Feb
20
By Paolo von Schirach
February 20, 2012
WASHINGTON – According to a piece in Caixin, a Chinese publication, by Mark Clifford, Executive Director of the Hong Kong-based Asia Business Council, Shi Zhengrong, CEO of China’s Suntech Power and the world largest producer of solar panels stated during the latest Davos gathering that soon enough (by 2015) solar power will be able to compete without subsidies in half the world against conventional fossil fuels. According to Shi, the magic threshold has already been reached in India, Hawaii, Italy and Spain. Other regions will follow.
Cost effective renewable energy?
So, it looks as if we are indeed at a “tipping point” notes Clifford. ”No longer are renewable power sources like solar and wind a luxury of the rich –Clifford writes– They are now starting to compete in the real world without subsidies. Fossil fuels are not going away. But we can at least look forward to a world where our dependence on fossil fuels will decline”.
US has cheap natural gas
Yes, except that here in the United States, while the US government lost money backing unsuccessful solar panel manufacturers like Solyndra, the natural gas revolution has changed energy economics, at least in power generation, beyond recognition. What Mr. Shi stated regarding the ability of solar energy to be price competitive with fossil fuels may be true in most countries. But it is interesting to note that he did not include the US, (except for Hawaii that needs to import all its fuels), in his list of alreday competitive markets.
And there is a reason for that. America has enormous amounts of cheap coal and now it has vast reserves of ultra cheap natural gas that will last more than a century, according to recent projections. (And it should be added that gas, the cleanest of all fossil fuels, carries a much lower environmental cost). In fact, now US gas is so cheap that some major producers like Chesapeake Energy have halted extraction in the hope of seeing prices go up a little bit.
Hard to make a case for renewables in the US
Given US rock bottom natural gas prices that are now less than half what they were in 2007, it is hard to make a broad economic case in America for solar energy or any other renewable energy source. Sure enough, as Secretary of Energy Chu and others have argued, at some point it will make sense to be heavily involved in solar energy. And it would be problematic at point to start from zero and compete with the likes of China that may have already taken over all the major markets.
How do we stay in this industry?
Clearly, beyond the US market, there is an entire world market out there that will benefit from renewable energy solutions. The fact that these technologies are not quite competitive at this time in the US market does not disqualify them for ever, as a matter of course.
So, while America’s immediate and even long term energy needs can be fulfilled by cheap traditional fossil fuels, it is obvious that America cannot stand by as the world develops new generations of potentially disruptive renewable energy technologies.
…Without a viable domestic market?
And, so, what do we do? Do we do nothing? Or do we claim a seat at the table by subsidizing industries that cannot compete without subsidies in the US, but may provide a foothold in world markets, even at the risk of getting more Solyndra-like lemons? Do we aggressively push R& D in renewable energy but hold on deployments? Do we go for something other than solar? Who knows really.
American ingenuity and inclination to innovate is normally field tested in the enormous US domestic market, always eager to experiment with and adopt new technologies. But here we have a situation in which the market for renewables is no longer ideal in America. Sure enough, if there are technological breakthroughs and solar becomes ultra cheap, that is cheaper or as cheap as natural gas, then let the different sectors compete. But this may be a while. In the meantime, chances are that China will have managed to corner the entire world market.
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