The Oil Drum

I would encourage everyone here to pick up a copy of "Solar Revolution" by Travis Bradford (2006). Bradford evaluates solar from the financial community's perspective and concludes that the days of the solar PV boom are not 20 or 30 years from now, but right now. Some of his key points:

- The problem that many analysts make when comparing the cost of PV to that of coal or gas is to neglect the fact that PV is distributed generation located right where the user is, which eliminates distribution losses and costs. Also, PV electricity production largely occurs during times of peak demand, so its output is inherently more valuable that a base losd plant runing 24/7.

- The key indicator to watch is not portion of current generation from renewables, which is regularly trotted out to show how insignicant renewables are compared to coal, gas, and nukes. It is much more important to look at the renewable portion of each year's new capacity additions. By some measures, wind actually was the largest in terms of new capacity addition of any power type in the US in 2006. In California, PV was actually a fairly significant portion of the new capacity addition for 2006.

- When evaluating what new capacity to add, there are a lot of huge problems with gas, coal, and nukes. From the financial community's perspective, the biggest problems with all three are the extreme risks and uncertainty of costs. What are your construction costs, fuel costs, emissions compliance costs? Can you even get a permit to build? Is there even going to be any natural gas avaiable for power generation? How long will it take to finance, permit, and build?

- Solar PV is unique in the power generation world in that you know all your costs, virturally to the penny, at the start of the project. You make power for a guaranteed period of 25 years with no uncertainty or risk. It is hard to overstate the importance of this fact. When you take risks out of the equation, the financial community can do what it does best, creative financial engineering. What you are seeing now in PV are offers for Power Purchase Agreements, where a financial investor will pay 100% of the costs to install a system and sell the output to the site customer for a guaranteed discount to the utility. Financial developments like this will have a huge impact on the ability expand the PV industry.

I can tell you from personal experience that the PV industry is absolutely booming here in California. My company's business doubled in 2006 compared to 2005. Sure PV is still in early adopter phase and starting from a small base, but at the rate its been growing it won't take long. Bradford believes that in just a couple decades, wind and solar will absolutely dominate each years new capacity additions.