The Real Hurdles for Solar Energy
We all have been told that the future of renewable energy sources is waiting on technological advancements and the convergence of economic factors that will cause the cost of conventional fossil fuel sources increase as reserves are further diminished and the gradual decrease in cost due to advancements in technology and economy of scale meet. The common belief is until these things happen, solar energy and in fact all renewable energy sources will continue to exist outside of the mainstream and on the fringe of possible and idealistic.
While these beliefs are widely held in the public mind with most satisfied to wait and in the meantime take small steps towards energy conservation and awareness, not all believe them to be true. The more surprising fact is the people saying that solar energy is viable right now are not just the extreme eco-activists. A look at many Fortune 500 businesses and even simple shopping comparisons make that readily apparent now. If those were not clear enough, a report issued in January, 2013 by Edison Electric Institute made it equally clear.
This report lists distributed energy resources and distributed generation as “disruptive challenges” to the retail electric business. What does that mean? To make sense of the report deciphering the terminology is needed. The US Department of Energy defines DER as –
“Distributed energy resources (DER)—also called distributed generation, distributed energy, and distributed power systems—are small, modular, decentralized, grid-connected or off-grid energy systems located in or near the place where energy is used. They are integrated systems that can include effective means of power generation, energy storage, and delivery.”
This includes, and is later highlighted as the most prevalent, solar power. The first page of the report in fact summarizes well with the explanation of falling costs and increased prevalence of lower cost alternative energy managed by the end users such as solar energy making it difficult for the utility companies to compete on a cost basis. This makes clear the utility companies are fully aware that current technology is adequate to provide consumers with a lower cost alternative to their services and they see it as a threat to their business plan.
While that may seem unlikely on first glance to many, even a cursory glance at currently available alternatives shows it is in fact true. Use, as an example, solar power hot water heaters. These are becoming more popular and with good reason.
- A typical long life electric hot water heater to service a family of 4 costs about $750 at your local big box home and appliance store. The energy label will tell you the average cost of electricity is approximately $500 per year. This will bring your cost to 10 years of hot water to an estimated $5750.
- A solar hot water heater can be found online even at places like Amazon for $3950. If you are in a high efficiency area for solar a savings of 90% can be achieved. This makes 10 years of solar powered hot water total $4450.
Even presuming higher installation costs there are still savings, and that is without taking into consideration the many tax incentives and government programs that reduce the initial costs even further. It is clear why utility companies are concerned when every installation can potentially cost them $500 a year. Widespread adaptation would make a serious impact on the bottom line of the company.
The news on the commercial front is similar. Walmart currently is acting on plans to add solar arrays to the roof of its nearly 4500 retail stores in the US and current active construction will have these arrays installed on 75% of its California based stores. You can correctly assume that business that ranks in the top 10 in the Fortune 500 is not expending tens of millions in solar arrays without having calculated a cost benefit of doing so. If a single home’s hot water heater will cost the utility companies upwards of $500 a year, what do you suppose a solar array on the roof of every big box store and flat roofed factory or industrial complex in the US would cost?
The evidence is clear that solar power not only can be economically feasible in the future, it is already. It is less a case of waiting for technology and scale to make solar power a common place reality, it is implementing it. Part of the implementation hurdle is a lack of qualified contractors to do the installations. Companies like the Mark Group that specialize in energy saving product installations are comparatively rare in the US. The other hurdle is the utility companies that currently provide the electricity having planned strategy reports to slow this process to preserve profits and market share.
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