Everything They Tell You About Solar Is Wrong - Travis Bradford

Travis Bradford thinks that the solar energy industry is going to change the world ... and soon. The founder and president of the Prometheus Institute, a nonprofit dedicated to accelerating the deployment of sustainable technology, Bradford is author of Solar Revolution: The Economic Transformation of the Global Energy Industry, which confidently predicts solar energy will become a dominate energy source over the next 10 years.

He spoke recently with the editors of HardAssetsInvestor.com.

HardAssetsInvestor.com (HAI [1]): You say in your book that solar energy is going to change the way the energy industry works, and that it will become a dominant player in the field. It's such a niche player right now. What's going to change that?

Travis Bradford, founder and president, Prometheus Institute (Bradford): The thing that determines the energy choices we make are both the cost of generation and the cost of getting electricity from where it's made and to where it's needed. Solar is going to end up being cheaper in both regards.

By putting energy nearer to the point of use, solar is going to change the electricity network from a very centralized network - almost like a mainframe computer - to a very distributed network; more like wireless laptops, where a lot of the processing power is at the end of the network instead of in the middle. It has the ... ability to change the way the electricity architecture functions.

The economic and the system repercussions of that change are going to allow solar to become a dominant player in the energy architecture. In fact, it's the only technology that can do these things. Everything else is limited by the way the networks are built today.

HAI: Not wind?

Bradford: The amount of wind you can use, or the amount of or way of tidal energy you can use, are limited by the costs and source availability in the first place, and also by the network that's needed to take that energy from where it's generated to where it's needed. Solar is the only thing that can solve the limitations that the current network creates.

HAI: But solar's nowhere near cost-competitive? What do you say to the people who say it's just too expensive?

Bradford: Well, just that it's not true. Just because people say it, that doesn't mean it's true. [Right now] it's cost-effective for lots and lots of applications, and the industry is growing at 40%-50% per year.

But regardless of how expensive it is today, I'm talking about an evolution over the next decade or decades. Ten years from now, solar will be half the cost or less of what it is today, and grid prices will be at least the cost they are today or substantially higher. What is today marginally economic will become wildly economic over the next 10 years.

That's not to say that we have to wait 10 years from now until the industry takes off. Every day, more and more applications are becoming cost-effective.

HAI: But the numbers people cite on a per-kilowatt/hour basis are far higher than for other types of energy.

Bradford: When people say solar is too expensive, they make two fundamental errors. The first is that they compare the cost of generating solar to the cost of generating other forms of energy. The difference is that solar can be generated where it is used, while the other forms have costs that have to be sent back to the user. It's not an apple-to-apple comparison.

Anytime someone uses the cost of generating electricity to talk about solar, they're already using the wrong model. What matters is the cost of delivered electricity.

The second error people make is that they compare solar to the wrong thing. They compare solar generation to the average cost of displaced electricity. But solar doesn't displace average electricity - it displaces middle-of-the-day electricity, which is the most expensive electricity of all.

When you make the correct calculations with the correct assumptions, solar is not really as expensive as people might lead you to assume.

HAI: What percentage of total energy costs are generation vs. distribution?

Bradford: Fifty-fifty, across the broad energy portfolio.

HAI: What are the risks to solar's success?

Bradford: I don't really see a lot of risk to the forecast that solar is going to get a lot cheaper. It's a pretty powerful trajectory that it's on, and the road map to get to half the price of today is well within reach over the next 10 years. It might even be in the next five.

The only other risk might be that grid electricity prices get dramatically cheaper in the near term. But it would have to get cheaper faster than solar does, in order for grid electricity not to continue to lose economic ground to solar. Solar's prices are falling 5% per annum. The odds that electricity prices will drop 5% per annum over the next 10 years are extraordinarily low.

HAI: There's a feeling that the U.S. is losing its leadership position in the solar industry to overseas competitors. Why is that?

Bradford: The other countries have had much stronger demand support programs, so they've installed a lot more solar capacity. Their local companies have been faster to make investments as a result, as they look to benefit from that. Also, Chinese manufacturers are very good at cost-engineering electronic devices, and they have been able to raise capital in the U.S. capital markets to scale up production.

That said, the reality is that the next generation of solar technology - both photovoltaic (PV [2]) and non-PV, such as solar thermal and solar-concentrating technologies - are predominantly supported by the U.S. private equity and venture capital industries. So the next generation of technologies is going to be driven a lot by American industry.

HAI: What do you think about thin-film technology?

Bradford: I love it. We've written two comprehensive reports about thin-film technology, and the second one is coming out this month. Our optimism about the economic offering of thin-film PV continues to grow every time we do another report. We track 135 thin-film companies around the world, and while not all of them are going to be successful, enough of them are likely to succeed that they will have a major impact on the solar industry and the energy industry in general.

HAI: Who loses when solar wins?

Bradford: The traditional belief is that solar creates a competing offering to electric utilities, and therefore utilities might lose if solar wins. But my firm belief is that getting involved in rolling out the solar architecture is a huge business opportunity, including utilities if they are foresighted enough to take it.

HAI: If you were an individual investor, how would you invest in the solar boom?

Bradford: The problem is that picking individual winners and losers is very hard. Unless you have a lot of expertise, it's going to be difficult to determine the real success stories from those that don't make sense. Perhaps a diversified sector play is the best bet for an individual or nonexpert investor.

HAI: One last question: Do you have solar photovoltaics on your roof?

Bradford: No, they're not practical in my case. I rent an apartment in a very tall building in Chicago.

One point I make is that solar shouldn't end up everywhere; it just should end up in relatively more places than it is today. Solar maps very well to the suburban living patterns of modern society. I've chosen to reduce my carbon footprint by living in an urban apartment. That said, I do hope they put a solar farm up in Chicago soon to help take advantage of clean energy ...

HAI: Thank you.

From: http://seekingalpha.com/article/91198-everything-they-tell-you-about-solar-is-wrong-travis-bradford?source=yahoo [3]