The True Power of Renewable Energy

There is a lot of misinformation about renewable energy floating around. Since one of our missions at The Motley Fool is to educate our readers about what's really going on, I think we need to clear up just how big the opportunity is for renewable energy -- solar in particular.

Bill Gates caught my attention earlier this month, saying he thinks solar power is "cute" and, according to fellow Fool Rich Smith, Gates thinks even other sources of renewable power don't have a lot of promise. Supposedly, "green" advocates "argue we might satisfy 10% of our electricity demand with wind ... and geothermal and biofuels combined," Rich wrote.

Let's take a closer look.

According to the U.S. Energy Information Administration -- or EIA -- wind, biomass, and geothermal already account for more than 5% of electricity generation in the U.S. That's before offshore wind generates a single kilowatt-hour of power, and much of the prime wind land goes undeveloped because of a lack of transmission lines. Wind, geothermal, and biofuels won't ever generate 100% of our electricity, but it's easy to see how wind alone could generate significantly more than 10% of our electricity. And that doesn't include the elephant in the room that Bill Gates is dismissing.

Get your shades ready
One common misconception about solar power is that it will never amount to a significant portion of our power generation. But that couldn't be further from the truth. Solar energy is the most abundant source of energy on Earth, and as converting it to electricity becomes more economical, we'll start to realize just how powerful it is.

To do a little case study showing solar's power, I've taken the Mojave Desert in the southwestern United States as an example of one place we could generate a lot of solar energy. The desert is 25,000 square miles (16 million acres), or about 0.66% of the total landmass in the United States, and isn't land most people would miss (sorry, Sierra Club).

In the chart below, I used existing projects by First Solar (Nasdaq: FSLR  ) , Brightsource, and SunPower (Nasdaq: SPWRA  ) to calculate just how much energy we could generate from solar power in this relatively small area. I then compared it to EIA data from February, when we consumed 312,334 thousand megawatt-hours of electricity in the U.S.

Company

Acre/MW

Thousand MWh Potential per Day

Percent of U.S. Consumption

First Solar 9.2 8,348 74.8%
Brightsource 9.2 12,522 112.3%
SunPower 3.9 29,538 264.8%

20% capacity factor used for First Solar, 30% capacity factor used for SunPower and Brightsource. Capacity factor and acre/MW will change based on a variety of factors for each project.

As you can see, even using the least-efficient solar panels from First Solar would generate a majority of the electrical power we need. A SunPower plant with sun trackers, based on the plant it is building with NRG Energy, could generate more than two and a half times the power we need.

Chinese solar giants like JA Solar (Nasdaq: JASO  ) , LDK Solar (NYSE: LDK  ) , and Suntech Power (NYSE: STP  ) would generate power somewhere between First Solar and SunPower in the same analysis. The bottom line is, solar power easily has the capability to generate enough electricity to power the entire country.

Cute is fine with me
Of course, solar power isn't a silver bullet today. There's no way to get solar energy from the Mojave Desert to New York City with current technology. But firms like A123 Systems (Nasdaq: AONE  ) are trying to make battery storage feasible for renewable power plants.

Ironically, Gates may help the cause by investing in technology that could make energy storage viable on a large scale. Gates has put money into a company called Liquid Metal Battery, which is hoping to make energy storage on a massive scale financially viable. Solar may be "cute," but Bill Gates is funding a potential solution to the biggest obstacle to its mass adoption.

Foolish bottom line
The opportunity in renewable energy, particularly solar, is bigger than most people imagine and dismissing it with offhanded comments like solar being "cute" only helps perpetuate the misinformation surrounding the industry. If solar power wasn't viable, oil giant Total (NYSE: TOT  ) wouldn't have invested billions of dollars in SunPower. Venture capital firms wouldn't be falling over themselves to fund greentech startups. And I could jump on the bandwagon with those dismissing solar instead of trying to reveal how big the opportunity really is.

In this Fool's opinion, solar power is here to stay, no matter what Gates has to say. You can educate yourself, decide if the investment is right for you, and hang on for the ride -- or get out of the way. Solar may not power your home today or tomorrow, but eventually it will creep its way into your life and you won't even notice the difference.

That doesn't mean solar is always a wise investment -- particularly lately -- but we can't ignore the opportunity.

Interested in reading more about solar stocks? Add your favorites to our free My Watchlist service, and our analysis of these stocks will come to you.

Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of Total and First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (17) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 25, 2011, at 2:29 PM, JeanDavid wrote:
  • Report this Comment On May 25, 2011, at 3:20 PM, jlacroix wrote:

    You obviously are not technically-oriented. Except for passive collection and direct application, the capital cost of solar collection is prohibitively expensive. In most large-scale systems, the energy required for producing the capital equipment and facilities is more than the total energy produced in the solar energy system's life-cycle.

  • Report this Comment On May 25, 2011, at 3:38 PM, Robt92122 wrote:

    First Solar's panels have an energy payback of less than one year and they last over 30 years. Soon we will have solar power making solar panels and compounding exponentially.

    Thin film panels are now selling for under $1 per watt and generate 1.5kWh per Watt per year. If BOS and installation are $1.50/W, the subsidized system cost to corporations THIS YEAR is $1 per watt (60% off) and the returns are 12% at $0.08/kWh.

    Rooftop solar for the Fortune 500 companies should explode once they figure this out. They should be taking advantage of the 30% ITC and the 100% first year depreciation rule that only applies to 2011.

  • Report this Comment On May 25, 2011, at 4:39 PM, ecofeco wrote:

    Large scale solar is one answer, but home systems are now affordable for about the price of new small car and will fit on the average roof.

    Heck, you can even buy them as ready made shingles!

    Take back the power!

  • Report this Comment On May 25, 2011, at 4:55 PM, JJTJJT wrote:

    It is just obvious.

    Thre seem to be high costs compared to oil, gas or nuclear energy, but this is only true when you look at the subject on a small time frame.

    The secret lies in the word itself. RENEWABLE

    Oil will get more expensive over time, just because it is rare.

    The second reason is, that it pollutes like hell. Just live in a big city and have the fun breathing near mainroads.

    Health care costs don't count, ozon layers don't count, pollution of oceans, lakes and rivers don't count.

    What the hell does count for the oil lobby as a cost factor? Well, the earth is our planet and our only one and their children have to live here too.

    The energy from the sun is enough to solve the energy problems. We should concentrate on this and give solar a chance.

    Just to give another answer to the comment above, I would like to mention that you can solar energy to produce the energy needed for the production of solar moduls and pre-products.

    It is such an argument as to say to Mr. FORD not to produce a production line for his T car model because the production line would be more expensive than the 1000 cars he might sell.

    He just sold a few more.

    Think about that, when you think about solar. It is just the beginning of this industry.

  • Report this Comment On May 25, 2011, at 4:58 PM, JJTJJT wrote:

    Sorry!

    The answer above should read:

    I would like to mention, that you can use solar energy to produce the energy needed for the production of solar moduls and pre-products.

    Thank You.

  • Report this Comment On May 25, 2011, at 9:32 PM, steveballmer wrote:

    It's value is in people believing they are saving the earth!

    http://fakesteveballmer.blogspot.com/

  • Report this Comment On May 25, 2011, at 10:07 PM, bermuda999 wrote:

    As a thought experiment, I ball-parked the cost of covering the Mojave Desert with solar panels. When I actually did a back-of-the-envelope calculation, it isn't as bad as I expected.

    Using the 264 million cost of this (http://en.wikipedia.org/wiki/Nevada_Solar_One) solar plant, which generates 64MW; and using the 8348MW total capacity from your chart for First Solar gives a rough guesstimate of 138 Billion to generate 3/4 of the current US electricity needs.

    Given how much the U.S. spends on other things, this didn't strike me as that large of an amount. Additionally, given the size of the installation, there would be massive cost efficiencies - might bring the actual cost down to 1/2 or 1/4 of that. To make most of this energy useful would require a great deal of additional grid infrastructure as well as enormous storage (battery) capacity.

    I don't know what the best battery storage system is, but this one: (http://thefraserdomain.typepad.com/energy/2007/09/american.h... costs about 4.5 million per MW, giving an additional cost of 3.8 billion to store all this energy.

    I have no guesstimates for the grid infrastructure costs, but overall this seems like a pittance to get one step closer to energy independence.

    Certainly seems like more bang for the buck than spending over 10x this to invade another country for their oil.

  • Report this Comment On May 26, 2011, at 10:38 AM, DJDynamicNC wrote:

    "Certainly seems like more bang for the buck than spending over 10x this to invade another country for their oil."

    ^^^^ This.

  • Report this Comment On May 26, 2011, at 4:25 PM, foolamok wrote:

    The genie is out of the bottle. A small town in Missouri, Rock Port, has already been generating all of the electricity is uses (probably a little more than it uses) for over 2 years. Solar, wind, and tide resources combined are formidable. Solar collection does not have to be large scale to work. Each individual turbine, by itself, in a wind farm, is not "large scale" either.

  • Report this Comment On May 26, 2011, at 5:54 PM, dcp64 wrote:

    The numbers here seem to be way off. The article is assuming 11,150 MWh/day (12,522MWh/112.3%). Based on DOE numbers, electricity production in the US in 2009 was 3,950,331,000 MWh, which works out to 10,822,824 MWh/day. The article is off by a factor of nearly 1000, which is why is all seems so inexpensive.

  • Report this Comment On May 26, 2011, at 6:30 PM, dcp64 wrote:

    Disregard my comment above. The numbers the author quoted are in ,000 of MWh and not MWh, so it does all add up. Apologies.

  • Report this Comment On May 27, 2011, at 8:01 PM, bermuda999 wrote:

    @dcp64: Thanks actually. The articles numbers weren't off, but mine were (in 2 ways)! I mistyped a number into my calc & completely missed the "Thousand" part of the MWh per day part.

    ...soooo what we actually have is: if it costs 264million to generate 64Mw per day, and we're going to install enough solar to generate 8,348,000Mw per day...it would cost: 264 million * (8348000 / 64) = 34.7 trillion (to replace 3/4)! Even with massive economies of scale, solving America's energy needs with solar doesn't seem practical.

    ...I was kind of shocked that my original numbers were so low, since I didn't believe that solar was economically viable yet.

  • Report this Comment On May 29, 2011, at 4:34 PM, GtownRJ wrote:

    TOT's investment in Solar was driven by government(s) mandates so it has little to do with the viability of centralized solar power generation. The problem with wind and solar is that it is sporadic in its generation, and this requires economical back-ups that can be ready quickly, and that they rarely peak when demand does. That is where storage comes in, and that is not cheap with any current technology, other than pumped hydro, weather Bill's liquid battery will be able to beat current NaS or Axion's PbC® potential low cost remains to be seen (but it nor solar will never very be useful in transportation).

    Geothermal on the other had has a predictable and steady power generation curve, so I was a bit confused as to why it was mentioned.

  • Report this Comment On May 30, 2011, at 8:31 PM, TMFFlushDraw wrote:

    @bermuda999

    I think you're confusing MW and MWhrs. The calculation should go like this.

    16 million acres in the Mojave/9.2 acres per MW = 1.74 million MW of FSLR panels.

    Figuring $3 as a round number building one Watt from FSLR (commonly quoted online) we get...

    1.74 million MW * 3,000,000 $$ per MW = $5.2 trillion.

    That's a lot of money but when put into context with 75% of all of the electrical power in the U.S. it isn't out of this world. It's only about 1/3 of our GDP and this transition would take 50+ years.

    Travis Hoium

  • Report this Comment On May 31, 2011, at 10:51 AM, MrChapel wrote:

    Something else Travis (and others) seem to gloss over is the NIMBY principle (Sorry Sierra Club, Travis?)

    The 'Green Proponents' all clamor and scream loudest about shutting down nuclear, going electric with our vehicles etc. and expound on the virtues of wind, solar, geothermal and other 'green' energy generating systems. Yet, these self-same groups begin screaming bloody murder when governments and companies want to set up these projects.

    If you want to replace energy plants (coal, gas or oil), you'll need massive solar farms. Let's use Travis' Mojave example. How long do you think it will take for the Sierra Club, Greenpeace, Friends of the Earth and myriad other groups to come forward and begin telling tales of woe about some insect/snake/creature that lives there that would be destroyed because of the massive building effort? They will do anything to protect the ecology and building such a massive solar farm isn't going to sit well with them.

    How about wind farms? They damage the living habitats of myriad animals, insects etc. They're polluting the view. They're killing birds. If you want to place them in front of the coast, they'll be complaining on how dangerous it is to the fish, pollution of view etc.

    None of the above is wishful thinking. Here in the Netherlands, several windmill projects have been on hold for over a decade because of 'green' groups, who are all for green power, go to court, to parliament, even to our highest court to stop these projects. Woe be unto you if you're planning on building a windmill farm nearby their suburbs. You'll wish you never thought of it in the first place, since they can hold it up for a decade or more.

    Here in the Netherlands, riding along the highway, you might see one or two windmills, if you're lucky, about ten grouped together. To generate the amount of energy needed, to replace that of a traditional plant, you'll need to put up windmills/solar collectors on huge tracts of land, multiple times the size of those traditional plants. There will always be some kind of insect/plant life/animal/whatever that the 'green movement' will say is vital and shouldn't be disturbed. Next, you'll need to be able to transport that energy over long distances. You'll need backup energy systems for security. None of which will be build because of aforementioned problems.

    Green proponents are their own worst enemy. They want it but will block any project because they also want to preserve our ecology.

  • Report this Comment On June 04, 2011, at 9:16 PM, jamminpower wrote:

    When gasoline hits, say, $10/gal, nobody will complain about capital costs or any other costs. They will all be more than happy to buy solar, wind, or anything but oil. It may not be this year, but it is just a matter of time.

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