Does the Wall Street Journal employ anyone who understands energy markets? 14

Comments View as Flat

1. 

   Ken Johnson Posted 9:30 pm
   03 Sep 2009

   What would happen to California's climate-policy programs under a federal cap-and-trade system? Will they generate emission-reduction benefits? Or will the surplus allowances freed up by California's programs be traded away, allowing equivalent emission increases elsewhere and nullifying any environmental benefits? 

   Permalink

   1. 

      cleanfamilyenergy Posted 11:58 pm
      03 Sep 2009

      California would trade the excess to pollute somewhere else. It's what the United States has been doing with China for years. Everyone in California would love cleaner air to breathe. But through this system, California, ideally, will be making excess money to invest in solar (even though we call know this won't happen). It will also encourage energy efficiency due to the extra cost of pollution.

      Permalink

2. 

   Tom A Posted 9:56 am
   04 Sep 2009

   While I agree that the Spansih study may not be applicable to the US (and more importanly; may be fundamentally flawed), your generation costs look a bit off. Natural gas prices would have to sky-rocket (x5 or so) for natural gas fired combined-cycle plants generation costs to reach $130 MWh.

   Permalink

   1. 

      Adam Browning Posted 3:21 pm
      04 Sep 2009

      Tom-Every year the California Public Utilities Commission calculates the cost of the next marginal fossil resource, which is assumed to be a combined cycle gas turbine.  20 year LCOE are right up there at 13 cents...http://www.cpuc.ca.gov/PUC/energy/Renewables/mprhttp://docs.cpuc.ca.gov/Published/Final_resolution/95553.htm

      Permalink

      1. 

         Tom A Posted 5:19 pm
         04 Sep 2009

         Adam,
         The market price referent cost calculation you refer to does assume sky-rocketing gas prices (approx $10/MMBtu compared to todays NYMEX Henry Hub future price of $2.73/MMBtu and EIA's gas price forecast of about $5-6.5 for the coming decade). It also appears to assume a carbon price of about $30 in 2020. My point being that this is quite far removed from current market conditions and therefore does not give a good estimate of current generation costs.    

         Permalink

3. 

   Clifford Wells Posted 7:34 pm
   04 Sep 2009

   I don't get it.  I developed a cost calculator for the pay-back on a solar powered array, and not a big one either, and it took 10 to 12 years to break even, not assuming any incentives or rebates, and assuming that the current price of electricity, fuels, and alternatives would remain constant.  I have tried this with other calculators available on the web.  All say over 10 years.  That's not very good.  A real investment should have a return within 5 years or so, or at least one would hope so.All this "mad money" comes from somewhere, either rate payers or in taxes or in debt.  There is no way around this logic.  You can't invent money.  If I purchase a solar powered system for $30,000, somebody gets a check for $30,000 even if you tell me it only cost $15,000 in my cash.  To disguise the true cost seems to be a horrendous practice, one that should probably be banned. Frankly, the experiences in Spain, California, and New Jersey only tell me about the "voodoo economics" that got this country into a major recession in the first place.  You can't explain it better or worse, other than solar is a total rip-off unless you wan't to talk about large facilities that make a bunch of it, some economy of scale.  Or maybe some new invention that is dirt cheap.  Perhaps I am missing some extremely technical argument here, but to the Great Unwashed, it makes absolutely no sense at all, and you're just playing with politics and other people's money.

   Permalink

   1. 

      cleanfamilyenergy Posted 7:52 pm
      04 Sep 2009

      A real investment should have a return of 5 years? Please tell me where you find such an investment, I am interested. That's a 20% return every year AFTER taxes. Fact is, these investments are hard to come by.
      
      I do not understand your idea of inventing money? A system costs $30,000, someone is getting a check for that much. $15,000 is coming from the homeowner and $15,000 is coming from the government. No one is hiding the cost.
      
      On the return on investment: solar is only economically feasible on homes paying more than 13 cents/kWh. Homes here in California that use over 130% of their baseline are paying 29 cents per kWh. The solar systems installed that target this price will give a return on investment of under 10 years. If you are looking at an average home paying under $100/month on electricity, then solar makes no sense yet.
      
      I would still like to know where you can find a 20%, tax free return on investment that is as consistent as the sun rising in the morning.

      Permalink

4. 

   Gar Lipow Posted 9:26 pm
   04 Sep 2009

   You are both wrong. These days investors demand a 5% return on investment if they consider it a safe one (because safe investments are so tough to find). They will take around 4% on Federal government bonds. OK so if you want 5% plus your princple back over the course of ten years this translates into slightly less than an eight year simple payback. So a ten year simple payback is not quite market clearing, but not that far from market clearing either.
   A ten year simple payback is not a 20% return on investment unless you are assuming zero interest. But these days rotsa ruck Clifford in finding a reasonably safe investment that will provide a simple return in five years. Eight years is about right, and a lot of projects will do that or better Wind generators, efficiency. Solar thermal is borderline.  PV probably still does not pay for itself - unless you consider things like the cost of air pollution, the cost of ripping the tops off of mountains, the cost global warming.

   Permalink

5. 

   Clifford Wells Posted 10:01 pm
   04 Sep 2009

   Nope.  You don't get it and I sorry we're talking past each other.  Set up a cost-margin model and over time, solar should save you money on whatever kW it gets, right?  Remember, I'm a homeowner who slaps down 10 grand on a bank note.  So take a look at your power bills based on whatever your kW-hours are, perhaps 1,000 to 1,400 in an average house.  At some point, your solar powered system should start SAVING you money on your electric bills, even one penny a month. Until that that time, your pay more money than the regular electric bills.  I won't get into the details about how to do cost-margin modeling for fear of confusing the issue.  But given that the average useful life of a solar system is about 10 years before serious maintenance or replacement is needed, that scenario does not work.I think you're looking at things from a top-down policy perspective, like "what happens if we put 5 billion into solar energy - what are the returns on that?"  Well, said like that, probably more that 30 years, I don't know.  Again. I apologize because as usual, people are talking some very strange economics that a homeowner cannot comprehend.  You want to juice the economy with green solar money and have your political objectives.  But every year I look into this issue, it really hasn't changed.Now if you want to give me a nice solar system like some stimulus package for free, great!  Bring it on!  My electric bills will go down right away, and thank you very much.  My the fact is that somewhere, somebody is paying 10 grand plus interest.  Well, what happens is that out kids get to pay for me to have cheap alternative power today.  It's another bubble economy in the making.  To me, if it's not pay-go, you're just playing with mirrors and smoke.  It's about as stupid as taxing our carbon so us people can get rebates to pay for healthcare or whatever. This stupid idea must have been hatched in California, which has the worst economy in world considering it is the 7th largest. 

   Permalink

   1. 

      Adam Browning Posted 7:45 pm
      07 Sep 2009

      Cliff-Almost all PV comes witha 20 or 25 year factory warranty.  you'll need to replace an inverter after 10 yrs or so, but you can count on the panels working for much longer than that.  and the point of my blurb was that solar is getting cheap.  module prices have come down 50% in 6 months, a trend that will continue:http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE57K46Y20090821

      Permalink

6. 

   mikeyohare Posted 2:22 pm
   05 Sep 2009

   Hi,Have you had practical experience in the effectiveness of solar panels? How does their actual output compare to their predicted output averaged over a few years? And how about their reliability and maintenance costs?Thanks in advance,Michael O'Harehttp://toolbarqueries.google.com/favicon.ico PR: wait...http://www.google.com/favicon.ico I: wait...http://www.google.com/favicon.ico L: wait...http://siteexplorer.search.yahoo.com/favicon.ico LD: wait...http://www.bing.com/favicon.ico I: wait...wait...http://www.semrush.com/favicon.ico Rank: wait...http://www.semrush.com/favicon.ico Traffic: wait...http://www.semrush.com/favicon.ico Price: wait...http://siteanalytics.compete.com/favicon.ico C: wait...chrome://seoquake/content/skin/close.gif chrome://seoquake/content/skin/close.gif

   Permalink

7. 

   Sean Casten Posted 8:37 am
   06 Sep 2009

   Adam,I'm skeptical of the WSJ's energy coverage as well, but I think they got this one broadly right, on two levels:1. Energy technologies that depend upon fickle goverment subsidies are always going to be prone to boom/bust cycles.  Spain's experience with solar in the 2000s is no different that the US' experience with wind in the 1980s. (The Atlantic did a very good story on the latter here.)2. Solar PV technology on just about any metric is the most expensive way to lower CO2 emissions.  Maybe that will change in the future, and maybe it's worth investing today to make that future come sooner.  But so long as policies are focused on deployment (as contrasted with R&D), the policies will inevitably be fickle as the public pressure comes to reallocate resources towards a particular bucket of social goals.The central idea behind a feed-in tariff fails on both fronts, because it (a) is inherently extra-market, and therefore prone to being removed as political winds shift direction and (b) is inherently based on cost-recovery rather than value creation.  (e.g., it does not set a single price for all equivalently-clean energy, but instead provides a rate specific for technologies necessary to bring them forward, inclusive of cost recovery).Like I said, I take a lot fo issue with the WSJ's energy coverage, most notably when they confuse profit-seeking behavior with the presence of perfect markets.  But on this one, I think they got it right.

   Permalink

   1. 

      Adam Browning Posted 7:38 pm
      07 Sep 2009

      Sean-My point was simply that California and NJ don't have feed-in tariffs, but rather market-based renewable policies...contra the article's statement otherwise.  I agree with WSJ and you that market-design matters. 

      Permalink

      1. 

         Sean Casten Posted 5:39 am
         08 Sep 2009

         Fair point.  My angst over feed-in tariffs got the better of me!

         Permalink