Krugman: Only Politics Can Delay “an Energy Transformation, Driven by the Rapidly Falling Cost of Solar Power”

… special treatment for fracking makes a mockery of free-market principles.

… will our political system delay the [solar] energy transformation now within reach?

Nobel prize winning economist Paul Krugman has another good column in the NY Times today, “Here Comes the Sun.”  He makes three key points.  First, solar is rapidly coming down the cost curve — I’ve  sprinkled a couple of the Climate Progress charts on this throughout this post.  Second, fracking is over-hyped.  Third,  the only thing that can stop the solar revolution in this country is fossil-fuel-driven politics:

We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives….

These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company both a symbol of government waste — although claims of a major scandal are nonsense — and a stick with which to beat renewable energy.

And don’t forget the traditional media, who overhype the output of  that propaganda machine (see Solyndra Is “the Royal Wedding of Energy Stories”)

But the cost drops are real and impressive:

But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.

This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.

And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.

See Economics Stunner: “Oil and Coal-Fired Power Plants Have Air Pollution Damages Larger Than Their Value Added.” Natural Gas Damage Larger Than Its Value Added For Even Low CO2 Prices.

I see on his blog that Krugman is getting a little blowback:

I’ve been getting some pushback from people I respect on today’s column, not so much for what I actually said as for what they fear readers may take away from it. So a bit of clarification.

Some of it involves questioning the cost data, but the main point, I think, is that even if solar power’s price per kwh matches coal-fired, it’s not going to take over the market right away, and maybe not ever. The sun doesn’t shine at night, and often doesn’t shine during the day. Intermittency is a big problem, and I probably should have made that clearer.

So what we’re actually looking at is still a partial role for solar, as a piece of a multi-source energy system. The point, however, is that it’s now looking like a much larger part than anyone imagined — and if we priced coal-fired power properly, that transformation would be happening now.

Well, the thing to remember is that, for many if not most applications, solar competes with retail prices, not the far lower wholesale prices.  They are hooked up on a roof and plug directly into the grid —  avoiding all of that expensive and difficult transmission and distribution — see Anatomy of a Solar PV System: How to Continue “Ferocious Cost Reductions” for Solar Electricity:

Chart from Emanuel Sachs of MIT. Note: This data is already two years old.)

That’s a key reason why demand has been soaring — see Solar is Ready Now:

Yes, this isn’t equivalent to baseload generation — but of course peak power is considerably more valuable than baseload.

Krugman also takes on Fracking:

Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.

Economics 101 tells us that an industry imposing large costs on third parties should be required to “internalize” those costs — that is, to pay for the damage it inflicts, treating that damage as a cost of production. Fracking might still be worth doing given those costs. But no industry should be held harmless from its impacts on the environment and the nation’s infrastructure.

Yet what the industry and its defenders demand is, of course, precisely that it be let off the hook for the damage it causes. Why? Because we need that energy! For example, the industry-backed organization declares that “there are only two sides in the debate: those who want our oil and natural resources developed in a safe and responsible way; and those who don’t want our oil and natural gas resources developed at all.”

So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners,” yet they demand special treatment for this industry precisely because they claim it will be a winner.

Indeed.  And  for those who are concerned about catastrophic climate change, natural gas is  even more problematic:

Krugman’s bottom line is inarguable:

But will our political system delay the energy transformation now within reach?

Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.

So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective. Here comes the sun, if we’re willing to let it in.

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45 Responses to Krugman: Only Politics Can Delay “an Energy Transformation, Driven by the Rapidly Falling Cost of Solar Power”

  1. harvey says:

    One option is to use solar to create methane from CO2 and water. Methane is easy to deal with can be stored and we already have a infrastructure to deliver it…

  2. Motorod says:

    Another is to use solar to create hydrogen, which could be a great source of propulsive power we could use for transit with slight modification to existing ICE motors and, more rationally, for providing for nighttime electricity demands.

  3. Charles Pye says:

    It’s great to see Paul Krugman address this issue. I wrote my own, similiar article here: arguing that solar was already cheaper to actually RUN the plants. The only thing that makes it expensive is the cost of financing the start-up cost, and that’s where government could help a lot. Some government-guaranteed loans (like Solyndra!) could reduce the finance costs greatly, without costing the government much at all.

  4. cervantes says:

    Right folks. The sun don’t always shine. (Nor do the wind always blow.) The most important technological problem is not renewable power generation, but storage. If we could store it cost effectively, we’d be in business. (A superconducting smart grid that could move it around from wherever it’s being generated to wherever it’s needed would be nice too.) Far too little attention is paid to these challenges, which are the real key. Hydrogen, however, doesn’t look so good. High volume to energy, highly explosive, leaks through the tiniest holes.

  5. Dave R says:

    I often sell country property that is some distance from traditional utility-supplied power. The costs of creating an off-grid system to power a home, including backup generation using propane or other fuels, have fallen to the point where many people don’t see any point in hooking up to the grid, even where that cost is not unrealistically high. The primary reason for many to hook to the grid isn’t for energy, but to take advantage of tax credits.

  6. Chris T. says:

    For what it’s worth, the reason storage is so important is … because storage is so important. That is, it’s crucial today because the system we use today is pretty near 100% supply-managed: I turn on my lights, and PowerCo spins harder to generate power.

    There is no fundamental reason that things have to be this way. In particular, imagine I have (for instance) a “Smart Washing Machine”. I load stuff into it and push the “wash” button, which does not actually turn it on, but rather simply sets it to “run when power is cheap and plentiful, or some time within the next 24 hours, whichever comes first”.

    If the wind kicks up at night, the Power Hogs spin up and use the wind power. If the sun shines brightly during the day, the Power Hogs spin up and use the sun power. If enough of this is automated, we end up with enough demand-side management that storage is no longer such a huge issue. The lights still need to come on when I need to see, but the electric car can charge “whenever”; the industrial size ice-maker that makes the air conditioning for tomorrow can run in the night; and so on.

    We will probably still need some kind of storage anyway, it just won’t be as critical as it is today.

  7. Ramez Naam says:

    As the author of the Scientific American post Krugman linked to (and which I think you linked to at some point as well, Joe), I’d like to offer a few thoughts.

    Skeptics are right to point out that solar won’t instantly replace coal. Even when solar prices are lower than coal, the switch-over will still require trillions of dollars of capital investment. This will be one of the largest industrial transitions in history.

    At the same time, that transition will be motivated (in both the private and public sector) by the return on investment of getting lower priced energy for the long term.

    The transition is starting already. The Department of Energy reports that in 2004, only 2% of new electrical capacity addition in the US was in the form of renewables. By 2009, that number had soared to 55%. In 2011, as much as 75% of new electrical capacity addition in the US could be in the form of renewables. By 2015, that number could be 100%.

    Because daytime electrical use is higher than night time, and because US electrical use peaks on hot summer afternoons when air conditioners are on, solar can replace more than half of our current electrical sources even without overnight storage.

    To replace the rest, we’ll need a combination of other renewables that provide energy when the sun isn’t shining (such as wind and hydro) and advances in energy storage.

    Those advances are on the way. In 2005, a study reported that lithium-ion battery prices had dropped by a factor of 10 since 1991, from more than $3 / watt-hour to around 30 cents per watt hour. That’s faster than even the price decline of solar energy. Considering that new generations of battery technologies such as metal-air batteries promise to boost energy density by another 10x, and that other types of energy storage such as compressed air and pumped hydro are also being experimented with, I suspect we will crack low cost storage in the coming decade.

    Solar and other renewables can replace coal and natural gas. If we put a fair and realistic price on CO2 emissions (as you’ve campaigned for frequently), they’d do so even more quickly.

    – Ramez Naam

  8. Ernest says:

    Assuming solar costs will continue to drop, the only thing preventing it from taking over completely is the storage issue. But there is some hope for the future even along these lines. Storage needs to be dirt cheap, long lasting.

    Aquion (cheap battery):

    Sun Catalytix (cheap hydrolysis):


  9. Soho says:

    I’m all for solar energy (I work in the industry) but I think the NCAR paper is getting way too much attention. Sit back and think about the consequences of leaking 2.5% of the world’s natural gas: massive pipeline explosions all the time. And those just don’t happen very often at all. Oil wells flare their gas for a reason.

  10. Chris Winter says:

    You’re right to point out the risks of hydrogen — although it’s been used in the space program in large quantities for decades, without causing disaster.

    I know: you’ll say price is no object for the space program, whereas consumers have to watch every dime. There’s some validity to that too; but my point is that there’s no technical obstacle to using hydrogen safely.

  11. workaday joe says:

    I think of solar as being in the “steam engine” phase of development. Give this technology a hand and a few decades and we’ll wonder what the heck took us so long.

  12. cervantes says:

    That’s gonna be a mighty hard sell. People need their clothes or dishes clean now, not whenever the sun gets around to shining. And the refrigerator can’t take a few hours off without spoiling the food. You might be able to reduce the need for storage somewhat, but we’re accustomed to power when we want it and believe me, as a resident of the unfortunate state of Connecticut, not having it in this modern world of today in which we live just doesn’t cut it for 99% of the people.

  13. fj says:

    This is so upbeat and positive makes one cringe at the negative spin naysayers will have to conjure up to counteract it.

  14. Toes says:

    v2G is an electrical storage system that is being developed. Plug-in eV’s will store power and discharge as needed.

  15. rjs says:

    if prices adjusted for inflation are falling around 7 percent a year, it pays to wait for lower prices…

  16. Toes says:

    Wind and conservation will shutdown US coal generation. Construction may start within the next several months on the grid bottleneck solution.

  17. Frank Restly says:

    Someone had mentioned using the electricity from solar power to create pure hydrogen. Pure hydrogen is extremely dangerous for the following reasons:

    1. To store sufficient quantities for later re-use hydrogen must be stored under pressure.

    2. As a result of the Joule-Thompson effect, hydrogen gas heats ups when it depressurizes. Meaning that to prevent hydrogen from self igniting when mixed in the atmosphere, it must be stored at low temperatures while under pressure.


  18. Joan Savage says:

    The usual interest in revising capacity should bring to mind the counterpoint, cut the demand.

    A long-time model of a vaccine refrigerator has a reserve cooling capacity designed to run only 27% of the time in a hot 43° C (110° F) environment.

    If my house is going to experience 43° C (110° F), I’d like to think I could cool it with an energy draw only 27% of the time, or less.

  19. mwnl says:

    Don’t expect any carbon price tax on coal, oil or gas in the US. Sellers have that option blocked.

    When alternate sources have the retail price beat the profit motive will make the transition possible, but not before.

    That means that base load prices will rise to take up any price advantage alternatives may offer or buy back prices will be lowered for surplus alternative energy sources.

    It is too soon to cheer. As Krugman notes, the US is an oligarchy not a democracy of rational maximizing equals.

  20. fj says:

    Yes, that’s a good strategy considering rapidly evolving technology with costs rapidly plummeting but, there comes a time when real and or potential benefits outweigh future cost savings.

  21. Mark Shapiro says:

    Krugman + Romm provides 93% of the news you need.

    No storage or intermittency problems.

  22. urban legend says:

    Why can’t a necessary portion of solar power generated during the day — or for that matter, wind power generated when the wind is blowing — be used to pump a liquid up to a reservoir — water? — and then allow gravity to do the job during the night? In other words, we store the energy, not the heat. We use water from dams to power turbines now.

  23. Max Rockbin says:

    Worldwide Growth slowed considerably this year because of cuts in European subsidies.

    There is currently a glut of panels due to overmanufacturing because the slower growth wasn’t expected.

    Too much supply, (relatively) low demand: LOWER PRICES.
    The big drop in prices this year is not due to a technical miracle. It’s due to oversupply. That is why Solyndra cratered and other companies are having a hard time too.

  24. Bill S says:

    Computing power doubles at the same price every couple years, but most people aren’t still waiting to buy a computer.

  25. Greg says:

    Thanks for those comments, Ramez: very useful.

    I’ll just point out that the cost isn’t as great as it might seem, since by building renewable power plants we are avoiding investment that would have been made, to replace old coal and nuclear power plants, and open new mines.

    A large part of those trillions will be spent in any event. It’s just a matter of choosing what to spend them on.

  26. Running a home on propane and fossil fuelled generators is not being “off the grid”. Seen a map of the pipeline grid recently?

    And from a climate damage standpoint going off the electricity grid can be a disaster. Up in BC one “alternative” island fought to stay off the electrical grid. Now instead of 95% GHG-free electricity this island powers itself with massive silos of propane and gasoline. Carbon fail.

  27. There is a lot we can do without solving the storage problem.

    As Ramez Naam says below in #8, intermittent renewables can replace up to half our electricity demand without solving the storage problem first.

    And as Chris T says above, there are strategies we can unfold like smart grid appliances that can decrease the need for storage in the long run even more.

  28. LOL. Great point.

    One of the early computer software legends once quipped in the late 80’s that he actually had friends who spent more on their car than their computer.

    Early adopters enable the future.

  29. Great link you provided to the data supporting your claims. Oh, wait…

    And don’t forget to send us a link that explains the same level of price decline happening for the other 35 years in the chart.

  30. D. C. Sessions says:

    In this part of the country, the #1 residential load is air conditioning. Nothing else even comes close. Conveniently, peak AC load coincides with peak solar availability. However, AC is needed even at night for several months of the year [1].

    However, it doesn’t take an impossible storage tank to buffer that. Pump heat from the house to the tank in the daytime, circulate the heat to air at night. When the wind blows at night, chill the tank.

    Sure, it’s not a complete solution. Shall we let the perfect be the enemy of the good?

    [1] I could say, “especially at night.” With nighttime lows in excess of 33C, doing without AC makes it impossible to get a healthy night’s sleep.

  31. D. C. Sessions says:

    Pumpback has been used in Western hydroelectric systems for decades. I remember back in the 70s when SRP retrofitted pumpback to Roosevelt Dam.

  32. Theodore says:

    It is a disgusting collective sickness of our time that we are incapable of making a conscious deliberate decision and sticking to it. We so fear angering the gods of free enterprise that we must wait till the price gets down to nothing before we can make the switch. If the battle is not fought and won, the wicked will not perish. We have gained little if solar energy wins only because it is cheaper.

  33. Ernest says:

    This is a good “curb your enthusiasm” point. (I sometimes get carried away myself.) Ultimately it raises the question of whether solar will thrive (even if it will take longer) if all subsidies were to be removed. This is likely to happen if the Republicans have their way. I certainly hope it thrives.

    The other Krugman point is asking the question of what is the real cost of natural gas, now that shale gas is all the rage. We should not automatically be against natural gas, esp. if it means not building new coal plants. Even in Amory Lovin’s “Reinventing Fire”, natural gas has a vital role to play, short of renewables being able to play a major baseload role. However, there needs to be more transparency about the fracking chemicals used. What are the “best practices” for the industry? Are the problems documented in the movie “Gasland” a result of a few bad actors taking shortcuts, or is there an inherent problem in “fracking”? For climate activists, what are the best practices for avoiding methane leakage? Unfortunately, the industry is trying to minimize transparency, which raises the question, what are they trying to hide? (NIMBYism, the people whose neighborhood and water most affected, can be a powerful political force here.)

  34. Tom Smerling says:

    This line from Krugman is great way to rebut the Solyndra scandal mongerers:

    “Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition.”

    Ironically, it is high-risk technologies like fracking gas and nuclear that require massive government intervention, to insure the developers against lawsuits. Funny how you don’t hear much outcry about that, do you?

  35. Bill G says:

    Those questioning solar often state its failure is no electricity can be made at night.

    In a real sense – yes it can. We have been living half year on our sailboat in the Pacific and Caribbean since 1996. We store our collection of solar power in batteries and use this power all night to run lights, TV, fans, watermaker, refrigerator and more.

    With good battery storage electrical power collected in daytime can be stored on any scale. And there are many alternatives for storage besides batteries – such as hydro power. Pump water daytime into dams; run generators night time to make electricity.

    We also have a powerful wind generator on board, so the two sources supply about 95% of all the electrical power we need. It works wonderfully.

    However we note some cruising boats just can’t trust alternative power sources. It is some kind of cultural distrust that is not logical. So they are forced to find, buy and transport fuel constantly to run their on board gas or diesel generators, then listen to the constant noise of those machines.

    Even though they are exposed to many boats successfully using only alternative power, they are just so culturally attached to fossil fuel that can’t break away. Very crazy.

  36. Bill G says:

    People just seem programmed to disbelieve any power solution that is not fossil fuel driven.

    My wife and I have lived for 16 years in the Caribbean on our boat and used wind and solar generated electricity almost 100%. It works wonderfully. We never even think about the solar panels – they just work every day. The wind generator takes a little attention, but very little and it is quiet.(KISS brand).

    This stuff works folks. We have lived happily with it for 16 years. Kick your fossil fuel faith and loyalty. You can do it!

  37. Bill G says:

    For storage on our 38 ft. sailboat we have four lead acid, deep cycle batteries capable of storing around 500 amps. We draw off this stored power at night for lights, watermaker, refrigerator, radios, TV and electrical appliances.

    It all works extremely well and trouble free. Two of our 75 watt panels are now 15 years old and showing no signs of dimishing power. We had to replace the third panel after ten years only because a worker accidentally broke it.

    There are two of us living on board six months of the year. Reading the reams of discussion back and forth and sideways about solar, leaves us wondering what all the fuss is about.

  38. Merrelyn Emery says:

    D.C. Amazing! Did people live there before air conditioning was invented? How did they do it? How do people in the tropics manage to survive without air conditioning?

    How come you don’t know how to keep your house cool or at least livable without air conditioning?

    I have never used an air conditioner in my whole life and I am no stranger to hot, ME

  39. Nathanael says:

    But *look at those numbers*. Retail price parity has already been reached in many places, and will be reached in most places in *two years*. The exceptions are mainly places with lots of hydro generation.

    At that point, that’s it. Smart banks will start making loans for solar panel installation. Utility companies will first have to cut electric rates, and then will decommission expensive “peaking plants” burning oil and methane, in favor of solar panels.

    A few years later and solar panels will be cheaper than the wholesale price of coal. At this point the political situation will change. Every fossil fuel plant which doesn’t run at night will be shut down.

    Next step requires battery (energy storage) technology to improve… so it will take about a decade. Solar PLUS batteries will be cheaper than fueling EXISTING coal plants by 2020, and that will be the end for the coal-burners.

    Meanwhile, cars will be converted to electricity, and eventually (sigh) so will the rest of the trains.

    This leaves metallurgical coal, heating oil, and natural gas for cooking and heating. The final one may be dealt with using landfill methane; heating oil will have to be phased out, but it’s so expensive already that houses using it will probably convert whenever they can afford it. Metallurgical coal is probably the hardest to stop using.

  40. Nathanael says:

    What the frackers are trying to hide is that there isn’t that much natural gas in the “tight” shale.

    Cheseapeake has adopted a strategy of “get in, drill, frack, advertise the large output in the first week, then sell the gas rights to some other sucker”. They wouldn’t do this if there was as much gas as they were advertising.

    The US Geological Service released a study not long ago saying that the frackers were claiming larger reserves than actually existed. It turns out fracked shale produces a lot early on, but declines VERY quickly, unlike “conventional” natural gas.

    So the frackers are running a scam on investors, basically. The fact that they’re ruining groundwater and farms to do so, while making global warming worse, is beyond disgraceful. They all belong in prison.

  41. harvey says:

    The hydrogen produced can be reacted with CO2 to produce methane which we know how to handle, and how to move around the country.

  42. Barry says:

    “I know: you’ll say price is no object for the space program, whereas consumers have to watch every dime. There’s some validity to that too; but my point is that there’s no technical obstacle to using hydrogen safely.”

    In the regular world, expense *is* a technical obstacle.

  43. Manuel H. says:

    I really like your article because it points out one of the strangest developments in energy policies: blaming renewables for needing to much subsidies to start-up (not for the whole life cycle) while other energy forms like fossile fuels and even more nuclear are being heavily subsidized with taxpayers money either through direct payments or the externalization of huge environmental effects. This creates completely deferred prices which renewables are then measured against…fact is renewable energies are developed far enough to be used on a large scale- To this point it’s just a matter of political will.

  44. James Newberry says:

    ” . . yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners, . . ”

    Mr. Krugman is an admirable economist yet this type of statement shows little knowledge of nation-state energy economics. Just what does he think of trillions of dollars of historical US subsidies for fossil and fissile fuel cycles, hundreds of billions of dollars of annual global fossil subsidies (IEA 2011), and nuclear power insurance indemnification are about? They are certainly not about his vaulted fantasy of “free-market” energy economics.

    Perhaps he might consider the term “war economy subsidized by the fuels of war” for a start. Then consider that petroleum is not a form of energy, it is a form of matter.

    Have a solar day, at least until the numerous impacts of carbonic acidification reduces civilization (and its very gross domestic product).