Time to end the guilt on incentives and start fighting

The last month has brought another depressing piece of news: This time the potential demise of Suntech, a pioneer credited with helping scale up the PV industry, on the verge of bankruptcy.

The recent turmoil being suffered by module and cell manufacturers in the PV industry is well documented (Paula Mints writes about it eloquently in the latest issue of REFocus magazine – see page 12) but in some ways the fact that a company of the prominence and status of a Suntech can go under, makes it all the more symbolic. At a time when we should be talking about good news and new markets, it is yet another bankruptcy making headlines.

According to Mints, we can expect further manufacturer failures, despite relatively high levels of technology deployment. Why? Simply because prices have become too low to be sustainable; currently the average price for PV modules is <US$0.70/Wp, down from over US$3 in 2007 and 2008.

The top ten manufacturers (in terms of companies that delivered the most shipments in 2012) lost a combined, eye-watering US$2.1bn last year: “This is not grid parity, it is not progress, and it cannot continue”, says Mints.
Time to level things up?

For years the renewable energy industry has been talking up the notion that at some point “grid parity” with conventional sources of energy generation would be a reality. This has almost been used as defence for the fact it requires support to help develop and scale up.

Maybe the lesson of recent events is that grid parity (and low prices) is not quite the holy grail it seems. Low pricing in the PV sector has proved unsustainable. How do companies innovate when losing money?

To a certain extent the notion of grid parity has pitted renewable against renewable: wind vs solar, CSP vs Solar PV. Technologies should be selected on the basis of the best available resource (and metrics) for a specific project/location.

Another consequence of the push for grid parity, and admittedly after some overly-generous and ill conceived support schemes, is that politicians have stripped back FiT programmes and other incentives. Of course it is desirable (and necessary) to be able to exist as an industry without subsidies eventually. But as the PV industry is finding out to its cost, low cost products don't necessarily equate to an industry reaching maturity.

“Public enemy number 1”

Crucially, many forget (or simply don't realise) one simple truth: fossil fuels receive billions in subsidies, and yet they are very mature industries. Speaking at the recent European Wind Energy Association annual event recently. Faith Birol, Chief Economist at the International Energy Agency (IEA) went as far as to describe fossil fuel subsidies – which amounted to half a trillion US Dollars worldwide in 2011 – as an “incentive to pollute”, and, as such are “public enemy number one to sustainable energy development.”

Wow. If this is now the official line of the IEA, which until a few years ago would hardly even acknowledge renewable energy in its official publications, then the renewables industry should take that as a kick in the solar plexus. It had better get out there to educate the public at large about the public money being spent.

A recent example from the UK highlights this issue perfectly. The Government has given the go ahead for two new nuclear power stations. The catch is, it still hasn't concluded negotiations with developer EDF on the amount of “subsidies” it will receive during the life of the plants.

It has been reported that the amount, under a “Contracts for difference” scheme, would guarantee the French company nearly £100 for each megawatt hour of electricity produced over 30 to 40 years (longer than the 25 years on offer for renewable). And EDF wants the UK to underwrite its debts for the project. Critics say the subsidies will cost bill-payers at least £1bn a year.

One voice, on message

Maybe I am being naive, but the UK Government (amongst others) has spent the last few years making life about as difficult as it can for renewables, creating uncertainty and tinkering with support schemes at every turn. Why? Ostensibly to save consumers from increased energy bills. Yet (and it is important to point out that REFocus is not anti-nuclear, just anti a playing field skewed heavily against renewables), it seems prepared to burden consumers with massively increased bills to cover nuclear costs.

So the renewable energy industry needs to be fighting more vociferously, educating consumers more proactively. However, at the recent EWEA event, many of the CEOs in the headline panel discussion were still describing wind as “intermittent”; wind of course is variable. If the captains of our industry aren't on message about something as basic as the variability of wind, it indicates a need for the whole industry to look at the way it communicates, addresses criticism, and educates consumers.

There is now a need for one clear voice, one clear message: this industry needs to carry on building great technology that delivers clean energy. So no more apologies on subsidies where they are needed.

Taken from the Mar/Apr 2013 issue of Renewable Energy Focus magazine. Sign up here for a free subscription.

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