DESERTEC COMMENTARY:
The Learning Curve

We've seen it with computers, now we're seeing it in solar power. Down the track, the result will be be clean, green, safe, cheap solar electricity -- years before carbon capture and storage and nuclear power is ever even ready for Australia.

The reason is "The Learning Curve." It's as powerful a force in economics as the force of gravity is in physics. What the Learning Curve means is that as research and development gears up in the industry, prices fall ever more rapidly. The compound effects are huge.

Take solar power. It's expensive today. But it's falling in price at multiples of other technologies -- particularly "clean coal" and "next-generation" nuclear -- which still exist only on paper. With expanding commercial deployments and ever lengthening operating records, we know what solar's price is. We don't know what nuclear or "clean coal's" costs are.

Concentrating Solar Power will be cheaper than many forms of conventional energy as early as 2010

Source: US National Renewable Energy Laboratory

Take just one example. During the 1980s, the cost of building and operating concentrating solar power plants in California -- which now total 350 MWs of capacity and are still running -- fell by half in seven years, from US36c a kwh to roughly 16c/kwh, a reduction of price of 11% per year. With thousands more MWs of capacity now planned in California, Spain and elsewhere, this downward slide of prices will -- if anything -- accelerate.

Given this, America's National Renewable Energy Laboratory believes concentrating solar power will "cross over" into upper-tier cost competitiveness against conventional technology (read coal and nuclear) as early as 2010 and full cost competitiveness by 2015 at the latest.

Given that new plant and equipment takes several years of planning to build, that means concentrating solar power is now cheaper than coal or nuclear for forward planning of new capacity.

If the choice is between solar and coal for construction by 2015 -- -- rational economics dictates choosing concentrating solar power. Or, conversely, new coal-fired capacity risks becoming an economic White Elephant the day it comes on line.

The above just states the case for concentrating solar power. Solar photovoltaics is on a similarly rapid downward price trajectory. It's just starting from a higher base.

The "learning curve" effect means renewables are falling in price much faster than coal

Source: IEA/OECD

During the 1990s, the OECD and the IEA calculated the power of the "learning curve" for solar PV over a 15-year period from 1980 to 1995. During that timespace, solar PV prices per kwh generated fell by 35% a year, a pace that's continuing today. Wind power fell by 18% per year. By contrast, stodgy coal fell in price by 3% per year. Once again, the case is clear: it's the rapidly falling solar technologies where tomorrow's money should be spent.

Given the crisis of climate change, powerful forces of innovation are now at work in renewable energy industries. Every day brings another breakthrough toward lower prices and increased efficiencies. In renewable energy, falling prices are entrenched. Meanwhilesluggish, mature, old-fashioned coal companies are still stuck in a mindset of denial, delay and subsidy-seeking. No one believes such lumbering behemoths will ever dance on the head of a pin.

In both concentrating solar power and solar photovoltaics, three factors are at work. The first is research and development of better technology. The second is manufacturing economies of scale. The third is the drive toward ever larger installations. Taken together, the three create a juggernaut of lower prices.

 

The levelised cost of concentrating solar power should fall below 10c/kwh by 2015, equivalent to coal and nuclear, but safter		Solar photovoltaics installed atop homes and businesses, will compete with traditional power plants by 2015.
Source: US National Renewable Energy Laboratory		Source: US National Renewable Energy Laboratory

 

What needs to be done?

Former "Australian of the Year" Tim Flannery and others recommend a carbon tax. This is smart and economically rational. it will allow the market to solve the problem by laying bare the relative environmental costs of various technologies, and then letting the market do the rest. Given that nearly Australia's entire electricity generating capacity must be replaced in the next 30-40 years, the country has a once-in-a-lifetime opportunity get things right.

Solar is the best bet. The numbers clearly say so.