Thursday, March 24, 2011

Renewable Energy: Horses for Courses

It has become nearly impossible to keep track of all the major wind and solar projects underway at any point in time. Considering that I can recall when a month's worth of project announcements could be counted on the fingers of one hand, that's a sign of the tremendous progress in renewable energy over the last decade. Today, the projects that I notice tend to involve either novel technologies, or companies or locations in which I'm interested, such as the new rooftop solar thermal installation on the convention center of St. Paul, Minnesota, not far from where my in-laws live. I probably wouldn't have even paid attention to this one, if the eye-popping price tag hadn't included a cool million in federal stimulus funding. As I read on, it quickly became clear from the figures included in the news story that it requires more imagination than I possess to view this project as a good investment for taxpayers.

In putting the project's $2 million cost into perspective it's important to understand the distinction between solar thermal collectors and solar photovoltaic panels (PV). The former capture and transfer heat, while the latter turn sunlight into electricity, which is much more valuable. A 1 Megawatt (MW) PV installation would cost quite a lot more than $2 million, but that doesn't make this installation's price a bargain. Assessing that depends on the annual energy savings and resulting avoided fuel purchases. From the project description and the emissions reductions cited in the article it was possible to work out the expected annual energy savings involved, which appeared to have been something of a mystery to the facility spokesperson quoted. A MW of solar thermal equates to 3.4 million BTUs per hour, although the River Centre's rooftop clearly wouldn't generate that on a 24/7 basis even in a much sunnier location than the Twin Cities. However, the 900,000 pounds a year of avoided CO2 are unambiguous. At 117 lb. CO2 per million BTUs of pipeline gas, that equates to saving 7.7 billion BTUs of gas a year. And at last year's average commercial natural gas price for the state, that works out to an annual avoided cost of $58,000.

When I convert that stream of future energy savings into its net present value over 25 years, even with fairly generous assumptions on the cost of capital and future natural gas inflation, it is worth about what the convention center alone paid for it, or around $1 million, ignoring the impact of the two years it apparently took to build it. So in the parlance of corporate project evaluation, the federal officials who approved the RiverCentre's solar roof for that stimulus grant destroyed about a million dollars of taxpayer value when they decided to fund a solar thermal project in such a northern location with relatively low annual peak-sun hours. What were they thinking?

Well, the DOE official present at the facility's unveiling offered a clue by means of a hockey quote--always a good call in Minnesota. "We want to be where the puck is going to be, not where it is now." I would translate that as their funding of this project constituting an investment in bringing down the cost of future solar installations. Unfortunately, that would be much more credible if the installation in question involved leading-edge thin film or multi-junction concentrating PV technology, for which performance and cost have been improving steadily, if not quite in Moore's Law fashion. But this is solar hot water. The thermodynamics and heat-transfer considerations for such an application haven't changed since I was in engineering school, even if the packaging has improved. There's only so much heat to be captured and transferred, especially in a place with an average January temperature of 22°F.

When I'm critical of projects such as this one, it's not out of a sense that all renewable energy is impractical or ineffective. Renewables are earning a place in our energy mix, and they will become even more important in the years ahead. However, because they depend on harnessing diffuse energy sources in real time, rather than disgorging geologically stored energy in the manner of fossil fuels, it matters greatly where we put them. That's why I've been relentless in my criticism of Germany's overly-generous feed-in tariffs, and I see rooftop solar thermal in St. Paul in much the same light. Installing renewable energy devices in locations with poor resources, particularly using taxpayer money--or in this case money borrowed on the taxpayers' behalf--reinforces all the worst stereotypes about renewable energy as a boondoggle. The British have an expression that seems apt here, "horses for courses": run the right horse for each racecourse. If someone wants to bet their own money on rooftop solar in Minnesota, they do so with my blessing. But where my tax money is involved--and perhaps I'm especially sensitive about that this time of the year--I insist that it be done someplace that affords the technology a decent chance of earning an economic return, rather than just feel-good, PR value.

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