Reason 1: UK is on track for 20GW solar PV capacity by 2020
Back in 2012-13, when the UK Government had both a Department of Energy & Climate Change and a UK Solar PV Strategy, the UK had ~2.4GW of solar PV capacity generating ~1.4TWh from July 2012 to June 2013. They estimated, “At the upper limit, by 2020 solar PV could reach up to 20GW and with a potential for 7GW at the lower end (including both large and small-scale).”
Technical deployment potential to 2020 for solar PV: [2]
The interesting thing I found about the wholesale market was the inclusion of “Non Physical Traders” 1.
Source URL: http://advances.sciencemag.org/content/3/3/e1601861.full
Author: Max Jerneck et al
Science Advances 29 Mar 2017:
Vol. 3, no. 3, e1601861
DOI: 10.1126/sciadv.1601861
As long as hoarding and speculation are available as options to financiers, their willingness to invest in innovation is limited. It is safer to live off the income streams of past investments, as “rentiers.”
A fully production-oriented economy is only possible if the financial component of capitalism is entirely subordinated to the entrepreneurial function, in which case it might no longer be recognizable as capitalism at all, but rather a centrally planned economy where decentralized financial decisions are curtailed. [Solarise notes, for example, China and to a lesser extent India now]
...investments in innovation must be based on more elaborate “fictional constructions” of future states.
Creative destruction is a power struggle between incumbents and challengers, which devise strategies by taking each other’s presumed actions into account. The power balance is observed by financiers, who restrict finance to what they perceive to be the winning side. As Weber argued, finance is a weapon in the struggle for economic existence.
Investment decisions have signaling effects.
As Kenney and Hargadon demonstrate, private venture capital is not a viable model for most low-carbon technologies, which are capital-intensive and in direct competition with existing alternatives.
The goal of the entrepreneur is to expand production, and money is a mean to this end. The goal of the financier is to make money, and production is one, but not the only, mean to this end. If the financier could, he would rather skip the production phase altogether and turn money directly into more money.
In Japan, (male) blue collar workers were integrated into the innovation process. Iwata argues that the elimination of shareholder control after the Asia-Pacific War turned the Japanese enterprise into a “unified body of employees.” Lifetime employment turned the worker from “an external seller of his labor” to a “corporatist who shares the responsibilities of management”.
Separation of ownership and control can lead to concern about excessive autonomy of managers to pursue growth strategies that do not necessarily make economic sense or only do so on a long-time horizon.
The function of finance, it may be argued, is to keep this from happening. During the 1980s “shareholder revolution,” financiers reasserted control.
Financialization is caused by nothing more than the removal of political constraints on finance. By deregulating finance and letting markets decide where finance should flow, politicians freed themselves from the responsibility of choice. Decision-making was moved from the realm of politics, where policy makers bear responsibility, to the realm of impersonal decision-making, either through technocratic control or to market forces.
In the early 1970s, when the American solar energy industry did not yet exist, there were two competing visions of where it should head. One camp consisted of a small number of entrepreneurs who had been involved in producing solar cells for the space program or pioneered their application on Earth. They envisioned an industry of small-scale energy production off the grid. Solar energy was too expensive to compete with conventional sources but had the advantage of being usable in remote locations or at sea.
The other camp consisted of the energy policy bureaucracy and closely affiliated large manufacturing and energy corporations along with utilities. This camp was wedded to the idea of utility-scale PV generation, competing directly with conventional sources of energy.
The first American PV firm to focus on the terrestrial market was Solar Power Corporation (SPC), founded in 1973 by Elliot Berman. He originally took his idea to a number of venture capitalists, but they “weren’t very venturesome” and declined the offer. Instead, he turned to the oil company Exxon, which made SPC a subsidiary after Berman had convinced executives that solar panels were cost-effective for offshore oil platform lighting, pipeline corrosion protection, and surveying equipment. Others took notice and the oil industry soon became one of the most important markets for solar cells. However, the involvement of oil companies would prove a mixed blessing.
The initial involvement of large financial conglomerates was ambiguous because they provided needed financial support but steered the industry away from existing markets toward a large-scale utility market that never emerged. By focusing almost exclusively on creating a future market for centralized energy generation, American firms missed the opportunity to develop the small off-grid and consumer electronics markets that were already available. There was an alternative path that was not taken toward decentralized solar energy, which would not have to compete with conventional sources. We know this because that is how the industry developed in Japan, where solar cells were applied mainly for off-grid use and consumer electronics, allowing the technology to mature gradually without much reliance on subsidies or record-level energy prices. This article demonstrates that the main reason this path was not taken in the United States was a disconnect between industry and finance.
Keynes noted that the ever-present tendency toward financialization calls for a substantial share of public investment. This is particularly true of extra-market goals, such as the mitigation of climate. Perhaps, the recently expanded role of central banks in economic governance could play a role in developing low-carbon technology, a topic worthy of future investigation.
A political strategy to bring productive and financial capital together is needed. It is necessary to close off easy ways of making money off money, such as speculation and stock buybacks. This article has examined ways in which financialization impedes the development of low-carbon industries. It has not examined ways in which financialization may aid it. This interesting issue needs to be addressed in further studies.
In my last blog , I published a summary of the various avenues that I could see currently being pursued towards raising solar energy adoption globally.
In summary, I mentioned:
- Developments in solar cells/panels (including Thin Film, 3rd Gen. PV, Concentrated PV, etc.)
- Developments in solar energy peripherals (including storage batteries, smart monitors, etc.)
- Utility-scale long distance solar energy exporting (including desert-based solar farms, High Voltage Direct Current transmission, Supergrids, etc.)
- Measures for increasing Residential and Commercial solar adoption (including government policies & incentives, education & consultancy, supply chain & market conditions, etc.)
- Financing of Residential, Commercial and Utility solar power generation
Compared to the other summary points, I didn't elaborate on my 5th and final point on the financing of solar energy. This was solely because I hadn't done the necessary learning on that topic to provide any detail at that point.
The fact that I limited the financialization in the solar industry to simply solar power generation shows how I underestimated the reach of finance in all aspects of the solar energy market.
I have since learnt more about the economics applied to solar energy, including but not limited to:
Utility-scale |
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Commercial |
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Residential |
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Add to the above, disciplines such as Secondary Markets, Refinancing, and Asset Management, the solar energy world is increasingly looking and sounding like something from "The Wolf of Wall Street" or "The Big Short". A far cry from "The Good Life", with which solar fans may rather associate themselves.
In fact, PPAs can come in Sleeved/Physical and Synthetic/Virtual varieties, which are openly acknowledged as financial derivatives 4.
There are concerns that the financialization of the solar industry has impeded (and is continuing to impede) the level of progress needed for solar energy adoption globally 5. I believe this is only bound to continue as we try to apply very flawed scarcity-based capitalist thinking and systems (including the same practices that gave us financial derivatives, collateralized debt obligations and other such gems that exist outside the 'real economy') to what is a post-scarcity situation.
In short, the financing of solar energy needs serious simplification!
What are you views on this topic? Please leave a comment below.
1 LCOE (levelized cost of energy) is one of the utility industry's primary metrics for the cost of electricity produced by a generator. It is calculated by accounting for all of a system's expected lifetime costs (including construction, financing, fuel, maintenance, taxes, insurance and incentives), which are then divided by the system's lifetime expected power output (kWh). All cost and benefit estimates are adjusted for inflation and discounted to account for the time-value of money. As a financial tool, LCOE is very valuable for the comparison of various generation options. A relatively low LCOE means that electricity is being produced at a low cost, with higher likely returns for the investor. If the cost for a renewable technology is as low as current traditional costs, it is said to have reached “Grid Parity”.
http://www.renewable-energy-advisors.com/learn-more-2/levelized-cost-of-electricity/
Our mission : "Raising solar energy adoption globally"
We live in very exciting times, where we are seeing daily
breakthroughs and records being set - where clean, green solar energy
(and other renewable energy sources) are rapidly displacing dirty,
non-renewable fossil fuels (coal in particular). And due to rising
efficiencies and reducing costs, solar energy is winning the economic
argument too, even without subsidies in many cases.
But we know that the transformation is not happening fast enough! (our friends at 350.org make the case clearly enough: https://350.org/science/
)
So I've been studiously analysing the market to understand where we
can make the biggest impact. I don't intend for the summary below to be
exhaustive, but I think it represents the main avenues being pursued
globally at the moment.
I would really appreciate comments from those in the industry to
validate, challenge or expand on my thoughts and to help prioritise
where you think we should focus our efforts as we begin this noble
mission ...
In no particular order:
1. Solar cell and panel product R&D/ bring to market – including Third-generation photovoltaic cells 1
- Thin film solar cells – cheaper, more potential use cases (e.g. building-integrated/ within windows), rising efficiencies
- Multi-junction/layered solar cells – much higher efficiencies by harnessing different wavelengths of the light spectrum (e.g. visible and IR) through multiple layered cells each using different band-gap semiconductors 2
- Concentrated PhotoVoltaics (CPV) - sunlight can be concentrated about 500 times using inexpensive lenses
- Temperature tolerance 3 – cooling of solar cells (e.g. water-based), heat utilisation by combining PV cells with heat based technologies
- Sun tracking – adjusting tilt of solar panels according to Sun's position, tilt depends on latitude of location and time of year (adjust in March and September)
2. Peripheral product R&D/ bring to market - Storage batteries, inverters, monitors, BOS (Balance of System)
3. Utility Solar energy long distance electricity export using HVDC transmission grid – projects considering solar electricity generation in deserts for long distance transmission (e.g. Sahara to Europe 4 )
4. Increasing Residential and Commercial solar adoption
- Government policy/incentives, micro-generation
schemes/accreditation
- Education, aggregator/comparison sites, business case
development
- Product/system go-to-market and supply chain (including
distribution/wholesale/retail)
1 Solar cells that are potentially able to overcome the Shockley–Queisser (efficiency) limit.
2 The semiconductor chosen for a solar cell has to absorb as much of the solar spectrum as possible, therefore a low band gap is desireable. However, this is counter balanced by the desire to also have as large a built-in voltage as possible which requires a larger band gap. Therefore as a compromise, a band gap between 1.0 and 1.7 eV makes an effective solar semiconductor. In this range, electrons can be freed without creating too much heat.
The photon energy of light varies according to the different wavelengths of light. The entire spectrum of sunlight, from infrared to ultraviolet, covers a range of about 0.5 eV to about 2.9 eV. The primary reason why solar cells are not 100% efficient is because semiconductors do not respond to the entire spectrum of sunlight. Photons with energy less than silicon's bandgap pass through the cell and are not absorbed, which wastes about 18% of incoming energy. The energy content of photons above the bandgap will be wasted surplus re-emitted as heat or light. This accounts for an additional loss of about 49%. Thus about 67% of energy from the original sunlight is lost, or only 33% is usable for electricity in an ideal solar cell.
3 All energy from photons greater than the band gap is converted to heat (~47%).