Renewable Energy: This Is Only Going to Hurt a Little Bit

By Daniel Englander

Sydney, AUS – It’s the last day of a round-the-world solar trip that’s taken me through Spain and Australia with pit stops in the UK and Hong Kong...

...In between bits of hallucinatory airplane sleep I’ve had a lot of time to think about greentech and the renewable energy industry. Over the course of this week I’ve met analysts, technology suppliers, investors and project developers. Only one, Travis Bradford, was American. And Travis, who was on a Euro-dash of his own, is more global citizen than your average putz from Padukah.

Granted, I wasn’t in the U.S. But from all the talk there about leading the greentech industry through innovation and investment, the absence of America from the conversation was striking and perhaps a bit revelatory. The other day Rob Day wrote an interesting piece on energy independence, arguing the concept of energy independence deserves a demand-side focus. Sure, when we’re thinking about fossil fuel, “The single most ‘Energy Independent’ barrel of oil is the one not consumed.” But underlying the notion of energy independence as an end-use issue is a more complex problem regarding the technology driving consumption

Energy independence in terms of renewables is both a demand and a supply issue. In theory, deploying renewables at scale would allow us to maintain our consumption levels while reducing our demand for fossil fuels. The supply of fuel is free – sun, wind, tides, ground heat, etc. – though the supply of technology used to convert that free fuel into energy isn’t. If you can imagine a future powered by renewables, then you should also be able to imagine a future where a new kind of energy independence issue rears its ugly head. While it’s not linked to fears of Middle Eastern or Venezuelan oil, it’s one we’re equally familiar with, one that’s equally xenophobic, and one that’s equally idiotic.

The issue of globalization and international is inextricably linked to the development of green technology and the growth of the renewables industry. Whether it’s Brazilian thermochemical lignin convertors, Chinese solar cells, or German turbine nacelles, the technologies driving the growing penetration of renewable energy are, by and large, not coming from the U.S.

The solar industry, because of its relative maturity, is a good example of this. The commoditization of input materials and secondary goods – polysilicon, cells, wafers, modules – has driven the emergence of a global supply chain. While some of the ideas driving this supply chain may start in the U.S., when the vapor depositor hits the epotaxial layer, it’s increasingly not going to happen in this country.

Take SunPower (SPWR), one of the U.S.’s leading solar companies. It started out as a concentrating PV company, moved into optics and optoelectronics (I found out this week SunPower occupied a pretty large piece of the IrDa market), and then finally into flat plate PV. Its highly efficient panels, derived from the company’s work in CPV years ago, have high average selling prices but fetch fairly small margins. If markets in the U.S. and Spain fail to meet demand projections next year and prices fall, a situation that’s looking more and more likely, SunPower’s margins will get even smaller. Good thing most of its manufacturing capacity is located in Malaysia. Without that, it probably wouldn’t have any margins at all.

I’m waiting for the day that some politician rails against Chinese PV because the factory workers in Shenzhen took our jobs. The problem is that those weren’t really our jobs anyway. Even less so because that same politician probably also voted against extending the investment tax credit or a national RPS, while voting in favor of expanding offshore drilling. Energy independence is a joke and a myth – and that’s a good thing. No one talks about computer or t-shirt independence, yet neither computers nor t-shirts are made in the U.S.

Even if the federal government took the step of actually supporting a renewables industry in the U.S., it wouldn’t be long before most domestic greentech companies move their operations somewhere else. Companies like A123 and First Solar (FSLR) have already figured that out – the rest will soon follow. We’ll need to accept a global supply chain in renewables in the same way that we need to accept one for other industries. The difference between renewables and other industries, however, is that not doing so will cost us a lot more than just some jobs.

When utilities and power retailers talk about security of supply, they’re not talking about natural gas reserves or coal contracts. They’re talking about power over-the-lines in whatever 10-minute increment they happen to be in at the moment. Regardless of how efficiently we use fossil fuels, they suffer from volatile prices, uncertain supply, and perpetually increasing demand – all bad conditions from the utility’s perspective.

If, instead of gas turbines or coal steam boilers, power producers used renewables, the price and security of their supply would be much more stable. Getting to that point requires a steady stream of cheap renewable technology – something available only if we accept the idea that true energy independence is both undesirable and impossible to achieve.

Disclosure: None

Comments

[vpratt:]

I suspect a reader or two will accuse you of being too cautious or even bearish. I find your article sobering. Shouldn't invest while intoxicated, I suppose. To look into the future is such a challenge, and even the present is full of blind alleys and traps.

You have provided needed reminders. I suppose national energy independence is somewhat analogous to home energy efforts. I could produce all I need on my own roof, but I eventually have to buy food, clothing, hardware, entertainment, and produce a product or service at my job. I could shop with home grown and energy in mind, but sooner or later I'm going to buy that bottle of Australian Shiraz or South African Pinot Noir. Or, less exotic, a toilet part made in Israel.

It may come to pass that we never lead the world in these new technologies or in the production of the end products. What is certain, and mandatory for our economy, is that we get involved immediately and deeply. Right now we're only in it up to our ankles. You're not really swimming till your keester gets wet.

2008 Sep 08 10:22 AM

[JohnnyN:]

There are many energy companies world wide hat have good idea's, but we all needs thing other things as well.

One US company that is interesting is called Beacon Power Corp., it just might be better that solar.

2008 Sep 08 01:11 PM

[NOWHEREMAN:]

Flywheels? are lubricants involved? if so, how often?

Perpetual Motion machine?

2008 Sep 09 12:33 AM

[lefty37:]

A huge partial answer would be--- Take ALL energy off of the commodity
market. That would be True supply and demand.

2008 Sep 09 06:11 AM

[User 258551:]

i think your wrong on green energy here in the usa . yea we may be fat dumb and lazy but sooner or later this country will lead the way to renewables we will have no choice when heating oil is 8 dollars a gallon and your electric bill is 300 on an average month . the feds are hearing the pressure and they will act ... solar power invest now be ahead of the curve...

2008 Sep 09 01:02 PM