Wednesday, October 21, 2020



Solarise all the things!

If we are to avoid dangerous levels of climate change, we need to decarbonise the economy and shift our energy supply completely to renewables. The good news is that the International Energy Agency thinks that that is going to happen. The reason? Interest rates have dropped. And this means that solar in particular (which has a long lifetime and low operating costs) is suddenly really cheap:

What happens in the extreme case where interest rates fall to zero? In these circumstances, the notion of a payback period ceases to be relevant. All that is required for an investment to be justified is that its lifetime returns should exceed the cost of construction.

Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.

There is, then, a real possibility that solar PV and other renewable technologies could fulfil the promise made decades ago by the promoters of nuclear power: that they will deliver electricity “too cheap to meter.” (Even with access to cheap capital, nuclear power never delivered on that promise.)

New Zealand has lower operating hours per year, so different costings. But we're still looking at electricity prices significantly lower than that provided by the grid. Our interest rates are already basicly zero, and the Reserve Bank is saying they will go negative next year. Which suggests that we should be using this moment to stick solar panels everywhere, to permanently shift our energy supply. As for how to make it happen, direct government funding like that used for the insulation scheme, and cheap loans to businesses would seem to be a good place to start from.