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Summary:

The article this weekend on the front page of The New York Times, “A Gold Rush of Subsidies in the Search for Clean Energy,” clearly underscores why the U.S. should phase-out all permanent and long-term subsidies for energy.

Chevron, BrightSource solar oil plant, the tower and the mirrors

Chevron, BrightSource solar oil plant, the tower and the mirrors

The article this weekend on the front page of The New York Times, “A Gold Rush of Subsidies in the Search for Clean Energy,” clearly underscores why the U.S. should phase-out all permanent and long-term subsidies for energy. When slow moving utilities start chasing solar and wind you know that we are ready to create a level playing field for all.

The article pointed out that subsidies were intended to “help renewable-energy plants that were jumbo-sized or used innovative technology,” which are “both potential obstacles to getting private financing.” But subsidizing jumbo-sized solar is deeply flawed. This shows the limitations of the government’s knowledge and ability to choose winners – in this case Fortune 500 companies.

My knowledge comes from having founded and successfully launched the largest solar services company, SunEdison.

Solar photovoltaic technology, at its core, is about distributed energy generation; each module is less than 400 Watts.  It is not about building massive arrays to feed the GRID. It is about getting off the GRID. Proven, effective solar PV installations are anti-jumbo.

That is why companies like WalMart, Kohl’s, Staples and others put solar energy on their rooftops.  The energy is at the same price, or lower cost, than retail electricity from the current GRID and gives these companies energy independence: an American ideal.

With the government focus on jumbo-sized plants, we are prone to making jumbo-sized mistakes.

Big energy companies are stepping up and proposing jumbo solar projects that make no economic sense.  Rooftops projects can be built in 90 days as opposed to three years. This saves working capital, planning costs, permits, environmental studies, and more importantly can be developed by hundreds of firms – not just the 1 percent.  Southern California Edison’s latest RFP showed that these smaller projects today are cheaper than new high-efficiency natural gas plants – even with today’s low gas prices.

Understand that a large energy company is like a carpenter with one tool: a hammer. Every problem looks like a nail. They are jumbo-sizing a technology that is most efficiently deployed in small projects that are stand-alone.  In the end, the people who are getting nailed are the ratepayers.

If the government wants to incentivize a move to American energy independence it should focus on three criteria:

  • 1) Helping solar achieve GRID parity within three years
  • 2) Make solar fully scalable for residential to industrial size
  • 3) Show how solar can improve security by becoming GRID independent

Instead of starting with 20th century assumptions of “bigger is better” we need to move to “small is beautiful”.  In short, as the new SMART car commercials assert, thinking “big” is thinking dumb.

I agree with Satya Kumar, an analyst at Credit Suisse who said, “… the industry could have done a lot more solar for a lot less price, in terms of subsidy.”

Lets hope America uses it God-given sunlight to help deploy cost effective renewables within our borders and continue to significantly increase our exports – it is already the fastest growing industry in the USA.  Now that is THINK SMART.

Jigar Shah is the CEO of the Carbon War Room, a nonprofit that harnesses the power of entrepreneurs to implement market-driven solutions to climate change and create a post-carbon economy. By bringing project finance and growth capital together with infrastructure entrepreneurs, corporations, governments and nongovernmental organizations (NGOs), he identifies and eliminates market barriers, driving environmental improvements alongside economic growth.

Shah founded SunEdison in 2003 with a new business model, the solar power services agreement business (SPSA). The SPSA uses mature technologies and required no new legislative action. The SPSA model launched solar services into a multibillion dollar industry. SunEdison now has more solar energy systems and megawatts under management than any other company.

  1. couple of corrections.The PPA model required legislation to change the definition of a utility to exclude PPAs and recent legislation extended California’s property tax exclusion for property owners to include PPAs. Those were big changes to California law. The ROI for the PPA owners is great thanks to California ratepayers and losses to local government revenues.

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  2. This is a poorly written article, that is full of hindsight, with no emphasis on how difficult it is to pass anything that opposes fossil fuels in our congress.

    The three points he makes are the main points the government has been working on. Funding large projects is directly funding economies of scale for renewables (#1).

    Funding large scale projects that are based on PV and not solar thermal, which many projects are switching to, is also directly supporting the upcoming micro-inverter marketplace. Power electronics are one of our best export markets (and growing too), while China can pump out the PV for next to nothing they still need all the other parts that are made in America (#2).

    Every branch of the US military has already confirmed #3 in some way or another, yet you really don’t see this news because of how biased the major media outlets are (this bias goes both ways, right (Fox news) AND left (MSNBC)). Many military bases are aquiring alternative energy vehicles and installing solar for the direct purpose of security.

    The topic of the article is decent, the rest is just bad with little supportive reasoning. I know this writer viciously hates subsidies, but every form of energy has been subsidized in some way since the very beginning. I agree that we should cut subsidies for all energy and see which will win, the answer is obvious to everyone involved, which is why companies are paying so much money to keep things the same in Washington.

    Anyone contending that the government isn’t doing enough and is simply wasting money doesn’t really know what they’re talking about, and if they do they are poor writers with fuddled arguments.

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  3. Felix Hoenikker Sunday, November 13, 2011

    Brightsource who?

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  4. it is reassuring to see someone send this clear message. The most effective solar investment (and wind if someone coud down-scale effectively) is at the point of use. No need to buy more transmission lines. The current subsidy model has this backwards. Let the energy distributors do what they want with their money while distributing this subsidy to point of use projects. It’s kind of like developing countries using only cell phones – no need for phone lines.

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  5. This article has been written in hindsight, without higher prices, these plants would not get built. Without building these plants, Solar would be a forgotten energy like the last three decades. Yest the Federal government is on tap for $40-$60 Billion in Extreme weather events, like what we have seen all year ,and are seeing right now in Texas!

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  6. I’m for Mr. Shah’s advocacy of distributed PV, but his either/or argument versus utility scale solar is wrong. This is because he gets the question that solar is a partial answer to wrong. The true answer, which outside North America all the world knows, is not energy independence but climate change. In the EU, the European Commission, national commissions and NGOs (especially Greenpeace) are wrestling over plans for serious de-carbonization that integrate distributed and centralized low carbon and renewable energy sources. This reality-based work is where the innovation is happening. Germany faced the false dichotomy of local versus centralized a few years ago and decided on both. It is leading both on PV and Desertec.

    The Roadmap conference strives to show people what is really happening, whether it be the cloud, becoming pervasive now, or the Internet of Things, perhaps beginning now (I was at Nest Labs for 17 months). I hope that over the next year people in cleantech and related IT will come to see that phrases like energy security/independence are FUD misdirections, and that the real, enormous question they are helping to tackle is climate change.

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  7. He does gloss over one huge issue here: local and commercial solar get subsidies too. You can argue that it is more economical because it competes against retail prices (attenuated by economies of scale etc) but he seems to trying to pull a sleight of hand here.

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  8. Agreed on rooftop distributed generation… Jigar just conveniently forgets to mention Sun Edison’s substantial portfolio of medium sized multi-MW groundmounts like its 17MW here in western NC.

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  9. And amazingly, Jigar is one of the backers of the proposed gigawatt solar farm in Namibia where even fewer people are on the grid and the argument for decentralization is even higher.

    I agree with both Jigars – let’s have both centralized and decentralized solar!

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