A Sign of Sanity in Solar Manufacturing

I've been writing for some time about the chronic overcapacity in global solar manufacturing and the consolidation this is likely to produce.  Now here's a sign that at least one company realizes how bad the situation is.  GE is apparently delaying the construction of its previously announced Aurora, Colorado, thin-film solar panel factory, and "taking this opportunity to re-look at our solar strategy."  I couldn't find a GE press release to back this up, but it's been reported by RECharge and confirmed by Forbes.  It's easy to read too much into a single event, but I think this looks significant, particularly in the wake of Monday's Chapter 7 bankruptcy filing by Abound Solar, incidentally another recipient of a sizable federal renewable energy loan guarantee.

If this information is correct, GE is backing away--for at least 18 months--from building a 400 MW thin-film photovoltaic (PV) solar line in Colorado.  That suggests that they have concluded that even a brand new facility using the latest technology and large enough to compete on scale with thin-film leader First Solar wouldn't be able to earn an attractive margin in this market.  And as a global competitor, GE would presumably regard the new US tariffs on China-based PV manufacturers as insufficient to resolve global PV overcapacity that appears to be stuck at about the same magnitude as demand, despite the continued rapid growth of the latter.

In the last year I've seen numerous articles and blog posts attributing the recent PV price declines to the predicted scale-related effects that have long anchored the industry's central narrative: If we build and deploy enough PV, the cost will fall to the point at which it will be competitive with conventional electricity generation.  That may still be true in the long run, but few of these advocates seem to have understood that the industry was getting ahead of its own narrative--that a big slice of the recent price declines was the result of intense competition among producers who over-expanded and whose margins have contracted sharply or turned negative in the process.  That's a good reason for GE to hit the pause button and focus on improving its technology in the lab, rather than the fab, while other, less well-capitalized firms struggle to survive long enough to participate in the expected growth surge when solar reaches "grid parity" on a sustainable basis.

PV is an important energy technology with a bright future, but its present doesn't look so great.  It's not unusual for manufacturing industries to experience boom-bust cycles, though in my experience those are more common in commodities like chemicals and fuels.  However, it is distinctly unusual for governments to contribute so much to the inflation of the boom part of the cycle through a wide array of incentives, loan guarantees and loans to manufacturers and with subsidies--in some cases extravagantly generous ones--to the industry's customers.  Such interference may have been necessary to jump-start PV supply and demand, but it will almost certainly make for a harder and messier landing for companies, investors and employees, and in cases like that of Abound Solar for taxpayers.  

Marrying Gas and Renewables

A Turkish developer recently announced that it would build a new power plant using technology from GE that matches wind and solar generation to the output of a highly responsive natural gas turbine, all integrated in one package with the hardware and software to mesh its output with the grid. GE is apparently calling this scheme IRCC, for "integrated renewables combined cycle", adding yet another acronym to our growing list of energy choices. This development looks interesting from a technical perspective, but also for what it suggests about GE's view of the future market for generating equipment and power delivery.

The International Energy Agency's "Golden Age of Natural Gas" scenario remains a question mark, rather than a certainty, but if gas is to serve as the key fuel for bridging between our high-emission present and the low-emission future, then we're likely to see more installations like the one in Turkey emphasizing the synergies between gas and renewables, rather than the tough competition gas is giving renewables in some markets. The IRCC--not to be confused with an IGCC or the IPCC--is interesting because it goes well beyond the idea of using gas-fired power plants to back up the naturally variable output of wind farms and utility-scale solar arrays.

The IRCC concept is built around a new combined cycle gas turbine, the Flex-Efficiency 50, with an impressive capability to ramp up and down, as needed, with minimal loss of either efficiency or emissions performance. And thanks to the energy technology portfolio the company has built up over the last decade, GE is able to offer one-stop shopping with GE wind turbines and a solar thermal generating module from eSolar, in which GE has recently invested. The gas turbine/solar thermal hybridization looks especially useful in maximizing plant efficiency and incorporating solar thermal power into the grid at the lowest possible cost, by avoiding the expense of an extra steam turbine and generator. If all this works as advertised, the grid operator shouldn't know or care whether the power being dispatched was generated using wind, sun, or gas.

Before you confuse this posting for a GE ad, I should note that at least in the configuration chosen for the Turkish site most of the power from this integrated plant would still be generated by the gas turbine, which has 10 times the peak output of the concentrated solar power module and more than 20 times the rated power of the small wind farm tied into it. By the time you account for the capability of the gas turbine to run 24/7 when necessary, compared to typical capacity factors of 25-40% for wind and up to 25% for solar, the proportion of the IRCC's annual megawatt-hours generated from gas could exceed 95%. Nor is GE the only firm bringing turbines like this to market. So it's an impressive step, though more of an incremental than revolutionary one. However, with its inherent flexibility, I wouldn't be surprised if this type of gas turbine could effectively integrate a much larger quantity of renewable generation on the grid outside the IRCC's fence, particularly after the operating experience of the first few installations has been absorbed.

GE's timing in introducing its IRCC concept could prove especially apt. Not only does the Flex-Efficiency turbine look useful for helping to meet California's aggressive new 33% renewable electricity target, but the 50-cycle version featured in GE's marketing materials--likely minus the solar thermal module--could be just what Germany needs, now that its government has begun to come to grips with the quantity of new fossil generation that's going to be required to make up for the post-Fukushima accelerated retirement of its nuclear power plants.

Conference Highlights

I spent the last three days at the annual energy investment conference held by the sponsor of this blog, John S. Herold, Inc. Many of the panels I attended were overshadowed by the enormous uncertainty about the US financial system and pending bailout proposals, along with the Presidential election, the dynamics of which appear to have shifted again. However, the sessions provided some very interesting insights into an important unfolding natural resource play, along with showcasing some nifty applications of existing technology that could help to narrow the gap between growing global energy demand and the stagnating supply of conventional oil.

The two words that I heard most frequently this week were “shale gas”, the development of which just might facilitate achieving some of Mr. Pickens’s ideas about energy security. This is not the kind of shale that has been touted as a nearly unlimited source of unconventional oil, but rather a layer of natural gas-bearing rock that until recently was very difficult to tap. But as several panelists explained, companies have “cracked the code” for drilling into these deposits and producing flows that compete favorably with conventional gas fields in both output and cost. The result could be a modest gas bubble—a period of relatively abundant US natural gas supplies—though it comes with an inherent price floor not far below current levels. So while it is unlikely to rejuvenate struggling gas-based industries such as fertilizer production, for which $7/MMBTU is still quite dear, it could support expanded natural gas use in both transportation and power generation, where it could yield significant environmental and cost benefits.

One of the two technologies that impressed me was featured on the Alternative Energy panel I moderated. One of the founders of DKRW Advanced Fuels described a clever application of off-the-shelf technology that turns Wyoming coal into unleaded gasoline without releasing the vast quantities of CO2 that have made coal liquefaction look unpalatable. This trick is accomplished by marrying GE’s gasification technology (the old Texaco Coal Gasification Process on which I worked briefly as a young engineer) with ExxonMobil’s methanol-to-gasoline process that operated for 10 years in New Zealand, until the natural gas field feeding it was depleted. The output is 87 Octane unleaded gasoline and a pure CO2 stream that will supply the region’s extensive enhanced oil recovery projects, which will effectively sequester it. This scheme creates a double energy benefit: mainstream liquid fuel from America’s most abundant energy resource, and increased output at some of our aging oil fields. Even better, it looks like this can be accomplished with lifecycle greenhouse gas emissions no worse than from conventional oil.

The other technology that caught my attention was presented by an old friend and former Texaco colleague, who is now the CEO of Compact GTL. Instead of using proven gas-to-liquids technology to unlock “stranded” natural gas reserves—non-associated gas deposits far from infrastructure or markets—he aims to apply it to the problem of “distressed gas.” He defines that as natural gas produced in conjunction with oil in projects for which the cost and logistics of traditional methods for handling the gas have become an obstacle to developing the oil field. Previously, such gas would be flared, but that practice is being phased out on environmental grounds. Turning it into synthetic oil could prove cheaper than re-injecting it into the ground, while also shortening the development cycle of some large oil fields. Another double win, if it proves practical.

With the country still debating the merits of expanded oil drilling and looking to renewable energy sources that have not yet achieved the scale necessary to wean us off imported oil and slash our greenhouse gas emissions, the approaches described above can provide a valuable bridge. They could also be real money-spinners, at a time when other parts of the economy are looking pretty sick.