Reasons to be cheerful, Part 2

There are plenty of reasons to be gloomy about the prospects of stabilising the global climate, but there are also some promising developments, so I’ve started a series on this topic.

I’ve been meaning to write this post for a while, but Stephen Lacey at Grist (via David Spratt on Twitter) has done much of the job for me, and better than I could have. The crucial point is that the cost of solar photovoltaic electricity has fallen dramatically and is almost certain to fall further. In particular reaching the point where it is the cheapest large-scale alternative to carbon-fuelled electricity generation, and competitive (at reasonable carbon prices and in favorable locations) with new coal-fired power.

This makes for some fundamental changes in the debate over climate change and mitigation, even as it reaffirms the central point that advocates of mitigation have made all along, namely that, with an appropriate policy response, the costs of drastic reductions in carbon emissions will be modest in relation to national or global income.

Until very recently, solar PV was just a promise, with a share in total electricity generation so small as to be negligible. As Lacey observes that changed in 2010, with 17GW of peak capacity installed. Allowing for availability, that corresponds to something like 4GW of coal or nuclear (standard plants are typically about 1GW). But that’s overly conservative because solar output is such a good match for peak daily demand.

The growth in solar PV has been driven by subsidy schemes like those in Australia. As in Australia, the decline in costs has produced massively more demand than expected, leading to succesive rounds of cuts. But while individual markets have bounced around, the market as a whole has grown massively, even as subsidies have been scaled back. At least so far, that’s true for Australia as well. As I said in the Fin a while back, this is one of the rare instances of an ‘infant industry’ outgrowing the need for subsidies.

Capacity for annual output of new solar modules is now approaching 50GW (peak), at which point solar PV would be one of the main sources of new generating capacity, comparable to wind and gas.

There is no obvious constraint on further growth. Until about 2005, the solar industry depended on offcuts from the semiconductor industry for silicon (the blip marked ‘silicon shortage’ on the graph represents the point where demand outgrew that source). And much of the ‘balance of system’ (installation, inverters and so on) still represents adaptations of devices developed for other industries, with the associated problems of supplies and inventories. But with recent growth, the whole supply chain will be optimised for solar.

At some point the share of solar PV will be large enough (say 30 per cent) that it will change the balance of supply and demand, ending the present situation where the excess supply of night-time power from coal must be sold at a discount. That will entail both changes in pricing structures, most obviously a premium for power supplied in the early evening or for storage technologies. But starting from a zero base, that’s quite a way off. For the moment, the main issue is cost

If the cost of solar PV continues to decline at rates similar to those we have seen in recent years, the whole debate over climate mitigation will be changed. Plausibly, a CO2 price of $50/tonne will be enough to drive a fairly rapid decarbonisation of the whole electricity sector. That means a smaller increase in prices than would otherwise have been expected, and therefore less of a role for adjustments in final demand.

Coming back to the claim of vindication made above, the sensible case for the claim that mitigation could be achieved at low cost was not to identify some particular technology as the anointed savior, but to argue that, with a carbon price (through a carbon tax, emissions trading scheme, or, less desirably, ad hoc measures that produce an effective price) and supporting policy instruments, some combination of options (renewables including solar, wind and geothermal, nuclear, CCS, energy efficiency, changes in demand patterns) would produce substantial reductions in emissions at relatively low-cost. At this stage, it looks as if solar PV and energy efficiency are the most promising candidates, along with wind, while most of the others look less hopeful than they did a few years ago. While this particular outcome could not have been predicted with any reliability, the general pattern could be predicted and was.

Earlier in this series Reasons to be cheerful (Part 1): Peak gasoline