Issues

Clean Energy

Could solar become the first unsubsidized energy source in U.S. history?

solar panels on houseLast year, the U.S. Department of Energy (DOE) announced its SunShot Initiative. The goal? Make solar energy cost competitive in the market by 2020— without a subsidy. It’s a highly ambitious goal that has never been achieved for any other electricity source.

The initiative aims to push production and installation costs further along solar’s extremely steep downward cost curve while continuing to increase technological efficiency.

One of the goals of the initiative is to fund work across the country that reduces the “transaction” costs of installing solar projects. These are costs that come from things like local permitting, utility interconnection, operation, price and rate procedures, and inconsistent or nonexistent land use and zoning guidance. (They’re mostly related to inexperience with modern solar technologies.) Out of the $5-6/watt installed costs of a grid-connected rooftop photovoltaic system, the DOE estimates that of as much as $1/watt could be saved in unnecessary transaction costs. That would equal a huge leap down solar’s already decreasing  cost curve.

solar system efficiencySource: U. S. Department of Energy, Energy Efficiency and Renewable Energy

Currently, the DOE is reviewing applications for partners in this part of the initiative. They’ll award funding soon—to the tune of $25 million (over $145 million has already been awarded). The Twin Cities have been part of DOE’s Solar America Communities program for the past few years and we partnered with Minneapolis, St. Paul, and the Minnesota Department of Commerce to apply for a SunShot grant.  If funded, we’ll rely on the excellent progress that has been made so far in order to

  • work on a regional and statewide basis to make sure that solar installation processes are as efficient as possible,
  • make sure utility rates and prices are set appropriately,
  • ensure the financial community understands opportunities in solar energy and access to financing becomes regularized and consistent, and
  • make sure land use and zoning guidance becomes more consistent, relevant, and readily available to solar businesses.

So, is it possible for solar to become the first unsubsidized energy source in U.S. history? Yes, but it will take coordinated efforts to make sure costs do not become so embedded that subsidies will always be needed, as has happened with so many other energy sources. In the end, if ongoing subsidies are required, the SunShot Initiative, along with present market forces, technological innovations, and a host of other cost-reducing activities, will result in keeping those subsidies very low in the future.

Last year, the U.S. Department of Energy announced its SunShot Initiative. The goal? Make solar energy cost competitive in the market by 2020—without a subsidy. But is it possible?

Add a comment 3 comments

  1. rich

    09.16.2011

    I believe the early settlers were able to travel and keep warm without a subsidized energy infrastructure. Getting this industry going will take a lot of hard work and investment on an individual basis to develop markets and business models that create cost advantages for customers. That is, it will need to continue to grow organically and incrementally as it is now, independent of the utility-scale aspirations of those who want to fight that battle.
    Public subsidies only matter when you are thinking on a scale that nuclear energy requires but solar does not. the potential for democratizing energy production is a strength of solar power that we should not overlook.

  2. Ross

    09.19.2011

    Great info. It’s exciting to think the solar PV industry could be planned from the get-go to one day be subsidy free (by proactively squeezing out industry transaction costs before they become “embedded”). As the title implies, we are still not there yet with coal, oil, natural gas, or nuclear.

    Of course, solar will continue to be subsidized for the foreseeable future — if not by the U.S., then by China, Germany, Spain, and other countries who have no qualms about eating our lunch.

    And solar would be worthy of public investment even if it weren’t on a path to zero subsidies. Societal investments should be judged based on the size of their expected returns (here, social benefit), not how fast the new market can turn a profit.

  3. Ross

    09.19.2011

    @Rich If only history were so simple.

    Dig a bit deeper, and you’ll see that those early settlers were settling on … subsidized land. This is how earlier American governments convinced people to move west, by offering them free land — effectively privatizing what had been Federal land. And the land was offered below cost, namely the government cost to survey and plat the land, establish and maintain the title registry, “defend” the settlers from the earlier inhabitants, etc.

    This is not meant to downplay the risks that the early settlers faced. Like the ’49ers (who also raced to claim free land), or inventors today (who race to claim government-subsidized patent rights) they invested enormous amounts of time and energy. Like today’s solar pioneers, they had plenty of skin in the game. Because government policy wisely required them to earn that subsidy, thus kick-starting private investment and development.

    The current “private markets can do everything” mind-frame is a recent phenomenon, coincident with rampant capital markets. Unfortunately, private capital is limited to financing investments whose benefits are most-easily internalized as private profit (eg, not the benefit of westward expansion, developing disruptive energy technologies, building new industries to compete with China, etc).