All Things Solar
Plus the future of San Onofre's Nuclear Generating Station, a ratepayer victory in California, and stats on the growth of data centers
Is the promise of solar downplayed even by its most ardent advocates?
Conservative columnist Edward Ring makes such an argument here regarding California. He writes:
When evaluating California’s energy policy, the scale of the transformation the state has embarked upon could use a bit more optimism. Ratepayers who are exhausted by the current run-up in electricity prices compared to other states would be encouraged if they understood the path we’re on is likely, within just a few more years, to compel providers to compete on price to serve electricity in abundance.
To test this theory, consider the return on investment for a solar power producer even at today’s prices. The installed cost for utility scale photovoltaics is now down to under $1.50 per watt. This means that via a 25 year, 6 percent per year construction loan, the break-even cost for sold electricity is only $.05 per kilowatt-hour. That’s an annual average, but even in winter, break-even productivity sufficient to cover the construction loan payment would only be around $.08 per kilowatt-hour. At that rate, solar capacity can be profitably overbuilt to deliver energy even in winter.
Per Ring, not only has the cost of photovoltaics come down, but significant advances are also underway in stationary batteries, e.g., sodium-ion batteries. MIT’s Technology Review characterizes sodium as having some properties similar to lithium, and cells made of sodium can reach similar voltages as lithium-ion cells. Consequently the chemical reactions that power the battery are nearly as powerful. (As a brief aside, note that a vast deposit of lithium was recently discovered in Arkansas.)
As vehicle-to-grid technology accelerates alongside evolving pricing models, owners will have the option to use their parked EVs to absorb surplus electricity from the grid and also sell it to the grid. “If only 10 percent of California’s 14.3 million registered automobiles were EVs with 50 kilowatt-hour batteries,” Ring writes, “they would have a total storage capacity of over 70 gigawatt-hours.”
Notably, California’s 2045 goal for total utility-scale storage is only 52 gigawatt-hours. “A decentralized grid with hundreds of thousands of photovoltaic arrays and mobile storage assets,” says Ring, “can significantly reduce the cost and scope of transmission upgrades.”
WRT to land-use concerns: A significant amount of solar power can be generated in California’s urban areas. In California’s cities, approximately 10 billion square feet of rooftop space is available for photovoltaics, which lessens the need to use large amounts of land or disrupt animal habitats. If maximally utilized, these roofs would be sufficient to generate approximately 275,000 gigawatt-hours per year. (For comparison, California’s total electricity consumption in 2022 from all sources was 287,220 gigawatt-hours).
Ring, incidentally, has two new informative pieces at City Journal and California Globe, with the former criticizing the California Air Resources Board, among other state entities, and the latter diagramming a realistic path for California to have abundant energy.
CHINA and SOLAR
Samo Burja also made compelling arguments about solar two years ago in this piece. He wrote:
The total amount of solar energy that reaches the Earth’s surface each year is roughly 750,000 petawatt-hours, more than 5000 times global energy consumption in 2015.1 This abundance means there are few other sources of energy that could prove as disruptive to global energy markets and geopolitics as solar power. Since the year 2000, solar power has rapidly grown from a curiosity into a notable source of energy. From 2000 to 2020, global electricity consumption soared by 75% to 25.8 PWh and solar’s contribution grew 788-fold to 0.8 PWh—or 3.3% of all consumption. The price of solar power dropped dramatically from $359 per MWh to $37 per MWh between 2009 and 2020, and solar industry revenues soared to US$170 billion in 2020.
But of course it’s China, not the West, that’s poised to gain advantages in the solar industry given that:
As of 2019, Chinese firms controlled 79% of solar-cell production;
China dominates the solar supply chain, with market shares ranging from 71% to 97% for such components as polysilicon, ingots, wafers, cells, and modules; and
At the time Burja’s piece was published, China had 261 solar manufacturing facilities, far outpacing other countries (India was next with 51, followed by America, with only 16).
While Western nations excel in lab research and efficiency benchmarks, China is good at expanding manufacturing capacity and reducing costs through scale. “In an industrial economy,” Burja writes, “the factory and the economies of scale it provides are the more important unit of innovation than the laboratory product.”
Per Samo, China also has a significant advantage in raw materials, as over 2/3 of globally-mined silicon comes from China’s western steppe. Additionally, Chinese company CATL is a leader in the lithium-ion battery market and China is aggressively expanding its energy-storage capacity, with a goal of 100 GW by 2030.
LEARNING CURVES & the FOLLY of SOLAR TRIUMPHALISM
Meanwhile, over at Michael Goff’s blog, he writes about learning curves — i.e., the regular relationship between the cumulative production of a good and its price — and warns that policymakers should be more careful in their use of these models. “There is an especially reckless use of learning curves called solar triumphalism,” Goff writes, “which holds that solar PV in particular has experienced rapid learning curve-induced price declines, assumes that the price declines will continue into the indefinite future, and therefore other decarbonization options should be rejected.”
He continues:
Large swathes of energy policy…the Production Tax Credit, Investment Tax Credit, and Renewable Portfolio Standards…are predicated on the expectation that these policies will lead to cost reductions that are socially beneficial knowledge spillovers. These policies are more politically palatable than carbon pricing, but if the benefit—and social benefit in particular—of learning curve cost reductions is overestimated, then these policies start to look ill-advised.
In this 2018 piece, Goff cautioned that solar triumphalism carries the risk of convincing policymakers that clean-energy or emissions-reductions technologies such as advanced nuclear, carbon capture/sequestration, or geoengineering can be safely taken off the table. “To do so would be profoundly unwise,” he wrote, “binding our hands in addressing the global challenge of climate change.”
THE REBIRTH OF SONGS
And speaking of nuclear, this piece at the Fort Worth Star-Telegram drops a few whitepills, including the previously unthinkable assertion that, in addition to Diablo Canyon being rebirthed, a similar outcome may be in store for California’s San Onofre Generating Station (SONGS), which the state has worked tirelessly to decommission in recent years.
The money passage:
Some foresee Silicon Valley tech companies mimicking Microsoft's strategy at Three Mile Island to use nuclear as a dedicated energy source to power data centers in California. Gene Nelson, president of Californians for Green Nuclear Power, even envisions a nuclear future at San Onofre. That's because even after the shuttered plant off Interstate 5 is dismantled, a switchyard with power lines and a substation without transformers will remain at the site because it houses electricity infrastructure that provides a key interconnection for the region's grid. "You don't have to build that infrastructure," Nelson said. "You just gotta build the power plants. You've already got the switchyard."
Another Nelson, Mark Nelson, one of nuclear energy’s most eloquent and charismatic proponents, holds that a SONGS renewal can happen if nuclear advocacy reaches critical mass. He says:
Citizen movements across the country have gotten rid of these moratorium and phase-out laws all over - from the coal states to the nuclear states. If California (lawmakers) got rid of it, they would find a way to spin it as being leaders and we would pat them on the back and say, ‘You did it, buddy. Good job.'
And indeed, fascinating things regarding nuclear are brewing in Southern California. El Segundo’s Valar Atomics, for instance, is developing nuclear fission reactors with the aim of synthesizing hydrocarbons and providing abundant, low-cost energy. I hope to provide more info on them soon, incidentally.
NEWS & NOTES
RETURN ON EQUITY: California ratepayers experienced a rare win in mid-October, when the California Public Utilities Commission reduced the investor-owned utilities’ routine cost-of-capital mechanism2 adjustment from 50% to 20%, effective January 1. In a surprising change of pace, the PUC commissioners offered deeper-than-usual thoughts on regulatory economics, with Darcie Houck in particular sounding as though she gave the topic rigorous consideration.
“Several parties recommended changes to the Commission's cost-of-capital proceeding,” she said. “Among those recommendations was a suggestion that the Commission consider price-to-book ratios while setting authorized ROEs. A price-to-book ratio is a simple comparison of a utility share price to its book value per share. These data are publicly available, and some parties…argued that price-to-book ratios above 1.0 indicate that authorized ROEs have been set above cost of equity.”
Houck then cited Alfred Kahn’s 1970 book, the Economics of Regulation:
Quoting from Alfred Khan, the source of the discrepancy between market and book value has been that commissions have been allowing ROEs in excess of cost of equity. If instead they had set ROEs equal to cost of equity, the discrepancy between market and book value would never have arisen. Setting ROEs above the cost of equity has led to prolonged periods of utilities maintaining price-to-book ratios above 1.0, and as was true in 1970 when Kahn published [the Economics of Regulation], share prices are now well above book values. When we take up cost of capital again, I would encourage my colleagues to look closely at these ratios as one factor of consideration among the others that we examine in the cost-of-capital proceeding.
Houck’s counterpart John Reynolds also provided helpful explanatory comments. “Cost of capital is a complex topic,” he said, “but you can think of the cost-of-capital mechanism as a simple crank that allows for an adjustment of utility return on equity based on market factors. [Our modification] is a smart way to make sure that the output is measured and reasonable.”
I’ve been critical of these commissioners in the past but I’m happy to give them praise when it’s called for. I think they gave this topic an unusual amount of attention and care, and the results seem positive. I think it’s a good sign that, despite being ciphers of Governor Newsom’s will, they are sometimes open to persuasion.
DISTRIBUTED ENERGY RESOURCES: In mid-October the CPUC also adopted a decision that endeavors to improve its complex web of DERs planning and data-acquisition processes, e.g., the “Distribution Planning and Execution Process,”3 “Distribution Resource Planning Data Portals,” and “Integration Capacity Analysis (ICA).”4
As translated by the Interstate Renewable Energy Council, an active participant in this proceeding:
California has some of the strongest requirements for public grid data; its ICA has the potential to be a powerful catalyst for faster and more cost-efficient deployment of clean energy and electric-vehicle charging infrastructure to meet the state’s ambitious climate and energy goals. The Commission’s decision to require a process to fully resolve inaccuracies in the data utilities are publishing is a promising step toward realizing this potential.
The aforementioned John Reynolds, noted that, while DERs planning processes were central to meeting state goals, a rising concern is the issue of large new loads joining the grid, and how uncertainty surrounding these loads could lead to stranded or under-used infrastructure. He cited a new rate case in Oregon, filed by Pacificorp, in which the utility proposes tariff changes to address new, large customer loads in excess of 25 megawatts.
“The essence of the utility’s proposal,” he said, “which is supported by the Oregon PUC staff, is that large potential customers will inform the utility of their load needs. The utility uses that information in planning its needed system investments. If a customer overestimates its load requirements, it can substantively harm other customers by creating stranded assets that are unused, or can shift costs between customers. It's an issue that I think requires more of our ongoing attention.”
DATA CENTER IMPACT: While Reynolds didn’t cite data centers specifically, it’s worth noting that the California Energy Commission expects data center peak-load demand to eclipse 4 gigawatts by 2040, according to its 2024 Integrated Energy Policy Report’s updated load modifier draft results.
“The peakload is expected to grow from roughly 1 GW to over 4 GW over the forecast period of 2024 to 2040,” Jenny Chen from the CEC’s Energy Assessment Division told Platts. “The average load growth over that period is approximately 11%.”
BTW, if you haven’t done so already, please check out
’s fantastic interview here with Consumer Regulated Electricity.
Vaclav Smil “Energy: A Beginner's Guide” (OneWorld Press), 2017, p. 32.
This mechanism allows the Commission to adjust utilities’ costs of capital if market conditions change significantly between cost-of-capital filing cycles. If there’s a difference of 100 basis points between the trailing 12-month October – September average Moody’s utility bond index rates and the IOUs’ respective benchmark rates, the cost-of-capital adjustment mechanism automatically triggers and the utilities must file compliance documents to revise their rate of return, effective January 1 the next year. The Commission subsequently orders that the utilities’ ROE be automatically adjusted by one-half the basis-point difference from the benchmark.
Further, if any “extraordinary” or catastrophic event materially impacts a utility’s cost of capital and/or capital structure and impacts them differently than the overall financial markets, utilities have the ability file off-cycle cost of capital requests outside of the regular adjustment process.
The process involves multiple steps: (1) historical load-profile review; (2) forecast adoption; (3) load and DER disaggregation; (4) grid-need identification; (5) solution development; (6) project prioritization in a workplan; (7) project scoping; (8) planning/designing/estimating; (9) permitting/sourcing/release; and (10) construction
ICA is an analytical framework that assesses an electric distribution system's ability to host additional distributed energy resources. ICA helps assess how many new DERs (for instance, solar power or battery storage units), can be added to a specific location on the grid without requiring major upgrades.