HOLIDAY READING: HOW TO GET TO A SOLAR-BASED FUTURE, ACCORDING TO MIT
How to get to a solar-based future, according to MIT; A new study argues for long-term R&D, reforms to solar valuation schemes
Herman K. Trabish, May 12, 2015 (Utility Dive)
A new take on solar’s future from the Massachusetts Institute of Technology offers a detailed vision of a bight tomorrow, but finds problems in the support U.S. solar gets today.
The MIT team behind "The Future of Solar Energy," a study released earlier this month, believes solar alone has the potential to address climate change by mid-century, but warns that are three potential hurdles solar must overcome to fulfill its huge potential.
“It is going to have to be solar,” explained MIT Economics and Management Professor Emeritus and study chair Richard Schmalensee. “That leads to the question of whether today’s technology, with incremental improvements, can do it. We have serious doubts.”
Only significant breakthroughs in solar technology will solve problems in cost, scaling, and intermittency that currently are preventing it from becoming the dominant global electricity provider, the study reports.
While solar advocates celebrate an 85% drop in solar module price, Schamlensee said, solar will have to get much more cost competitive, especially as market factors and higher penetrations force the price back up.
“It will take increasing solar by a factor of 65. Not doubling, but a factor of 65,” Schmalensee said, outlining how solar could help the world avert the worst consequences of climate change. “And it has to be done globally, in China and India and sub-Saharan Africa. That means it has to be cheap.”
A price on carbon would be the best way for solar and other renewables to compete, according to the study, but “it is difficult to imagine that the expense of switching from fossil fuels to solar energy at very large scale would be voluntarily borne by U.S. voters, let alone by the citizens of India, China, and other developing nations.”
To achieve the scale needed to get over the second hurdle, much of solar technology must change.
Today’s crystalline silicon PV modules are proven, relatively efficient, durable over 25 years, and it is likely to be “ten years and probably beyond” before their dominance faces a serious marketplace challenge, Schmalensee said. “But it is just too expensive. Something has to be cheaper.”
For innovative solar technologies now in development or limited deployment that rely on scarce materials, “a scale-up of this magnitude is likely to be uneconomic,” the study from a team of engineers, scientists, economists and business professionals explains.
“Fortunately," the study reports, "materials constraints do not appear to be an issue for other emerging solar technologies.”
Moving toward mid-century, Schmalensee said, “I hope we get some high-performing thin films made with earth-abundant materials. And it would be good to see CSP coming up on the outside because of its dispatchability.”
Future PV and grid integration
Photovoltaic films thinner than a human hair made from earth-abundant materials and mounted on durable flexible material that can be glued to other surfaces could be “pretty ubiquitous,” Schmalensee said. It could be rolled out and fastened securely down on a warehouse roof or the west-facing side of a house or desert mountainsides in Arizona and rocky hillsides in New England, he imagined. “Or it could be transparent to visible light and be on building windows.”
Because solar varies over time “in ways that are imperfectly predictable,” dispatchability in one form or another is the way over the intermittency hurdle, according to the study.
Some grid systems may be able to handle increased variability “by moving to more flexible fossil-fueled generators, by making demand more responsive to system conditions, and by making modest use of energy storage,” the study explains. “In most systems, however, higher levels of solar penetration will likely require the development of economical large-scale energy storage technologies.”
“Even with the recent Tesla announcement, storage is not cheap enough at the large scale it is needed,” Schmlensee added. “There is a lot of work to do.”
The study offers lengthy insights into present and future PV and CSP designs,balance of system costs, and battery technologies. There are also detailed chapters on the business and economics of solar and the technical challenges of integrating high solar penetrations into the transmission and distribution system. Finally, there are policy recommendations for driving research and development (R&D) and subsidizing deployment.
In all these areas, and especially the last, Schmalensee said, “The key thing is: Think longer term.”
The policy needed to get there
The MIT researchers target mid-century for their solar-based future, but “there are policy changes that ought to be made right now to get there,” Schmalensee said.
First, “get R&D right,” he emphasized, because “it is not automatic that there will be new technologies.” Only the federal government can afford to invest in the promising but risky undertakings that will lead to breakthroughs like the thin film he envisions.
Second, prepare the grid for higher solar penetrations. That will also require R&D spending. “There needs to be fundamental research on storage of all kinds, splitting water, batteries, whatever," he said.
And third, he said, “fix these stupid subsidies so we are getting more solar per dollar.”
The four main types of subsidies, the study explains, are price-based, output-based, investment-based, and indirect. The main concern must be “the efficiency of solar deployment subsidies, i.e., with the value of electricity produced per dollar of subsidy spending.”
The study’s strong arguments for a putting a price on emissions and using afeed-in tariff to drive solar growth do not overcome the reality that, Schmalensee acknowledged, they are both “political non-starters” at present.
Output-based subsidies, on the other hand, have proven effective. “The main advantage of an output subsidy as compared to a flat feed-in tariff is that it provides better incentives for producing electricity when the electricity is most valuable,” the study reports.
Because tax credits have proven politically feasible for renewables in the U.S., a production tax credit for solar might get to Schmalensee’s “more solar per dollar” more effectively than the industry’s current but soon-to-sunset federal investment tax credit.
“Policies that reward production are generally superior in terms of return per dollar spent to policies that subsidize investment in solar generation,” the study explains.
Its recommendation on this subject: “Subsidies for solar and other renewable technologies should reward generation, not investment, and should reward generation more when it is more valuable…Tax credits should be replaced by direct grants, which are more transparent and more effective. If this is not possible, steps should be taken to avoid dependence on the tax equity market.”
“Nobody else subsidizes investment,” Schmalensee said. “If you want solar output, you subsidize output.” But not through net energy metering (NEM), he added.
Net metering and the cost shift
The MIT study recognizes the benefits of net metering, saying that "by enabling those utility customers who install distributed solar generation to reduce their contribution to covering distribution costs, net metering provides an extra incentive to install distributed solar generation."
But then, by asserting the policy is unfair to non-solar owners, it charges deep into the nationwide controversy over net metering now pitting solar advocates against utilities:
“Costs avoided by households that install distributed solar generation are shifted to utility shareholders and/or other customers. Recovering distribution costs through a system of network charges that is more reflective of cost causation and that avoids the current direct dependence on electricity consumption would remove the extra subsidy and prevent this cost shifting.”
The perceived unfairness has produced an aggressive pushback against net metering from utilities on behalf of their shareholders and their non-solar owning customers. Utilities also argue that subsidizing rooftop solar by paying system owners the retail electricity production is unfair to utility-scale solar developers who complete for power purchase agreements at wholesale electricity prices.
An important part of Schmalensee’s argument against NEM is practical. “The future is probably going to involve a lot more distributed generation,” he said. “Let’s not make it be the subject of a huge fight we don’t have to have.”
Another part of his argument is more problematic to solar advocates. When solar owners’ electricity usage is reduced by their rooftop generation, the part of their bill charges that goes to grid costs is proportionately lowered.
“It is arithmetic. If I stop paying for the network, you have to pay a little more,” Schmalensee argued. “If fewer people are helping to pay for grid infrastructure, then the fewer people who are paying for it have to pay more.”
The study includes detailed simulations of the California and Texas grid systems intended to validate the premise that rooftop solar owners do not bring adequate benefits to the system to warrant retail rate subsidies.
Its recommendation: “Residential PV generation should not continue to be more heavily subsidized than utility-scale PV generation. Eliminating this uneconomic disparity will require replacing per-kWh distribution charges with a system for recovering utilities’ distribution costs that reflects network users’ impacts on those costs.”
Lingering questions on solar valuation
Valuing solar properly for both utility-scale arrays and distributed systems will be crucial in moving toward a solar-based future, clean energy advocates say, but it is riddled with complexities and caveats.
“’For every complex question,' H.L. Mencken said, 'there is a solution that is clear, simple, and wrong,’” responded Pace Energy and Climate Center Executive Director Karl Rabago, a former Texas utilities regulator and authority on the value of solar. “This is complicated stuff. Net energy metering is not a subsidy simply because the billing rate applied to the gross production billing is not the wholesale electricity rate.”
The complexity is explained in Valuing Distributed Energy, a recent whitepaper from Princeton and Columbia Universities, in enumerate four solar value concerns that need to be addressed, beginning with the cost shift:
The grid system needs to be paid for without imposing a disproportionate burden on other grid customers
The benefits provided by distributed energy (DE) to the grid and to society need to be identified and valued
Retail prices should accurately reflect the wholesale price in real time and in the context of the whole system
Because the financing of emerging technologies may necessitate “visibility on price over the life of the capital asset,” DE may not be able to use short-term pricing mechanisms
Attempts to push utilities and regulators to find a more detailed and effective value of solar have also been taken up at the federal level lately. Last week, Sen. Angus King (I-ME) introduced a bill that would require states to unbundle rates for distributed energy resources and would designate them as Qualifying Facilities under the Public Utilities Regulatory Policy Act (PURPA) of 1978. Sen. Lisa Murkowski (R-AK) also introduced a bill to push states to examine how distributed resources contribute ancillary services to the grid, as well as study the impacts of net metering.
Schmalensee agrees that finding techniques to properly value solar will be difficult, but that net metering is too simple a tool to use for distributed solar across the country.
“What happens on the current system is simple arithmetic,” he said. “How you fix it is not simple. There has to be a way to recover the cost of the wires that people will think of as fair. Getting that right is not simple.”