Since 2007, California has experienced a solar boom. Photovoltaic panels rest on 107,159 rooftops, as of this writing (the numbers are updated here every Wednesday). Driven by incentives that are bankrolled by every Californian who pays a utility bill, Californians now have more than one Gigawatt of solar capacity installed over our heads That’s a lot: one Gigawatt is roughly the size of one of the state’s four nuclear power plants, although solar PV panels do not produce power at the steady, even rate that nukes do.
California recently approved 11 separate solar power plants, big installations of mirrors and equipment that can concentrate the sun’s heat to produce power. If built, those 11 plants will have a capacity of 4.2 Gigawatts. The cumulative impact of all of this building—driven by federal investment tax credits and state mandates to generate a third of the state’s power from renewable sources by 2033—is astonishing. In short order, solar could lose its tinfoil-hat-California-dream aura to become the Golden State’s new normal.
This is a stunning triumph of all the things we Californians hold dear: idealistic bureaucrats, an action-hero governor, starry-eyed inventors, entrepreneurial environmentalists, venture capitalists, and thousands of big and small businesses and homeowners who want to be part of the future.
But will it last?
California has been on the solar cutting edge before. In the 1980s, the state produced 95 percent of the world’s solar power. One company, LUZ International, designed solar thermal power plants and managed to reduce the price of generating a solar kilowatt hour of power by two-thirds between 1984 and 1989.
But by 1991, LUZ was bankrupt. The problem wasn’t the technology: LUZ’s plants are still gleaming away in Kramer Junction and Harper Lake for the utility NextEra Energy Resources. What did LUZ in were falling energy prices, unpredictable political support for the tax incentives that kept investors in the game, and the lack of a big-picture push to make solar a fundamental pillar of energy security.
Unfortunately, the things that killed LUZ are still around. Forecasts of falling natural gas prices would make solar energy less competitive. Solyndra has ensured dwindling political support. And we still don’t have a national greenhouse gas policy or a carbon tax that would ensconce solar as a core of our electric portfolio.
Is there a cautionary tale here? Or is LUZ just an artifact of the past?
The first person I called was Michael Lotker, LUZ’s former VP of Business Development. He wrote a report on the demise of LUZ published by Sandia National Laboratories in 1991. For a report, it’s a ripping yarn of how high energy prices—combined with an activist California Public Utilities Commission and government initiatives—helped make room for solar entrepreneurs in California’s energy markets. Investors were attracted by federal “Energy Tax Credits” while state property tax exemptions helped reduce costs. LUZ’s power plants looked vaguely like space stations or Martian landing pads. Big circles of mirrors concentrated solar heat, while extensive pipe systems carried hot fluids to the generators. Although the engineers managed to reduce the cost of solar power, energy prices fell even faster: fossil-fuel prices dropped by 78 percent between 1981 and 1991.
Meanwhile, the political support for solar power evaporated. Congress started dragging its feet on the yearly renewal of the Energy Tax Credit, and 1990’s renewal lasted only nine months. This made financing perilous. Then, in 1991, California’s governor vetoed the property tax exemption. Although it was ultimately reinstated, the credit was labeled “controversial.”
I reached Lotker, who’s left solar power to become a rabbi, while he was helping with a funeral. He remembered the days of trying to secure political support. “It was two emergencies every year,” he told me. “The first was getting the new plant online. The other was getting the credits. It was always life or death and it made our costs much higher.”
Lotker described many barriers to the company’s success. There was “false confidence” in the availability of renewable energy—and a lack of commitment to taking the steps to make solar competitive with other forms of power, including putting a price on pollution or the hidden costs of conventional power generation.
“I always thought support for these [steps] was a mile wide and an inch deep,” he said. “Everyone loved them but no one would fight to the death.” Thirty years ago, Lotker and his compatriots at LUZ looked at bombing ranges in Nevada and imagined powering the whole U.S. with concentrated solar thermal power from them, but “inch deep” support cut their small effort off at the knees.
Today Rabbi Lotker drives by the old plants occasionally and says he feels “like a father” to them, but without a carbon price solar power will lack enough support to become a major part of the grid.
In the usual discussions of solar power in the media, we focus on whether the technology “works” or whether it’s too expensive to compete. Sometimes we talk about poor management, boondoggles, or the proper role of government in helping renewable energy. Rarely do we talk about how politics invades a business model, making a risky proposition more risky. If we learned anything from the past, it should be that the dumbest thing we could possibly do is to support a technology, get companies going, and then yank the support so that taxpayer investments go to waste.
Some of LUZ’s founders started a company called BrightSource, which designs, develops, and sells solar power plants that use banks of precisely angled mirrors to concentrate heat on a central tower to generate steam and electricity. BrightSource has contracts for 2.4 Gigawatts of generation with California utilities and plans to design and build several plants. BrightSource’s senior vice president of government relations and communications, Joe Desmond, was formerly chairman of the California Energy Commission and has held positions in the public and private sector. He is a springy intellectual with an encyclopedic enthusiasm for solar.
To Desmond and those on the inside of the energy business, it’s obvious that the entire utility sector is the product of government regulations, incentives, and goals. But that can also be risky for a technology. Regulators sometimes get enamored of a technology with hidden barriers—hydrogen for example—that then falls out of favor. And no one will forget the starkness with which the tricky relationship between politics and the grid was laid bare during the California blackouts of 2000-2001, which cost Governor Gray Davis his job. “There are high consequences for the failure to manage risks,” Desmond said.
Desmond mentioned two ways that risk is already embedded in the solar energy landscape. First, as in the ’80s, federal tax credits are an important part of getting investors to pony up money for solar projects. The “Investment Tax Credit” has been extended to 2016, a solid timeframe that allows entrepreneurs a predictable future. But a provision called Section 1603—which allows those tax credits to be monetized early—must be renewed every year, and it was not renewed at the end of 2011. With shades of LUZ, the shuttering of 1603 is likely to cut private financing for solar significantly. Solyndra’s bankruptcy is driving the debate around renewing programs like 1603, even though the loans the federal government made to the start-up are very different from the tax credits made to solar producers. “It’s difficult to communicate the difference in a sound bite,” said Desmond.
But, in many ways, the problem with tax credits is old-school. The newer, more interesting, more futuristic risk is the one posed by the restructuring of the grid itself. The old grid was hierarchical, with centralized power plants dispatching power at will. The new grid is a two-way flow of information and energy. “We’re moving from centralized to distributed decision making,” said Desmond. “How do we manage these risks?” Regulators often play catch-up to the technology. A partially solar-powered grid will have benefits and risks we don’t yet understand, and these will be combined with the risks of wind, cheap and plentiful natural gas, and a “Smart Grid” that makes consumers and their usage part of the conversation.
As the grid gets more complicated, so does the regulation. BrightSource and other power companies have been working on ways to store energy so it can be dispatched on the grid when it’s needed. BrightSource stores heat, and then uses it to generate electricity after the sun has set. Hydroelectric plants often pump water back behind a dam so they can send power onto the grid when it’s needed. But as energy storage evolves, regulators need to decide philosophically what it is. Is it like electricity, which is a product? Or is it more like natural gas, a fuel that can be stored? Recently the California Public Utilities Commission has had seven proceedings on energy storage. The consequences of the commission’s obscure decisions on this issue may suddenly become visceral some screaming hot afternoon in 2015. And no one wants to be the next Gray Davis.
I left the conversation with Desmond thinking that while the energy cognoscenti have learned the lessons of LUZ, the rest of us have not. We’re enjoying the same pointless debate about the government’s proper role in energy markets that we had in 1991. In the meantime, the grid and the power markets have evolved from the punch-card world of 1981 to the day-trading Internet of today We need to up our game.
In some ways, reality has overtaken the moribund conversation. A day or two after I interviewed Desmond, a tree fell across a power line near my house and left me without power for almost 24 hours. I hadn’t lost power in five years, and the last time it happened I was miserable. I had just a few battery flashlights, the battery in my laptop only lasted two hours, and the phone was dead. Not this time. Now my laptop’s battery lasts seven hours, my cell was fully receptive, and I had a cheap solar-powered LED light from Ikea. With my gas stove and the IKEA lamp I made dinner, called the utility to report the wire, and did an evening’s work on the computer. I even watched a movie on it. Between the batteries, the 3G network, and the solar light, my evening was not too different from a night on the grid—just darker.
It made me wonder if maybe we were missing the whole point about solar. I called John Perlin, a solar historian and author of From Space to Earth: The Story of Solar Electricity. Perlin is now involved in the installation of solar photovoltaics at UC Santa Barbara. He believes we’ve gotten too wrapped up in trying to make solar power compete with fossil fuels, distracting us from its real advantage, which is that it’s right on the roof, independent of the grid. You don’t need wires, or power plants, transformers, or dispatchers. “Doing away with high-voltage lines is not a Luddite view,” says Perlin, “It’s a futuristic one. The revolution will come as we cut down the utility lines and up with the rooftops.” We’ve put decades of effort into making solar conform to the grid—even down to converting solar panels from DC power to AC power and then turning that AC power back to DC power for our TVs, computers, and electronics. House by house, we’ve created redundant costly equipment. Perhaps what we need instead is a more contrarian viewpoint. “All our appliances are DC, trapped in an AC world,” said Perlin. “The history of technology is full of these discontinuity stories.”
If we’re going to take advantage of the discontinuity of our times, then we (the public, policy makers, and the media) need to start talking about what power means now.