Solar Symbiosis: Making a Clean Break

In previous articles I have discussed the possible change for American society that could come about through an epiphany of solar power onto the landscape of our energy industry. Solar power has several defining characteristics that make it a disruptive technology - a paradigm shift not unlike the move from wood to coal to steam to oil. It rivals the Internet for the kinds of changes it could bring about in an exceedingly short time span.

First of all:

Solar energy is the great leveler (unlike oil, which has been the great divider) between the haves and the have-nots. No one owns the sun. It can't be drilled or mined or tied up in financial derivatives. It is the only energy source in the world that is primarily free at its source and universally available to consumers. And the closer a nation is situated towards the equator - and the bigger their deserts - the better the technology works. (Here comes the Sun, 2/17/2007)

It has very few mechanically moving parts and in some cases (thin films) none. Its substrate is refined polysilicon, or Si, the basis on which the entire semiconductor industry has built its integrated circuits. Giant firms like Samsung, Hitachi (HIT), Intel (INTC), Emerson (EMR), and Sony (SNE) rely on silicon to bond infinitesimal data paths (with gold wires) in order to carry billions of instructions per second within TVs, computers, and cell phones. The telecom and electrical industries are entirely dependent on silicon - one of the most abundant elements on earth (in its raw unrefined state) - to create their international hubs of communication and an information-based society which today we call the "modern world". Thirty years ago there were no personal computers, no such networks or cell phones, and TVs were powered by primitive cathode ray tubes. A lot has changed in thirty years, and the pace is accelerating.

In the 21st century the role of refined silicon is going to expand into power generation and lighting. I think the move will be from a centralized view of power production to a de-centralized or "mesh" build out of power. This migration could also transform our ailing automobile and construction industries, which I will explain later in this missive.

Trina Solar (TSL) recently made a significant announcement that the end of the chronic polysilicon shortage is probably near at hand. In just three short years, solar power has grown from a small tangential player in the alternative energy field to consuming more silicon than all the world's semiconductor companies combined. Solar companies have signed billions ($) in long-term supply contracts for refined Si. More than a 170 firms are now in the process of building or ramping poly plants. Some of these plants, like the two being built by LDK Solar (LDK) in China, are enormous. Solar power has a compound annual growth rate of 40-50% worldwide and yet it is barely a blip on the American power scene. I think all that could change in 2009.

With the new supplies of poly coming on stream, the cost to build solar panels could drop 50% within a year. With oil at $113/bbl, it is highly unlikely that the large U.S. power plants (which utilize oil and natural gas for their generators) are going to charge their utility customers less ($) in the future. With each successive year, the cost of a solar installation drops while the cost of a monthly utility bill rises 6%+.

In real terms, it is getting cheaper to buy a roof top solar installation - or build it into a new home from scratch - than to rent power from your local utility company for ten years. How? By the time you figure in the rebates from the state and Federal government, the tax write off for the project and the tax deduction for the interest on the construction loan, it is cheaper to finance a solar electrical installation for 10 years at 7% than it is to pay your monthly utility bill. And at the end of 10 years you OWN your system, whereas with your local utility company you're merely rented power to the tune of $18,000 in a decade.

When a large supply of poly comes on stream in 2009 and 2010, solar panel prices could quickly drop to parity with the rising cost of fossil fuel power, and that's where the paradigm shift to solar could begin to show its muscle for the first time.

The Chevrolet Volt is designed for commuters who drive 40-80 miles a day. Because I commute to work each day I can see the profound difference in suburban subway traffic when school is in session and when it is not. There are millions of Americans who drive less (locally) than 80 miles a day. If construction companies (it is now law in California) would offer prospective buyers a solar alternative, homeowners could have their cake and eat it too: a higher property value and their own "fuel" source too .

BIPV (built in photovoltaic) construction costs are much less for a new home than a remodel (although Akeena's (AKNS) Andalay panels may change that). A new solar installation can be financed along with the house. The solar unit supplies power to the house during the day - sometimes even running the meter backwards during the peak hours of the day - and at night the car can draw power from the grid to recharge its batteries. 80 miles a day in a gasoline-powered car is $15/day in fuel, so the cost savings is about $300/month.

There is virtually no reason for the automobile industry to continue its tie to a commodity (oil) that is ultra-expensive, dirty and obsolescent (Remember the Kodak camera and film processing?). But there has to be an infrastructure available to support the widespread use of electric cars. This is where residential solar power systems come in. Millions of homes can gently "add" power into the national grid (without over-taxing it) during the day and then draw that power back during the night for use in the home. It is a win-win proposition on a national and personal level, not to mention the carbon footprint. Because the life of a car is normally 15 years, this could begin to become a reality in less than a decade.

The same can be said for commercial installations on large warehouses across the sunbelt of the United States. From a million points of light - from residences and commercial structures across the country - excess power can be generated in bite-sized pieces that will add up to a huge piece of the energy pie over time.

There is also the built-in epigenesis of technology innovation over time which occurs when thousands of minds work on a single idea. Think of the quantum leaps in bandwidth (broadband) and the processing power of PCs in just the last 5 years. There is a new memory standard called PRAM which is 1,000 times more dense than existing flash drives. At any time, a new invention can come along that levels the playing field and provides more service with less raw materials at the same cost as before (or cheaper). The efficiencies of solar panels increase about 6%/yr. Solar panel makers now use less polysilicon and yet achieve greater conversion rates. This constant innovation - which creates a competitive edge between companies - will continue in the future.

The last great innovation will be lighting. 20% of all energy in the United States is consumed by interior and exterior lighting. Light emitting diodes - another silicon product very similar to a semiconductor - consume 1/100 the power of conventional lighting and yet last 10 times longer. They create a better, more pure or refined light stream, and yet are dirt cheap to manufacture (a single bonder can create 50,000/day). To give you an idea of the scale, it is common for large fabs to have dozens (if not hundreds) of bonder machines.

Although it is true that solar energy creates a relatively thin stream of electrical power, the lighting and computing systems of the future will require less and less energy to run. Think of the advances in the last 5 years that have occurred just with your cell phone and imagine what the same cycle of technology improvement will do for solar energy, home insulation, and appliances. In the relentless drive to eliminate costs, home builders have created siding and shingles that never need to be painted, interiors that are so well-insulated that they can be heated by the light of bulbs, and windows that won't allow damaging UV through.

The real kicker would be a national policy, a fervor - not unlike the one we had in the 1960s when the U.S. raced the Russians to the moon - to reach energy independence in 10 years. The 60s "race to the moon" fervor followed 13 years of a brutal Cold War with soviet communism.

Our dependence today on foreign fossil fuels at a $113/bbl, is the height of stupidity. The main contention is theocracy vs. democracy. Those countries have a right to their religious ideals within the framework of their own geography. But we have a right to our democratic ideals too. There is a reason the Western Hemisphere was once called the "New World".

The only way to end our financial relationship with foreign oil is to make a clean break. Thus a plan that utilizes the free source of the sun to lead the way. Our national strength is our creativity and our inventiveness. Surely this is a better, more noble use of our funds than tilting at windmills and attempting to win unwinnable guerrilla wars on foreign fields. There would be new jobs in a national alternative energy policy - in construction, installation, transportation, and lighting - if the country pulled together to change direction and develop the solar industry; just like we did before with the biotechnology, computer, networking and Internet industries. These aforementioned industries have created millions of new jobs for Americans.

See also:

• Akeena - the Solar CSCO, December 10, 2007
• Akeena Solar, November 9, 2007
• Here Comes the Sun, February 17 , 2007

Disclosure: I have a long position in solar companies Akeena (AKNS), Trina Solar (TSL), and Suntech Power (STP); plus Claymore Global Solar Energy ETF (TAN), the new all-solar exchange-traded fund.

Comments

[richjoy:]

You have made a (seemingly) convincing case for solar...I too have investments in solar, as I see it as one of my "mega-trend" ideas.

However, I do have a few questions: (a) What about solar efficiency in our northern states?; (b) It seems you have glided over future solar efficiency with a weak case (I reference: "The efficiencies of solar panels increase about 6%/yr. Solar panel makers now use less polysilicon and yet achieve greater conversion rates. This constant innovation - which creates a competitive edge between companies - will continue in the future.")...how can we know this will continue into the future?...doesn't expanded use of solar absolutely depend upon such continued innovation?; (c) your case seems to also depend upon continued government subsidies and tax credits--what happens if those are ended?; and (d) a "clean break" with foreign oil?...what you are smoking is surely illegal.

Nonetheless, I think you would be an excellent spokesman for the solar industry.

2008 Apr 16 07:49 AM

[jdspain:]

we are not moving fast enough on electric cars. there should be larger incentives to get more of the commuter to trade in there care earlier. i have no idea of per cent of commuters that could drop buying gasoline and have it pay for over night charge to batteries. If break even we still when if the offset is less pollution. then again no idea about disposal of batteries or recycle. Does anyone know if an electric car is cheaper then buying $4. gas if your commute is less than forty miles each way?

Peco in my area is not a cheap provider of electricity and is looking for increases all the time.

2008 Apr 16 08:16 AM

[petyaczar:]

Every 24 hours, the SUN pours as much energy onto the earth as mankind has used in the last 100 years. - and then some.

The future is bright for a sunny solar industry.
Stop the Abomination known as biofuels. Stop the political insanity that is gasohol. Eat food, DO NOT BURN IT!

long on Solar since 2005.

2008 Apr 16 08:43 AM

[gebby:]

dont worry about governments ending tax subsidies for solar. this is a life or survival question. global warming is real and governments everywhere are building out clean energy technologies. ultimately oil will be used primarily only for the military. solar is a mega rend. increased efficiencies in solar also come from economies of scale. the thin film industry is already achieving 20% conversion. and ascent solar just received a grant from the airforce to work towards this same conversion rate. they are creating a double thin film. anyone with doubts needs to imagine the needs the world is facing.

2008 Apr 16 09:16 AM

[Van Gastel:]

"It is the only energy source in the world that is primarily free at its source and universally available to consumers."

I know you quoted that from another source, but it seems to me that wind is the other part of the environmentally friendly energy equation. I am heavily invested in solar, particularly from China, but I believe wind belongs in the same portfolio and should certainly not be overlooked in an article like this for its ability to produce energy on a larger scale, day and night, particularly in wind parks.

2008 Apr 16 09:26 AM

[prescott:]

"global warming is real and governments everywhere are building out clean energy technologies."

Whatever. Global warming is a red herring. This is a national security and a moral issue. Our country's health and well being should not depend on a commodity resource controlled by others. Especially when the "others" do not share our values regarding human rights and political freedoms.

Also, oil is just plain dirty and obnoxious. The pollution factor should be a strong driver toward solar as well.

I'm afraid the whole 'global warming' thing is just diverting people's attention toward 'conserve, conserve, conserve!' and away from 'produce, produce, produce' more (free, clean, renewable) energy.

2008 Apr 16 10:17 AM

[frflyer:]

I agree with your arguments for solar. Let's not forget the huge potential of solar thermal power plants. Hopefully we will have some companies going public in this area soon.

Same for wind, I wish there were more oppurtunities for investing in wind power. Where are the big wind companies in America, like Vestas in Europe?

As far as subsidies for alternative energy, let's not worry about that, until we stop the subsidies for coal, oil, gas and nuclear, which are huge by comparison. So far the public money allocated for renewables are a drop in the bucket.

2008 Apr 16 11:36 AM

[George Sears:]

You can find plans on the web for a smallish house that uses $300 a year in electric heat. It's designed for Montana. So you can do a lot with construction techniques, like structural insulated panels (SIP's). I've built LED lights. My outdoor lighting system runs on one 65 watt solar panel, and one battery. The superbright LED's, right now, tend to run hot. But there is enormous momentum building for LED lighting. Like you say, a car like the volt can be "run" with a fairly small array of panels, even if power is traded on the grid to actually do the charging at night. So, we can heat a house with a small amount of energy, have lights, and have a car. Fridges and many other appliances can be made relatively efficient. A few things, like dryers, are a problem, but so what? Why are people so negative? I think what this column says will just snap into focus.

2008 Apr 16 11:53 AM

[frflyer:]

Just wanted to comment on electric cars. I think they already have a market in city or in town delivery vehicles, taxi cabs, job trucks for farms etc, where the range is already sufficient.

For the time being, we should be encouraging Detroit to build (PHEVs) plub in hybrids. With no range problems, people will be less discouraged from buying them. The average American driver would get 100mpg overall, and would hardly use the gas engine for their daily commute. Overnight charge would cost $1 at current power prices. Even now, the grid is cleaner than burning gasoline. This would give electric cars time to improve their range and maybe time for charging stations to be built. Phoenix Motorcars utility pickup with a battery from AltairNano can be charged in 10 minutes with a 440 volt charger.

2008 Apr 16 12:16 PM

[free flow:]

Photovoltaic systems work well outside the sunbelt. Electricity passes current more easily when temperatures are lower, which is why systems must be designed to handle voltage of 125% of that which is rated on the panels. Days of mostly sun with some reflective clouds will also produce more power than cloudless days.
Solar panels covering south facing roof slopes also reduce the need for air conditioning if they are separated from the roof covering by an air space, and they will extend the life of composition roofing shingles by cutting out the heat and UV rays.
So get off your butt and get your system installed. Your kids, the planet, and your financial health will love you for it.
Also some, if not all, utility companies will install a "time of use" meter for a nominal fee. If you use electricity primarily during "off-peak" hours, you can sell the utility expensive power and buy it back cheaper. My personal system produces 2/3 of my power but I have a neutral electric bill. My system came on line in Nov.2001, and has run without a single glitch.

2008 Apr 16 12:26 PM

[Rabbito:]

PEAK OIL = GOOGLE IT AND BE MADE AWARE, SOLAR IS THE ONLY ALTERNATIVE

2008 Apr 16 04:18 PM

[Global Warm...:]

There is a lot to say about solar power. One point: it really is a win for the power companies. They need to have generating capacity for peak demand, which, in a lot of places occurs on a hot, sunny summer day (with little wind). That is when air conditioning demand is the greatest and also the peak for solar power production. Even though solar power is much more expensive than base generating capacity, it becomes more feasible when compared to the cost of providing peak capacity from generating units that only run part of the day. Time of use pricing is designed to smooth out the load to the utility so they can make maximum use of their capital equipment.

2008 Apr 16 07:04 PM

[User 179319:]

Here is another idea: use the electricity produced by solar panels during the day to produce hydrogen, and then fill your car with it in the evening or burn it to heat your house or produce electricity during the night.

2008 Apr 16 07:39 PM

[Ames Tiedeman:]

The U.S. Government needs to make solar mandatory on all new homes west of the Mississippi. We need to use solar as a tool to get off oil. We must do this now!

2008 Apr 17 07:00 AM

[Al Borrero:]

I think that he hits the problem squarely on the head. The only real way to justify an electric car is with (hopefully) most of the power coming from the walls and roof tops. The addition of a lot of small inputs of power is a great way to lower the carbon problem, as well as handle a real big problem of cashflow, politics, and dependency on other unfriendly nations.

2008 Apr 18 09:18 PM

[batengineer:]

Electric Cars pose three major problems preventing wide use by public
1. The economics don't make sense. It is still far cheaper to operate a low cost auto on gasoline than to buy a very-very expensive electric vehicle that runs on electricity
2. The power demand issue needs to be solved if. If a large number of people start charging vehicles at home at night, the local power demand on the utility system becomes excessive, requiring large overdesign of generators to handle this new load.
3. Battery cost and life are not yet acceptable for large scale elestric vehicle use.

Other issues: It has not yet been shown that electric vehicle is cleaner or less CO2 emmission than a gasoline burning vehicle given that ~60% ( in US) of electricity is generated from coal.


On Apr 16 08:16 AM jspain wrote:

> we are not moving fast enough on electric cars. there should be larger
> incentives to get more of the commuter to trade in there care earlier.
> i have no idea of per cent of commuters that could drop buying gasoline
> and have it pay for over night charge to batteries. If break even
> we still when if the offset is less pollution. then again no idea
> about disposal of batteries or recycle. Does anyone know if an electric
> car is cheaper then buying $4. gas if your commute is less than forty
> miles each way?
>
> Peco in my area is not a cheap provider of electricity and is looking
> for increases all the time.

2008 Apr 21 10:26 AM

[jrw:]

what is john doing with akns on this sell off? I am long 800 shares and devastated!

2008 May 08 11:48 AM

[Chipstocktr...:]

"What is John doing with AKNS on this sell off? I am long 800 shares and devastated!"

Happily buying more in the $5s.

2008 Jun 09 09:40 PM