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Solar Study: 'The Costs Far Outweigh the Benefits'

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csem1.jpgWhile the New York Times discovers solar in Silicon Valley, new solar research from just across the Bay at UC Berkeley finds that solar panels are currently just too expensive to be beneficial. That adds a cloud to the sky of California’s growing solar industry.

UC Berkeley Haas School professor and director of the UC Energy Institute, Severin Borenstein, says that people who install solar panels today are “throwing money away” because the current technology “is a loser.” His research concludes that the cost of a solar PV system today is three to four times greater than the benefits of the electricity it will produce, and instead of subsidizing residential solar installations in the state, we should be funding more R&D.

It’s a valid point to advocate for an emphasis on R&D, but the price of solar is also dropping as installers developing low-cost ways to put panels on rooftops, an industry being driven by the demand of early adopters. It’s not an either/or scenario — we need both R&D and adoption to bring the price down.

Borenstein argues that we need a breakthrough in solar technology to bring the costs down. And we agree that everyone is waiting for technologies like thin-film solar from Valley companies like Nanosolar and Miasole to offer major cost reductions. But the companies installing and funding installations of PV systems today will be the same ones that will be installing and funding the next-generation of solar technology, whenever that finally arrives.

The president of Borrego Solar, Mike Hall, makes a good point when he tells us that:

“Right now, about half the cost of solar is on the technology research and development side, and the other half is in the integration work and construction of solar power systems. So while money should go into making technology more efficient, it cannot all be put towards R&D because we need to put money into the development of the systems themselves.”

Other solar makers, like SunPower, were a little more terse in their reactions to the study. Julie Blunden, VP of public policy and communications for SunPower, said:

“Severin Borenstein’s recent paper on solar policy is predicated on a host of faulty assumptions that are simply out of touch with the success of solar market development in California and around the world.”

We think the study’s major fault is that it doesn’t seem to take into account the way adoption of technology in general works. Early adopters pay a premium for a technology in its early stage of life to have access to that technology at the cutting edge. In solar’s case it’s a green luxury item that people are willing to pay more for to feel good about their choice.

Yes, solar panels are not cost-effective enough for mainstream homeowners, but saying early adopters are “throwing money away” is more than just harsh, it’s uninformed. Like an Economist correspondent recently wrote: “Solar power still makes little sense for the average homeowner, even in sunny southern California.”

And it’s the early adopters who are willing to pay more for solar now that are driving demand and helping bring down the costs of solar. We agree with the study that we wish the costs would come down faster and sooner, and we are eagerly waiting technological breakthroughs. But the market mechanisms need demand and scale of adoption as well as technology to deliver a lower cost.

7 Responses to “Solar Study: 'The Costs Far Outweigh the Benefits'”

  1. Green energy is definitely the best solution in most cases. Technology like solar energy, wind power, fuel cells, zaps electric vehicles, EV hybrids, etc have come so far recently. Green energy even costs way less than oil and gas in many cases.

  2. If states or the federal government would require utilities to pay for the energy sent back to the grid, it would be possible to further offset the cost of solar and make the ROI much more pronounced. I bet we’ll see a variety of changes in technology, deployment and public policy that improve all renewable ROI in the next several years.

  3. OK, so Berkeley is joining the ranks of The Economist and Goldman Sachs, which all now have calcualted and pointed out that Solar PV is not cost competitve and will not be for a long while.

    GS put out research in 2006 which pointed out that Solar PV is 5x as expensive as Wind, Geothermal, Hydro power. It is 3x more expensive than Biomass and of course wind, geothermal and hydro are NOW cost competitive with coal, nuclear and gas/oil.

    I guess I would like to be in that crowd of people rather than the self interested solar hypers.

    GS also pointed out that solar PV may become cost competitive in 2012-2020… But will we still have polar bears then ?