Semi-Random thoughts on Energy, Derivatives, and Tesla.

Nuclear vs Solar:

Obama is selling Nuclear. This is one of the few issues with which I really think he's screwing up.

The question is, even with more Government support, will the nuclear industry really get off its ass and start building plants? Nuclear energy is all about politics. Very little of it is real. The financiers won't invest in plants unless they can get the Government to take pretty much ALL of the risk.

So, as far as nuclear is concerned, we might get a bill that still won't produce any new plants. It would be good to see this bill if it's posted out there; I haven't looked.

On the other hand, can Obama really sell a MAJOR wealth redistribution Bill using SOLAR ENERGY as the argument? The US CULTURE doesn't support Solar. They think its for calculators. The Culture does support Nuclear, however. They (we) have been taught how SIMPLE and CHEAP nuclear power can be for generations. The fact that the REALITY doesn't end up supporting this (when the cost of the RISK is included) is not well understood by just about everyone (IMO).

So, does Obama Sell Solar and confuse the people (failing to pass a Bill), or does he sell NUCLEAR and move WITH the cultural assumptions in order to get a bill in that will also support Solar and other Renewables / Efficiency?

I don't know, it's a tough decision for alot of people politically, because it involves taking a SH!T-TON of money from a select group of Industries (Carbon Emitters) and giving it to Others. It's massive Government intervention, and people don't like that (even if it's required for their long-term survival, and even if it MIGHT turn out incredibly well).

Don't know.

A thought: Remember, the Solar Industry is tiny relative to total Global Energy Demand. Some talk like the amount of Global subsidy required to create vast demand for Solar Energy Products is some impossible number. What is a dollar, and how many of them are there in the World? There are a SH!T-TONS of SH!T-TONS of them in World. They're tied up in all manner of Derivatives... like a giant cloud of Dollars up in the sky that is able to exist without really affecting life down here on Earth (maybe a light misty rain every now and then). What happens if a Financial Regulation Bill passes that adds just a tiny percentage to the costs of dealing in most derivatives, and makes some derivatives illegal? Money has to go somewhere else. Is there a downpour?

Inflation? Money that doesn't go into a derivative will go somewhere else, where the costs are more well known. Assets, Businesses, Stocks and Options, maybe cars and other Consumer Goods of Particular Value.

When Oil decides to go up (in Dollars) (It Will), then the Solar Short argument is sunk.

Blah blah blah....

Another Thought: Tesla is coming. Tesla rocks. Tesla is American. Tesla is HYPED! There's BIG MONEY that believes in Tesla, and will buy it.

When Tesla comes out, will a new generation of Big Money be born (Overnight)?

When people see people beat the odds, they want to figure out how they did it. In comes Speculation and creative thinking. If money follows thinking, then the boom can come, and it can cross borders at the speed of LIGHT.

Wondering about Intel.

The New york Times told us the other day that Taiwan Semiconductor Manufacturing Company is planning to enter the Solar Cell market.

What I want to know is, where is Intel? These guys know the Silicon Wafer as well as anyone else. Are they passing up an opportunity?

Wait, looking up "Intel Solar" brings up SpectraWatt. SpectraWatt was formed by Intel in June '08. Their plan was to build a manufacturing plant in Oregon to start deliveries in mid-2009. In January of '09, SpecraWatt halted construction of their Oregon plant, and on April 9th of this year they announced their intention to build a headquarters and manufacturing plant in New York.

Ok, so deals went sour in Oregon, I don't know the details, can't say much about that, but still, I gotta say WTF? Come on, INTC. Do you REALLY want into this market? After a year with pretty much nothing to show for it, you are now planning to manufacture 60MW by 2010, and 120MW annually within a couple of years after that. Even if the Implementation had gone flawlessly, this tiny output demonstrates a lack of vision, at the very least. SpectraWatt will have to do better than this if they want to compete in this market.

So, it looks then like Intel has actually moved to enter the Solar Market. They've just done so in a half-assed noncommital sort of way.

Of course, they've got cash. Maybe, like HP, they've discovered that the bottom line doesn't necessarily support building new manufacturing plants in the US. They could buy a heck of alot of Asian production, all in one fell swoop. There won't be too many opportunities to buy into the Asian industry on the cheap, though.

My guess then is that they're not actually idiots; they know what's up, and they're just being sneaky. It's too bad, though, that this Leading US Company is taking so long to get into the game.

Thoughts on Solar Materials - Thin Film - 6/3/09

I hear the arguments on future domination of the Solar Industry by Thin Film Technologies, but I would suggest that this is far from certain.

What particularly gets me is when people talk about how they're going to come up with solar paint or some such thing, and all of our problems will be solved, just like that; like a snap of the fingers. The argument goes that there's little point in spending all the time and effort on the massive industrialization of Silicon, because some futuristic technology will simply come along to make it obsolete.

Ok, so maybe it's true that some revolution will come along that will completely change how we see Solar Energy. Maybe one day you'll be wearing Solar Clothing to charge your remote devices, and cars and homes will wear coats of Solar Paint to provide for their Energy needs.

Even if this Solar future is to be the case, though, we know that it will have to meet certain requirements, particularly in terms of Scalability / Material Availability, and Cost Efficiency.

Remember that only 1000 Watts of Power strike the surface of the earth per Square Meter on average in the middle of a clear day. That's it. No matter the wonderful technology that you develop, you can't generate more energy than what's available. To generate the incredible amounts of Energy that will be required of the future Solar niche will require a mind-dizzyingly vast array of "panels" distributed around the Planet. That's miles upon miles of glass and aluminum frames housing some kind of protected PV material, whether Wafer-based or Thin Film; or else unhoused, or lightly-housed thin films of various types, even potentially including "painted" Solar surfaces.

The main point that I want to mention at this point is on the value of Cell Longevity.

Note that when you invest in a Solar Panel, you are actually paying upfront for the entire future energy production of that panel. Normally, Solar Panels are rated in Cost per Watt Peak, or Peak Power, which is an indication of the amount of Energy that the Panel would produce at an instantaneous moment of time in ideal midday conditions. Peak Power, however, is no indication of how much Energy that the Panel will actually produce over its lifetime. Two different kinds of panels may cost the same number of Dollars per Watt, but if one lasts only half as long as the other, then ultimately it is twice as costly in terms of its total Energy Production over its lifetime.

This is where the Levelized Cost of Energy (LCOE) comes in. When you Calculate the Levelized Cost of Energy of a Solar System, you are basically determining the overall cost of the System per unit Energy over the Entire expected Life of the System. I did a rough version of this kind of calculation here. Sunpower Corp provides this nice description of the factors involved.

There are a several reasons why a Solar Cell might stop working. One reason that a cell could fail would be from molecular damage to the PV material simply by the bombardment of Solar Energy (including various cosmic rays). This could slowly degrade any kind of Solar Cell. Other types of Solar Cell may be chemically susceptible to degradation, such as today's Organic and Plastic Cells. These materials degrade quickly under common exposed conditions, and at this stage of the game, a lifespan of five years or so seems to be the cutting edge. Finally, of course, smashing a Solar Cell by way of storm debris or a baseball can destroy a panel, and dirt and grime can cover the surface and degrade its performance.

Solidly encasing the PV material in an aluminum and glass (or possibly plastic) module will, in most cases, help to protect the cells from physical damage, but that housing will certainly add to the cost of manufacturing the module. For a thin film product aiming to compete on very low manufacturing cost, this added expense is going to be a killer. In fact, during First Solar's Q1 '09 Conference Call, Jesse Pichel of PJC suggested that Glass was actually FSLR's largest cost. First Solar didn't disagree, and nobody mentioned Tellurium.

Now, if glass is actually even a significant portion of the cost per watt for a thin film, then it sets a kind of a lower limit on the potential cost to manufacture Thin Film Cells housed in glass (adjustable by efficiency). So, to some extent, the decision is whether to go for extreme affordability (or flexibility) and avoid a robust enclosure, but lower the operating lifetime of the cells; or else go for a longer lifespan, but adding significantly to the total cost of the module. First Solar, for example, is targeting a production cost of $.65 per Watt.

Though I'm certain that nanotech of various sorts will be able to make headway in durable exposed thin film cells, I can't help but think that it's going to have its limits. For comparison's sake, a tarp is made of very tough stuff, yet I've seen my share of tarps shredded by fall winds, and a tarp doesn't depend on the same kind of exacting chemical structure that a PV cell does. You can beat the crap out of a tarp, and it will still keep the rain off of your stuff. I'll be very impressed if I see a thin film material that you can roll into a ball, peat with a stick, and still use to generate electricity. I can't wait to see the infomercial.

There are numerous conclusions that I could follow with, but for now, I'm going to leave this with a simple idea for the consumer. Don't just buy solely based on Cost per Watt, or one day you're going to be led astray. Know what you're buying, and make sure that it has a solid warrantee over a time period to assure your expected payback. If you're offered a deal too good to be true on a cost per watt basis, it could simply be that the product you're buying is going to crap out long before it pays itself off.

Idle Speculation... Counterparties, Derivatives, and Hedging.

I work with a fellow, incredibly sharp, and very well versed on finance with a focus on hedging.

Today we were talking.

He talks about how basically everybody is hedged in all of these ways, so that they'll be assured of returns within some particular range. For instance, a bank doesn't care about whether you pick a fixed or a variable interest rate, because as soon as they make the deal, they're going to hedge it with derivative deals designed to make sure that returns over the period of the loan are within an acceptable percentage range, irrespective of what happens to actual interest rates over that time. Well, it seems that everything works out great as long as none of the hedging Counterparties go under. At that point, you have to have another layer of hedge to insure you against counterparty bankruptcy. Soon enough, it becomes a pretty ugly web of dependent hedging relationships.

Another example would be in the case where you might write, say, 1000 Naked Call Option Contracts on some company. You don't have the shares, but you've just offered to sell 100,000 shares to the Call Buyers IF the price of the stock is above a particular "strike price." At the Option's Expiration Date, if the Calls ended "in the money," then you'd have to buy and deliver a huge number of shares, and you'd take a very large loss on the deal. Well, to protect from losses, you can simply buy a swap from a counterparty, which basically insures you against loss in the case that you had to deliver shares. Having just paid a premium to a counterparty, however, and by putting THEM on the hook for your potential losses, you are giving that counterparty incentive to support your interest in whatever way they can; to keep your calls "out of the money." Of course, your counterparty isn't going to just go on the hook for your losses without a hedge, so they might very well bring another counterparty in on the deal, and so on. In such a way, there could potentially be incredible amounts of money riding on the success or failure of even a small public company, and nobody outside of the loop would have any way of knowing about it. These side deals would all be private arrangements, and they wouldn't leave a tick on a chart.

Well, my first impulse was to suggest that in such a situation, a share price could not move freely because of all the pressure put on it by its associated Derivatives, but my friend corrected me, and suggested that, no, the shares could move to reflect fundamentals IF the Derivatives were in balance in both directions. Of course, normally there would be Financial interests sitting on the other (long) side of the deal. Some of these interests would be the same ones that were placing the original short bets, and long interest could be used as a hedge in and of itself. However, it's not the normal case that I'm worried about. The case that I'd be worried about would be one in which a significant chunk of Wall Street were on one side of a trade, and they eventually had to take their losses and test the fitness of their counterparties. Really, it wouldn't have to be Call Options in particular, it could be the Derivative Hedging of Short Sales, or Naked Short Sales of a target company, that could create a systematic counterparty risk in the case of a big, unexpected price movement.

Last, imagine that you are at a company involved in Investment in the Stock Market, and you are involved with various and sundry counterparties in hedging deals. Imagine that you look at a stock or industry that seems like a promising prospect for future growth. What would you do if you found that your counterparties would take big losses if you went and did something to drive up the price and profit from the long side? Well, at the very least you'd think very carefully about whether it would be worth it to blow up your own counterparties by buying those shares.

I don't know... it's just Idle Speculation.

FSLR; The Betamax of Solar?

FSLR announced their earnings today. The results were great, particularly considering the overall economy.

I've given FSLR considerable thought in the last couple years, and I remain convinced that they have unspeakable future problems. On their investor relations page, they link to the pdf associated with their Q1 conference call. In it, they mention what they consider to be risks to their business, but nowhere do they mention the risk associated with availability of their critical Tellurium supply. Ok, so maybe they have it all figured out; but nobody's asking, and nobody's telling.

Ok, I don't know, but I want to get an idea of what kind of supply issue they're up against, so I've gathered some info.

Per Greentech Media, FSLR uses 6 grams of Tellurium per square meter. (See.)

Per First Solar, the FS-277 Module is .72m2 and has a peak power of 77.5W. (See.)

77.5W / .72m2 = 107.64W/m2

So, at 6 grams / m2, the amount of Tellurium required per Watt works out to be 6g / 107.64W = .056 g/W.

Well, we know that FSLR is aiming for a bit over a GW in annual production for '09 and '10, so rounding to 1GW gives roughly 55.7 Metric Tons of Tellurium required to produce that GW of modules.

The question, then, is how much Tellurium is out there, and what does it cost?

According to the USGS, the price has ranged from $41,800/MT in 2004 to
$82,000/MT in 2007. The World Supply of Tellurium according to US Geological Survey was 132MT in 2006.

Ah, no problem. If they're using 55MT to produce 1W worth of modules, and they're paying even the high price of $82,000/MT for their supply, then they're only paying a total of $4.5 Million for their entire yearly supply of Tellurium. That's less than a penny per Watt. In fact, during the CC, Jesse Peechel stated, quite possibly accurately, that First Solar's largest cost was glass.

Wait, a problem. Solar is big. A sensible look at the required future scale of Solar Energy puts the annual Global installation rate to be around 30GWp per year by just 2012. What if FSLR wants to maintain a significant share in this market?

Well, as it is today, it appears that over a third of the World's Tellurium supply is required for the production of a single Gigawatt of First Solar modules.
If FSLR were to take 10% of that market, they'd have to produce 3GW of modules, which by today's efficiencies would require 165MT of Tellurium, or more Tellurium than the World produced in 2006! Well, maybe the price of Tellurium is a pittance when the company is demanding only a third of the World supply of material, but I can guarantee that it won't remain so when that company is demanding 33MT MORE than the World's annual supply.

A big part of this problem is that there's no such thing as a Tellurium mine. Tellurium is only produced as a byproduct of mining other commodities, such as Copper. This means that it's very difficult to increase the World Supply independently of the supply of those other materials. If you were to mine Tellurium alone, the cost would be astronomical, and yet if you were to drive up the mining activity in Tellurium's sister elements, then you'd have the affect of driving down the prices of those materials, thus making them into less desirable targets for mining.

What about efficiency gains? Sure, if FSLR is able to pull off a tripling, or even just a doubling of their efficiency, then they could make do with dramatically less material. I can imagine several possible ways that they could do this, but I suspect that it will be a tough path. As it stands, per the CC pdf, FSLR has increased the conversion efficiency of their product by .3% since Q1 of '08. That's simply not going to cut it, particularly if you look out past 2012 when the market gets even larger.

I don't know. They have some very smart people there, and they're working hard in an exciting industry. The particular technology just doesn't seem to stack up to me, though, and like I said, nobody is asking questions and nobody is volunteering answers.

Ah well, in the short term, I'm quite certain that they are going to do great. Wall Street loves them, and they have excellent margins for the time being. They very well might be able to leverage some of that temporary financial advantage in order to open up new technologies to their benefit, so we'll see.

All that said, I'm not short FSLR, and I suspect that to go short FSLR would be a very bad plan.

Also, a final note, it's pretty obvious that I think that the strongest players at this time are out of China, but it's not that I don't like some US Companies. I really like Applied Materials, and Sunpower to name a couple of domestic players.

The Market - A Bucketshop.

So, a fellow on Bloomberg was talking about Bucketshops this morning.

We modernised ourselves into this ice age.

Wikipedia on the Bucketshop.

Basically, they were businesses on the sidelines that would play bets with customers on the stock market, but were not actually connected to the stock market. It's as if I were to bet someone $50 on LDK to go up, and vice versa, but neither of us would actually ever trade a share of LDK, and certainly we wouldn't be regulated as if we were actually trading in the market. It's very close to what has happened with Derivatives in the last 10 years. A great many of them, Trillions of Dollars had no fundamental basis in any physical ownership of ANYTHING whatsoever. They're side bets, pure and simple, and many of those making the wagers had no ability to pay up in the case of losses. The idea of running bucketshops didn't stop when they were outlawed... it was expressed later by those that led the US Government to deregulate via the Gramm-Leach-Bliley Act, and it was implemented by the "Derivatives Desk."

Of course, the Bucketshop is illegal, but the insideous concept finds its way even into the regulated markets, by way of the DTCC. Is the DTCC just throwing your trades in a bucket in the back room? In some cases, at least, it certainly is; only, we the customers don't ever get to look behind the curtain to see for ourselves. Does the share that my brokerage claims on my account really represent a legitimate link to a physical asset? All I know is what my broker tells me. If my broker were a bucketshop, would it be obvious to me, the customer? Would they admit it?

The DTCC needs to get cracked open. Let's find out what's going on in there. The Investing Public has the RIGHT to know how the DTCC handles their PROPERTY.

Part II : Percentage Land Area required for 100% Replacement of 2006 Energy Demand.

Yesterday I posted a chart showing a rough estimate of how much land area would be required by each State in order for that State to replace 100% of its Energy Demand (per DOE numbers).

I posted it at DailyKos, and on the LDK board for comments.

Apsmith of DailyKos makes a good point that there are generator losses, etc., which should be used to reduce the overall total energy required to be replaced, and China_s2 of Yahoo agrees, and points out a different set of data, which is based on retail electricity use, so should closely represent actual electricity delivered, as opposed to total Energy Input.

So, I copied over the old data to a new sheet, plugged in the new data, and came up with a rough estimate of the total land are required to replace 100% of US 2007 Electricity demand.

Percentage Land Area required for 100% Replacement of 2006 Energy Demand.

The following chart represents the percentage of land for each State, and the USA as a whole (without Alaska), that would be required to replace 100% of that State's Annual Energy Demand.

Make no mistake, the numbers are huge. Then again, nobody is actually talking about 100% replacement by Solar, Ever. This is just to give an idea that it is physically possible, at all.

Assumptions and references follow.




here's the spreadsheet.


References:


State Energy Data.
State Land Area Data.
State Insolation Estimates.
Sunpower Power/Area Claim.


Assumptions / Notes:


The percentages reflected in the Graph are based on a Stationary system, though the value for Power/Area is based on a Sunpower claim related to their tracking system. This should be irrelevant, as Power is independent of whether the system tracks or not. Since these are Sunpower numbers, the Panel's Conversion Efficiency should be around 22%.

The Demand cited is irrespective of source, and so includes existing production of renewables such as Hydropower. Here's a very interesting page from the DOE giving detailed map-based information on US Energy sources. There's a "Select a State" dropdown that will take you to a close-up of the individual State including facts and demographics.

In order to work out an the Area, I used the equation:

Annual Energy Output = 1 Year * Power/UnitArea * Insolation Ratio * TotalSolarArea * 8760.

For more info, see A Note on Units of Energy and Insolation. Solve for TotalSolarArea, and divide by the State's Total Land Area, and you will get the percentage. Most of the trouble here is just in the conversion of units. On a political note, can we just all go metric please?

The Insolation values were eyeballed from the map. If anybody's got some better data on State Average Insolations, I'd love to see!

The base data does not seem to include Transportation Energy, though it didn't specify.

Of course, this assumes nice flat areas of land, on which to set up installations, and it also assumes that each state takes care of its own needs irrespective of local conditions or capacity. It's a brief look from 1000 miles up above. It's not exhaustive, but it's fun, and maybe interesting.

By all means, if my basic math is way off, let me know.

This post is followed by Part II, which calculates the same area percentage, but only for the replacement of Electricity End Use.

For the Survivalists: How much gasoline is one Solar Panel worth?

Ok, first, what is the Kilowatt*Hour equivalent of a gallon of gas?

A Gallon of gas contains 114,000 BTU/gallon per Wikipedia (and other sources).

So, 1kWh is ideally equal to 3412 BTU, but no Generator is ideal. The generator's conversion efficiency is measured by its "heat rate," and the common range seems to be centered around 8,000-11,000 BTU/kWh. For this estimation I took a very efficient generator and used 8000 BTU/kWh (about 43% Efficiency).

Using these numbers gives a Total Energy Output/Gallon of 114,000 BTU/Gallon * 1kWh/8000BTU, or 14.25 kWh/Gallon.

Cost: $2.50/Gallon. This gives Cost/kWh = $2.5/14.25kWh = $.18/kWh


Now, let's look at a single 200Wp Solar Panel over one year at a 17% Insolation location (like in Massachusetts).

200Wp * .17 * 1Year = 34W*Year = 34W*Year*365Days/Year*24Hours/Day = 297.8kWh
Cost: $800/Panel. This gives Cost / kWh = $800/297.8kWh = $2.68/kWh


Woah! Ok, so obviously the Solar System doesn't pay off in a year. Going out 25 years, though, (assuming 10% average degradation over that time) gives a total of 6700.5kWh produced over that time for a total 25 Year Cost/kWh of $0.12/kWh.
For another comparison, over 25 years this single solar panel will produce the equivalent of 470 Gallons of Gas, or at this rate, 19 Solar Panels (3800Wp) will produce the equivalent of a gallon of gas per day.


Of course, this isn't exhaustive. I didn't compare costs of the generator involved, or of the installation and inverter costs for the Solar (this will at least double the cost for Solar Energy, but Government Incentives will bring it back down quite a bit). The focus here is a comparison between energy output over time. The point being, it's a potentially valid hedge for those that might be worried about future disruptions in such things like the supply of gasoline for generators. Prior to such a time, there are choices to be made, and in the case of a very long term potential outage, Solar Panels will provide much more energy than a person could even safely store in the form of Gas for an extended period of time. I also didn't account for such things as Interest on debt, because a Survivalist isn't necessarily going to care about that. If the time comes that they are preparing for, they know that money just might not worth what it is at the moment, and a working light bulb may be worth alot more.

Of course, remember that if you're one of these people, the neighbors will know that you have Solar Panels (or a Generator), and they'll want in on it. Therefore, the best thing we can all do now, is to do everything possible to make sure that not just "we" have a system, but to make sure that as many of our neighbors have them, too. Desperate people are dangerous.

An Idea to take up-front cash on long term debt via Solar.

Based on Amendments to the Bailout Bill that Passed in November, there's a 30% Tax Credit for Solar Energy Installation Costs.

Let's see. If you borrow the cost of a Solar Project to be payed back over some number of years, you'll get 30% back all at once around tax-time (if you payed out the equivalent in taxes that year). If you don't owe on taxes, there's still the possibility that the 30% credit will become fully refundable under the upcoming stimulus package.

Do you think that some folks wouldn't like 30% upfront on a long-term loan, particularly on a loan for a product that will pay itself off in the long term?* These guys need all the upfront money they can get, and you can bet that this 30% will look appealing to many. It's like a money machine. Watch Solar Equipment Demand take off over the course of this year.

*Depending on circumstances.

What a Market this could be.

Forget Large-scale Energy Production for a moment. Turn your eyes from the rooftops, fields, and deserts where you could put PV or Concentrating Solar. For a moment, look around your house and think of all of the possibilities for very Small-scale Solar.

Somebody at Yahoo joked about giving someone a Solar Powered Flashlight, as if, I suppose, you waited until you needed it before you decided to try and charge it up. Thinking about it, though, who wouldn't want a solar powered flashlight for an emergency (with LED lighting). I have a flashlight sitting at my desk, and for the few hours of actual emergency light it's provided, I've changed the batteries numerous times (my Son likes to play with it). Rather than going hit and miss with a flashlight that may or may not have charge in its batteries for an emergency, why not have a flashlight that is constantly charging, as long as light is present?

Another example that's come up is based on the smoke detector that is currently sitting on my kitchen counter. The Smoke Detector is dependent on the tiniest flow of charge to trigger the alarm, and yet, they come with batteries that just might not be there when you need them. The smallest solar chip or thin-film coating could keep a very small battery charged up for a very very long time.

The list goes on. Remote Controls, MP3 Players, Cell Phones, Game Controllers, ... remote devices in general. Sure, depending on your amount of time talking on the phone, or listening to music, you might need a way to plug in the device to give the batteries a boost, but it seems to me that if you could bake a durable thin film onto the surface, you'd be set for rather a much longer time between charges, at the very least.


BTW: Googling "solar flashlight" does turn up solar flashlights. On the other hand, I just did a bunch of calculations, and I have a hard time believing that the quality of these things, based on today's common batteries, solar collectors, and manufacturing scale, is terribly high. It will take some time, and some good combinations of technological advancement before quality solar remote items become commonplace.

Looking forward to 2020.

Per Wikipedia, Total World Consumption of Energy in 2005 was somewhere in the area of 15TW. It's suggested that 86.5% of this total is derived from Fossil Fuels, which amounts to a total World rate of Energy Consumption of 13TW. Note, this value includes the energy content of Oil and Liquid Fuels, so is not just the Electricity component.

Using 2005 as a rough basis:

The Total Energy Consumed over the whole Year could be written as 13TW*1Year.

There is a growing consensus in the World that the first International Targets will be in the area of 20% production of Energy from Renewables by 2020. Let's be conservative, and suggest that this target will be missed, at least on a Worldwide scale. There are several major Economies that might not play along, particularly among the heavy coal users.

We'll go with just a 15% target. 15% of 13TW*1Year = 1.95TW*1Year of renewables needed for, say, the year 2020.

Pulling a number out of my butt, let's say that Solar PV will provide just 10% of this amount of Energy by 2020. That makes for a Solar PV contribution of 195GW*1Year in 2020.

Since a Solar Panel doesn't provide constant Energy, we can take some averages, and assume that over an entire year, the panel will have provided a total Energy of about about 20% of its Peak Power Rating, so in order to provide 195GW*1Year, you'd need to install 971GWp of Solar Panels.

Hmm, 971GW of installed Solar Panels by 2020. Sounds crazy.

2007 Total Installation was in the area of 8.7 GWp. That leaves 962GWp to produce over the next 12 years.

What would this look like?

Photon Consulting put out some numbers quite some time ago suggesting what the growth curve in Solar would look like up to 2012. I took 10% off of the top from each of their yearly estimates to reflect the effects of the present slowdown, and came up with the following path to 962GWp by 2020.

The Spreadsheet is here.

For sake of completeness, I also made a more conservative scenario where the present downturn caused the Photon Numbers to be slashed by 30% over the next 3 Years. See the "Scenario 2" tab.

In the end, it makes little difference whether we slow down a bit for the moment, as the long term goal is largely set, and will almost certainly be acted on with great vigor by the Obama Administration.

Is it any wonder that I look with some scorn at the short-sighted calculations regularly drawn up by Yahoo bashers who suggest that today's Solar Manufacturers will wither due to lack of future demand for their products? The market that we're talking about is simply larger by orders of magnitude than most people can visualize, and it follows that so is the opportunity at a time when wholesale replacement of Existing Technology and Energy Sources are the order of the day.

Residential thinking..

I mentioned housing back in December of '07, and though the idea behind the post hasn't become reality, I stand behind what I said.

The question right now is, how is Obama going to help to create this scenario. As it stands, we have the 15% Investment Tax Credit, but this isn't enough to give the market a sense of direction.

One item that I'd like to see would be a kind of a Government loan guarantee to banks that would support the financing of alt-energy projects. Domestic Energy Installations pay for themselves over time, and so the guarantee itself, would likely cost the Taxpayer very little. If the Government were to guarantee lending on some limited time and scale basis, banks would be incented to start to produce the lending programs that will benefit both, the banks, and the borrowers over the long term.

Coal / Solar Cost Comparison - Final Draft

Note: This article is under revision, considering current fluctuations in price. The Concept is sound (IMO) as a way to make rough comparisons in cost, but the Prices are presently off.

Also note, the 33% Insolation that is used as a basis for comparison, is very high for a stationary system, but well within the range of a tracking system. For more information on Insolation, see "A Note on Units of Energy and Insolation."

I'll set up two equivalent scenarios using Coal and Solar, and will then make comparisons.

Note: I make numerous assumptions, and will mention these where appropriate.




For this thought experiment, we'll imagine that both of these industries are starting from scratch with equal Energy Production Capacities. In reality, of course, Coal has tremendous existing Scale Advantage over Solar.

This will be a demonstration of how fuel costs could affect the long term comparative cost of the Coal Energy vs. Solar Energy.

First, imagine two industries; Solar and Coal. The goal of both of these industries is to produce Energy.

Now, divide each of the industries into three groups.

Group One:

Group One is made up of those segments of the Industries that produce the actual Electrical Generation Facilities.

In the case of Coal, this is the industry that produces the actual Power Plant. It would include everything from the ground up, like the steelworks that made the metal, to the quarries that produced the Concrete. It would include the Engineers, Managers, and Laborers for the Plant Construction, as well as the Lawyers and Lobbyists required to work with the Government and Public to support the plant's construction.

In the case of Solar, this would include all of the players from TCS, Wafers, Crucibles, and Modules, through the final Solar Power Plant Installation. Once again, it would include all of the extraneous support required for the project.


Group Two:

This group is made up of everyone associated with supplying the fuel for the Power Plants that were produced by Group One, above.

- For Coal, this would include everything from the actual Mining of the Coal; the engineers, geologists, equipment operators, supervisors, etc. This group would also include the Transportation of the Coal to the Power Plant.

- For Solar, there is no Second Group. There is no Delivery of fuel to the Solar Plant.


Group Three:

This is all of those involved in the upkeep over time of the power plants. I'll ignore this group, and give Coal a freebie. I think it's safe to say that Solar will beat Coal on Upkeep Costs over time.

Notes and Assumptions:

Note: The Solar Plant is going to have to be rather larger in peak rating than the Coal Plant, since Sunlight isn't constant. 33% is a fair conversion for a very sunny place, so our Solar Plant has to be three times the rated output of the Coal Plant (Say, 350MW Coal = 1050MW Solar). Whatever actual output we settle on, we just want the total yearly output of Energy from both plants to be the same for comparison purposes.

Note: Solar does not provide a base load like Coal. We're just looking at total Energy Output, not the convenience or timing of the final product. Ultimately, for future base-loads, we'll need a heck of a grid, plus some other provider like Sequestered Coal, Geothermal, or something else like that.

Note: I have Silicon-based Photovoltaic Solar in mind in writing this.

Note: PV Solar lends itself to a decentralized solution. Therefore, when talking about a 1050 MW Installation, we don't have to assume that some company has bought 1050 MW worth of Panels and Installed them as a single project. Instead, we can talk about a total of 1050 MW of Panels installed anywhere, in any distribution. Whether Centralized, or not, a Watt of Solar Energy offsets a Watt of Fossil-based Production.

Note: The referred-to Spreadsheet is likely not entirely clear to anyone but myself. I did try to add descriptions to help, but there are a lot of numbers involved. Feel free to counter my numbers with your own if you think that I'm off on anything.

Assumption: I've worked out several Cost scenarios involving guesses on future Inflation / Coal Price Increases. Of course there's no telling how the price of Coal will vary over the next 25 Years. There are numerous reasons to suggest, however, that the price of Coal will not remain static, particularly in the face of Peak Fossil and US Dollar Depreciation. Even if Coal is not near Peak, Peak Oil will put increasing upward price pressure on Fuel to support Coal Deliveries. Nearly all of the price pressures in the foreseeable future point towards a continued Increase in the Price of Coal, particularly in the price of non-local Coal that requires long distance transport.

Assumption: No cost factors related to future Climate Change Regulations are included in this Document. This gives a huge Freebie to Coal, as Sequestration and Carbon Credits will add greatly to the cost of Energy Production from Coal Sources over the next 25 Years.

Assumption: No cost factors related to Increased Healthcare Costs due to the Burning of Coal. This is another Freebie for Coal as far as this paper is concerned.

Assumption: I assume for the initial calculations that the lifespan of the Coal Plant and the Solar Plant are equal to 25 Years. The lifespan of either a Coal Plant or a Solar Plant is certainly greater than 25 Years. I'll look back at this in a later section.

Assumption: I assume for the initial calculations that the Conversion Efficiency of the Solar Panels stay constant throughout the life of the plant. Again, I'll look back at this in a later section.

Imagine both a Coal Industry and a Solar Industry, each capable of producing a single Power Plant per year (or arbitrary unit of time, really).

Year One: Both a Coal and a Solar Plant are built.

By the end of year One, both the Coal Plant and the Solar Plant have produced one Yearly Energy Unit. The Coal Plant has consumed it's required yearly supply of Coal.

Year Two: Both a Coal and a Solar Plant are built.

By the end of this year, the Plants that were built last year, each produce their total yearly capacity in Energy. In addition, the new plants being constructed this year have each produced a Yearly Energy Unit. The two Coal Plants consume a total of 2 Units of Coal for the year.

The Total Amount of Coal burned since the first Year is 3 Units.

Year Three: Both a Coal and a Solar Plant are built.

By the end of this year, the Plants that were built in the two previous years, each produce their total yearly capacities in Energy, for a total of 2 Units of Energy from Solar and Coal Plants. In addition, the new plants from this year have each produced a Yearly Energy Unit. The three Coal Plants consume a total of 3 Units of Coal for the year.

The Total Amount of Coal burned since the first Year is 6 Units.

Now, to make some Comparisons between Coal and Solar based on the above setup.

Comparison One: Side-by-Side – Energy Output

Take a look at this spreadsheet, I'll take it out 25 Years.

See Sheet 1.

This first set just shows that over 25 years, the total Energy Output of both our Coal and Our Solar Industries are the same. Easy enough, that was part of the basic assumption.


Comparison Two: Side-by-Side – Feedstock Demand

This next set shows how the total demand for Coal Feedstock grows over time.

See Sheet 2.

Per Plant, of course, it's linear; just One Unit of Coal Fuel per Year per Plant; however, as the number of plants increases, the Total Yearly Demand for Coal for the Industry increases exponentially based on the rate of increase of demand. This is a recipe for increased cost of that fuel over time, particularly since the Coal is utterly destroyed in the process of burning; there is no recycling or conservation of raw materials.

In fact, over the first 25 years of the scenario, the yearly demand for Coal from the Power Plants has increased 25 times. Unless supply increases similarly, prices will have to increase due to the additional demand.

This is where our assumption that the Coal Industry isn't actually a behemoth in comparison to Solar comes in. Of course, the Industry is so large that an extra 25 Plants worth of Demand isn't going to stress out the Suppliers too much. However, the ability of the Coal Industry to increase supply to meet demand is not infinite, particularly since, once the coal is gone from a site, it's gone and the total production from that site has to be replaced by production from a new site. Finding new sites gets more difficult over time, particularly as International Politics and Dependence on Support from Sovereign Governments creates Long Term Complications and various forms of Blowback.

Looking at some actual Coal Consumption Numbers (See P.35), we see that in 10 years between '97 and '07, consumption of Coal increased from 2317 to 3177 (Millions of Tons of Oil Equivalent), or by 37%. According to The World Coal Institute, "at current production levels coal will be available for at least the next 147 years." They specify at "current production rates," which says to me that they are not taking into account increases in Demand / Production, as production rates would either have to increase to meet demand, or else price would have to go through the roof to take into account the discrepancy. Oddly enough, at the beginning of the writing of this paper, the World Coal Institute estimation was that we had 155 years worth of Coal remaining, but now, having confirmed my links, I see that they've updated this number to 147 Years, which means that in about two weeks of time, the World Coal Institute revised their estimate down by eight years*. For a counter opinion on the timing of Peak Coal, see this article which concludes that it could be in as soon as 15 years.


Comparison Three: Costs – Inflation Scenarios

Looking at a specific example, I'll take a look at some samples of Coal Plants, to see how much coal they each go through in a year. I've grabbed a couple of examples from the web, which gives some idea of how much coal a plant will go through, compared to its rated power output. It looks like Milliken Station on Cayuga Lake is quoted as the most efficient plant of the four that I found (in Energy per ton of Coal), so I'll use that plant as an example, and support it as within a reasonable estimation with some averages from www.powerofcoal.com.

See Sheet 3.

In fact, it appears that the fuel cost that I derive for Milliken Station is slightly above the average in the Industry. Per PowerofCoal. Working out the Cost per Watt from Milliken Station over 25 Years at $100 / ton gives $6.26/Watt*25 Years. This compares to the National Average, which works out to $5.18/Watt*25 Years. Note that since this “PowerofCoal” reference was dated, most Coal Prices have increased quite dramatically, so the national average costs have probably increased by 25% or more.

Note: Per “Checking my Numbers,” below, it appears that Milliken Station is very close to the theoretical maximum in terms of Energy Production / Ton of Coal. Therefore the PowerofCoal Numbers are likely skewed in some way, likely due to the Particularly large amount of easily recoverable Coal in the Powder River Basin in Wyoming, and possibly also due to Government incentives at some stage of the Coal Energy Production Cycle.

Over the first 25 years of this plant's life, it costs a total of around $2.6 Billion in initial Construction Costs and Yearly Deliveries of Coal Fuel. Of course, this assumes that the price of Coal doesn't increase over this 25 years, and it assumes that the plant costs nothing in maintenance. As shown on Sheet 3, if Inflationary factors are considered, total cost for this near average plant over 25 years could actually approach $6+ Billion.

For Fuel Cost Estimation for other Coal Plants, see Sheet 4.

Ok, now to look at an equivalent Solar Installation (1050MW @ 33% of Peak in Total Energy Output). There are alot of different ways to work out sample prices for equivalent Solar Installations. The first, and ugliest example would be to use the retail price data from Solarbuzz.

According to Solarbuzz, the average US Retail Price for Panels is $4.82 Watt, and the Total Cost of the Project is about Twice the cost of the PV Modules. Using this method arrives at an end resulting cost of between about 2 and 5 times the cost of an equivalent Coal Plant over 25 years (Depending on Future Inflation). At this price, the total cost of the Installation would be $4.82/W * 1MillionW/MW * 1050MW * 2 = $10.12 Billion (compared to $2-$6 Billion for an equivalent Coal Plant). Wow! Ok, but this number reflects the many inefficiencies of small-scale retail distribution and installation. It also represents the current high demand / low supply that we see in the World PV Market, reflected among other things by a cost of Polysilicon of 5-10 times (or more) the cost of its production (Polysilicon costs are around 40% of the total cost of producing Solar Panels at this time).

So, with a 25 Year window, it's tough to compare the Best-case scenario for Coal to the Worst-case scenario for Solar at present Solar Prices. We'll get back to this one a bit later.

Instead, I'll try to gauge the cost of some existing large scale PV Solar Installations. Attached you'll see a few price references to indicate the Cost / Peak Power that is currently available for mid-size Installation sizes.

See Sheet 5.

This spreadsheet shows some examples of Solar Power Plants in the real World, their output, and their projected costs. Remember, that I've chosen a 1050MW Solar Plant to be equivalent to a 350MW Coal Plant in annual Energy Output.

The Price per Watt ranges from $5.33 -$8.05. So, using this range of prices to construct a theoretical Solar Plant of 1050MW would give us costs ranging from $5.8-$8.5 Billion. Remember, this is compared to a cost for coal of my just slightly above US average Coal Power Production Costs of $2.6-$6.5 Billion.

Personally, I think that assuming future inflation to be zero is ludicrous, and can't help but think that the much safer bet is that Coal Fuel Prices will increase significantly faster in the near and mid-term future than we're used to thinking about. If this is the case, then there are cases in this scenario in which Solar Installation would be the best economic choice for installation RIGHT NOW.


Comparison Three A: Costs – Inflation Scenarios – Extended to 50 Years

We know that a Coal Plant Lifespan isn't limited to 25 Years. We know that Solar Panels are typically warranted out to 25 Years. We also know, however, that Solar Panels can last significantly longer than 25 Years. Sheet 7 gives some idea of what kind of useful lifespan we are looking at as far as Solar Panels, based on a .5% degradation in output per Year. Considering this degradation would certainly throw off the previous Calculations, so I'll consider it for this scenario. I'll also cut down the total output of the Panels by 5% due to Inverter Losses, and by 10% for High Temperature Loss. In addition, I'll take into account the Panel Output loss over that 50 Years using the Chart on Sheet 7 by reducing the overall Output by an extra 12.5%. All of this means that now, instead of needing 1050MW to equal the 350MW Coal Plant, we're going to need a 1364MW Solar Plant.

As before, using Solarbuzz, $4.82/W * 1MillionW/MW * 1364MW * 2 = $13.15 Billion for the entire Solar Installation.

Now, for the Coal Plant, we'll figure out the cost over 50 Years assuming some inflation rate. This time I'll assume a rate of 4%. See Sheet 8. It seems that assuming 4% Inflation in the price of Coal over these 50 Years, even with all of the negative offsets that I've just added to the cost of the Solar Installation, the Coal Plant LOSES with a total fuel cost of $13.4 Billion.

Remember, Solarbuzz Numbers are Retail. How much money can we save for a utility-scale operation by buying bulk? I'm going to take a wild guess.

In the real World, Trina Solar recently reported an ASP, or Average Selling Price, of $3.85 / Watt, which is relatively high relative to other Solar Manufacturers, but well below Retail. Given a direct relationship with a Modulemaker such as Trina, and the ability to buy at around $3.85 / Watt, brings the cost of our 1364MW Solar Plant cost down by $2.6 Billion to $10.50 Billion.

We can do more. Solarbuzz says that the total cost of the Installation is twice the cost of the Modules. Well, clearly this reflects the cost of Installation on the Retail Level, which will certainly be higher than the cost of Installation on a Utility Scale. It is much more challenging to do thousands of Individual Installations on unique rooftops all over a region, than it is to take a piece of land and set up a large scale array of panels. Another Efficiency factor to be found in Large-scale installations will be the savings due to an efficiently engineered wiring and electrical design. For instance, a large scale system won't need the vast number of small inverters that would be required for an equally powered Residential Distribution. I think it's pretty safe to assume that 20% in efficiencies could be found in this situation, so we work out a Installation cost per Watt of $3.85, or $2.6 Billion Dollars off of the cost of the 1364MW Installation, leading to a total cost of $7.9 Billion Dollars.

So, the results of this scenario show that over 50 Years, our 1364W Installation should compare very favorably with Coal. The Total Installation Cost of $7.9 Billion is much lower than the Coal Plant's 50 Year Cost of $13.4 Billion assuming a low low inflation rate of 4%. Is fact, just considering a low 4% Inflation Rate, the Solar Plant breaks even with the Coal Plant at 39 Years. Anything beyond this time is Icing.

A Note on Scale

So far I've been assuming that 1050MW or 1364MW of Solar panels could be even bought on the Open Market. This is a questionable assumption.

According to the Chart on Sheet 5, the total annual installation for 2007 was 2.2 GW. However, as can be seen on the same chart, the rate of increase of installation capacity (limited by production capacity) is taking off, and is expected to increase by Eighteen Hundred Percent, to 37GW Annually, in the next Four Years.

This is when things will start to get interesting, because Utility-scale Developers will for the first time ever, have the opportunity to supply large-scale plants with decreasing lead times, and at the prices that I have talked about in this document, or less.

Conclusion

Well, so far, what I've shown is that there is overlap in the long term price of a Solar Installation and Coal Installations. Much depends on the future rate of Inflation, or at least Inflation in terms of increased Price of Coal. However, given that Future Inflation is not knowable, but in today's World Economic Climate could be explosive, Solar, even at today's high prices, fills a lucrative Energy Niche as a hedge against increasing Coal prices.

As it is, Solar Producers have more than enough Customers to easily sell all the product that they can make at today's prices. Industry Production Capacity is increasing incredibly fast, though, and will likely soon outstrip demand. However, long term Coal Generation costs would indicate that a price bottom for Solar Products will arrive as defined by projections of long-term production costs from Fossil Fuels similar to what I've shown above.

In a future Post I will look at Comparisons between Solar and Natural Gas Electricity Production, which is really a much closer fit to the particular niche that Solar fills, but in this first case I wanted to compare the costs to Coal, which is typically acknowledged as the cheapest current source of Electricity.

Checking my Numbers

Energy Capacity per Ton of Coal:


Is it reasonable to assume that a Coal Plant like Milliken Station actually consumes 876000 Tons of Coal per Year in order to produce its 350MW of Power?

Per Wikipedia, Coal Plants produce approx. 2KW*Hour/KG of Coal.

I want to solve the equation (2KW*Hour/KG)*X Tons of Coal Burned / Year = 350 MW * Year.

I'll convert to Years because because I want the Annual Average to make Comparisons to. As for the Mass, I want Long Tons, which are equal to 1016 KG, and for Power I want Megawatts.

So, X Tons / Year = (350MW * Year)/(2KW*Hour/KG)

Then, X Tons / Year = (350MW * Year)/(2KW*Hour/KG*1MW/1000KW*1Year/8760Hours*1016KG/1Ton)

Finally, X Tons / Year = (350MW * Year)/(.000232MW*Year/Ton) = 1.5 Million Tons of Coal / Year. Wow, this is rather a lot higher than my estimated Coal Fuel Demand for a 350MW Plant, which makes the Solar Plant considerably cheaper in Comparison.

Let's try another estimation. A physicist friend of mine, who works in Coal, estimated for me that a Ton of Thermal Coal, when burned, produces 26 GJ of Energy (Wikipedia has it at 24 GJ/Ton (after some conversions)). Using an Online Converter, 26 GJ works out to 7.22 MW*Hour. Not all of that Energy is converted into Electricity at the Coal Plant, only between 30%-35% is typically converted with a theoretical limit at about 45%.

Using 35% Efficiency would put the Energy / Ton of Coal at 9.1 GJ/Ton, or 2.52 MW*Hour/Ton.

Using the same process as above, for a 350 MW Power Plant, this works out to 1.22 Million Tons of Coal / Year, also higher than my earlier Estimation for Milliken Station.

Let's go one step better for Coal. I've seen reference to 30 GJ per Ton and 42% Conversion Efficiency at a particular plant. I'll work out the Tons of Coal / Year for a 350MW Coal Plant under these Conditions.

30 GJ per Ton = 8.33 MW*Hour/Ton.

At 42% Efficiency in converting this energy to Electricity at a Coal Plant, we get 3.5 MW*Hour/Ton.

Calculating as above, at this incredibly efficient example we come up with Total Tons per Year = (350MW * Year)/(3.5 MW*Hour/Ton*1Year/8760Hours) = 877,000 Tons per Year. This almost exactly matches our estimation for Milliken Station. Nice!



PowerofCoal Data Check:


PowerofCoal Claim: The Average Cost of Production of all US Coal Plants (as of Jan '08) = $23.68 per MW*Hour

In Comparison Three I used this number to calculate a Cost / Watt over 25 Years of $5.18/Watt*25 Years. To do this, I did the following conversion:

Average Cost / Watt*Year = ($23.68/MW*Hour)(1MW/1,000,000W)(365Days/1Year)(24Hours/1Day) = $0.20 / Watt*Year = $5.18 / W*25Years or $10.36 / W*50Years.

Note: These numbers for PowerofCoal.com include all of the cost of production, including presumably, maintenance and upkeep. So, they should be slightly more representative of the actual costs to produce Energy with Coal in the US, however, as shown above, Milliken Station is close to the peak of Efficiency in terms of Energy Output to Coal Consumed, so in order to arrive at a lower average cost than Milliken Station, the average cost of Coal to these US Coal Plants must be much lower than $100 / Ton, or else the cost to produce Coal Energy in the US must be Subsidized. We can see from the Chart that the US does indeed have access to very cheap Coal from Powder River Basin, though from the same Chart we can also see that other Coal Sources are increasing their prices dramatically.

Using the above numbers as a starting place, and then calculating in 4% in Inflation Increases per year, gives $8.63 / W*25Years or $31.63 / W*50Years.

Additional References

Commodity Price Data (Pink Sheets)

PV Costs to Decrease 40% by 2010

China Spurs Coal-Price Surge -WSJ



* Note on World Coal Institute Archives. Based on Archived Reports :

2008 Estimated Reserves: 147 Years
2007 Estimated Reserves: 147 Years
2006 Estimated Reserves: 155 Years
2005 Estimated Reserves: 164 Years
2004 Estimated Reserves: 190 Years
2003 Estimated Reserves: 200 Years
2001 Estimated Reserves: 200 Years

Conclusion, since 2001, we've used 53 Years worth of Coal. LOL!

Future Company.

In about 5-7 years, there will be lots of today's panels being replaced by newer versions. These old panels would still have a tremendous amount of life left in them, and will hold alot of value.

So, you buy some testing equipment (maybe from Spire), and set up a company that takes all of the assorted panels from the various sellers, sorts them all into known units (size and output), and resells them.

Anyway, just a thought. :)

A couple points on FSLR.

I have to say, I'm not a fan of FSLR's particular technology, CdTe, because of the whole Tellurium Scarcity problem, as well as the Cadmium toxicity.

As evidence of this, I'll point out a line on their Q2 report.

Under "Liabilities," "Accrued collection and recycling liabilities" are shown as $23.5 Million for the Quarter. This compared to $69.7 Million in Net Income. One of the goals mentioned in the CC, was that they had produced their 500th Megawatt in Q2.

Essentially, the two big problems of CdTe lead to a company that MUST recycle the vast majority of their product for its lifetime. They MUST have that source of Tellurium, and in order to do business in places like Germany they've got to deal with their toxins at the end of a product's life. That could potentially lead to an increasingly expensive infrastructure required to support an increasing number of installations, which will be distributed widely around the planet.

I guess my hope would be that a big chunk of this expenditure is for the set-up of a recycling facility, and is a one time cost. What happens years down the road when FSLR has many GigaWatts of installed capacity?


On a totally unrelated note, it seems that they state in the CC that Conversion efficiency has increased by 10 "basis points," or .1%. I'm sorry, but that's peanuts. When asked about whether their newer facilities were producing more efficient modules, they replied that the 10.7% figure that they had been using was just an average, and that the actual efficiency varied, and they confirmed that 10.7% was the average at all of the facilities.

Based on this, I'd be very curious what kind of mid-term increases they are expecting in Conversion Efficiency, because otherwise it looks to me like they're close to "stalled."

As I've said before, just because I have a hard time believing in the fundamentals of this company, I wouldn't be shorting it unless I was willing to lose alot of money, at least in the short to mid term.

Disclosure, I have no position on First Solar.


Note: For more background on FSLR, See this.

Peak Coal.

Peak coal: sooner than you think

"Looking to the future, many analysts who are concerned about emerging supply constraints for oil and gas foresee a compensating shift to lower-quality fuels. Coal can be converted to a gaseous or liquid fuel, and coal gasification and coal-to-liquids plants are being constructed at record rates.

This expanded use of coal is worrisome to advocates of policies to protect the global climate, some of whom place great hopes in new (mostly untested) technologies to capture and sequester carbon from coal gasification. With or without such technologies, there will almost certainly be more coal in our near future.

According to the widely accepted view, at current production levels proven coal reserves will last 155 years (this according to the World Coal Institute). The US Department of Energy (USDoE) projects annual global coal consumption to grow 2.5 per cent a year through 2030, by which time world consumption will be nearly double that of today."

FSLR and the Tellurium Fiasco.

It's interesting to see First Solar so well hyped, while the Tellurium issue goes undiscussed by the Investment Community. The possibility of a price spike in Tellurium has been discussed for some time over at the Stock Psychology Blog, and at that Author's posts at Seeking Alpha.

Here's his latest post on the subject.

It sure looks like there's a hell of a spike happening in the price of Tellurium. To me, it's reminiscent of what's been happening in Silicon, and it's just the kind of price movement that makes highly dependent industries struggle with competitiveness. The difference between Tellurium and Silicon, of course, is that Tellurium is incredibly rare on earth, while Silicon is incredibly common. With Tellurium, you can't just increase manufacturing capacity freely, because there simply isn't enough raw material of refine, whereas with Silicon, though refining is expensive, there is a vast amount of raw material available for as far as the eye can see.

Posted in response... Arguments for buying Solar.

My many cents (I think this might go on long):

I see you're in Massachussetts. There's an excellent tradition of Solar in that state, I believe it's the home of both Evergreen Solar and Spire Solar.

Here's the DSIRE page for your state on incentives available in your state: http://www.dsireusa.org/library/includes/maphomeowner.cfm?State=MA&CurrentPageId=1&RE=1&EE=1

The Federal incentive program is also available till the end of this year.

A professional installer would be able to calculate all of the incentives and give you totals.

Go get some numbers, and see what kind of payback timeframe you're looking at. Remember, the standard warranty timeframe for silicon-based panels is typically 25-30 years.


Buy now, or buy later?


If you want "cheaper, more efficient technology" then you're pretty much out of luck. You'll have to wait for at least a year. It's all pretty expensive(*)(**).


An Argument for buying now:


If the shit hits the fan, and for whatever reason Energy prices (continue to) spike in the next couple of years***, or if power simply becomes unavailable, then you'll be served by having bought now. However, prices of equipment and installation are undoubtedly high. If you have the money, then it might be worth the immediate investment. It depends on what you see happening in the next few years as far as the World Economy is concerned.


An Argument for buying later:


Industry "shorts" argue that there will be a "glut" of Silicon and Silicon-based panels on the market in the next year or two. They argue that the manufacturing capability is scaling up way too fast, and that it will outstrip demand, reduce prices of the final product, and cause the industry to bust. If this happens, it will be within two years as the world's polysilicon supply increases manyfold as many projects currently in development begin producing. Personally, I believe the shorts are incorrect (and very often shills for the Fossil / Nuclear Industries). The company LDK Solar, for instance, has just announced that they are almost completely sold out of product for '08 and '09, and they have numerous long-term contracts stretching out over the next 10 years with European and Asian trading partners. In any case, any price reduction will serve to boost demand until a balance is achieved, and considering the Economy's thirst for Energy, I don't believe that prices are going to collapse for many years. This isn't the 70's again, Fossil Energy has few options for new development with which to increase supply.

"Shorts" also argue that thin-film panels will take over the market, and blow away today's Silicon Technology in efficiency and price. This may be, but I have my doubts. For one, thin films are less efficient per unit area than Silicon-based Panels, and they have their own "feedstock" constraints. Some use Cadmium Telluride, where Cadmium is toxic, and Tellurium is one of the rarest elements on Earth, and others use Indium, which is not incredibly rare, but is not common. Another factor between thin films, and Silicon-based panels would be durability / working lifespan, and I don't think we have the numbers yet.

Positive arguments for buying later would also include increased Federal Subsidies under a Democratic President / Congress, as well as new Incentives that will be forthcoming from Lenders (we've seen a couple examples of banks seeing value in lending for these projects, and I think we'll see more coming).


An Argument for buying Solar stock:


Maybe it makes sense to wait before Installing at home, but there are Installations happening at an increasing rate all over the World. It is my strongest "Belief" that getting into certain stocks over the next year is truly getting in on the Ground Floor of an Industry Boom. In truth, these stocks have been beat up since the end of last year, and I call that a good thing for anybody who gets in while they're out of favor. The risk, of course, is that the World Economy will collapse, taking with it the Stock Markets. If that happens, then you had better have a Home Energy Installation, firearms, and a stash of food. Otherwise, it seems to me fair to say that as the cost of all Energy Increases (in US Dollars, at least), combined with the economies of scale that we're seeing develop in Solar Manufacturing over the last 2 years (and the rest of '08), Public Companies in this Industry will be increasingly recognized by American Investors as we go into '09 and beyond, and owning some stock during a period of growth could eventually offset some of the increases that you'll see in your own power bills.


Anywhoo, just a couple of thoughts.


* There has been a shortage of Polysilicon for use in Silicon-based panels, and in the next year many new plants will be up and running around the world.

** It's possible that you could get some kind of solar water-heating system for a bit cheaper than PV.

*** Possibly due to further devaluation of the US Dollar?

A premise... The Recession

I think we're in a Recession, and I think it's going to be a long and ugly one.

Now, maybe it doesn't make sense to suggest investing in stocks while believing that we're at the beginning of a Recession.

Well, here's a premise.

I believe that we are entering at least one or two very hard years, but I can't help but believe that the best bet is on the likelihood that the international system of trade will survive.

I don't believe that all of those Asians out there are just going to lay down and starve if the US stops buying their goods. In fact, I believe that the entire World has been preparing, at least in part, for possible or partial "decoupling" from the US since around 2000.