Friday, July 17, 2009

Washington state tries to join solar party?

Previously-unknown Teanaway Solar Reserve appeared with a splash last week, announcing plans to build a 75MW photovoltaic project in central Washington. So far, they have a location and a lot of frothy press; what's not as clear is whether their business model extends much further.

The map above shows that the country's best solar potential lies in the Southwest; not only do these areas get lots of sun, but their highest electrical demand--air-conditioning--occurs when solar energy is also near its peak. In comparison, other parts of the country get less sun and need the most power during the dark days of winter. So it's not surprising that California has three times more solar power capacity than the rest of the country combined.

This doesn't mean that photovoltaic (PV) panels don't work in large swathes of the country; they do, but they are a money-losing proposition. An article on the economics of solar power lays out the range of yield on investment for a project in an area--like Central Washington--that gets about 25% less sun than the Southwest: about 1,500kWh per year per kW of panels installed.

The 1,500kWh/kWp in the chart below means that the PV panels produce 17.1% of the power they could if the sun shown day and night, year round (this is a fair comparison, since most other energy technologies don't depend directly on the sun and produce at 80-90% of their annual potential, including renewables such as biomass and geothermal). Federal incentives extended during the past year cut the cost to build by about half, so it's not unreasonable to assume a project like Teanaway Solar could complete a project at a net price of only $3.00/watt peak. The problem is that a large solar project in the Northwest will likely have to sell its power for many years no more than $0.10/kWh. At that rate, the chart shows a yield on money invested of only 5%--and out of this must come taxes, insurance, and maintenance before any of it can be used to repay lenders or investors.

Since investors and bankers typically don't commit large sums of money for near-zero yields, the Teanaway Solar promoters must believe that renewable energy markets will shift massively in the future--perhaps a tripling of electricity prices, even more lucrative government incentives, or an unprecendented fall in the price of PV technology. That isn't a very good business plan. It fell to the pro-business-as-usual Washington Policy Center to point out the obvious problems with the plan, including that the project would cost several times more than even nearby wind installations and that other high-hype/shaky-economics energy showpieces haven't turned out well.

I know quite a few good people who have been working hard on solar for many years; I'm just hoping a near-inevitable reversal for Teanaway Solar doesn't reflect badly on the wider regional industry. And I surely hope this doesn't give the remaining detractors of renewable energy more ammunition--the next couple years aren't going to be any easier for green power, so this is my marker to help protect the brand. Let's under-promise and over-deliver; we don't have to be like California--we can have our own party.

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