Framing the case for solar in terms of national security will create a stronger impetus for government action in promoting solar energy. In making this case, conventional notions of national security need to be broadened to encompass energy security, economic security, social security and environmental security.
Although there are various sorts of commercially available solar technologies, this article will focus on distributed solar photovoltaic (PV) systems that are typically associated with roof-top installations, rather than large utility scale solar farms because of the former’s unique supply-chain advantages. The abundant nature of solar resources means that distributed solar PV systems have a significantly shorter supply chain than fossil energy systems. Short supply chains are advantageous because they translate to reduced transportation and infrastructure build outs, which directly improve environmental and economic performance, and maximise benefits to the local economy. With distributed solar, the supply chain is virtually nonexistent; solar power is converted by the solar panel into electricity that is fed through just a few metres of cable before being used.
A distributed energy system, such as a network of rooftop PV, is a more resilient energy system than a centralised one because it consists of numerous, relatively small modules, each able to function independently of each other and each with a low individual cost of failure – meaning the disruption of one or few
nodes within the network of the distributed renewable energy system will not bring down the entire system. Centralised energy systems, such as coal-fired power plants, are the opposite, consisting of one or a few large, centralised units that are more vulnerable to high-cost failure. As the ice storms of early 2008 in southern China demonstrated, centralised coal-fired plants are highly vulnerable to bottlenecks along their long supply chains; the high-cost failure manifested itself in 17 provinces, municipalities or autonomous regions that experienced power failures or reduced power supply as a result. Distributed solar energy systems, on the other hand, are placed very close to the end-use, thereby dramatically reducing the supply chain and potential points of vulnerability. Where solar systems are grid-connected and feed in excess energy generation to the grid, solar systems can also enhance the resilience of the grid.
Another aspect of security is reliability. While renewable energy resources have been dismissed for intermittency, the causes of variations in solar resources (e.g. diurnal cycles, cloudiness, etc.) are well understood and fairly predictable. Centralised large-scale power, on the other hand, is intermittent for reasons that are far less predictable. Occurrences such as extreme weather conditions or terrorist strikes are more likely to disrupt entire energy systems based on centralised production than distributed production, as it is less likely all the nodes of a distributed network will be impacted. Moreover, technological advances in energy storage, sun tracking and shade mitigation are extending the use of solar power throughout the day. The result is that the lifecycle costs for solar power are more certain than for centralised fossil fuel plants, whose fuel costs remain subject to volatile market forces.
In the wake of the global financial downturn, developing new energy sources domestically offers compelling economic security propositions in diversifying economies that have been heavily dependent on low value-added exports. The rapid emergence of China as the world’s leading manufacturer of solar PV panels has made meaningful contributions to China’s economy, providing 10,000 jobs as of 2007 that are expected to increase tenfold to 100,000 by 2020. However, since over 95% of domestically produced solar panels are exported, the multiplier effects of building a robust domestic solar PV market, which would create a hitherto nonexistent ecosystem of parts manufacturing and installation expertise, have not been realised. If China wants to head off a steep decline in economic growth in these turbulent times, developing a domestic solar market provides some interesting possibilities.
Finally, the social and environmental advantages of solar should not be underestimated, especially for a government whose legitimacy rests heavily on maintaining the social fabric. At the end of 2006, some 11 million rural dwellers lacked access to any electricity. Off-grid solar panels represent the most practical and economic choice for the reduction of the energy poverty gap in many remote rural areas that are currently off-grid and the focus of rural electrification, one of the government’s most important social programmes. Policymakers must also recognise the public health costs that the entire supply chain of coal power production imposes, including the health and lives threatened in coal mining, as well as the harmful emissions of sulphur dioxide and nitrous oxide emissions. A recent study [pdf] concluded that the negative environmental, public health and other social costs of China’s coal industry (excluding climate change impacts) add up to 1.7 trillion yuan (US$249 billion) per year.
Even with a 40% drop in solar module prices, and assuming installation costs remain roughly unchanged, installed solar PV power would cost, on a per kilowatt-hour basis, some eight times as much as coal-fired electricity. Framed in such narrow economic terms, this gap is a mental barrier for policymakers to create robust financial incentives for the adoption of solar power. It has been suggested that the central government should wait for the expected demand from the United States, which has recently passed strong financial incentives to promote solar adoption, to further scale up solar module production in China and further drive down module prices. Indeed, it seems that China’s current policy for solar, as outlined in the 11th Five-Year Plan for Renewable Energy, adopts this wait-and-see approach in the form of cautiously modest targets for installed solar capacity by 2010. The 2010 target of 300 MW of total installed solar capacity, which includes non-distributed and non-PV solar (i.e. solar thermoelectric generators), pales in comparison to the 874 MW of PV installed in the United States by the end of 2007, or the 12,300 MW of wind installed in China by the end of 2008. But such a cautious approach, which reflects a psychological hang up on the price disparity between solar and fossil fuels, misses entirely the aforementioned national security proposition of solar.
Source: Julia Wu, et al., “China’s 11th Five-Year Plan: Wind and Utility-Scale PV Targets are Up, but RPS is Gone,” New Energy Finance, April 11, 2008.
More crucially, the true cost of deferring the replacement of coal power with clean solar power is often missed by policymakers, and certainly by the private sector. Such cost cannot be measured solely in economic terms, but must also include the increased difficulty in mitigating greenhouse gas emissions. Experts are in general agreement that a 60% to 80% reduction in greenhouse gas emissions is needed by 2050 compared to 1990 levels in order to stabilise climate change. Because coal power infrastructure has a lifecycle of 40 to 50 years, we are really talking about energy investment decisions that have to be made today. Each megawatt of solar power deferred today is an additional megawatt of coal power that will spew greenhouse gases for the next 40 or 50 years.
Even if the aforementioned benefits seem too intangible to value, there are three additional economic considerations. First, solar PV power, while not generally cost competitive with “base load” grid-based electricity, is in many regions cost competitive with “peak load” power, which is turned on when power demand reaches the highest point during the day.Peak load power is the most expensive type of power for utilities to produce and usually occurs at, or overlaps partially with, the hottest time of the day when the sun shines brightest and power consumption is at its highest. Solar power is the ideal strategy for “peak shaving.”
Second, decentralized energy systems eliminate the need for expensive, inefficient and resource-intensive transmission-and-distribution infrastructure. The State Grid of China, which is already under financial pressure after an 80% drop in profits in 2008, plans to spend a whopping 1.16 trillion yuan (US$170 billion) over the next two years on grid construction. Not only are network losses experienced in transmission and distribution estimated to range between 8% and 9%, but the construction of every 100 kilometres of power lines of a 500-kilovolts grid project reportedly requires 5,000 tonnes of steel, 2,000 tonnes of aluminum and 7,000 cubic metres of cement. While the need for expensive transmission and distribution capital outlays cannot be eliminated in each and every case, stand-alone distributed PV systems are a highly economical choice in remote rural areas that lack grid access. The recently announced utility-scale solar farms in Qinghai’s Qaidam Basin (1 gigawatt (GW) installed capacity) and Yunnan’s Kunming city (166 MW) are a step in the right direction towards a low carbon economy, but the reliance of these projects on T&D infrastructure means that they are clearly not the final destination that distributed energy solutions such as PV represent.
Third, the simultaneous use of solar panels for applications other than power generation can improve its economics. For instance, the installation of rooftop solar panels can reduce a building’s air conditioning load by shading the roof. There are also so-called building-integrated photovoltaic (BIPV) applications, where the PV panels are not installed on top of the facade of a building, but as the facade of the building, eliminating the need for conventional building materials.Furthermore, when such BIPV installation is wrapped into the mortgage of a new building, additional financing becomes unnecessary and the PV system can be financed using some of the cheapest available forms of long-term finance. BIPV’s improved economics represents a major opportunity for China, where McKinsey projects that some 40 billion square metres of floor space in five million buildings will be built by 2025.
Finally, the modular nature of solar PV means that it can be installed in stages, panel by panel, or solar farm by solar farm, allowing electricity production to begin shortly after construction commences but before it is finished, thus greatly enhancing the economics of solar power. This is in contrast to large centralised power plants, which take years to build and cannot generate power until construction is completed. The opportunity cost associated with the lag time of planning to construction in large-scale fossil fuel plants is rarely taken into account in the economic analysis when comparing relative costs of different energy options. When coupled with decentralization, modularity also means that the generation capacity of solar systems is scalable and more likely to match demand, reducing instances of overcapacity and hence inefficiency that are now being experienced in China’s coal power sector.
While it is beyond the scope of this article to quantify to what extent the foregoing considerations reduce the cost of solar PV power over coal-fired power through an “apples-to-apples” comparison, one authoritative study [pdf] estimates that the financial benefits of employing a distributed energy system can exceed those of a centralized system by as much as a factor of 10. If accurate, this would offset the cost difference between solar and coal-fired power.
Julian L. Wong is an energy analyst based in Washington, DC. He recently completed a Fulbright Fellowship at Tsinghua University in Beijing on renewable energy policy and is the author of The Green Leap Forward (www.greenleapforward.com), a blog on China’s energy and environmental issues.
NEXT: Recognising solar’s bottlenecks
This article first appeared in the Winter 2008 edition of China Security magazine. A full version of the article with references and graphics can be accessed here.
Homepage image by Matthijs Koster