“Why are solar companies going out of business as the industry grows? The explanation is fairly simple, and it may continue to happen over and over again.”
The headlines above are from a recent article on Motley Fool. It s a familiar headline given the recent solar industry turmoil and the election falsehoods reported in the media. But the thesis like this one that the industry is in some self inflicted death spiral is just plain wrong.
The actual answer IS simple and straight forward:
- Solar energy and other renewables are competing with highly subsidized fossil fuel energy This is not new news. During its remarkable accent, the solar industry has been driven to meet a subsidized utility cost basis (kWh cost) that then ripples negatively across the entire solar industry supply chain.
- Fossil fuel subsidies run between 10x to 20x more than the amount renewable energy receives depending on sector and timeframe. Numerous articles on the specifics of the subsidy imbalance can be found here and in an older post on this blog.
- Of course the fossil fuel industry doesn’t pay for negative externalities – its been using ground level air and earth’s atmosphere as a garbage dump for particulate and GHG emissions. This represents an enormous economic burden to society via healthcare, environmental damage, climate change and general quality of life which is paid for in non-energy cost sectors. In other words, we are certainly paying for it, just not on the energy bill.
- And while the solar industry has done a great job of reaching near grid parity in certain markets despite this subsidy imbalance, a number of studies have shown that if you level the subsidy playing field – WITHOUT factoring in negative externalities, solar can be the same or lower kWh cost depending on locale.
- While a barrier to new, large balance sheet entrants, current efforts from Elon Must/Lyndon Rive and their SolarCity, as we ll as Sunpower, First Solar and many others to go large scale to solve immediate pressing global climate change problems, the fossil fuel subsidy largesse limits the success of these efforts.
- The enormity of the subsidy imbalance problem is global in nature and is well understood to be holding back a rapid transition to clean energy generation.
I always find it amusing when I hear free market fundamentalists opine on the renewable energy industry when they state that they would never invest in a sector that relies on subsidies to exist. The entire energy industry is not a pure market and has always been highly subsidized and regulated.
So, how much longer will societies around the world take to regulate a level playing field so the all important energy sector can meet the Paris climate accords targets?