#23. Power to the people?

What with so many other things happening, you might well have missed an important report* confirming that solar panels can now produce electricity more cheaply than coal, gas or nuclear. Though the limitations of this breakthrough need to be noted – hence my stress on ‘electricity’ rather than ‘energy’ more generally – this has implications that go far beyond the obvious matters of price and the environment.

One of these implications, and one that we’ll be hearing quite a lot about in the future, is “utility death syndrome”. In essence, the huge progress made in improving the efficiency of solar may render the current “utility model” obsolete. In brief, the “utility model” is the system whereby power is generated by small numbers of large plants and then transported long distances to the customer. This model has prevailed hitherto because, although long-distance transport is both wasteful and costly, siting small power stations all over the country would be costlier still. In other words, large plants provide economies of scale which are greater than the costs of long-distance distribution.

Solar, though, is likely to work very differently. The benefits of having one large solar plant instead of lots of small ones are negligible, and are certainly not enough to counter long-range transport costs. In the future, the most cost-effective way of delivering power might be to dispense with concentration in favour of a myriad of small and medium-sized solar farms serving cities, towns, villages and even individual homes and business premises.

A number of thoughts are likely to have occurred to you, not least that you need power when the sun isn’t shining. Though this is true, there are solutions to peak management which need not require connection to the grid. Battery efficiencies continue to improve, and small supplementary power stations (running on gas or coal) might be feasible, but I suspect that the best solution could well lie in generating heat from waste. This is a technology that we’re going to need anyway (as the supply of low-cost, high-EROEI conventional fuels continues to dwindle), and it could easily be used for ‘peak-shaving’ infill at times when solar is offline.

Please remember that our industrial economy requires high levels of utilisation. Trains and aeroplanes lose money unless they are nearly full, factories are uneconomic if they sit idle for much of the time, and private roads and bridges only work financially if they are pretty fully utilised. So, if large numbers of customers disconnect from the grid, the remaining customer base may simply be too small to service the capital costs of the utility system.

My approximate estimate is that, if as little as five per cent of customers went ex-grid, the utilities would cease either to make profits or to pay tax. At a defection rate of ten per cent, cash flow could fail to cover depreciation or the cost of dividends and debt interest.

Of course, the prices charged to remaining customers could (and no doubt would) be increased, but this would simply accelerate the rate of customer defection.

This, in essence, is what “utility death syndrome” means, and it worries not just utilities themselves but governments as well. Who, for instance, would collect the taxes currently garnered by the utilities?

The fact that governments are conflicted over this helps explain the regulatory and investment uncertainties that have contributed to a sharp fall in global renewables investment. This investment fell to US$214bn in 2013, from US$250bn in 2012 and US$279bn in 2011. Experts have identified the US, Britain, France, Germany, Spain, Sweden, Romania, Poland and India amongst countries where policy uncertainty has been an issue. To be sure, escalating solar efficiencies have contributed to the decline in investment (because you can now install more capacity whilst spending less), but the divergence between what the customer wants (cheaper, cleaner and more sustainable power), and what governments and utilities want, has played a much bigger role in the 23% slump in investment in renewables.

Ultimately, the continuing decline in conventional fuels’ EROEIs (energy returns on energy invested) will swing the balance in favour of localised solar, because the flip-side of a declining EROEI is a rising ECOE (energy cost of energy), and my analysis suggests that these ECOE costs are already on a sharply rising trajectory.

The next big twist in the story is likely to be the realisation that shale gas is not the “magic bullet” solution to energy constraint that its starry-eyed supporters continue to believe. Even in shale “sweet spots”, production declines at an alarming rate, and the surge in investment – a surge so large that it has brought US gas prices down sharply –already seems to be tailing off, not least because the oil majors are walking away from shale. When shale output peaks (probably in 2017 or 2018) and then enters a precipitate decline, the economic case for solar will become unanswerable.

To those of us who understand the implications of EROEI trends, of course, the pro-solar case is already wholly convincing.

Solar alone will not answer the problems posed by falling EROEIs and escalating ECOEs, problems which are already crimping economic growth and raising frightening questions about a global economy mired in debt. Solar makes pretty big acreage demands, and electricity cannot, in any case, supplant fossil fuels in activities such as mining, agriculture or steel-making. Neither can solar preserve our car-based societies, because electric cars are enormously energy-wasteful (whereas the case for electric public transport is a strong one), whilst our enormous thirst for plastics will continue to depend on hydrocarbon feedstocks.

This said, progress in solar is highly encouraging, and governments need to think through the implications of a future supply system that is likely to be far more localised than the monolithic model which still, for the moment, prevails.


*From US brokers Sanford Bernstein


18 thoughts on “#23. Power to the people?

    • Well, complicity is pretty general, so I know what you mean! Ukraine surrendered its nuclear weapons in return for a Western security guarantee, and if that proves worthless for Ukraine we’ll be hard-pressed to convince Iran………..

      But I still think “Vlad the Invader” is mostly at fault.

    • Thanks John.

      On Russia, I’m clear on my views about this, i.e. that this is crude nationalism c. 1900, but I don’t want to dwell on this as the subject is meant to be energy, not Russia (in fact I might delete that line).

      By abiotic, can I assume you mean growing kerogen (the petroleum precursor) in tanks?

      As someone who has actually stood on top of a small nuke (when I was in a nuclear sub), I know they’re feasible, but I question both viability and public response. Every study I’ve seen shows nukes as expensive, with low EROEIs.

    • On Russia, what I’m reading is that Putin is manfully resisting the provocation to invade being provided by the Nazi Putsch Regime installed in Kiev by the Mad American Empire’s Victoria Nuland

      A referendum our bent politicians would kill for, to rejoin Russia, is dismissed by our US puppet politicians as somehow illegal, while the $5billion subsidised usurpers of the previously democratically elected, though admittedly bent Ukraine Govt are the NAZI heirs, The Right Sector, who are sending in snipers & death squads to stir up unrest & provoke Putin in the Russian speaking Russian territory ( Till the 1950s Kruschev gift).

      On abiotic oil, I rather meant the mooted concept that oil is a naturally occurring substance, produced under heat & pressure under the Earth’s surface, rather like that other form of carbon, diamonds, & not at all solely a product of long buried trees etc, which is what we’ve been sold up to now.

      Regards & thanks for the interesting articles.
      John D.

    • Thanks, just taken a look, interesting stuff.

      My work centres on my belief that the economy isn’t fundamentally a monetary system at all, but an energy dynamic with a complementary (but now out-of-kilter) money economy grafted on in parallel. If you look through my earlier post you’ll find a downloadable guide to Surplus Energy Economics.

    • Surprisingly good. The theory of the economy as an energy system is something I’ve been developing and publishing for quite a long time, and I’ve had good responses across the board. Encouragingly, too, critics tend to argue only from the basis that “the human spirit” or some such will pull us through. I recommend you read the brief guide (downloadable at an earlier post on this site).

  1. John

    I’ll pass on Russia (though my late father actually knew Kruschev).

    The theory that oil isn’t an entirely fossilised fuel source has been around for a long time, and a well was even drilled in Sweden to try to prove this. I’m not really qualified on this, though the fossil argument does seem to have a lot of evidence supporting it, whereas (so far as I know) no proof has yet been found for abiotic petroleum.

  2. Hi Tim,

    Solar is looking promising, worth keeping an eye on this technology, perovskite solar cells.


    Other interesting ventures are things like http://www.generalfusion.com/

    and the polywell reactor technology, here is a google talk from the inventor, Robert Bussard, that is a bit dry but worth watching.

    Why the government are investing in HS2 and not something like the above is disappointing but hardly surprising. If everyone in government believes that fusion will be fifty years in the future it will become a self fulfilling prophecy.

    • Well, you might know my views on HS2 – I’m opposed to it on grounds of cost and priority. Politicians have very short horizons. Two reports today interested me in this respect. A university report says that the UK will run out of fossil fuels in five years, and five years is also how long Robert Peston thinks Britain’s Net International Investment Position will allow us to go on borrowing from trade creditors, given a shocking balance of payments deficit of 5.6% of GDP.

      I’m no expert on fusion, but I do know that there are doubts about it – perhaps you can put me right? What I’ve heard is that energy out as % energy in has reached barely 70% despite research dating back to 1932 – that building something capable of containing the forces involved may not be possible – and that the ITER pilot plant alone may cost USD 15 billion. Can you enlighten me on this?

    • There are no experts on fusion, otherwise it would have been solved!. The article below points to the fact the energy released from fusion experiments has been following moores law, it also points out that the money invested in fusion research is quite low, its not more than a billion dollars a year in the whole world, given that the UK alone spends a lot more than that on pet food its surprising we have come this far. The UK signed up to the Iraq war costing over a trillion dollars in the name of energy security, not the wisest investment ever. No one knows whether ITER, the Bussard reactor, The National Ignition Facility in the US or the approach taken by General fusion will work but given the potential payoff shouldn’t we be investing a bit more than the pet food budget for a middling sized economy?. I guess while we have a government whose leader tells its party members to think of the headlines on what they do, you will end up with intelligent well educated people impersonating the pub bigot and given that some of those newspapers clearly think the enlightenment is a bad thing, a 15th Century Tavern bigot at that. Its not surprising Tanzania got a 4G network before Britain, I wouldn’t be surprised if they had a fusion reactor first as well.


  3. The curious thing is why solar power needs feed in tariffs if it is grid competitive? The unfortunate thing about solar is that in the UK it has low load factors (10% across the year), it delivers little power at all in winter, little power early morning or late afternoon at other times, and nothing at night. Fifteen per cent of its gross output is thrown away in inverter losses, and due to its common timing it simply pushes highly efficient fossil off the grid, or fights with nuclear for baseload priority.

    In analysing the cost of solar you need to include the cost of meeting demand through the standby or storage. Speaking as somebody who works for a company operating all four, neither batteries, CAES, pumped hydro, or renewable-to-gas technologies are economic when construction costs are allowed for, so you either include these costs in the solar bill (and find out that renewable energy is far more expensive than the snake-oil salesmen make out) or you rely not on “smaller local” plant, but large scale grid connected plant that can produce the 60 GW needed to keep the lights on in Britain on cold winter evenings. But having pushed this regrettably inefficient “localism” agenda in energy, you’ve reduced average grid demand, without reducing grid costs, you need to invest in assets to support the intermittency of solar, and you need to pay far more per unit for your grid-supplied power. There’s also a slight problem with this localism that the government’s low carbon agenda will see a four fold increase in electricity demand by 2050. Close to demand there simply aren’t the sites for PV or wind turbines to deliver that volume of power, and wind (in particular) is a grid dependent technology.

    Solar power is a poor solution in the latitudes of the UK that does little for our energy mix, and costs a lot. A great way for wealthy, bungalow dwelling pensioners to reduce their electricity costs by £200 a year, but that £200 (and the costs of the PV installation, and the standby/backup impacts) get added to everybody else’s bill. Appallingly regressive, but because the costs are incurred through energy bills, the liars and thieves of Westminster can blame the energy industry for problems of fuel poverty and the like.

    As a result of UK energy policy, we now have subsidies for new nuclear, subsidies for solar PV, subsidies for solar thermal, subsidies for wind power, subsidies for tidal and wave power, subsidies for biomass, subsidies for gas CHP. And as from next year, to try and keep thermal plant in the market the capacity mechanism will be offering most retained coal and gas generation subsidies. Now, Tim, as an economist, can you explain to me what sort of market it is where every different form of power generation only operates because of government subsidies?

    • You’re obviously very well informed on this, and thanks for your comments. I’ll try to answer some – that does NOT mean I disagree with you, by the way, but debate benefits from different opinions!

      Comparisons with fossil fuels are all very well, but there seems clear evidence (in EROEI trends) that the energy (and hence financial) cost of oil, gas and coal is on a strong uptrend. To me, the evidence pointing at shale (even in the US) as hype looks ever more convincing, with high gas volumes reflecting the scale of investment attracted by this hype. Well decline rates are scary. I’m sure you know all this.

      So, in making investments, we have to prepare for much higher fossil fuels. UK oil and gas production is declining at 15% annually, which can only worsen a balance of payments deficit which is already unsustainable (5.6% of GDP). So part of the government’s aim is to reduce the sharp upward trend in energy imports. In the future, we may not be able to afford them.

      The problems with solar do include the UK climate and the peak issue. Solar is probably capable of increasing its efficiency by a further 30% or so on top of what’s been achieved so far. Granted, that’s hardly competitive with fossil fuels at their current prices – but what if prices rise, or the UK can’t buy them because our trade position is too bad? Are we confident that the City of London, its reputation tarnished by scandals, is going to go on earning the forex to import energy (and food, etc)?

      My preferred solution to the peak issue is to waste-to-heat conversion as the peak shaver source. Not ideal, to be sure, and, whilst we don’t have the ideal climate for solar, we have enough NIMBYs to delay waste conversion for years.

      I agree that we can’t electrify everything to displace fossil fuels. Electric cars seem ludicrously energy-wasteful, though electric public transport might be better.

      As you may know, my book argues that, globally, growth is probably over, because the energy consumed in accessing energy is rising sharply. The UK has additional problems, including declining energy production; huge debts; and a stubborn balance of payments deficit, sustainable thus far only thanks to the City (which most people seem to dislike).

      Bottom line, I think we’re going to get poorer, and that importing ever more energy, possibly at higher prices, using a currency in which trust may weaken further, might not be feasible.

      I also think our energy policy has been a complacent shambles – the dash for gas, gas exports, selling of Westinghouse, delaying nuclear decision-making for a decade durnig which costs escalated – but at least this government is trying to do something.

      Lastly, for now, feed-in tariffs aren’t ideal – ask the Spanish public about this! – but how else can we promote energy production at home?

      Over to you!

    • “Over to you!”

      Now there’s a challenge! But here’s some thoughts:

      The first thing is to stop (and reverse) coal power plant closures in response to EU directives. We aren’t technologically in a position to achieve the EU goals on CO2, so all but abandoning a cheap fossil fuel with diverse supplies in favour of untrustworthy Russian gas makes no sense. From a home produced perspective then there’s plenty of coal in the UK and under the North Sea that it will be feasible to extract remotely in future years if we still needed it, in the meanwhile there’s a whole range of international producers, and the ability to stockpile (unlike gas, where the supply choices and storage are limited). If new coal plant had attached district heating networks then the efficiency would be quite credible (though see comments below on district heat).

      Fracking is not the answer – at the margin it might help, but the vertical borehole density and highly faulted geology of the UK mean it will be expensive and difficult to scale up. I’ll take that back if there’s far more development of the technique, but as practised in the US I don’t see it giving the UK new found energy security.

      Next, energy efficiency retrofits. Whilst the public at large don’t believe it, the energy companies have done a good job of delivering energy efficiency improvements. The central problem to making this better still has two components – first, too much micro-managing by regulators and policy makers has made the programs proceed in fits and starts (eg 1m easy to treat cavity walls uninsulated because the regulator changed the energy company obligation rules).. And second, we have a major problem of seven million solid wall properties, with solid wall insulation schemes progressing painfully slowly. The actual economics of solid wall insulation are often poor, and a better solution would be rebuild programmes based on the old slum clearance schemes of before, using CPOs and standardised construction or system build techniques. We only need a few Victorian terraces in the hands of the National Trust, the rest should be bulldozed. New build standards are now pretty good – I don’t see much merit in worrying too much about new build, when the existing stock is the problem.

      Waste to energy is OK, but the key problem is that the main output is heat, not electricity (you can do CHP, but this usually involves technically complex and expensive pyrolysis systems, for minimal gain). District heat is constrained by the costs of heat network pipes, at an average of £1,200 per metre. High density heat demand like flats are easy to serve, low density is very difficult (just think about the value of the pipe across the frontage of a typical semi detached house, before you’ve provided the CHP energy centre, heat interchange units etc). If you can co-locate high density housing and a waste from energy plant then you’re almost in business, but people generally don’t like this idea. It’s also an unrecognised problem that current recycling policy pulls out to many hydrocarbons from the waste stream. If you want energy from waste, then the only things you want to pull out are metals (easily recycled) and glass (doesn’t burn and clags up the grates), but at the moment the enthusiasm for “recycling” means councils want to remove food and garden waste, plastics and paper.

      The other thing is to go nuclear. The problem is that (with Hinkley Point) our government have opted for a hugely expensive French designed EPR, rather than seeking to build a less demanding solution that can be built more cheaply. The three fold cost over-runs of the EPR at Oykiluoto can be argued as being first of a kind risk. But when the second EPR at Flammanville is also three times over budget and five years late, don’t people start to see a trend? Even Sizewell B came in at lower cost per MW than Hinkley Point C is expected to, and that was first of a kind, and a single reactor (normally stations have two or three reactors to minimise design, construction and services costs). South Korea is building two new AP1400 reactors of similar scale to Hinkley Point with a budget of about €5bn. You have to wonder how DECC managed to bid EDF up to £16bn?

      In the grand scheme of things it is very difficult to identify how much as been spent in the UK on the Canute-like quest against climate change. My fag packet calculations suggest that we’re talking about the thick end of £20bn on solar and wind alone, with aggregate load factors of around 30% on “plate” capacity of around 13 GW. If we’d hired Doosan to build AP1400s, our £20bn would have bought the same 13 GW of capacity, but with 95% load factor, and fully despatchable (unlike wind or solar). Which do you think would have done more to reduce our dependence on imported fossil fuels, or our emissions? We could still do this, by aborting DECC’s idiotic plans to build out four times as much solar as we currently have by 2020, killing wind subsidies, and stopping civil servants trying to negotiate contracts with anybody for anything. But don’t hold your breath. Of we could cancel HS2, and replace half of our gross national generating capacity with nuclear.

      Your wider argument about energy being the real driver of economics is absolutely valid, but I question whether poorly designed energy policy will bankrupt the UK and EU long before we really need to worry about EROEI.

  4. I was just wondering if the title of your article had anything to do with the famous Lenin’s quote: “Soviet power, plus electrification will equal Socialism”. If not, it is an amusing coincidence

  5. Hi Tim

    Some ideas about how modular micro solar smart grids could come about which I wrote to my good friend Charles Hugh Smith back in 2012. The idea has a nice fit with your take and puts a different spin on it.

    Solar energy and the move toward it is often conceived of in terms of macro, national or institutional projects. That a government, a power company, a business, a school or a private household will be expected to invest a large amount of money in one go and build a solar plant or buy an array of panels and have them installed along with the inverters and necessary safety equipment to channel that new power throughout premises or home and back to the national grid.

    Much of the time this ends up in forms of mal-investment at tax payer expense which is partially why solar has such a poor reputation. These kinds of approach are risky and expensive and also calls on the investor to make the solar investment at a point where then return on their investment makes good economic sense. This leads to a lag in take up as people wait for solar power efficiency to become more cost effective. This effectively means a smaller market and ultimately lower investment back into the technology and hence slower progress in its overall development and deployment.

    Perhaps this is not the correct approach if we want to see solar power adopted and developed? As an alternative, we can set this approach aside for the moment and start to think of different ways that solar power could be deployed and adopted.

    At present there are exciting developments taking place in the world of thin film solar panels and solar coatings. They can generate power from any light source and do not require direct sunlight. Developmental ideas are being drawn from physics, chemistry and biology. For instance from physics and chemistry using nanotechnology involving carbon buckyballs, graphene and other carbon allotropes with polymers and also using ideas from photo-synthesis from biology. New thin film panels are being developed which use sandwiches of layers and each layer harvests energy from different bands of the spectrum. Thin film solar is the future as it is not a size dependent product and is therefore infinitely portable, flexible and extensible and indeed cost effective. In which case we can begin to think about how solar power take-up can be achieved in micro terms instead of as large projects on a macro level.

    Imagine if all the world’s laptop, mobile phone, iPad, iPhone, MP3/4/5 player, iPod docking, amplifier and speaker producing companies (indeed any company that sells products which also include a mains power adapter), provided a portable solar cell that would power the equipment as part of the purchase price. It would just come in the box as a normal power supply would.

    This would be an evolutionary and affordable path to solar energy in that it would be carried out on a piece-meal basis with no real immediate costs or investment risk/decisions for consumers to make. Even if it cost an extra $20 then the consumer would still buy into it as firstly its just plain cool, secondly it will save them money on their domestic bills and thirdly, they’ll be able to power their equipment when camping or traveling.

    It is also an approach that does not rely upon any technological leap of faith in the possibilities of solar power – all the solar panel initially needs to do – is power the product it is supplied with. No-one will argue that solar powered calculators are not efficient as they clearly do power calculators and that’s all there is to it and they’ve been doing that job for over 20 years.

    As more and more household and office electrical products are powered by low voltage supplies, then more and more products are available for a safe solar power source which does not need any inverters or extraneous safety equipment. On the lowest level we can see that solar power is generated not for the house in general but for each electrical item that uses it and each solar power supply is specifically designed to meet the requirements of the item it powers. In much the same way as each power supply that comes with a mobile phone, laptop, tablet etc each has its own unique consumer.

    However one can take this further as we can also apply the logics of a national smart grid at a micro level and introduce the idea of a system based on a modular solar panel schema.

    That is that not only can each individual solar panel power the equipment it comes with, then taken collectively all the panels for all the phones, laptops, printers, etc could also be designed so that they can be integrated into their own mini smart grid with the addition of a controller panel. The home owner could have an aluminium frame mounted on a sun facing wall and add smart panels to it as they bought new electrical equipment.

    In this scenario, intelligent panels would be combined into a mini smart grid with a controller which could receive a power requirement message from consumption units telling the controller what power watts/volts/amps it required and then the controller unit would arrange, configure and route sections of the mini smart grid in whatever combinations of series or parallel was necessary to meet the consuming units precise power requirement. The collectivized mini grid could then service different consumers with varying power requirements simultaneously.

    I would stress here that the great beauty of this approach is that it does not ask any party to commit themselves to a big solar investment at any given time. In this micro modular based scenario – as solar technology develops and the consumer purchases new equipment, then they also receive improved and more efficient smart panels to integrate into their smart grids. The mini smart grid consequently becomes self updating and more efficient over time in a way that bears no real noticeable cost to the consumer.

    One has to believe in solar power simply because if it is only at best 18% efficient at present – then this leaves plenty of room for technological improvement which is something our societies excel at.

    Also of interest at this time as you eventually also need to store power as well as generate it – is dual carbon batteries see below..




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