Solar power much cheaper than other sources, at least if not all costs are counted

The assumed now self sufficient solar energy kept on intriguing me. To recapitulate, last Friday I heard the news that solar panels became so cheap and so efficient that subsidies were not needed anymore. In the media basically the same thing was repeated without any criticism. It looked like a triumph for solar energy that suddenly became mature enough to stand on its own feet and cheaper than other sources. It looked like a good-news-story to me and the media fell for it.

To me it didn’t make much sense. The initial warning light was that the solar panel sector was pleased with the decision to no longer subsidizing it anymore. It surprised me because in the past they were frantically fighting lowering subsidies. The answer of the sector was that it is good that there is “clarity” now. Indeed, in the last years nobody knew if the green certificates (a payment according to produced electricity paid by the net manager) would still last and how high it would be. In that sense, those who wanted to invest had no certainty how high the return of their investment would be and that certainly withheld investors to buy solar panels.

But is this any better now than before for an investor? As far as I know it was always said people could gain money from it, whatever the subsidy was at the time. It was only a matter of how high the subsidy was to get a rate of 5% profit (this rate was communicated by the Minister on several occasions). But a few years ago there was an oversubsidising and many individuals and companies gained (loads of) money from it. The subsidies were very lucrative during several years. Some green companies even installed solar panels for free and let the owners have the advantage of the low price (when the panels produced electricity, the meter spins backwards). The only thing they wanted were the green certificates. So probably there was much more to gain than that 5%. The green certificates were granted for fifteen year, so those contracts are still in effect and we will have to pay for them for the next ten/fifteen years.

In 2012 the green certificates for solar energy amounted to €626,000 per year and growing, this for an energy source that is insignificant in our current energy mix. Sure, it is a nice thing there is not subsidized anymore, but the good-news-show distracts from the high costs still waiting for us in the next decade (and a half) and other subsidies are still in effect.

This is an example how the news was brought (translated from Dutch):

[…]

“Those who have solar panels pay 80 euro less for one megawatt hour of green electricity than for traditional power” says Alex Polfliet, the chairman of PV-Vlaanderen, the sector federation of solar panel suppliers.. A study of the Flemish Energy Agency confirms that solar panels also yield a lot of money without subsidies. They are now cheaper and more efficient than before.

[…]

The end of subsidies seems to be the deathblow for the sector, though there is some good news: since January 1, 2014, all new homes need to be more energy friendly. And according to Polfliet solar panels remain the best choice to generate renewable energy.

[…]

Sounds impressive, it lets us think that solar power is much cheaper than traditional power. The big question is of course how this 80 euro is calculated. I have seen many calculations of performance of solar panels and they come to rather different results in savings or payback time.

Yet, the fact that the money of the purchase/installation of the panels can be recuperated by an individual is only part of the story. As confirmed by Agoria (association of the technology industry), there is a hidden costs of solar energy when used in a power grid in which electricity needs to be available all time. Storing electricity is very tricky and therefor very expensive. People who live off grid proof it is possible, but it means saving as much energy as possible, sometimes renewing appliances, have batteries or a backup generator,… Which is not accounted for in these calculations of those individuals nor in our national power grid. Agoria rightfully called this an hidden subsidy, because the panel owner don’t need to invest in storage or don’t need to adjust their demand, so in fact they use the net as free storage or a free to use battery.

This is not hard to understand. Electricity by solar is produced when the conditions are right, not necessarily when electricity is needed. This seems a small detail, but it isn’t. It means that something else have to take over when there is none/not enough, meaning a backup plant spinning in the background or having the ability to store enough energy for the time it is needed. The cost for building and maintaining of this backup system is not accounted for. Individuals that have panels don’t have this backup capacity themselves and therefor put the produced electricity on the grid, whether it is needed or not. The responsibility for it is now in the hands of the netmanager, who will have to take measures to balance the load. The netmanager will invoice this costs to the consumers (which the panel owner is also part of) or when government is funding it will be the taxpayers (which the panel owner is probably also part of) will pay the bill.

Becoming curious about the study of the Flemish Energy Agency (VEA) I downloaded their final report for projects with a start date from January 1, 2014. But to my surpise I found that the unprofitable top (the amount of euro needed per MWh so the investment over the life of the project achieves the required rate of return) was 26.0 euro per MWh (1 certificate per 3.731 MWh). Meaning they still need subsidies to be profitable. So I am a bit puzzled about this statement. Maybe I don’t have the right report? Or maybe the report referred to in the article is not yet published?

Finally, that “best choice to generate renewable energy” depends on how you look at it. As seen above it depends on whether you look at it through the eyes of the panel owner (will benefit if no indirect costs are taken into account) or as the country as a whole (meaning higher energy prices and taxes). But I agree that the solar panel owners will loose less than non panel owners. But that would not be the smartest way to put it of course.

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