The Renewable Revolution is Here. Will the US Compete?
June 18, 2012
The new industrial revolution, based on transition to renewable energy and sustainable technology is here. Who will seize the initiative to lead in the coming century? The US has stumbled somewhat lately, with a growing anti-science and technology movement, funded by highly regressive fossil fuel interests doing everything it can to fog the issues, distort the science, and confuse the public on this critical area for technological competitiveness.
I present here an OpEd piece from Stanley “Skip” Pruss, former energy advisor to Michigan Governor Jennifer Granholm, on the prospects in renewable deployment and manufacturing in that key industrial state. Then, lets compare to ongoing efforts in Germany, a region similar geographically, and with an equally renowned manufacturing tradition.
We got a glimpse this month of Gov. Rick Snyder’s view of renewable energy in Michigan.
Signaling likely opposition to the new proposed ballot initiative that would require 25% of Michigan’s electricity to be derived from renewable sources by 2025, the governor said during a visit to Port Huron that “Michigan is not necessarily a very good renewable state for wind or solar, relative to some of the states out west or in other parts of the country.”
Michigan’s present clean energy standard requires 10% of our electricity to come from clean energy sources by 2015 — the lowest requirement among the 29 states that have mandated clean energy standards.
While it’s true that there are areas within the U.S. that have more wind and solar energy potential than Michigan, any implication that developing Michigan’s clean energy resources would be economically inefficient is plainly wrong.
Validating the cost effectiveness of clean energy, the Michigan Public Service Commission has determine that wind energy in Michigan costs about 40% less than energy from a new coal plant.
This is because innovation has led to dramatic improvements in wind and solar technologies, lowering costs and improving the economics — a trend that will continue. And because they don’t burn fossil fuels, there is zero threat of volatile or escalating fuel costs ratcheting up utility bills.
Meanwhile recent electricity costs are up 13.5% for DTE Energy customers and $4.28 per month more for Consumers Energy’s residential customers (using an average of 500 kilowatt hours of electricity per month). These increasing costs are largely attributable to the escalating cost of coal and coal transport — given the fact Michigan utilities import 100% of the coal they burn — and needed environmental upgrades to aging 20th Century infrastructure.
Gov. Snyder needs to take an energy lesson from Germany, an automobile manufacturing country with a highly skilled, unionized labor force similar to Michigan’s. Germany backed renewable energy policies aggressively and now gets 17% of its electricity from clean energy sources, with targets of 35% in 2030 and 80% by 2050. The result: 382,000 new jobs in thriving clean energy technology sector and a projected 600,000 jobs by 2020.
One would think that because Germany lies, on average, 400 miles farther north than Michigan, it might not necessarily be a very good place for solar energy. Yet Germany has deployed 6 times as much solar energy (25 gigawatts) as the entire U.S. (4.2 gigawatts) and has a vibrant wind sector as well.
Now, how does the US’s manufacturing giant compare to a close European counterpart?
Germany has a trade surplus with China; the uS, a trade deficit. The uS exported 94 billion dollars in goods to China in 2011, compared to 367 billion in imports from China – a deficit of 273 billion. The New York Times attributed the 12.7 billion dollar surplus that Germany had with China in the 12 months leading up to August 2011 “largely [to] the sales of capital equipment that helped China produce more products.” Solar production lines are one such example.
The value chain for photovoltaics starts with silicon and moves on to wafers, cells, panels, and installation. In addition, there are downstream manufacturers of pro- duction lines used for wafer, cell and panel production, along with upstream array planners.
In the middle of the value chain, cell and panel manufacturers are suffer- ing – everywhere – as explained above. For Germany, Switzerland’s Bank Sarasin has openly stated that SolarWorld might be the only German panel manufacturer left in 2015 as the market consolidates (though one might wish to add Ersol, a subsidiary of Bosch). Market analysts are advising the slew of smaller German solar firms to merge in order to reach critical mass. But not all midsize solar firms in Germany are in trouble. Solar-Fabrik posted a profit in Q1 2012, and Phoenix Solar was only slightly in the red, to name just two. And another recent market study estimated that 86 of the 232 solar firms in Germany will still be around in 2017 after bankruptcies, takeovers and mergers. It’s consolidation, not failure. The PV sector is growing up.
Further down the value chain, however, things look even brighter for Ger- many. Wacker, the largest German manufacturer of solar silicon, is now reach- ing full production at its new polysilicon plant in Germany and is on schedule to increase its production overall by more than 50 percent this year alone. The firm says all of its silicon is already sold up to the end of 2015, and it plans to grow by another third with a new plant in the uS by 2014. Germany is also home to the world’s largest inverter manufacturer, SMA, which continues to post impressive results under tough market conditions. And we haven’t even mentioned Fraunhofer ISE, Europe’s largest solar research institute.
This part of the value chain is currently also in trouble because of the mas- sive surplus production capacity mentioned above; new production lines will be rare for a while. But this sector, too, is likely to stay in the West because it – unlike panel production – is truly high-tech, whereas panel manufacturing is not more compli- cated than assembling televisions and electronic devices. In other words, Germany benefits from solar manufacturing in China by selling a lot of the production equip- ment and getting back cheap solar panels to install.
The public eye may focus on the middle of the value chain – panels – but Germany clearly reaps benefits all up and down it. And thanks to massive deploy- ment, German firms can be expected to stay on the forefront of innovations, such as the grid integration of solar with home systems that store excess solar power so that less of it has to be sold to the grid, allowing more PV can be connected. Another example is inverter technology that allows solar power plants to stabilize the grid even at night by acting as phase-shift oscillators.
Market researchers at IMS research recently found that the largest PV system integrator in the world is Germany’s Belectric, and German firms “made up 14 of the top 30 and managed to grow their business by more than 50% to 2.2 GW.” These firms are planners and builders, so they do well where a lot of solar is put on the ground and on roofs, not where solar cells are made. And the cheaper solar is, the better they do. overall, 24 of the top 30 firms were European, and there is good news for the uS as well: “u.S.-based companies First Solar, SunEdison and SunPower… were ranked 3rd, 4th and 5th respectively in 2011.” only three firms from China were in the top 30.
The price of solar power has dropped by 60 percent over the past six years. Since 2009 the German government has raced to keep its feed-in tariffs up with plummeting PV prices. While prices have come down, deployment has grown. In the last two years, Germany has installed roughly 7.5 gigawatts of additional capacity annually, making it the largest solar market in the world by far.
It’s a good time for the uS to get on board deploying solar. China and Germany have brought down the cost of solar, and the German example demonstrates that the local payback is great. Indeed, the role that Germany and China have played in helping bring down the cost of solar shows how industrialized and emerging coun- tries can work together to deploy more renewables and combat climate change.
PV has long been cheaper than peak power for utilities and is now cheaper than the retail rate for consumers in a growing number of uS states starting with hawaii, California, and Arizona. Market researchers at McKinsey stated in April 2012 that PV will be the cheapest way for the commercial and residential sectors to get electricity in most of the US in just a few years. The future is bright indeed for solar firms that can survive the current consolidation phase.