claim for Spain. Let the fisking begin!
Spain, the article declares, has achieved “grid parity,” backing the claim with only a link to a post at Forbes.com last December. The Forbes.com blog by Peter Kelly-Detwiler, “Solar Grid Parity Comes to Spain,” builds off a report from Bloomberg titled “First Large Solar Plants Without Subsidy Sought in Spain.” The Bloomberg article reports that many large-scale solar projects have applied to connect to the power grid, and the head of solar energy analysis at Bloomberg New Energy Finance is quoted as saying, “Spain is probably set to have Europe’s first utility- scale solar parks without subsidies.” So following the chain of links we have gone from gleeful declarations of “grid parity” to mere grid-connection paperwork that “probably” will yield “solar parks without subsidies” according to a solar energy analyst.
But read a little more and you get the views of the solar power lobbyist in Spain who reports that while many companies are anxious to develop solar power projects…
The biggest hurdle they face is to get the government of Prime Minister Mariano Rajoy to restart the planning process for new solar generation, said Eduardo Collado, director of operations at lobby group Union Espanola Fotovoltaica. Rajoy ordered the end of subsidies for new projects 10 months ago.
“None will go ahead until that changes, even though there are a few plants definitely needed at points in the system where the network operator wants them,” Collado said in an interview.
So, none of the subsidy-free projects will go forward until the policy that ended subsidies is changed?
Still, just a bit later in the article, a solar power developer said it would be able to build without subsidies. Maybe, at long last, this report justifies the triumphant claim that Spain has reached “grid parity”?
Not exactly. In June 2012 the developer said it expected to be able to build without subsidies in the last half of 2013, because “we think the cost of photovoltaic will have dropped enough by then and, given the irradiation in Spain, will be totally competitive.” So once again we have hopes of grid parity “next year,” which through the magic of sloppy reporting become triumphant claims that “Spain has … achieved grid parity.”
So what about India? As the Triple Pundit post reports, Deutsche Bank anticipates solar power transitioning “from subsidized to sustainable markets in 2014” based on the emergence of “large unsubsidized markets in places like India, where sunshine is plentiful and the alternatives are expensive.” Okay, so once again we have analysts claiming that solar power could live subsidy free soon, just not yet, and no doubt one day such predictions will come true.
But in parts of India, as with many other places around the world, where centralized grid power is expensive or unreliable or unavailable altogether, solar power is already an economical option. Solar power is a product with a few successful market niches, and these market niches will likely continue to grow as (and if) costs continue to fall.
Without extensive policy interventions, a sustainable solar power industry would tend its market niches and prepare to exploit other niches as it became more competitive.
And, by the way, please do yank fossil fuel subsidies and address externalities with appropriate policies, and let fossil fuels shrink to their market-justified size as well.
Get policy right and let the market sort ’em out.