Why Distributed Solar?

In my last post, I talked about personal criteria for a new solar power business endeavor. This post explains why I chose the distributed solar power industry.

Three factors make this industry very exciting

1. Increasing energy prices
2. Decreasing solar power production costs
3. Solar power enhances to the current power grid (so utilities shouldn't fight it)
   

Increasing energy prices - we hear near daily news stories of increasing energy prices due to a combination of: rising global energy demand, reduced supplies of economically accessible fossil fuels, increased costs of new generation facilities (CAPEX). Additionally, utilities face uncertain (potentially large) costs associated with updating neglected transmission infrastructure, and accounting for carbon emissions from burning fossil fuels. These macro forces all indicate a strong trend toward increasing electricity prices.

Decreasing solar power production costs - Photovoltaic solar power production costs are going the other way - they are experiencing downward price pressures from learning/efficiency improvements and scale economies similar to the microprocessor industry of the last two decades. PV electricity can now be produced more cheaply in Japan than it can be purchased from traditional utilities--Germany and Spain are on track to do the same in the next 5-10 years. In the interim, we must rely on incentives to reduce consumers' PV cost to near-utility pricing.

Grid enhancing - the current US electrical grid has endured a post-deregulation period of underinvestment, and needs new capital investment to keep up with rising energy demand (especially peak demand). Peak energy demands strain the grid as it carries expensive peak-load power to homes and business in summer mid-day heat to run air conditioning. PV Solar provides a terrific offset to this problem because it provides its maximum energy mid-day when the sun is brightest. Home owners with PV solar panels can generate their own mid-day power, and because of net-metering, send unused electricity back to the grid where it can be consumed by a non-solar neighbor (using only the tiny fraction of the grid between homes instead of the high-load portion between the power station and the neighborhood). Essentially you're removing your demand (and a portion of you neighbors) from the peak demand period -- utilities love this for three reasons:

1. They don't have to use their most expensive generators to supply your peak demand
2. They may be able to delay capital investment in new generating capacity
3. They can delay investing in the grid infrastructure

Sound Exciting? I think so. The implications are even more profound when you consider how this technology can benefit the grid-challenged developing world once costs come down far enough.

PV, solar