Trends In The Cost Of Energy

Introduction

Energy is the largest component of the world's Gross Domestic Product. It is a measure of our state of civilization. Its availability determines our standard of living, but also threatens to undermine it: the excessive use of stored energy through burning fossil fuels is a cause of Climate Change. Now, the depletion of these fuels will force us to reinvent how we can continue to advance our civilization in a sustainable manner.

The phenomenon of climate change was identified first in the nineteenth century. By the end of the twentieth century, a consensus evolved in the scientific community as well as among progressive political establishments about the need to limit global warming, but a global response has proved elusive until now.

Over the last half century a number of significant changes to our energy outlook have emerged. In 1949 M. King Hubbert, an Exxon engineer, predicted that oil production in the US would peak in 1971.

This prediction was correct within days. The Global Hubbert's peak (GHP) has been followed by a decline in fossil fuel reserves. A number of other transformational developments have occurred over the same time frame, including:

i. the emergence of cost effective renewable energy sources, particularly Solar Photovoltaic (PV).

ii. with new extraction technology, large amounts of local natural gas reserves have become accessible to dramatically change energy politics. This recent discovery of recoverable natural gas, together with the rapidly advancing renewable industry, gives the US local options not expected a decade ago. The US again has a realistically independent energy future.

In this article, the cost evolution of a variety of energy sources is examined. In particular, the role of renewable "Electronic Energy" in the form of PV will be examined in detail. The author shows data indicating that by 2020, photovoltaic electricity will be the lowest cost electrical energy available. This further asserts the need for a reliable storage solution compatible with wind and PV electricity generation.

It also suggests to the financial community to reexamine investments in the energy mix.

Comparison of Various Technologies

The technologies we will compare in this article are nuclear, coal, oil, and natural gas; and solar PV and wind among the renewable options. Table 1 summarizes the comparative status of these energy sources.

To compare all the options, Kilowatt-hours (kWh) will be used as the measure of energy, wherever possible. (In some cases it is difficult to obtain true comparable costs). In Table (1) and on the comparative graphs Figure (2) and Figure (3) the costs are calculated with the following formula:

The cost of generation ($/kWh) = [cost of generation equipment ($/kWh) + cost of fuel $/ (kWh) + maintenance $/(kWh)].

This calculation assumes:

• i) All technologies have 20 years of usable operating life

• ii) Interest on capital is included in the cost of generation equipment

• iii) Maintenance includes both labor and capital equipment

• iv) Base load operation is 7,000 hours (80% duty cycle)

•for nuclear, coal and fossil fuel.

• v) Wind and solar hours of operation is dependent on location. For wind 4,000 hours (45% duty cycle) for solar 2,000 hours (23% duty cycle) are assumed.

This calculation does not take into account the cost of environmental, health, decommissioning, and other indirect liabilities, nor does it take into account the end of life value of the operating system. The cost of financing is included in the cost generation equipment (assuming a debt to equity ratio for the financing of 4:1). For details of the calculation see (energy calculations)

Nuclear Power

The politically most sensitive energy source is nuclear. In recent years, bowing to public wishes, Germany has decided to shut down all nuclear facilities. Two years after the Fukushima accident, Japan is still uncertain about restarting its reactors. Chernobyl and Three Mile Island all are within recent memory.

Nuclear power does not emit any carbon containing gases, so it does not contribute to climate change. Operating in principle for 24 hours, it is a suitable power source for clean base load electricity. Sources of concern are accidents and the unresolved issues of disposal of spent fuel and decommissioning nuclear power stations at the end of their life.

When the first nuclear reactors were built, proponents declared that nuclear power would be too cheap to meter. It did not turn out that way. Today, it is difficult to understand the true cost of nuclear power. A first reference represents a most optimistic view of nuclear power. This paper created enough interest that there has been an ongoing discussion since it was first published on April 2 2010. The conclusion of the paper is that the cost of nuclear power is under $0.04 per kWh. The value of nuclear power shown on Figure (3) before 2000 shows this number. This analysis does not adequately take into account the concerns expressed above about nuclear power.

A further reference comes from the experience of the most active player in the nuclear power industry, Electricite de France (EDF). EDF has built and operates the largest number of nuclear power stations in the world. In the reference quoted they announce more than a factor of three cost overruns on the Flamanville plant. The plant now is planning to start operation in 2016 and forecasts $0.12/kWh electricity cost.

It is difficult to arrive at a reliable cost of nuclear electricity. The best numbers I can extract is an average price of $0.10/kWh for 2010, and $0.12/kWh for 2020. The general conclusion of the experts is that nuclear power will not represent more than the present fraction in the electricity mix (presently at below 20% in the US).

Fossil Fuels

Figure 1. Timeline of the usage of fossil fuels

Figure 1) is a dramatic representation of the time line of the history of the use of fossil fuels. In the beginning (1 to 4 billion years ago), the majority of gases were CO2 and N2 in the atmosphere. From this beginning of time, fossil fuels were created by photosynthesis enabling CO2 to react with water.

CO₂ + H₂O >>> light >>> O₂ + C - (H₂O)

If all the O₂ in the atmosphere was made by this process, the upper limit of fossil fuels stored over 4 billion years can be calculated from the total O₂ in the atmosphere today. Within an order of magnitude accuracy, the weight of O₂ in the atmosphere is 10e18kg (1followed by 18 zeros). The extractable part of this stored fossil fuel (see table 1, is estimated to be less than 10e16kg, less than 1% of the total carbon deposits, as calculated from the Precambrian content of the atmospheric O₂) is expected to take place over a few hundred years as shown by the small blip on the time line (note that the first part of the line extending over 5 miles to the left of the page). The peak of the bell shaped curve, representing Hubbert's peak, falls close to the year 2000. The half width of the blip is 100 to 200 years, making it imperative that we find an alternate energy source to fossil fuels in our children's lifetime.

Climate Change is principally caused by increased CO₂ and other greenhouse gases in the atmosphere, due to man made and all other effects. Increased CO₂ leads to an increase in the earth temperature. There is however, an even more serious consequence of increased CO₂ (and parallel a reduction in O₂) in the earth's atmosphere. At the present rate of CO₂ generation, (10e13 kg/year), we have to consider the reduction of atmospheric O₂ to the point when living organisms can not sustain life. (A reduction of O₂ concentration of 1% equivalent to 10e16kg of O₂, would affect life itself.) We are presently a factor of 1000 away from this condition.

Coal

Coal is the most abundant stored fossil energy on earth. The estimated extractable reserves are about 1 Trillion tons. There is enough coal to provide power to the globe for more than a century. The US has one of the largest reserves in the world. The problem however is that coal is also largest green house polluter of all the energy sources (Table 1). In 2012 coal was the fuel for 40% of the world's electricity and 26% of the global primary energy. The use of coal for electricity generation in the US is being replaced by natural gas. In 2012, for the first time the generation of electricity by natural gas was equal to the electricity generated by coal.

At a price of $30 per ton, the cost of electricity generated by coal is about $0.03 per kWh. The price of coal today can reach $150 per ton. At these prices the cost of natural gas generated electricity becomes competitive with that generated by coal. These cost calculations do not include the cost of externalized environmental and health costs, which amount to about $0.14 per kWh for coal.

Coal as a source for carbon has a value as a raw material for several industrial and consumer uses. For electricity generation coal is not the lowest cost solution any more.

Oil

Ever since the age of the automobile, fossil fuels (primarily oil) have been the world's preferred energy source. Returning to Figure 1), and Hubbert's Peak, the bell shaped curve starting around the year 1900 indicates the use of fossil fuels. Since early in the planet's history, photosynthesis has converted carbon dioxide and water to hydrocarbons and oxygen. Today, burning fossil fuels reverses that process. If we burn all the stored fossil fuels, we would end up with an atmosphere primarily of CO2, instead of oxygen. That would be the ultimate climate change.

The world's crude oil reserves at the end of 2012 are about 1,600 billion barrels. The consumption for the same year was reported at 32 billion barrels (10e13kg). With these numbers the existing oil reserves would last 50 years. Of course both the size of reserves and consumption levels are moving targets. Whatever the supply and consumptions numbers are, available oil reserves are finite and we are beyond Hubbert's peak. The remaining oil should be kept for industrial and consumer applications, and not burned to produce heat and pollution.

	Energy content	Total reserves	2012 years left	CO2 pollution	Electricity cost ($/W) 1980 2010 2020
Nuclear					0.03	0.11	0.17
Fossil fuels
Coal	7 kWh/kg	1 trillion tons	300	1kg/kWh	0.03	0.07	0.12
Oil	10 kWh/l	1 trillion barrels	43	0.7 kg/ kWh	0.11	0.15	0.19
Gas	10 kWh/l	1000 trillion m3	100	0.55kg/ kWh	0.04	0.06	0.07
Renewable energy
Wind					0.08	0.07	0.06
Solar PV					1.00+	0.10	0.05

Click to enlarge

Table 1. Comparison of different energy sources ($/kWh)

Natural Gas

Natural gas is one of the forms of recoverable stored hydrocarbons. Total natural gas reserves are estimated to be 10e15kg. Natural gas has received special attention in the last decades, since the size of US reserves has become apparent. Potentially, these reserves can make the US energy independent.

Natural gas, due to its molecular makeup produces less CO2 than other fossil fuels. However, there are significant environmental consequences associated with the hydrofracturing (fracking) process to extract the newly identified natural gas reserves. The water that is used in fracking and the subsequent disposition of that water has to be taken into account in the evaluation of how clean natural gas is.

Natural gas today can be cost competitive with coal to produce electricity. But the pricing of these two fuels is very volatile. In 2012 the cost of natural gas reached parity with coal for the production of electricity, but in February 2013 a recent report of the IEA forecasts coal to be the dominant fuel again for electricity at least until 2015.

The natural gas industry has attracted so much capital that at least for the time being the price of natural gas will remain competitive.

Wind

Among the different sources of renewable electricity generation, wind was the first to reach large-scale cost effective penetration of the energy industry. Cumulative electricity generation from wind reached 300 GW by 2011. Wind capacity is large enough so that the transmission capacity of the existing grid is limiting the growth of wind generation.

The intermittent nature of wind makes it even less predictable then solar. A suitable energy storage medium will be necessary to enhance the value of electricity generated from wind (and solar).

The cost of electricity from wind has leveled off, since megawatt-size wind turbines have been deployed. Electricity costs range fro $0.05/kWh to $0.10/kWh, depending on location and the cost of equipment. The industry expects further modest cost reductions. One of the uncertainties of wind electricity is the cost of maintenance.

Wind energy generation has already found its proven role in the electricity mix. As a viable renewable energy, its future competitiveness in relation to fossil fuels will only improve.

Solar PV (Photovoltaic)

Since the author's primary expertise is in PV, the role of PV will be examined in more detail. Figure 2) shows the historical cost evolution of thin film PV modules and those of crystalline PV modules. This figure shows a forecast until 2020, assuming the trend observed for the past decades will continue. This Figure is a summary of the substance of this article.

PV, The Electronic Energy Source

Moore's law is an empirical observation in the semiconductor industry. It observes that the density of integrated circuit components doubles approximately every two years. This periodicity has changed with time, starting at 18 months, now closer to three years. This is not a law of physics, It is an empirical observation that is effected by many parameters, notably by the laws of the land, the state of the art of applicable science and by investments committed to the progress in the technology.

There is a similar relationship for the cost evolution in PV technology, illustrated on Figure 2. While Moore's law can be demonstrated by the progress in one company (Intel), progress in PV has to be viewed in terms of the accomplishments of commercial entities, governments, and academic institutions worldwide. The main empirical observations are the following;

• There are two parallel developments, for crystalline Si and for thin film PV. Among thin films aSi (amorphous Silicon), CdTe (Cadmium Telluride) and CIGS (Copper Indium Gallium DiSelenide) are included in the "Thin Film" plots. Points are taken from several publications, but the primary data is from the NREL continuing report of maximum cell efficiencies, as measured at NREL . Two summary presentations that well summarize the progress of PV development and their data is used in the construction of Figure 2. [see note (A) below]

• The efficiencies of the two different classes of PV cells - crystalline Silicon (CSI) and Thin Films - are plotted against time. The data falls on two parallel lines with the same slope. The line representing Thin Films (lower line) is shifted in time by about 12 years from the evolution of cSi cells. This is the time the Thin Film PV development was delayed compared to the development of cSi PV technology. For more than three decades the curves show remarkable similarities. [See note C]

Figure 2. The evolution of PV efficiencies for the period 1980-2030 Upper line cSi the lower line Thin Films (aSi, CdTe and CIGS)

PV developed for space applications and concentrating PV CPV are not included on Figure 2.

The main conclusion of this analysis is:

The efficiency of PV cells of crystalline Si and thin film have increased at a rate of 5% per decade. There are no reasons or physical laws that the efficiency should not keep increasing until they reach their maximum efficiency determined by band gap and the number of devices used for multijunction cells.

This is the equivalent of Moore's law for PV technologies. It is to be noted that PV module efficiencies in production lag by about three percent behind cell efficiencies. (there is a scatter of +/-0.1 in the absolute value of the efficiencies). The curve of cSi with a 1eV band gap will have to go parallel with the time axis at about 30% efficiency. For thin films, since multi junction cells are included, this asymptotic behavior comes about at around 50%. The efficiency of thin film PV cells is forecast to reach 25% by 2020 and 30% by2030, with corresponding commercial module efficiencies of 22% and 27% respectively.

Figure 3 shows the cost evolution of the various energy technologies in the past 40 years and reasonable expectations until 2030. These calculated values use the data taken from various references quoted above. The forecast for PV is based on the considerations presented below:

Figure 3. The cost of electricity US cents/kWh for different technologies for the period 1980-2030

The cost of thin film modules per watt has always been substantially lower (about 50%) than crystalline Si of the same efficiency. The efficiency of cSi was at any given time about 5% higher than thin film PV [note Figure2] because the development of cSi has preceded those of thin films by five years.

The reason for the lower costs of thin films are cost difference are;

i) the thickness of the semiconductor material is much thinner, (2 microns compared to 300 microns)

ii) the interconnections of the monolithically integrated module was part of the manufacturing process resulting in substantially lower assembly costs,

iii) the electrode structures and the high currents in crystalline Si technology require additional costly materials and processes not needed for thin films.

There is an existing high volume mature industry that can guide us in estimating the terminal cost expectations of glass-to-glass encapsulated thin film PV modules. Car windows and low-e windows are a very similar structure and cost to the thin film PV product. The estimated production volume for these products is over 1 billion square meters per year. This volume would generate over 200GW of PV electricity. In this volume the manufacturing cost of the laminated glass is about $20 per square meter. This can be expected to be the terminal cost of glass-to-glass PV modules. If we assume thin film module efficiency by 2050 of 40%, one square meter will produce 400 Watts. This gives a terminal cost for this type of modules of $0.05 per watt. We double this terminal cost for PV (as a conservative contingency), with $0.10 per watt module prices a system can be installed at $0.20 per watt, with resulting cost of PV electricity of about $0.01 per kWh. The $0.10 module cost is equivalent to $40 per square meter of the laminated glass industry product, still twice the existing terminal cost reached in the glass industry.

Now let us examine the reality of these further cost reductions. We will focus on ternary semiconductors without any carcinogenic material such as Cadmium. State of the art of CIGS laboratory cells have 20.7% efficiency. For the moment we bypass other PV technologies, to focus only on TFGPV (Thin Film Glass encapsulated PV). High efficiency triple junction crystalline PV devices such as GaInP/GaInAs/Ge (with demonstrated cell efficiencies above 41%) primarily used in space application and CPV applications are substantially more expensive than TFGPV.

There are several advanced concept PV systems, based on nanotechnology that may lead to improved efficiencies. At this point the commercialization of nanotechnology based PV devices is not adequately defined. Once they are fully developed, they might replace the present thin film semiconductor material in a TFGPV device. Their influence on cost will be felt if the nanotechnology based PV will lead to higher efficiency devices.

In planning the future, the role of crystalline Si PV has to be understood better. Today the PV industry is in a destructive mode due large subsidies of the industry and the large overcapacity of production that was funded globally. In 2012, manufacturing capacity in China is greater than demand and all crystalline manufacturers are operating at a loss. It seems that the government of China has made a commitment to keep the industry alive and allowed further lending to the industry and set up substantial consumption.

As discussed earlier, thin film modules of identical efficiency have substantially lower cost than cSi. In the examination of future PV options we focus on ternary semiconductor thin film devices. The route to higher efficiency is reached by the use of multi-junction devices. Starting with the present CIGS champion cell of 20% efficiency, an ideal double junction cell is forecast to have a maximum efficiency of 30%. Expecting the usual lower efficiency for a module compared to a champion cell, module efficiency (as predicted by Figure 2) of 22% is a reasonable by 2020 with the introduction of tandem devices. 30% cell efficiency with the development of triple junctions is forecast by 2030.

To calculate cost, we start with delivery of 5% efficient aSi product from Duna Solar in 1998. The starting point manufacturing cost was $0.95 per watt. The predicted module cost for a 22% efficient TFGPV module is $0.24 per watt in 2020 and $0.15 per watt in 2030. We assume [see note (B)] installed system costs of $1.0 per watt in 2020 with corresponding electricity price of $0.05/kWh. With installed system cost $0.60 per watt in 2030, the cost of electricity is $0.03/kWh. It is to be noted that ultimate limit of PV efficiency can be increased in subsequent years at least double that of the 2030 value to over 50% and above, with further reduction of cost to $0.01/kWh. The overall conclusion from this analysis is:

The cost of electricity produced by TFGPV is forecast to decrease throughout the century to the level of one cent per kWh

The percentage of PV in the energy mix very much depends on the availability of suitable storage. Presently, there is a strong focus on the development of battery technologies. Batteries are not likely to reach the energy densities available in fossil fuels. However the availability of very low cost PV electricity opens up a different approach to energy storage. Consider the potential use of aluminum as a fuel. A mixture of Al and water can produce Hydrogen at room temperature. The main problem is that the amount of Hydrogen generated is still below the weight or volume capacity of fossil fuels. The other big problem is that the cost of hydrogen generated this way still higher than by other means. However if the cost of PV electricity can be brought down to $0.01/kWh, Hydrogen from Al generation becomes cost competitive with fossil fuels.

Conclusion

The energy industry is in transition. From the basket of energy technologies available today the industry will change gradually to clean renewable energy. The transition period will take several decades, depending the positioning of the capital and the timing and amount of investment. Ultimately the dominant element in the energy mix is expected to be solar PV.

In solar PV there will be a refocus on thin film based PV, with a further increase of efficiency to the 50% range and a decrease in module cost to under $0.20/watt and $0.01/kWh. This is a realistic goal by the middle of the century. Such low electricity costs will also bring novel solutions to energy storage. Investors in the energy industry will be well served to note this change in direction!

Note A: Others have noted general cost reductions in the cost of PV modules. These cost reductions were correlated to an increase in manufacturing volume.

Note B: The cost of installed system in the past two decades was 2 x module costs. Here we conservatively assume the cost of installed system in 2020 and 2030 will be 4 x module costs

Note C: The upper curve for cSi levels off the efficiency at 26%, which is the maximum efficiency for a single junction PV device with the band gap of cSi. The efficiency of thin film PV devices is shown to continue to increase beyond this band gap efficiency, because multi junction PV devices are also included. Multi junction cSi devices, while possible, are more difficult to accomplish due to strict requirements in lattice match.

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. I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Energy Value]

Zoltan - Very well assembled and thought out article. A few points -

1. The all in cost for PV solar energy is a bit higher due to a factor not taken into consideration here. Continual exposure of modern PV panels to elements (wind, rain, freeze/thaw cycles) causes an exponential decay form the initial efficiency performance. If it starts out at 5% efficiency in year 1, one freeze/thaw wind/rain cycle later, you're seeing 4.9% efficiency... which means that the generating capacity of a field of PV arrays is on average something around 60% the initial output when they're first set up... and the cost of those PV panels and the labor to replace them by somewhere between the 12th and 18th year isn't something I see factored into these cost models. This is a significant component of the overall cost equation (much like drilling and completion costs are for oil wells - where depreciation of these expenses is a huge component of the financial models). I'm wondering, have you actually built a one or two decade horizon financial model of the all-in costs / KWH that accounts for yearly depreciation of labor and material and accounts for yearly expected degradation in the efficiency of each panel? I would be very interested in looking at such a model. The points laid out in this article are a good start but really need these two layers added on before it can be taken as realistic.

2. Current industrial solar generating capacity mainly comes from heliostat based generation systems. For these installations the yearly material and labor depreciation is truly small (not zero, but small)... and they really do compete with oil-fired generation / KWH (not with coal or gas, but they do beat oil-fired generation). Given the mass deployment of these type of solar installations in the US and North African market today, I wonder if you could also add a measurement of the generation costs of this class of facilities... these actually should be much lower cost than industrial deployment of PV arrays because of the much lower equipment degradation and capital depreciation over time.

[fhbecker]

Read one of Zoltan's other articles, thought he did a good job on the topic, but I got lost a lot.
Made it to the third paragraph on this one, and now I realize that he just makes up some of his information. K. Hubbard worked for Shell not Exxon. Sad. Now one need to check everything else he claims is true.

[shgifis]

This is a very important article which should be read by anyone seriously interested in the future of solar energy.

[santafemike]

Well done article. I have some comments. One is political The citizens of the USA subsidize fossil fuels and this affects the costs. I think that $50B-$100B in direct subsides, $300B-$500B in cleaning the environment and health issues and $200B to $400B in military efforts in the middle east should be figured in.

Outside of that natural gas is much less abundant than coal and if we used this for massive electric we might find ourselves soon looking at this shortage. I think the best solution is daytime solar/wind and nighttime natural gas. This takes care of peak demand between the air conditioner times for 1pm to 6pm and then less usage during the evening.

PV is certainly a better deal than thin film right now and I think with the current components that will be true. The Holy Grail will be the nano structures on plastics. Right now they are playing with new nano structures and spectrum attraction. It still looks like 5 years off and maybe more for commercialization. Still billions of reactions to one sun vs today's one reaction to one sun will certainly make a big difference.

[T L R]

Here are a couple of important items to factor into your analysis of this article. Proven oil reserves worldwide have increased from 642 BB in 1980 to 1.474 TB in 2011. Info from the US Energy Information Agency (EIA). While US Proved Reserves are down from the 1970's, the EIA's recent report from Aug. of 2012 shows the US reserves increased by 12.8% in 2010 to a total of 25.2 BB. Per the agency's website "proved reserves of U.S. oil and natural gas in 2010 rose by the highest amounts recorded since the U.S. Energy Information Administration (EIA) began publishing proved reserves estimates in 1977." Next report due later this month. In Feb. 2013, the USGS published a report on the oil resources in the Green River Basins. Their summary: "Using a geology-based assessment methodology, the U.S. Geological Survey estimated a total of 4.285 trillion barrels of oil in-place in the oil shale of the three principal basins of the Eocene Green River Formation. Using oil shale cutoffs of potentially viable (15 gallons per ton) and high grade (25 gallons per ton), it is estimated that between 353 billion and 1.146 trillion barrels of the in-place resource have a high potential for development." Recall from the Worldwide data above, that this US amount would nearly equal the total Worldwide reserves for 2011. Proved reserves are of course changing all the time, usually upwards. In 1980, according to the EIA, the US had 31.3 BB of proved oil reserves. However, between 1980 and 2010, the United States produced 77.8 BB of oil and still had 20.7 BB of oil reserves left. So, between 1980 and 2010, the United States produced 2.5 times the amount of oil as it had proved oil reserves in 1980.

As far as Global Warming is concerned, please look at the HadCRUT4 temperature data recently released. A strong flattening of the temperature curve can be seen starting around 2000 at the same time the amount of CO2 has been increasing. The HadCRUT4 temperature data is what is used by the IPCC to monitor global temperature. Perhaps this 10 to 15 year period is too small to draw conclusions, but should at least provide an impetus for climate scientist to review their algorithms which all predicted continued steep increases in global temperatures which have not materialized.

[ephud]

TLR

"Proven oil reserves worldwide have increased from 642 BB in 1980 to 1.474 TB in 2011"

No even close. Proven reserves have increased by more than that from the tar sands in Colorado and Utah alone.

"USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions......At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world’s proven oil reserves"

http://bit.ly/12vw7rs

[JRP3]

"A strong flattening of the temperature curve can be seen starting around 2000 at the same time the amount of CO2 has been increasing."

2000 was also the beginning of a decrease in sun spot activity, lower than normal, which has only recently started to increase once again. So the fact that we still saw increasing temperatures during a slightly longer period of low sunspot activity would suggest some other warming influence still in effect. If sun spot activity picks up again as it has in the past we may again see a steeper climb in temperatures.

[Freddy Hutter, TrendLines Research]

ephud, you are confusing proved reserves (1p) with probable reserves (2P), possible reserves (3P) and contingent resource (uneconomic). Only when the two other categories of reserves are included does the volume jump from 1.4-Tb to 6.9-Tb. They generally have technical or environmental issues preventing immediate development. As crude price rises over the decades, some of contingent resource will be transferred to the reserve tally. In short, each $1/barrel increase adds 26 billion barrels to reserves.

URR/EUR charts: http://bit.ly/oa0MbC

[Zoltan Kiss]

"ephud" Sorry for making an error with the reference. Actually the reference used is ) http://bit.ly/10LkiMz
Hopefully it is helpful

[Zoltan Kiss]

"Daniel Holzman" Thank you for your clear description of your Utah project. Since your statement 'the author has grossly understated the actual cost of delivered solar power" goes to the heart of my article,
I would like to present again some of my arguments. Your conclusion is that the cost of electricity in your Utah project is $0.11/kWh. Note
in the table in my article for 2010 I quote $0.10/kWh. In my calculations I use 2000 hours of insolation per year, instead of your 1750 hours. Just taking only this into account, your cost of electricity would come out at $0.09/kWh. The article is conservative compared with your number.
It is sad and telling, that your installation, typical of other installations in the US compared to the rest of the world is too expensive. You arrive at $4.0 per watt, when in Europe e.g., Germany there were installations in 2012 at $2.0 per watt and in China under $1.50 per watt. We in the US better figure out quickly what is the reason for this discrepancy.
As to the cost in 2020, rereading the article, the argument for 22% TFGPV module and $1.0 installed system cost leading to $0.05/kWh
electricity cost is not "grossly understating the cost"
It just came to my attention, that for delivery in 2014 contract has been signed in China for installed system cost at about $1 per watt.

[ephud]

Zoltan

"A further reference comes from the experience of the most active player in the nuclear power industry, Electricite de France (EDF)."

Could you please provide the correct link to "A further reference"? It's the same link as "A first reference".

[Zoltan Kiss]

"Richard Berger" You summarize succintly the weakness of my article for the "Seeking Alpha" community, there is no actionable investment advice. You are correct. I am hoping to get help on that from all of you.
But surely if PV will generate electricity at $0.01/kWh in less than 50 years, we are witnessing the largest industry on earth developing.
There are some early forecast by Shell that PV will be the largest component in the energy mix by 2030. Let us figure out how to benefit from that. The PV industry is in a real turmoil today. The PV technology will again have to undero a generatinal change to reach that ultimate goal of $0.01/kWh. I tried to make a roadmap for that transition in my acticle. Let us help this transition by investing in the industry.

[Zoltan Kiss]

Some further answers on your comments; "Pompanofrog", Please explain your question." what payback period do you speak of to achieve equilibrium.?"
'blueice" for further information I can recommend the reference in
"Freddy Hutter's" comment. Nice presentation of the simulation data.
"Freddy Hutter" The silly comment you refer to (I am an older fellow, not beyond "silly" comments) is not a prediction. It is closing the loop on the great equation in reference to the simultenous origins of fossil fuels and oxigen. I also would not be too dogmatic on your prediction
of peak CO2 in 1929. Sevaral factors could change that (earthquqake, vulcanic activity) that could bring the CO2 content into that silly range (1000ppm) where I would have trouble breathing.

[wsnell8]

Interesting article! But a few notes. You mentioned, "we have to consider the reduction of atmospheric O2 to the point when living organisms can not sustain life. " I am not sure this would ever be a problem. The atmosphere is 20.9% O2 now, and humans can tolerate as little as 16% partial pressure with few side effects. But the real reason this wouldn't be a problem that few people realize is that the most prevalent element in the earth's crust by mass is oxygen at 46%! Carbon, on the other hand makes up only 0.03%. (See http://bit.ly/Z3fOSL) So I would suspect that more oxygen would be made available as resources are tapped but there simply isn't enough carbon to make an appreciable difference. Also some research has been done on the effects of CO2 on plants and humans. Apparently plants flourish at double the current CO2 content and also become more drought resistant. Humans begin to see some slight negative effects when amounts reach 1500 ppm or 0.15% (See http://bit.ly/Y7YHMh) and I have a hard time seeing this happening anytime soon (being at ~385 ppm or .0385%) especially as plants and the oceans (full of plankton) start picking up the gas and converting it back to oxygen. So there is really no danger of displacing or using oxygen up with carbon. The financial implications, however, of making CO2 a pollutant are tremendous and negative.

[wsnell8]

One other note: Since you were mentioning both the pros and cons of each energy source, another strike against wind power--in addition to its intermittent nature--is the noise of the turbines, the death of birds around it (ostensibly because they are painted white which attracts insects) and the interference with weather radars used for severe storm warnings. Some people have also reported sub sonic rumblings which they say have made them ill.

[JRP3]

Bird death is over hyped, windmill kills are a tiny fraction of bird deaths each year. One of the largest causes of flying bird deaths is buildings. No one is suggesting we stop building those or take down existing ones to help the birds.

[User 10524111]

Excellent article.
However, in estimating costs "to the user" of PV and wind, one needs to factor in the huge subsidies states are giving to developers which will result in much higher costs than the generating costs. And, some states give these subsidies for up to 20 years.

[enge2103]

Has any of you thought about the possibility of creating clean energy through the POX - process, partiel oxidation of coal through incomplete combustion by injecting Air / HP Steam at about 1290°C in a deep underground coal mine, producing about 50% CO and 50% H2, this extracted gas can than above ground being converted into CH4 and through simple catalysis in Methanol, etc. This pilot plant technology exist and has been tried out intensively, for example in Germany and Holland. Also why is nobody given attention to the possibility of reconverting CO2 and H2O over a Nickel catalyst to CH4, etc.
The energy needed in this case could be available from not consumed excess electricity produced by Solar, Wind Turbines, etc, so no need to store electricity. Many refineries and fertilizer plants have excess CO2 available from for example their H2 production plants for sweetening oil-products and producing NH4, so inside refineries and fertilizer plants it could be economically very feasible to convert CO2 + H2 => Ni catalyst => CH4, etc.
All known existing but somewhat forgotten technologies.
Also do not forget the old FISHER TROPSCH SYNTHESIS process, for producing Oilproducts as done now in QATAR, etc?

[trader1701]

This is an excellent, well-thought out article with a few exceptions.
First, there is no consideration of "energy density".
In the case of "PV" , how many square kilometers of land would be required to equal the output of 1 nuclear or gas/coal fired power station (which requires maybe 3 or 4 square kilometers of land)
Assume 100% efficiency of the PV system, under 100% ideal conditions (which, if memory is correct results in approximately 1 KW/square meter of power collected)
Second is maintenance. With few exceptions, nobody seems to take long-term maintenance into their calculations. In the case of PV, the diminishing efficiency of, and eventual disposal/recycling of the PV panels (the chemical composition/toxicity of the PV panels was starting to be discussed, but the sudden silence is deafening) should be factored into any investment decision.
PV will always have "niche" applications, but until the above two factors are addressed, it will only be viable under heavy subsidies. And in this era of global pauperism, energy density/maintenance will remain the primary consideration.

[chicago233]

The arthur vastly underestimates the cost of both wind,virtually useless, and solar energy. Vastly underestimates the quantity and expected life of fossil fuel reserves.

This is a political article promoting continued government support of a failed or failing pair of faux industries.

[Rich in Quebec]

Chicago - Your response is a concise repudiation of both wind and solar. As long as your standard seems to be to meet fact with unsubstantiated opinion, I will meet your standard in opining that your comment is as valid as a repudiation of the auto industry a century ago.

[Exbuggywhipmaker]

"Climate Change"...? You bet, tomorrow it's forecast to be 40 deg with some showers, somewhat cooler than today.
If disaster casters had been alive during the ice age, just think of the panic.
So a hundred years from now it is forecast to be 1 degree hotter than today. Also forecast, is a longer growing season, helpful when feeding extra billions of people.
But, the climate fear mongers cry, "all our cities will be underwater!" Will this be from climate change, OR 100 more years of liberal economics?

[buzzltyr]

good numbers but the labor ope costs can come down a lot. You are at $500 per panel. That is around what they get now for a small roof top job. In a large solar farm installation with a panelized set up that should come down a lot. So you are at $30 a square foot, the labor on a wood warehouse roof is more like $2 a square foot. Should be a similar type installation. Techniques will improve with time

[DanielHolzman]

First let me say that I appreciate the author providing an understandable, clear thesis, and backing it up with verifiable facts. I always enjoy an article which is articulate and carefully constructed.

Now onto the question of the actual cost per kilowatt hour of electricity, which is generally known in the industry as the levelized cost of power. I believe the author has greatly understated the actual cost of delivered solar power. I will base my comments on a recent solar project in Utah I did the cost estimate for.

This project included approximately 1000 panels, each with a peak output of approximately 300 watts. The capacity factor (ratio of actual energy produced to theoretical energy capable of being produced) for this installation was about 20 percent. This is fairly typical of a North American installation in a relatively sunny area (note that EIA quotes a rate of 19% for Arizona). Therefore, out of the potential 8760 hours in a year, we should expect approximately 1750 actual watt hours of generation.

So assuming the author's estimate of a design life of 20 years, each peak watt of available power from the panels can be expected to generate 1.75 kwh per year, or 35 kwh over the course of the life of the project. Now we turn to the actual cost of the 35 kwh produced.

The actual cost to install a solar panel system includes permitting, design, materials, labor and equipment for installation. In my project, the cost of the panels represented approximately 50 cents per watt. Electrical equipment including an inverter, cabling, safety equipment and connections cost about 50 cents per watt for equipment. The support structure for the panels came in at about 30 cents per watt. Installation costs including profit, overhead, design and permitting came in at about $1.70, for a total installed cost of about $3 per watt.

The total cost per watt over the life of the project includes maintenance, repair, and disposal costs for the panels at the end of their life. Estimating life cycle cost was not part of the project, but a reasonable estimate for all in costs would be about $1 per watt for these items, yielding a total net present value of about $4 per watt. Since we expect to generate 35 kwh for $4, the all in cost per kwh is about 11 cents, which I believe is a reasonable number for current installations.

The author's conclusion that photovoltaic power might come in as low as 5 cents per kwh in 2020 is puzzling. Even assuming 5 percent per decade improvement in efficiency (the author's numbers), there is simply no way to get from 11 cents per kwh in 2013 to 5 cents per kwh in 2020. Note that for my project, only about 17% of the installed cost was for the panels. Most of the installation costs are not susceptible to cost reduction.

One has to be very careful to distinguish between cost of installation and price of installation. The actual cost to install is a function of the price of materials and price of labor, which of course are variable. The price of a project is a function of competitive bidding pressure at the time of installation. The current market for solar panels is very competitive, and low cost panels (in some cases below production cost) are available. Not so for installation, where installers have alternative projects to work on, so installation pricing is relatively firm.

My conclusion is that the levelized cost per kwh of solar is in excess of 10 cents per kwh today, and will drop relatively slowly, perhaps to 8 cents per kwh by 2020. Just how competitive this is with gas, nuclear and wind remains to be seen.

[Donald YATES]

Lower cost materials for PV (as identified by Berkeley University) do offer the opportunity for capital cost reduction. I still have $8 per watt PV in use, as manufactured by BP in Australia, some 28 years ago. I am working on PV systems that are a long way south of 20 cents per watt for the collectors

As for reducing the inverter and installation expenditures, switching higher DC voltages around 250 volts vs 12 volts, and robotic-placed plug together panels, should also more than halve these supporting costs. And there are many other financial operational savings possible.

Yes, 'levelised cost per kwh of solar ... in excess of 10 cents per kwh today' is about the norm, but as suggested by those paying wholesale, the gentiles have to pay retail.

[mandydrew]

There is some scientific reasoning that solar activity has a significant impact in global temperatures. As the sun now enters a more active phase of solar flairs, those temperatures will drop similar to the mini-ice age experienced in the 17th century. Ironically the presence of greenhouse gases may help compensate for that effect.

There is some economic reasoning that if sea levels are rising and areas being barren due to lack of rain, we would be better focusing our efforts directly to flood defenses, desalination and irrigation and relocation of populations. This is more economic that attempting to control aspects of climate for which ultimately we may have no control. Efforts in combating climate change are causing economic stagnation through high energy prices, which in turn limits our budgets for direct measures now before desperate measures have to be taken.

It should also be said that nuclear power is far from being carbon-neutral in that the cost of construction, transportation of raw materials, handling and burying of waste products should be considered as well as the length of viable and safe operation. Wind power in itself is unreliable and is tarnishing our landscapes.

No mention in the article is made of tidal power, which has the potential to provide a reliable and power source of energy as well as helping with prevention against flooding and coastal erosion, and possibly an impact in tsunami events.

[JRP3]

Last I knew increasing solar flare activity leads to increase in temperatures, not decrease. The mini ice age you refer to was an extended time of unusually low solar activity, known as the maunder Minimum http://bit.ly/Y6hyqX
We are now coming out of a time of lower than usual solar flare activity in the last few years, which may have helped keep temperatures from rising more than they did, in effect masking global warming to some extent. If flare activity picks up as expected things might get rather warm in the next few years.

[blueice]

Mr Kiss, CO2 levels have been declining in America for the past five years, despite CONgress...