Last year, the Department of Energy released a report called "20% Wind Energy by 2030." The broad sweep of this study makes it a must-read for investors in wind companies like A-Power Energy Generation Systems (NASDAQ:APWR) or anyone hoping to see king coal dethroned.
I'm hardly spoiling the ending by telling you that this hypothetical wind buildout would require 15 million acres of land (more than all the farmland in Indiana), and under "optimistic assumptions" could cost around $197 billion, before netting out large expected fuel cost savings. The study's authors noted that the plan was "ambitious," but that it "could be feasible" if certain major obstacles are overcome.
The DOE is now looking to do a similarly comprehensive analysis with regards to solar power. The Solar Vision Study was launched in June, with publication expected by next spring. I expect the report to be an eye-opener for SunPower (NASDAQ:SPWRA) and First Solar (NASDAQ:FSLR) fans. Both companies, I should mention, have representatives on the study's steering committee.
Fortunately, we don't have to wait for the full report to gather some important insights. In late October, all of the study's various working groups presented progress reports at a workshop in Anaheim.
Solar Vision coming into focus
First off, this study is considering a wider range of outcomes, as it probes the feasibility of solar power meeting 10%-20% of U.S. energy demand by 2030. At the low end, Solar Vision's capacity projections still come in near the top of estimated ranges put forth by past studies. The 20% scenario pushes well beyond these. For example, Google (NASDAQ:GOOG) last year included 250 gigawatts of solar in its Clean Energy 2030 proposal. Solar Vision's 10% scenario has solar at 255 gigawatts, while the high case goes to 420 gigawatts.
As a point of reference, U.S. installed solar electric capacity (as distinguished from solar water heaters and other thermal devices) was just 1.5 gigawatts at the end of 2008. Talk about trees growing to the sky! No wonder so many dollars have been thrown at money pits like Energy Conversion Devices (NASDAQ:ENER).
PV versus CSP
Under both scenarios, concentrated solar power (CSP) and solar photovoltaics (further sub-divided into utility and rooftop PV) contribute fairly equally to the generation mix. Does that mean investors, by piling into PV players like Trina Solar (NYSE:TSL) and Suntech Power (NYSE:STP), are scrambling over perhaps just half of the future solar pie? That depends on whether you measure by actual generation, or "capacity." The latter term can be misleading.
CSP has a better capacity factor than PV, so fewer megawatts need to be installed to generate the same number of kilowatt-hours that PV produces. Thermal storage technologies, such as United Technologies' molten salt power towers, widen the gap even further. This may explain why folks like Google and Siemens are fixating on the CSP side of solar. We plebes lack investment options in this realm, but I'm sure that will change.
No magic wand required, but clairvoyance helps
The working group assigned to PV cost reduction and scale-up opportunities presented some good news and some bad news. A key insight they shared was that no technological breakthrough is needed to get costs down. SunPower investors are likely familiar with the company's roadmap to a 50% cost reduction by 2012. There's no magic to it -- just a lot of hard work. The group then noted that "rapid market and technology change make us less confident of predictions." That strikes at the heart of why I've yet to invest a dime in this space.
Deus ex machina
The CSP gang celebrated the fact that the Southwest "provides the best solar resource in the world for CSP." They also warned that -- as with wind power -- long-distance transmission infrastructure is a major challenge. As with the DOE's wind report, I wouldn't be surprised to see Solar Vision assuming a major transmission buildout by ... somebody out there somewhere. The grid integration working group poses the simple question "Who pays?" I'm afraid there's no simple answer.
Speaking of paying, the finance working group has yet to venture a preliminary guesstimate as to the manufacturing price tag on all these solar systems (at $2/watt, this would be upwards of $500 billion under the 10% scenario), but these folks have ballparked project costs at $1 trillion to $2 trillion.
This is starting to make wind power sound like a steal!
