Wind And Solar Share Fatal Flaws: Politics And Variability Of Output

by: Robert Wagner

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A recent article titled "Once 'Overhyped and Sexy' Solar Tumbles" highlights the many issues with the solar industry, many of which are shared with the wind power industry as well:

The poor economics:

"The collapse in silicon - a linchpin of solar panel manufacturing - which has led to a steep drop in prices per watt of solar panels. That amount is now less than a dollar, down sharply from $4 per watt a few years ago, making it difficult for companies to make money."

The extreme risks:

"Some of the $75 billion sector's high profile names have fallen on hard times recently - most notably Suntech Power (STP)...In its heyday, the stock traded just shy of $90 and had a market capitalization of $16 billion: on Thursday, the last day U.S. markets were open, the shares traded around for 42 cents each."

Stiff competition from conventional energy:

"As domestic drilling and abundant natural gas has stoked expectations for U.S. energy independence, it has also sapped attention from renewable energy."

Stiff Competition from overseas:

"Chinese companies, which critics contend have benefited from the dumping of cheap solar panel imports in U.S. markets and government subsidies that totaled nearly $2 billion last year."

Dependence upon the government:

"Although Washington still gives a nod to clean energy, gone is the flurry of incentives that once helped solar industry champions boast of one day breaking the stranglehold of fossil fuels on the economy. Public subsidies helped prop up failed companies like Solyndra, which became a political football in the 2012 elections."

Accountability is now being demanded:

"Solar is now "in a reality phase. Now projects need to stand alone" in returning investments without government support."

Being compared to the Dot-Com Bubble is rarely a good thing:

"Publicly-traded solar firms bear more than a passing resemblance to dot-com companies in the wake of the bursting of the 2000 Internet bubble. Many are now confronting the realities of share prices trading far from their highs, as fiscally-challenged governments pull back on the purse strings."

In my opinion solar was never a viable alternative energy source, nor is wind, and they both share a fatal flaw; inconsistent production. Anyone that has ever experienced a power outage understands how important consistent continuous power is, and wind and solar do not, nor will they ever, be able to provide that. Until we can control the weather and rotation of the earth, it is unlikely that these alternative energy sources will ever truly become commercially viable energy sources. We will never power our homes at night with solar and we will never fly our jets on wind power.

Chefs that don't eat their own cooking?

Never trust a skinny cook the saying goes. Simply visit a solar panel plant, and ask where they get their power. The legendary state of the art solar manufacturer Solyndra was powered by coal, and they even defaulted on part of their electric bill. Visit a General Electric (NYSE:GE) plant making wind turbines and count the number of wind turbines powering the factory. There will be none. Same story for the GM (NYSE:GM) plants that make the Volt. Go to a local Home Depot (NYSE:HD) and look for the Sierra Club manufactured solar panels or Green Peace manufactured home wind turbine, you won't find them. Visit a wind farm like the one we have outside Chicago and count the number of idle turbines, even on windy days. I personally witnessed an occurrence similar to what was described in the linked letter when I recently drove to Chicago. We made a game out of counting the turbines that weren't turning, and stopped when we got above 100. Some of those turbines cost up to $4 million dollars, and there are hundreds of them that sit idle when the wind stops. Industry and homes can't be powered by an energy system that is literally as predictable as a 5-day weather forecast, and whose output is as dependable as a summer breeze.

Variability is the death sentence of this industry. Because the output is variable, it is impossible to calculate out the true cost per kilowatt. What is the cost per kilowatt of an idle solar panel at night or on a cloudy day, or an idle wind turbine? Same as anything that is divided by zero, infinity. What stats are published are usually from wind tunnel or highly controlled studies, and no one I know lives in a wind tunnel. Facts are, wind patterns are unique for each location and they change, so there is no way to publish a one size fits all cost and benefit estimate for a wind turbine. Same goes for cloud patterns and solar. That issue alone will prevent any industry from ever seriously adopting wind or solar, especially healthcare. How can an accountant ever hope to sell the concept when they can't, nor will they ever be able, to answer the most basic of pro forma cost questions. Energy prices are variable, yes, but they can be hedged, and the prices paid are market prices shared by all. The cost per kilowatt by a wind turbine varies from location to location, season to season and day or night.

Those who fail to study history:

Dependence upon wind and solar would actually be dangerous and there are relatively recent historical events that highlight this seemingly overlooked catastrophic risk. Wind and solar depend upon, well, wind and solar to work. There are infrequently occurring events that alter the amount of solar radiation making it to the earth, as well as disrupting established wind patterns. In 1815 a series of natural phenomenon including the eruption of Mt. Tambora resulted in a "year without a summer." Snow covered many areas where solar panels would be today, and the large reduction and leveling of global temperatures almost certainly altered wind patterns. A society and economy based upon wind and solar would have been forced to rapidly return to conventional energy sources or face disaster. That risk may be trivial to some ivory tower professor that can prove wind and solar makes money on paper, who enjoys spending other people's money watching his pet research project in action, but one only needs to read about the devastation caused by the year without a summer to understand that those risks should not be ignored.

Political Risk, that second fatal flaw:

Our nation is in fiscal crisis. We simply don't have the resources for such deeply flawed centrally planned grand experiments. When the political tide inevitably turns, wind and solar are almost certain to be on top of the cutting block. In a city near where I live a school purchased one of these wind turbine to help reduce the cost of their electricity. They soon found out the hard way that without wind, there are no savings. The turbine has since broke, and they have elected not to fix it. I was unable to find a link to that story, but there are plenty like it. Those kinds of stories, where money is being taken away from key public services like education, or actual harm being done by the turbines will almost certainly be used against this industry when the inevitable political battle occurs. In my opinion, wind and solar are a lot like the "Wizard of Oz." So far, no one has really looked at what is behind the curtain.

A look behind the curtain:

Countries have spent a fortune on wind and solar, and have gotten very little in return. Spain's experiment in green energy is considered a "disaster." It is claimed that Germany spent $110 billion to delay global warming by 37 hours. Here in the US, even using the official numbers of "A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show," works out to be $38.6 billion/65k = $593k per job. The actual numbers are even worse. Of the $17.2 billion that was actually spent, 3,545 jobs were actually created at a cost of $4.85 million per job. Clearly, this isn't a success story one would want to defend in front of a congressional hearing.

Pouring salt in a wound:

To make matters worse, a science based on a consensus is no science at all. In 1492 the consensus was that the earth was flat. The consensus didn't make it so. Unfortunate for the global warming theorists, the only thing flat is the global temperature chart over the last 20+ years. By the way, when NASA scientist James Hanson claims that the warming hiatus is due to increased emissions from burning coal, that isn't a typo, just like warming can cause cooling, burning coal can cause warming and cooling, which ever suits your argument.

Leading climate scientist James Hansen, the head of NASA's Goddard Institute for Space Studies, says the lower than expected temperature rise between 2000 and the present could be explained by increased emissions from burning coal.

Just to be sure that the author of the article didn't misquote Dr. Hanson, I went to the original letter. Here is the relevant quote:

First, if our interpretation of the data is correct, the surge of fossil fuel emissions, especially from coal burning, along with the increasing atmospheric CO2 level is 'fertilizing' the biosphere, and thus limiting the growth of atmospheric CO2. Also, despite the absence of accurate global aerosol measurements, it seems that the aerosol cooling effect is probably increasing based on evidence of aerosol increases in the Far East and increasing 'background' stratospheric aerosols.

I will leave it to the reader if any of that makes sense. First Dr. Hanson states that we are increasing atmospheric CO2, which leads to limiting the growth of atmospheric CO2, which doesn't seem to be consistent with the atmospheric CO2 data (more below). He then attributes the cooling effect to "aerosols" and then admits that there is an "absence of accurate global aerosol measurements." I'll leave it to the reader to decide if that qualifies as sound "science." Personally I've never known sound science to base conclusions upon data that doesn't exist. Reading the actual letter from Dr. Hanson simply made me more confident of my analysis, and If I can highlight such obvious flaws in a financial article, I'm sure a congressional inquiry would be able to do the same...and more. Just for completeness, page #16 of this solar radiation presentation demonstrates that solar radiation was in a downtrend from 2002 to 2009, and the 2009 level is below the level from 20 years ago. This chart demonstrates how solar radiation closely tracks atmospheric temperatures. I'm not a climate scientist, but I would imagine that might have more to do with the cooling trend than nonexistent aerosol data, but that is just my opinion.

Here is more on the topic if interested:

Some scientists claim that part of the lack of temperature rise is due to the cooling aerosol effect of sulfur dioxide, also a byproduct of burning coal. Hansen rejects this and is supported by an earlier NASA paper, which says that sulfur dioxide (SO2) aerosols in the atmosphere are due mainly to increasing volcanic activity, not from burning coal.

One quote not to be overlooked is:

"The productivity of the planet's terrestrial biosphere, on the whole, has been increasing with time, revealing a great greening of the Earth that extends throughout the entire globe. Satellite-based analyses of net terrestrial primary productivity reveal an increase of around 6-13% since the 1980s."

People often forget that besides from being a greenhouse gas, CO2's main function is airborne plant food that is crucial for plant and animal survival.

Likely Reaction:

Regardless of its soundness, supporters of this science are sure to claim success in their efforts, pointing to the fact that global temperatures have stopped increasing. It surely is a huge victory for alternative energy sources like wind and solar. Not quite. After spending countless billions of dollars, the trend in atmospheric CO2 is unaltered over the last 20 years (link above), in fact it appears to be accelerating upward. Clearly the link between global temperatures and atmospheric CO2 needs a bit more refinement. In any case, I wouldn't want to be a consensus scientist called in front of a congressional inquiry to justify the results of my tax payer funded research and defend the results of the policies it inspired. Especially if those conclusions are based upon "nonexistent" data.

In conclusion, "overhyped" and "sexy" are not the adjectives I would want to see when applied to an investment. Rarely do stocks meeting those descriptions return to their past glory, especially ones that are almost entirely dependent upon government subsidies. If the economics and science were behind the wind and solar industries there would be no need for subsidies, but that simply isn't, nor is it likely, to be the case anytime soon. I simply find it hard to believe industries will adopt wind and solar, when the wind and solar industries haven't even adopted them, nor has the White House for that matter. Before you post nasty hate messages on this article, I am no enemy of alternative energy. I am heavily invested in alternative energy companies that I believe are commercially viable without government assistance and produce a product that is widely demanded by the existing markets. I do not believe wind and solar meet those criteria, nor do I think they will anytime soon. I my opinion wind and solar are political agendas, not sound investments. Ironically, Al Gore seems to agree with me, his investment portfolio appears to be light on wind and solar as well.

Symbols of interest:

  • First Solar (NASDAQ:FSLR)
  • Trina Solar (NYSE:TSL)
  • LDK Solar (NYSE:LDK)
  • JA Solar (NASDAQ:JASO)
  • Siemens AG (SI)

Disclaimer: This article is not an investment recommendation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.