Florida Power & Light (FPL) has built a 25 megawatt photovoltaic power plant in Southern Florida that will supply power to 3000 homes and businesses–a small fraction of the company’s over 4 million customers.[i] And, when the plant comes on-line Tuesday, October 26, 2009, President Obama will travel to Florida in Air Force One to promote the largest US photovoltaic plant and the carbon dioxide emissions it will displace. However, Obama’s flight will result in releasing greenhouse gases, negating some of the more than 19,000 tons the plant is estimated to save each year.[ii] And, President Obama won’t mention the high construction costs of this photovoltaic plant that will be paid for by US taxpayers and electricity consumers in Florida.
He also won’t mention that while the plant employed 400 draftsmen, carpenters, and others during its construction, few full-time employees will be needed during its operation—one engineer to trouble shoot problems and six ground keepers to keep the grass trimmed and animals away.[iii] As such, the ongoing operation of this solar plant will not help the rising Florida unemployment rate.
FPL spent $152 million building the plant[iv], which amounts to $6,080 per kilowatt—a figure substantiated by the Energy Information Administration, who ranks photovoltaic solar the highest cost technology of a potential slate of 20 possible future generating technologies.[v]
While traditional fossil fuel technologies cost substantially less, solar photovoltaic technology is being supported by Federal subsidies, consisting of investment tax credits and accelerated depreciation, and by mandates for renewable power in many US states.[vi] The Florida Legislature approved a one-time rate increase of about 31 cents per month for the average customer to cover the construction of three solar test sites totaling 110 megawatts—about one half of one percent of the total energy FPL produces.[vii]
The US is not the only country building and subsidizing solar plants. In fact, it ranks fourth in the world for cumulative installed solar electric power. Germany ranks first, Spain second, and Japan third.[viii] In Germany, solar producers receive as much as 64 US cents per kilowatt hour through a feed-in tariff, which requires utility companies to purchase renewable power at their higher cost. The feed in tariff for photovoltaic solar in Germany is more than eight times higher than the electricity price at the power exchange.[ix] Germany is reducing its subsidies for solar to ease costs for electricity consumers. Surprisingly, Germany’s photovoltaic manufacturing industry is beginning to support slashing subsidies due to competition from Chinese manufacturers, whose production costs are 30 percent lower. China is now the world’s largest producer of solar cells.[x]
Spain has a mandate requiring 20 percent of its electricity generation to come from renewable power by 2010, and it uses feed-in tariffs to further promote renewable generation. In 2008, Spain’s solar power cost was over 7 times higher than its average electricity price.[xi] Spain also slashed subsidies for solar power, limiting those subsidies to 500 megawatts, about one-fifth of the solar capacity it subsidized in 2008.[xii] In Japan, the government has set a target for 30 percent of all households to have solar panels installed by 2030.[xiii]
Subsidy Levels by Country
In 2008, the International Energy Agency released an analysis of policies used to deploy renewables during the period 2000-2005 for the 30 countries of the Organization for Economic Cooperation and Development and for Brazil, Russia, China, India, and South Africa.[xiv] They found that the investment costs of photovoltaic systems are high, representing the most important barrier to their deployment. The agency’s calculated 2000-2005 policy effectiveness levels for photovoltaics are lower by a factor of ten than for more mature renewable technologies such as wind energy. Feed-in tariffs (complemented by the easy availability of soft loans and fair grid access) have been very effective in Germany, albeit at a high cost. In recent years, the level of the German feed in tariff for solar photovoltaics has decreased to some extent, and an element of degression, a pre-determined percentage decrease in the renewable technologies’ support level, has been introduced. The German parliament approved proposals for acceleration of degression rates for stand-alone installations from 5 percent per year in 2008 to 10 percent per year in 2010 and 9 percent from 2011 onwards. According to the IEA, this creates incentives to reduce costs.
The IEA calculated the remuneration levels in 2005 for each renewable technology for the 35 countries they analyzed. The solar remuneration levels are given in the figure below. In Luxembourg, for example, the remuneration level in 2005 was as high as 90 cents US per kilowatt hour. The average renumeration levels are higher for solar photovoltaic technologies than for other more mature renewable technologies due to their high investment costs.
Even with large subsidies, solar photovoltaic power is having trouble gaining market share, contributing less than one percent to the total power generated in each of the countries that have the largest solar capacity in the world—Germany, Spain, and the United States. The reason is the high investment costs that solar power needs for deployment. Regardless, our Federal and state governments seem intent on making consumers of electricity pay for solar technologies that are not economic against traditional generating technologies causing taxpayers and customers to subsidize their construction and operation. Our state and Federal politicians tout that this will help employment. However, when the largest solar plant built in the United States goes operational on Tuesday, it will lose 393 employees that it employed for less than a year, needing only 7 for ongoing operations.
[iii] “Solar plant set to open, even as shadows loom”, Herald Tribune, Zac Anderson, Oct. 14, 2009, http://www.heraldtribune.com/article/20091014/ARTICLE/910141033/2055/NEWS?Title=Solar-plant-set-to-open-even-as-shadows-loom
[v] Energy Information Administration, Assumptions to the Annual Energy outlook 2009, Table 8.2, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html
[viii] Solar Energy Industries Association, http://www.seia.org/cs/about_solar_energy/industry_data
[ix]“Economic Impacts from the promotion of renewable energies”, Rheinisch-Westfalisches Institut fur Wirtschaftsforschung , http://instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf
[x] “Solar-Power Incentives in Germany Draw Fire,” Vanessa Fuhrmans, Wall Street Journal, September 28, 2009, http://online.wsj.com/article/SB125383541153239329.html
[xi] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf
[xii] Wall Street Journal, “Darker Times for Solar-Power Industry”, May 11, 2009, http://online.wsj.com/article/SB124199500034504717.html .
[xiii] Energy Information Administration, International Energy Outlook 2009, May 2009, page 68, http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2009).pdf .
[xiv] International Energy Agency, “Deploying Renewables: Principles for Effective Policies”