Not So Fast on Solar and Wind Power

I suggest that you not look down. If you do so, you're apt to discover that we're all standing on a slick energy banana peel.

Think about it. President Obama is in the process of cobbling together an ideal energy package designed to achieve energy independence. And it just might -- for our children and grandchildren. But the notion that we can now punish Big Oil companies through tax and regulatory excesses -- as I suspect will be the case -- seems totally foolhardy. And there'll likely be similar tough sledding for coal companies, especially surface miners like Patriot Coal (NYSE: PCX  ) and Massey Energy (NYSE: MEE  ) .

Flip that switch
But it appears that this is the road that will be taken, because many of the powers that be in Washington mistakenly believe that, at a moment's notice, we'll be able to virtually flip a switch and fulfill most energy needs with renewable energy. I'm as green as the next person. Planet Earth is the only place I've ever inhabited. However, a little realism on the energy scene would be welcome.

I'm also trying to be realistic by wagering that the magic renewable energy switch won't become meaningfully operative for perhaps decades to come. In the meantime, with the need to import the lion's share of the oil and gas we consume -- frequently from countries that aren't our friends -- it wouldn't take much for that banana peel to get us.

Right out of graduate school and working for what is now part of Royal Dutch Shell, I had the pleasure of meeting James Schlesinger, the nation's first Secretary of Energy. A Washington Post article that he recently co-wrote with Robert Hirsch, another longtime energy seer, began with:

Why are we ignoring things we know? We know that the sun doesn't always shine and that the wind doesn't always blow. That means that solar cells and wind energy systems don't always provide electric power. Nevertheless, solar and wind energy seem to have captured the public's support as potentially being the primary or total answer to our electric power needs.

Expensive backup
The article went on to point out that large-scale storage of electricity is available only in the few places where hydroelectric dams exist. Beyond that, and because of the need for backup systems in places where there aren't such dams, wind and solar require total backup from other forms of energy -- e.g. fossil fuels. On that basis alone, the implementation of full-scale wind and solar systems will be costly and likely is eons away.

All this is not to advise Fools to avoid solar and wind energy companies altogether. Indeed, you're fortunate that, if you’re a regular Motley Fool reader, my colleague Toby Shute does a world-class job of keeping up with solar, from LDK Solar (NYSE: LDK  ) and Suntech Power (NYSE: STP  ) to the other meaningful players in the group. Beyond his work, I'm simply looking for a little realism about how quickly wind and solar can really make a difference in our lives.

Drill, baby, drill!
Until we're able to depend on renewable energy for most of our needs, we'll need to explore for, produce, and process oil and gas the old-fashioned way -- albeit with some new technology added. As a result, hydrocarbons will account for most of our energy needs for many moons to come. That's precisely why there are companies like Brazil's Petrobras (NYSE: PBR  ) and ExxonMobil (NYSE: XOM  ) , among others, drilling in challenging and inhospitable places like Russia's Sakhalin Island and the salt cap beneath the deep waters of Brazil's Santos Basin.

And then there's the refinery scene. Industry consulting firm Wood Mackenzie is predicting that the majority of new refinery capacity added over the next several years will be located in the Middle East and Asia. Clearly, that rebalancing act -- along with a disdain for nuclear power and a refusal to drill for oil and gas off most of our outer continental shelf -- will do nothing for the president's avowed desire to move meaningfully toward energy independence.

Don't push oil and gas out the door quite yet
So as I indicated above, we really are on an energy banana peel, and it wouldn't take much for us slip and fall. These are the primary elements of our conundrum that cause me to nudge Foolish investors toward well-run majors like ExxonMobil and France's Total (NYSE: TOT  ) these days. Believe me: The oil and gas sector is here to stay for a long, long time, and you need to be involved in it.

For related Foolishness:

Suntech Power Holdings is aMotley Fool Rule Breakersselection. Petroleo Brasileiro and Total SA areMotley Fool Income Investorrecommendations. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned above. He does, however, welcome your questions, comments or kibitzing. The Fool has a disclosure policy.


Read/Post Comments (14) | Recommend This Article (8)

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  • Report this Comment On May 28, 2009, at 2:44 PM, crozetproject wrote:

    Mr. Smith - I think you're holding up a straw man version of solar and wind power to argue your point. In electricity markets, there is the concept of peak consumption. That's why power costs different amounts in California at different times of day. Same goes for other tight electricity markets such as Hawaii or Italy. Electricity costs the most during midday because that's when the most electricity is used, a result of businesses operating and such. Those peak hours also happen to be when the sun shines the most, and the wind blows the most. The difference between peak demand and evening demand is considerable.

    Right now, people who are serious about wind and solar consider them sources for filling the gap between baseline and peak demand. Yes - for solar and/or wind to be exclusive power sources requires significant advances in technology and infrastructure. But for these sources to fill the peak/baseline gap is very realistic - and they still have plenty of a way to go to fill the gap. The alternative is to run fossil fuel plants to meet peak demand, and then have excess capacity going during non-peak hours (you don't just turn these things on and off). That's an example of a "dumb" grid, as opposed to a "smart" grid, which is able to modulate and allocate power better according to demand level.

    I grant you that fossil fuels will not vanish overnight and may still prove valuable as investments in the near/mid term (I'd look at pending legislation before buying, though), but neither are they as necessary nor as inevitable as you argue.

  • Report this Comment On May 28, 2009, at 2:57 PM, NOTvuffett wrote:

    An electric grid that charges me more to run my AC during the day when it is hot is not my idea of a "smart" grid.

  • Report this Comment On May 28, 2009, at 5:11 PM, hinetreturn wrote:

    Mr. Smith, I would suggest you do some research into Compressed Air Energy Storage. This is not some pipe-dream future fusion energy technology but has been operating successfully and economically for more than 10 years both in Germany and in Alabama, US. A GW facility is under study in Ohio. Many areas in the wind belt have depleted natural gas wells that would make excellent CAES facilities and already have pipelines installed. It takes an amazingly small storage facility to produce GW capacity. In the case of the Ohio facility an abandoned limestone mine. For more detail see http://www.seco.cpa.state.tx.us/zzz_re/re_wind_projects-comp... and http://www.princeton.edu/~cmi/research/Capture/Papers/Succar....

  • Report this Comment On May 28, 2009, at 8:58 PM, sabertoothtiger wrote:

    Whoa, not so fast, buddy. You "suspect" that the government is going to do something stupid, and then say that would be stupid! That's just st.... (you pick a word). I don't want my tax dollars subsidizing fossil fuels any longer. Let the true cost of burning carbon be reflected in the price of carbon-based energy. And on the investment side of things, I'll be happy to place a few bets on solar companies that are growing fast!

  • Report this Comment On May 28, 2009, at 9:31 PM, NOTvuffett wrote:

    Sabertooth, I have a real world test for you- get a quote on how much to install a solar system (a real one that supplies almost all your needs) on your house then calculate how long it would take to pay for itself. Fossil fuels aren't used because they are subsidized, they are used because they are cheap.

    CAES could make sense in places where energy that would otherwise be wasted during non-peak times could be stored. since it is not an adiabatic process, it wouldn't make sense to store much energy like that otherwise.

    let's say we have a cavern and we store air at 40bar. rounding here- 144x40x14= 80640#/square foot. then we cycle it between one pressure and another. rock is typically very strong in compression and weak in tension. I really wouldn't want to have a house setting above the cavern, lol.

  • Report this Comment On May 28, 2009, at 9:38 PM, NOTvuffett wrote:

    I should add that I believe in wind power, I think we should build all that we can.

  • Report this Comment On May 29, 2009, at 2:29 AM, jrmart wrote:

    Mad Money's Cramer always talks about research, yet he sometimes doesn't follow his own advice. Case in point, Cramer is always recommending First Solar, the company that produces the lowest cost per watt thin film solar panels.

    I just completed several months of research on another solar company and I just got their quote to install their new system on my own home for $89,000. That seems like a lot of money until you understand that the local power company will front all of the costs. After the system is installed, I will then lease the system back from them for less money per month than I'm paying now for my electric service from them. Any additional power not needed by me will be fed back into their grid.

    First of all, lowest cost per watt means very little when roof top space is limited. If I went with Cramer's recommendation of First Solar, I would need to double the size of my roof to get the same power output. More panels would increase install costs, maintenance costs, wiring costs and overall total system costs. As you can see, cost per watt is really a bad way to choose a solar system. By the way, many of the German banks are no longer funding projects using thin film technology because of the above facts.

    The German, Spanish, Italian, South Korean and Australian power companies are now using this premium solar company to produce solar power. On a trip to Portugal in October 2008, I visited a large scale solar system from this premium solar company that had just been installed by the local Portuguese power company.

    PG&E in California and Florida Light & Power are now using this solar company. Ellis Air Force base, Walmart, Macy's, JC Penny, HP, AMD, Johnson & Johnson and lots of other companies are now using this solar company.

    This same company has a patented sun tracking system that follows the sun to also produce 33% more power over a given day. 

    This same company does over a billion dollars a year in sales and just installed their solar system on the Department of Energy Headquarters roof in Washington DC in 2008.

    Once you understand all of the above facts and couple that with the price of silicon dropping like a rock, you now have a real winning premium solar company to invest in. The name of this company is SUNPOWER.

    Sunpower holds the world record in solar efficiency, which means their products are up to 50% more efficient than the competition and generate about two times the power with the same roof space.

    As a result, SunPower has the largest install base in North America -- including homes, commercial sites and utilities -- and over the last two years, they installed more systems in California homes than any other provider.

    When you purchase a SunPower® solar system, you're getting the same technology that still performs on cloudy or rainy days and for longer hours every day.

    But their technology isn't the only reason for their success. SunPower® also offers an industry first--a 25-year warranty that can guarantee exceptional system performance

  • Report this Comment On May 31, 2009, at 4:10 AM, Brettze wrote:

    David

    Have you noticed the warning sign label usually found on the unseen side of the gas pump at your favorite gas station? It warns that gasoline is a carcigeon. Gasoine is not exactly your kind of kool-aid, but hey, how about trying electricity in your car for a change? Also, you know, that Big Oil lacks competition as it practically owns every wheel lugnut on the road... Of course, we can begin to tap more into coal to help us charge more electric cars. Electric cars dont use any juice during waiting for stoplight to turn green nor do they during coasting. Coal may be dirty but still much cleaner than gasoline as the source of air pollution will be shifted out of heavy populated centers . Tailpipes will be relegated to the dustbins of history. it can happen much sooner than you think.. Every bit of wind, solar and whatnots will help. Analysts like yourselves are still addicted to oil and you are still pale green.. Not quite shamrock green yourself!!

  • Report this Comment On May 31, 2009, at 4:28 AM, Brettze wrote:

    Jmart

    you probably dont realize that roof top solar panels block sunlight from warming the roof on top of your house.. Your house will be colder during wintertime and you will need more energy to heat your home. It is almost a zero sum game... You will be back where you were. Solar panels belongs in the hot deserts where land is cheap. The only ingredient left to add is the grid to hook up the solar panels and delvier the solar electricity to you with your roof warmed by sunlight. Spread the solar collectors not piggy back on your rooftop or you are better off living in a multistory apartment...

  • Report this Comment On May 31, 2009, at 4:33 AM, Brettze wrote:

    I decided to chop down my beautiful row of tall Italian Cypress trees soaring 50 feet high because it is in the wrong location blocking sunlight from touching a good part of my house.. It is a sad affair.. I love my Italian cypress trees. They are gone. So, my home is much warmer even in winter time. I would not install any solar panels on my rooftop, period! I think I get more solar energy in oform of solar radiation heat directly from the sun than being converted into electricity on the rooftop. It would be more cost efficient to invest in a massive solar array somewhere out in the desert and getting a credit from your utility than to have it on your roof top and an costly inverter of your own. Keep it traditional grid style... Just grow the grid..

  • Report this Comment On May 31, 2009, at 4:39 AM, Brettze wrote:

    Oil prices are already creeping upward and yet we do nothing but talk and talk and still using the wrong approaches on problem solvings on the energy crisis. We are kept being distracted about by issues like clean coal. You have to remember that there is people very busy on keeping your eyes off the ball... They usually succeed!! Again and again.. maybe it iwll take $15 gasoline to get your proper attention at last.

  • Report this Comment On May 31, 2009, at 4:45 AM, Brettze wrote:

    There is different shades of green ...To the extreme, there is such "blackish green" people who think they should stop Earth rotating until they get everytihing right again.. So you got to think and do what you know how to make yourself as green as possible.. For example, I ask you whether you really need to use your clothes dryer or can you get by with a indoor clothesline? huh? You ought to be aware that your electrical clothes dryer consumes as much electricity as 100 flourscent bulbs at the same time ? Also, do you think you really need to heat or cool your entire house by relying soley on your "Energy Smart" thermostat?/ Or do you think you can get by with heating only a couple rooms at any given time with more intelligent heating system and a much smaller furnace? Ditto for your central air conditioning? do you really need it?/ or will a room air conditioner do? Your central air conditioning system consumes as much electricity as 5000 to 10,000 flourscent bulbs?

  • Report this Comment On May 31, 2009, at 8:32 PM, hirejam wrote:

    I feel we need solar, wind, gas wind, etc to survive. I'm not sur who will benefit the most in the his new energy era, but as long as people find jobs that's all I care about .

    Kevin

    www.hirejam.com

    Ohio green jobs

  • Report this Comment On June 03, 2009, at 11:18 PM, booyahh wrote:

    blah blah blah meanwhile oil will ultimately go over $100, so invest in oil. btw we didn't cause the ice age, but hey, let's not talk about that. cuz the media and the experts is always right, right? i mean they were sooo right about wmd and swine flu and the new great depression, whatever - gasoline ain't goin' anywhere cuz it smells real good, mmm.....

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