Solar, From Disruptive to The Obvious Incumbent

March 19, 2014


Australia is embarking on a radical transformation of its electricity system that will see solar PV transition from being “disruptive” technology to the “incumbent” technology, displacing coal and sparking a radical change in the way that electricity is provided.

This is the assessment from Clean Energy Council CEO David Green (pictured), who in a presentation last week said generation will move from its traditional place at the point of supply to at or near the point of use; the primary role of the grid will be converted to that of a back-up “battery”; and consumers will play a key role in a more competitive market.

Green told a Davos Connection conference on infrastructure last week that the core logic behind having large scale generation plants close to their fuel source (coal or hydro) was being challenged by shifts in the basic cost parameters of many sources of energy allow generation (mostly solar) to be built closer to where it is used.

It was clear, he said, that solar PV has been taken up more rapidly in lower-income suburbs than higher income – because of the attraction for lower-income households to get a lower, fixed rate of electricity.

Now, new financing models – such as leasing and community ownership, as well as models for renters – was likely to spark a third wave of investment in solar PV.

“Further innovation in the business models will potentially unleash still more waves of investment until solar PV has fully transitioned from disruptive technology to the new incumbent technology,” Green says. (You can read the whole presentation here)

“In a similar way we are witnessing the battery energy storage market emerge. Like the solar PV market, it is initially focused on early adopters, but spreading quickly as the economic case for investment becomes favourable.”

Green says it is not yet clear whether the spread of low-cost energy storage will result in households disconnecting from the distribution grid entirely – seen as the most radical vision for a decentralized energy sector, and one that CSIRO entertained in its Future Grids analysis, and which has been raised by utilities in the US and elsewhere as either a great opportunity, or a horrendous threat.

“For the moment it would seem more likely that households will stay on the grid,” Green says. “But that the role of grid-supplied power will be inverted, from the primary source of power (supplemented by embedded generation like solar PV) to a safety net supplier of last resort, with embedded generation being the primary source of power.”

“Even this more moderate vision would require a fundamental rethink in the financial model for distribution network services businesses.”

Green says that Australia has managed to shift around 13 per cent of its electricity generation to more decentralised renewable sources so far, with much of this also coming in the form of what he calls “modular” wind farms (they can be built with just a few turbines or more than a hundred).

But because this and solar are disruptive, it will be fiercely contested by those who benefit from the traditional system – the network operators and the fossil fuel producers.

“They will have an obvious tendency to resist change,” he says. “Others will embrace it. It is potentially an exciting and dynamic time for the energy sector to drive innovation and reach for the future.”

Business Insider:

Goldman Sachs has set an estimated date for when they believe residential solar power becomes competitive with existing electric across the U.S.

It’s relatively soon.

And it’s mostly thanks to Elon Musk.

Here’s the timeline from Cleantech analysts Brian Lee and Thomas Daniels, included in Goldman’s latest note on Tesla:

  • First, assuming the Gigafactory — the giant manufacturing facility that will soon begin pumping out lithium ion batteries to be used in both Tesla vehicles and renewable energy storage units — reaches its potential, the cost of said batteries should drop to $125/KWh by 2020, from a current price of more than $200/KWh, and dropping 3% each year thereafter.
  • The cost of solar panels continues to fall. Goldman says we can expect an average reduction of 3% annually here as well. That is extremely ambitious — cost reductions have stalled a bit of late — but it does jibe with this famous chart.


Finally, if electricity prices continue to climb in-line with historical increases — something that assumes a steadier economic recovery — prices for existing forms of electricity will increase 3% annually.
“This puts LCOE at $0.20 by 2033 which would be at parity with the US grid price,” Goldman says.

And this could happen even sooner in New York, California, and Hawaii, where electricity is more expensive and especially in places like Hawaii where costs are $0.36 per KWh, the note.

What’s more, Goldman says this will all go down even without credits:

While the ITC runs only through 2016, our Clean Energy team believes the number of households hitting grid parity will continue to grow as the cost of the systems comes down…SolarCity has seen a 40% decline in the per watt cost of PV panels since the second quarter of 2013 driven by improved scale which is expected to continue. This has been true for Tesla’s battery costs as well, which have declined from of $500/KWh in 2008 to $250/KWh for the Model S to potentially $125/KWh at the gigafactory. As a result we should note that the quantitative grid parity and return calculations we show above are arrived at without any Federal or state credits.

They go on to invoke the two scariest words in the world for utilities: grid defection (people leaving the grid). And they lay out three reasons why, though nothing is imminent, we are heading in that direction.

Ultimately the holy grail of solar is to move to a situation where the customer is no longer tied to the grid at all. This may be far off, aside from entailing a much more expensive solar/battery system, this is also potentially out of people’s comfort zone entailing a 100% reliance on a new system for their electricity needs. That said, decreased reliability from an aging distribution infrastructure, a broadening desire to reduce the carbon footprint, and perhaps most importantly, the reduction of solar panel and battery costs could also work together to make grid independence a reality for many customers one day.

They conclude: “As this is a very high-level exercise, we do not quantify the addressable market in this report, but to us the conclusion is very clear – the potential for this application could be very large.”

15 Responses to “Solar, From Disruptive to The Obvious Incumbent”

  1. patricklinsley Says:

    Business Insider link is wrong. It leads back to this page. Thanks for posting though finally seeing that once again the hippies were right

    This song was playing while I was typing so I had to post it too seems somehow appropriate since we’ll have to ‘carry on’ with changing how we generate and use power.

    Please continue to be awesome all.

    • Maybe its the right link. 🙂 Spirit dedicated a great deal of this album to the environment….You have the world at your fingertips, so many changes have all just begun….we’ve got nothing to hide…we’re married to the same bride… she eats away from inside…Its nature’s way of telling you somethings wrong………

      It’s nature’s way of telling you, summer breeze
      It’s nature’s way of telling you, dying trees

      Living in the city
      I’ve been abused, he has
      Jobs I keep the people I meet
      They don’t do more than make me amused

      Lookin’ at my body
      I’m slipping down, so far
      The air I breathe and the water I drink
      Is selling me short and turning me round

  2. Obvious incumbent indeed.
    PJM…(east coast independent system operator, the largest US operator(
    “announced recently that wind and solar power could generate about 30 percent of PJM’s total electricity for its territory covering the Mid-Atlantic region and part of the Midwest by 2026 without “any significant issues.”

    -40 percent less carbon pollution than “business as usual”
    -Lower average energy prices across PJM’s footprint, because wind and solar would –avoid $15.6 billion in coal and natural gas fuel costs
    -Very little additional power (only 1500 megawatts) needed to support the minute-to-minute variability of the renewable power
    -No additional operating (known as “spinning”) reserves needed for backup power
    -44 percent less gas-fired generation and 21 percent less coal-fired generation, which also reduces the amount of carbon pollution emitted into the atmosphere

    Lower energy prices, lower CO2 emissions, and no additional spinning reserves.
    “No big deal.”

    The sky has not fallen.

  3. Another brick in the wall…Utilities are not too keen to adopt vehicle to grid tech, a renewable enhancing storage idea.

  4. andrewfez Says:

    Yeah, first solar (fslr) just upped guidance and my investment just jumped 20% in 1 day. To put that into perspective I only need 10% growth per year to retire. I think I’m up 33% now. Who says the market is over bought?

    • Andrew – Very smart. I have been reading a lot about solar lately. This thing is going to be huge. Costs are still coming down and everything is happening so fast. Its so fast, its hard for anyone to get it. Its like Moores Law for semiconductors happening in the stodgy old utility business. It means solar is going to have a revolutionary impact. It is very hard to understand because its exponential. Most people won’t get it. It means by the time you realize its there, its already turned into a tidal wave. In ten years, nobody will be talking about how small solar is. Or wind for that matter. The whole conversation will shift to renewables integration and new forms of renewables like wave, tidal, and storage. FF and nuclear are dead. They just don’t know it yet. With all the gaffe we get here on CC, its easy to have doubts. Don’t believe the deniers. You have the right idea.

      • andrewfez Says:

        Hey Christopher – I keep saying this is one of the big growth stories (with respect to investing) of the era. It’s fine if someone wants to invest in Coca Cola, but it’s already a huge company with a product everywhere in the world – it’s years of large growth are done; sit back and collect the dividend. But if someone wants to see large growth in this era of stagnation, they’re going to have to get on board the second industrial revolution and get exposure to wind and solar. The risks are high, but so are the rewards.

        GE is a no-brainer as they are in a position to take advantage of the revolution regardless of what the energy mix will look like. We looked at the latest GE turbine literature a few Crocks ago with EPoet, regarding a design that adjudicated instability on smaller grids.

        The other things i follow are TAN (Guggenheim Solar ETF), Sun Power Corporation (the US’s biggest PV panel maker), and Solar City. I haven’t had time to pursue it, but my next research attempt in the field is the solar/renewable limited partnerships (LP’s) like Brookfield Renewable Energy Partners LP.

        There are still a lot of conservative investors that are dismissive of the renewables so i think this is one of the easier sectors to be a ‘smart money’ player in: by the time they figure out what’s up, and the ‘dumb’ money starts floating into the sector, those of us who were already in the game will have descent positions.

        I’m seeing a short term outflow of $$ from things like Solar City and into First Solar right now – my stock is now sitting at a 41% gain as of this Friday. Who knows, it might be the next Tesla?

  5. cyhalothrin Says:

    It would be a much more obvious incumbent to me if I was assured that only silicon-based solar panels were being used. I honestly don’t get how you folks have no problem with the cadmium-based thin-film panels. If cadmium on everyone’s rooftop is OK with you, then why not use plutonium-based panels?

    I’m am not being a deliberate dick by saying this. There is no reason to use cadmium when safe silicon is so abundant. Furthermore, it’s also been found that the cadmium-telluride panels have a short life-expectancy and break down if used in areas with strong sunlight and heat. Not such a big problem in Germany, but a big problem in Australia, the American southwest, and where I live (Taiwan).

    Spread toxic waste around just to save a few bucks – and you guys call yourselves “environmentalists?”

  6. Solar dominance will only accelerate as demand lowers production costs and boosts research and development. There is still much room for improvement.
    Not only are solar costs dropping exponentially, storage costs are declining exponentially also.

  7. toddinnorway Says:

    For those who worry about the toxicity of Cadmium Telluride, I would point out that although elemental chlorine is very toxic, it is not a problem when bound to sodium, i.e. as sodium chloride, otherwise known as table salt. It might also be of interest to know that certain combinations of mercury and other metals are used in your mouth to form a stabile mechanical seal where tooth decay has been removed.

  8. […] 2014/03/19: PSinclair: Solar, From Disruptive to The Obvious Incumbent […]

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