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Does Robert F. Kennedy, Jr. Harbor Green Illusions about Solar Power?

Ozzie Zehner’s book Green Illusions calls our attention to the sometimes exaggerated claims that are made for alternative energy. Zehner sees these unrealistic ideas as widely shared in the mainstream environmental community. He maintains that they lead to the illusion that if we only muster the will to invest more in solar panels, windmills, and biofuel, we can produce our way to a future of clean, cheap energy. Not so, says Zehner. Alternative energy has a role to play, but it will never live up to the hype from its boosters.

Then, last week, just two days after I posted my own review of Zehner’s book, the New York Times published a perfect case in point of green illusions. It came in the form of an op-ed entitled “Solar Panels for Every Home,” by David Crane, President of NRG, an energy company involved in both conventional and renewable energy, and Robert F. Kennedy, Jr.,  a senior attorney for Natural Resources Defense Council and president of Waterkeeper Alliance. Their article pushes for more home photovoltaic (PV) systems as a way of avoiding disruptions of electric service like those recently caused by superstorm Sandy. Unfortunately, many of the claims the authors make are, at best, highly misleading.

Claim No. 1: Your rooftop solar system can keep you cooking when the grid goes down

Crane and Kennedy write,

we believe there is a better way [than gasoline backup generators] to secure grid independence for our homes and businesses . . . Electricity-producing photovoltaic panels installed on houses, on the roofs of warehouses and big box stores and over parking lots can be wired so that they deliver power when the grid fails

Not really—not unless you hide a lot in that phrase “can be wired.” Here is what I learned when I had a 6.3 kW photovoltaic system installed on the roof of my barn three years ago. I asked the engineers who designed the system whether it could be used for backup power when the grid went out. “Yes,” they said, “you can do that if you install battery storage.” Unfortunately, they told me, battery storage would add $10,000 or more to the cost and might require settling for a smaller system. Even then, I would have enough backup power to last only two or three days, not nearly enough to get through a Sandy-sized outage.

Why can’t the panels be “wired” so that my neighbors and I can draw power directly from the panels, at least during daylight hours, if a tree knocks down a power line farther up the street? The answer is safety. If everyone’s home panels continued to feed power into the lines, repair crews (not to mention children playing among the downed branches) would run the risk of electrocution even after the local utility threw its cutoff switches. To avoid that, home systems must be designed to shut off automatically when grid power goes down.

Claim No. 2: Home PV is already cost-effective

Crane and Kennedy write,

Solar panels have dropped in price by 80 percent in the past five years and can provide electricity at a cost that is at or below the current retail cost of grid power in 20 states, including many of the Northeast states. So why isn’t there more of a push for this clean, affordable, safe and inexhaustible source of electricity?

Based on my own system, which is in many ways typical, that claim is highly questionable. My system cost $45,000 and is designed to produce 7,000 kWh of power per year. (So far it has produced just a bit more than promised.) With a design life of 30 years, it should produce some 210,000 kWh before it fails. Dividing $45,000 by 210,000 kWh gives a cost per kWh of 21 cents. That is about the cost of electric power in New York City, but according to data from the Energy Information Agency, only Hawaii has a statewide average rate over 20 cents per kWh. And, even the figure of 21 cents is misleading.

First of all, the 210,000 kilowatt hours in question are produced over span of 30 years. Thirty years of power at 21 cents per kWh is worth $45,000 only if you assume zero cost of capital. Suppose we apply a an inflation-adjusted cost of capital of 3 percent, and assume that the cost of electric power rises at the same rate as general inflation. In that case, you have to value the power at 33 cents per kWh (in today’s dollars) to pay for the system.

Furthermore, this 33 cents assumes no maintenance costs. The panels themselves are supposed to be almost maintenance free, but the weak link in the system is the inverter. An inverter for a system my size, installed, costs about $3,500. The one that came with the system has a 10 year guarantee. If I have to replace it twice over the life of the system, that will add another $7,000 or so. That puts the break-even value of power over 40 cents per kWh.

It is true that the numbers change in favor of PV if we assume that the cost of electricity will rise faster than the average of other consumer prices—a point we will return to shortly. That expectation, however, does not bear on the authors’ claim that that the cost of PV is below the current cost of electricity in twenty states.

It is also true that the cost of panels is dropping so that a new system would cost less than what I paid five years ago. Still, a drop of 50 percent or even 80 percent in the cost of panels would not mean the cost of an installed system has dropped by that much. The panels account for only about a third of cost of a system, and as panels get cheaper, that percentage decreases. The rest of the cost is accounted for by the inverter, wiring, roof racks, other materials, labor, and permitting costs. Even if the panels were free, the cost of rooftop PV power would still exceed the cost of power from the grid in most states.

Why, then, isn’t there more of a push for this clean, affordable, safe and inexhaustible source of electricity? Because it’s not so affordable after all.

Claim No. 3: Germany gets half its power from rooftop solar

Crane and Kennedy write,

More than one million Germans have installed solar panels on their roofs, enough to provide close to 50 percent of the nation’s power, even though Germany averages the same amount of sunlight as Alaska.

I have no idea where the “close to 50 percent” comes from. I hope it is just a typo. In any case, it is far from the numbers given by Germany’s Federal Ministry for the Environment, Nature Conservation and Nuclear Safety in a recent report that boasts of that country’s alternative energy leadership. Here are the official German government data for 2010:

  • Share of renewables of all kinds in total primary energy consumption: 9.4 percent.
  • Share of renewables of all kinds in electricity generation: 16.8 percent.
  • Photovoltaic share of renewable electricity production: 11.8 percent. (The rest is from wind, hydro, and biomass.)
  • Photovoltaic share of total electricity generation: 1.9 percent.

There is quite a gap between “close to 50 percent” and 1.9 percent. True, PV is growing faster than other renewables, and will probably continue to do so. A recent article from Bloomberg quotes Dr. Joachim Pfeiffer, a spokesman for the center-right Christian Democrats, who predicts 35 percent, perhaps even 40 percent, total renewable power by 2020. That would be nearly a four-fold increase from today. Still, even if PV dramatically increased its share, it would be hard to get it much above 10 percent of electric power output by 2020.

It is worth asking how Germany manages to produce even 2 percent of its power from PV, given that it has only as much sun as Alaska. The answer is that the German government subsidizes PV and other renewables through feed-in tariffs. Under feed-in tariffs, the government guarantees a price high enough to cover the cost of renewable energy, which is then fed into the grid and sold to consumers at a lower price that reflects the average cost of energy from renewable and nonrenewable sources.

Feed-in tariffs are an effective way to encourage production of alternative energy, but because they keep retail prices low, they do little to encourage conservation. In many cases, low-tech conservation measures, such as retrofitting buildings for energy efficiency, are much more cost-effective ways to reduce environmental harms than are PV or wind power. It appears that Germany’s enormous investments in alternative energy are yielding a smaller reduction in pollution than they could under a framework more favorable to energy conservation.

So, should you install a rooftop solar system?

By this time, you may be wondering whether I regret my own investment in rooftop PV. For several reasons, I do not.

One reason is that I’m a bit of a techno-geek. I think those sleek, silent panels are classy, and I love just watching the meter spin when the sun is shining.

Another reason is that my system is probably marginally more cost effective than average, at least for locations outside the sunbelt.  Partly that is because of the ideal construction and location of my barn, and partly because I had some extra funds lying around in low-interest bank accounts, which kept my cost of capital low. Also, permitting costs and delays, which Crane and Kennedy mention as a major problem in some areas, were not a problem at all in my community.

Third, and most important, my installation was heavily subsidized:

  • The federal government provided a 30 percent tax credit, worth nearly $15,000
  • My local utility added a cash bonus of $4,500 for the installation.
  • Under its net metering policy, the utility buys all my power at 7.7 cents per kWh, which is the local retail price.
  • The state adds a cash subsidy of 15 cents per kWh.
  • None of these cash flows is subject to income tax, unlike the earnings from most of the other investments I could have made with my idle funds.

In short, at least where I live, the subsidies are sufficient to make the returns on a home PV system competitive with interest rates on bank deposits, T-bills, or other low-yield investments. If you have idle cash, if your location is ideal, and if you think the panels improve the appearance of your property, then they are not a terrible investment.

What if you are worried more about saving the planet than earning a return on your investment? Is rooftop solar still a good idea? The answer, I think, is still a qualified “yes.”

One qualification concerns possible environmental damage done by manufacturing the panels. Reportedly, the Chinese companies that supply the panels for most home installations do not follow international best practices for disposal of toxic wastes. They should do so, and if they did, the panels would cost more, making home PV systems somewhat less affordable.

A more important qualification is that the American system of cash subsidies is not good public policy. Like German feed-in tariffs, our subsidies keep the cost of power low for the end user, so they do nothing to encourage conservation. The best policy would be not to subsidize the cost of PV, but to raise the cost of power from fossil fuels to a level that reflected the harm done by pollution. (See here for a fuller discussion.) Higher prices for fossil-fuel power would still encourage the use of PV while simultaneously giving a powerful incentive for more conservation. Rising prices for electricity from the grid would also reward early adopters of home PV by raising the otherwise modest rate of return on their investments.

The bottom line: Subsidies are not good policy, but if you take them as a given, you probably do more environmental good than harm by accepting them and installing your home system. However, if you really care about the environment, you should not stop at that. You should also campaign to change the policy to one that levels the playing field between fossil fuels and renewables by raising the price of the former rather than subsidizing the latter.

Above all, keep in mind that neither PV nor any other kind of renewable energy is a free lunch. Anyone who tells you that some magic technology will bring a future of clean, affordable, safe and inexhaustible energy, at no cost to your pocketbook or the government budget, is suffering from green illusions.

23 Responses to “Does Robert F. Kennedy, Jr. Harbor Green Illusions about Solar Power?”

JSGDecember 17th, 2012 at 1:32 pm

I'm guessing the "German 50% Solar" comes from a very different but related statistic: Germany consumes 50% of world-wide PV production.

That's NOT the same thing as "getting 50% of power from PV" of course.

Politicians being innumerate and fuzzy on logical thinking?? Say it's not so! :-)

Jardinero1December 17th, 2012 at 1:50 pm

This is a really balanced piece. Curiously, omitted is any mention of nuclear energy. In the west, this is the cleanest, safest form of electrical power generation which exists. It produces zero CO2 and is cost competitive with coal and oil generated electricity.

My other quibble lies with the notion that CO2 emissions are inherently bad. This is arguable.

Assuming, for the sake of argument, CO2 emissions are a “bad”, reductions in net CO2 emissions can be found by other policy means than taxing or prohibiting the use of fossil fuels. Fossil fuels can be burned more efficiently. CO2 can be sequestered. Emissions can also be re-absorbed with the restoration of forests, prairies, wetlands and estuaries. These are effective policy prescriptions which are typically ignored.

Finally, I quibble with the entire notion of “renewable energy”. I believe the phrase is fallacious and sidetracks the whole debate. There is no renewable. There are different methods of power generation that utilize varying combinations of finite resources and finite land. Wind and solar are capital and labor intensive, toxic in their manufacture, and utter hogs of finite land. Other renewables like Hydro power are extremely limited in their application and destructive of the physical environment. Hydro power ruins freshwater fisheries and has been catastrophic for marine estuaries by impeding the normal ebb and flow of water.

EdDolanDecember 17th, 2012 at 2:01 pm

1. "Assuming, for the sake of argument, CO2 emissions are a “bad”, reductions in net CO2 emissions can be found by other policy means than taxing or prohibiting the use of fossil fuels." The idea of a carbon tax is that it provides an incentive to engage in all those other ways of reducing carbon, e.g., burning the fuels more efficiently. They are not alternatives, they go together.

2. "There is no renewable. There are different methods of power generation that utilize varying combinations of finite resources and finite land." That is exactly Zehner's point. You would probably like his book, at least the first 146 pages. See my full review here http://tiny.cc/njv3ow

Jardinero1December 17th, 2012 at 3:49 pm

I think that there is a shock effect that a new tax induces. With any new new tax, there is a decrease in demand. But after the initial shock and everyone is accustomed to the tax, then it back to business as usual and demand just keeps right on climbing. Thus, I think taxes are a poor inducement to change ingrained behavior, especially when you refer to something so globally and culturally ingrained as fossil fuel consumption.

Historically, regulatory demands that polluters reduce pollutants, have been very effective at reducing pollutants that society has deemed a bad. Examples run the gamut, from leaded gas, to raw sewage, to industrial pollutants like dioxin. If CO2 is really a problem it deserves a much harsher response than a mere tax.

JakeDecember 17th, 2012 at 6:01 pm

I'm having a 7kw system install for about $28000 in Westchester. $10500 of that price comes from Coned's Renewable Portfolio charge on everyone's monthly bill. We pay about $25/yr for that line item. That's enough for about 10 homes to get solar installed every year in my town. What happens when everyone wants solar installed?

EdDolanDecember 17th, 2012 at 9:07 pm

"With any new new tax, there is a decrease in demand. But after the initial shock and everyone is accustomed to the tax, then it back to business as usual and demand just keeps right on climbing."

I am not so sure about this. In fact, there is a very large body of research in economics and marketing that suggest that elasticity is greater in the long run than the short run, that is, over time, a given price increase causes people to cut back more and more.

Jardinero1December 17th, 2012 at 9:21 pm

We likely continue to disagree. In the short term and the long term, I think an outright mandate will probably be more efficient than cajoling the public with an additional tax burden. I say that as a libertarian who prefers the least government involvement. I remember reading a piece back in the nineties which suggested that a regulatory approach is more effective and efficient than using the tax code to modify behavior in bads. I will dig around for it.

EdDolanDecember 18th, 2012 at 1:03 pm

I am suspicious of outright mandates because they tend to reduce flexibility in meeting the goal and also often lock in one technology rather than another. A good example of a flawed mandate is CAFE standards for cars. See my post here on why I think a gasoline tax would work better
http://www.economonitor.com/dolanecon/2011/07/15/…

Having said that, there may be some cases where a mandate is appropriate. For example, the phase-out of chloroflourocarbons started with a tax but when the time came to eliminate them entirely, the tax was replaced with a mandate.

The biggest problem with mandates like "your utility has to buy 20% green power" is that the mandate also forces the utility to sell retail at the average price, so that consumers pay less for the green power than its cost of generation That discourages even the simplest conservation measures. For example, I stayed last night in a Seattle hotel. Retail power rates in Seattle are very cheap because they average in cost of power from Columbia river dams. However, the Washington State utilities also have a green power mandate, much more expensive, but does not show up in retail cost. As a result, this hotel does not take even the most trivial, costs-effective measures like changing to high-efficiency light-bulbs.

kakatoaDecember 18th, 2012 at 2:26 pm

Ed,

I concur with your assessment ("many of the claims the authors make are, at best, highly misleading") of the of the claims in the Op Ed post by D. Crane and R.F.K. Jr. on residential PV. As an FYI in CA the three BIG ISO's are fast approaching an AVG price of 20 cents a kwh for the residential market- lots of folks are paying a marginal cost of $.33+ for a kwh of electrical energy. There was a bit of a rate revolt back in the summer of 2009 when the marginal price that a lot of PG&E residential customers had to pay was closer to $.44 kwh. How electric rates are set in CA is a tad political and don't have much to do with the cost of providing the service as PG&E has stated: "In fact restrictions on increasing lower-tier Non-Care and CARE rates have resulted in a situation where cost of service has absolutely nothing to with the levels of various tiered residential rates"- see page 1-12 of PG&E's Rate Design Window 2012 Prepared Testimony.

kakatoaDecember 18th, 2012 at 2:32 pm

I installed a 6.12 (DC rated) Kw system in 2006 (in concert with a Time of Use Net Meter) so I didn't experience the July monthly bill shock that lots of folks in the Central Valley experienced in 2009. As my location gets more sun then your area my actual output is closer to 9400 kwh per year. During the hot July of 2009 my little system produced 1057 kwh- in July of this year it produced 1063 kwh. The economic benefit that I obtained from my PV system in concert with my rate schedule that hot July, 2009 month was $466.50. By the way PG&E has a few contracts with NRG (i.e. D. Crane's company) to supply RE to help PG&E meet it's 33%RES mandate. Mr. Crane's firm cash flow from these the RE projects is dependent on the Time of Delivery (TOD) factors in their 20 to 25 year PPA contracts with PG&E. I'd love to have a contract like the ones NRG has with PG&E- $.24 kwh for the output, from his RE facilities at super peak times in the summer

Bonnie GoodellDecember 18th, 2012 at 3:54 pm

Once again, I argue for the K.I.S.S. of adding global insurance premiums to all carbon production to pay for the damage caused by excess carbon. The fees fund an insurance pool to pay the costs of the damage created by that excess carbon. Whether the "extremity" margin of storms like Sandy, or the drying up up of rivers dependent on snow melt, crop losses to drought extremities, or inundated atolls and coastal cities. Raise prices by putting the actual costs where they belong so people can understand it.

Humans do not understand complex economics so are easily manipulated by pass-through subsidies. The mortgage interest tax deduction is a subsidy not of home ownership but of mortgages and house prices. Try to explain that to someone buying a house for the sake of a bigger mortgage deduction. The health insurance exclusion makes health care cost more. Explain that to a union benefits negotiator.

But people do understand that more traffic accidents equal higher auto insurance premiums. So call it extreme weather insurance premiums, and make sure the premiums go into a insurance fund and are paid out for disasters. Because politicians who have access to "tax" funds can also get confused about the intended incentives.

That is number one. Number two, I try to practice some extreme efficiency. I do most of my lighting at night with a headlamp charged up during the day on a small solar panel. It works great and is outside all these wiring and storage and taxation concerns. Of course, I live in Hawaii, on the Big Island where our electricity costs 45¢ per kWh, where we experiment with all kinds of radical efficiencies. One thought is that technologies such as that, if available to people during power outages caused by the likes of Sandy, would help get people looking outside that box, at the possibility of cheap convenience rather than expensive fears of deprivation. The second thought is that the hardware available for that kind of radical efficiency is meager and of poor quality. The switches on my headlamps wear out and stop functioning in a few months, while all other components are good for many years. These headlamps sell in 5000s from China for $2 each and for $50 each from Amazon. But you can't get one with a good, simple toggle. If prices go up, by pollution and depletion costs rolled into the prices directly, the market for better efficiency products would really open up.

Jardinero1December 18th, 2012 at 4:58 pm

I guess it depends on how you structure the mandate.

Fundamentally, I am opposed to mandates or taxes on CO2 because I don't think CO2 emissions are a problem, climate change or not. I would prefer to live with the consequences of elevated CO2 emissions, whatever they may be.

Peter SchaefferDecember 18th, 2012 at 5:23 pm

JSG,

I researched this a bit. Apparently, the aggregate capacity of Germany's solar panels is equal to 50% of power demand on some occasions. In other words, on a bright sunny weekend day, solar might actually be generating 50% of Germany's electricity for some period of time. Power demand is lower on the weekends in Germany (apparently).

Over the course of an entire year (2011), solar accounted for 3% of Germany's total power production.

Peter SchaefferDecember 18th, 2012 at 5:34 pm

A key flaw in most (but not all) of the economic arguments is that even with extensive home solar the grid is still required and must be paid for. Beyond that a complete backup conventional power system is needed for period of low solar/wind generation. That too must be paid for.

Peter SchaefferDecember 18th, 2012 at 5:45 pm

JSG,

The quote is

“More than one million Germans have installed solar panels on their roofs, enough to provide close to 50 percent of the nation’s power, even though Germany averages the same amount of sunlight as Alaska.”

The key phrase is "enough to provide". Most people would interpret that as solar producing 50% of Germany's power. In fact, total power generation in Germany in 2011 was 614.5 TWHR (Terrawatt-hours). Solar was 19.0 TWHR.

However, you can interpret "enough to provide" as capable of producing 50% of needed power under certain circumstances. That turns out to be true.

djmDecember 18th, 2012 at 8:58 pm

this is great for people with money, but if you raise the cost of fossil fuel to make solar equal in cost poor people will be very cold.do what I do plant lots of redwood trees,to offset carbon foot print.

GuestDecember 18th, 2012 at 9:57 pm

Ed,

Great analysis on solar.

The key to success (where success is managing energy needs and environmental constraints) is a diverse portfolio. Eliminating any source of energy is similar to eliminating classes of assets in an investment portfolio. One can energy sources, but eventually, those classes of assets will be the lowest cost, lowest risk, and most environmentally desirable source of energy.

Having Federal goals which mandate one source of energy over another serve only the vendors selling their solutions. The end result is higher environmental destruction and higher cost because the operator has lost flexibility to meet the needs of the consumer.

The challenge for all energy sources is valuing externalities. All energy sources have these externalities. Meeting externality cost changes over time. Technology has historically emerged to solve environmental problems and to lower the cost of meeting externalities. Regulations have been very effective in reducing environmental impacts from energy sources.

Energy production has no easy answers because all sources of energy have negative environmental impacts. A world without cheap energy is a world without transportation, light, heat, cooling, abundant food….and lower health care quality. The best solution is always efficiency, but efficiency limits are quickly reached…..and then more energy must be produced.

My energy production solution is electric recharging strips in Interstate Highways with base load from nuclear. Installation of nuclear waste to energy plants eliminates nuclear used fuel storage issues. Small Modular Reactors reduces the need for transmission grids. Peak power comes from solar, and load following comes from natural gas. Coal and wind are used in select situations. The combination provides transportation and network electrical needs for the nation.

Jardinero1December 18th, 2012 at 11:54 pm

A big chunk of german renewable is hydroelectric which was already extant when they started counting renewables. If you back out the already extant hydro-electric, you will note the germans have made strides, but not great strides.

CupcakeDecember 19th, 2012 at 7:06 am

The Times has posted a correction to the statement about Germany getting half its power from rooftop solar panels but I guess that still leaves them half in the dark about some flaws in the oped.

There is also a post on the media correction site, MediaBugs (http://mediabugs.org/bugs/factual-error-about-grid-tied-solar-panels-being-used-as-power-backup-after-storms), that is trying to shed some light on the errors in the Times article. Hopefully they will get through.

Munchen SolarJune 21st, 2013 at 6:54 am

Well, I think this is a good news for everyone. Indeed, a very economical way to own a solar panel and enjoy the benefits of green energy. In this case, solar panels were used as roofng.

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