President of the Jamaica Public Service Company, JPS, Kelly Tomblin, is rejecting claims that she’s using scare tactics to keep businesses from turning to renewable sources of energy.
In an interview yesterday on Nationwide This Morning, Chief Executive Officer of Solar Buzz Jamaica, Jason Robinson, accused JPS of using ‘scare tactics’.
This was in response to comments attributed to Ms. Tomblin in a recent Gleaner report that the company could be forced to raise electricity rates if its top customers leave the grid.
But speaking with Nationwide News yesterday, Ms. Tomblin sought to clarify the comments she made to the Gleaner newspaper.
She’s insisting she’s not using a scare tactics.
Ms. Tomblin says she would prefer companies stay on the power grid.
This, as the intermittent use of the grid is more of a burden on JPS than if a company were to be removed completely.
And, Ms. Tomblin says the JPS doesn’t build LNG plants contrary to Mr Robinson’s claim.
He’d said the light and power company has been offering to set up small LNG plants for large companies, which would also take them off the grid.
She’s also refuting his claim that JPS’s rates are going up.
A field of photovoltaic solar panels providing alternative to the supply from the JPS.
With many local entities turning to solar systems or other renewable systems to reduce their reliance on more expensive energy supplied by the Jamaica Public Service Company (JPS), there is a another indication that persons who remain on the JPS grid could face the consequences.
“We all should be concerned and thoughtful. You don’t want everybody who can afford solar on their roof going off the grid because you would still have to pay for the grid,” CEO of the JPS, Kelly Tomblin, told The Sunday Gleaner during a recent interview.
“How do we take care of a particular company so that we also take care of the whole? How do we find a way to make it affordable for everybody and don’t just let people cherry-pick off the grid?” added Tomblin.
There is no official registry of the amount of renewable energy being utilised on the island, but it is estimated that approximately 35 megawatts of renewable energy has been installed between residential and business customers in recent years.
The target is to have 20 per cent of the country’s energy need being supplied by renewable sources by 2018, moving to 30 per cent by 2030.
Energy Sales
The JPS has recorded four years of decline in energy sales from 2010 to 2014, but has seen a turnaround in the last two years with a two per cent increase in 2015 and a four per cent increase in 2016.
“This could be due to the fact that the cost of electricity to customers has dropped by about 25 per cent over that time (usage tends to increase when the price of electricity is lower),” the JPS said in an emailed response to questions from our news team.
According to the JPS, while it has not yet seen any revenue fallout from renewable energy installations, it recognises “that energy sales could have been higher if some customers had not gone off the grid”.
If more paying customers move to renewables and leave the JPS, the company will be selling to a smaller group of paying customers and could be forced to find alternative ways to remain profitable, which could see electricity cost increase for some customers.
If Top Customers Left
Tomblin admitted that if the company’s top 50 customers were all to leave the grid it would cause a serious problem, but she argued that she is confident that these companies are cognisant of their responsibility to the Jamaican people.
“I am really encouraged, having been in meetings with our top 50 customers, and we are having a lot of meetings with the Private Sector Organisation of Jamaica (PSOJ) and the Energy Committee to say how we can balance personal and country interest,” said Tomblin.
“People who are adding solar are doing so during the day; that is not when Jamaica has a peak. So unless they have storage we have to maintain the same power plant and the same grid, because they come on the JPS system at nights, so they still have to pay and, therefore, it is not that much of an impact to the system,” said Tomblin.
But PSOJ President Paul Scott said the decision to remain on the grid or not is one entities will have to decide based on what is best for their business.
“I am aware of some members who have not come off the grid because of the impact it might have on residential users, while other members have come off the grid,” said Scott, who is a member of the Electricity Sector Enterprise Team.
“So one must make their own economic decision based upon their own situation. Serious companies would take that (impact on residential users) into consideration. I would encourage our members to make decisions that will impact the overall competitiveness of Jamaica. Different industries have different utility requirements and therefore, you can’t generalise.”
According to Scott, the use of the grid will change over time, as PSOJ members, and the private sector as a whole, are always going to calculate the cost of energy as a significant part of their business.
Hands-on training is a key element of Wigton courses. Here (from left) Renford Smith, Marcus Grant and Alan Searchwell connect the electrical components of a solar panel at the Wigton Renewable Energy Training Lab in Rose Hill, Manchester, recently.
“BY BEING natural and sincere, one often can create revolutions without having sought them.”
The Wigton Wind Farm team could be drawing inspiration from these words by French fashion designer Christian Dior, as it rolls out a training programme designed to fuel interest and inspire further action on renewable energy in Jamaica.
“It is open to anybody who has an interest. It is open to the general public,” said Sanja Simmonds, engineer and training coordinator at the wind farm, which is located at Rose Hill in Manchester where they began the renewable energy training courses this year.
In January, the farm trained 20 people from across sectors — private and public, and including students as young as 19 years old — in photovoltaics.
“Once you have an interest, it just goes from there,” Simmonds noted. “(The training) is how we can stimulate that interest and have greater interest for the technologies.”
The first training course ran for three days, as will the next one looking at solar thermal energy to be held in April.
The third training course, which will focus on wind energy and hydro, will be held in July. The final one for the year will be held in November and focus on bio-energy.
Up to now, Simmonds said they had been careful to avoid over saturation, with each course having a cap of 15 participants, with provisions for no more than an additional five.
“We don’t want anyone lost. If you have too many people, you may have persons sitting around and not paying attention. What we want is for participants to be fully engaged and hands on,” he said.
“The delivery of the first course was extremely effective, based the feedback we got. The training courses are not for you to you only to come and sit down before a PowerPoint. It is 50 per cent theory and 50 per cent practical. So we had participants (from the first training course) actually doing, for example, photovoltaic installation, sizing wires, sizing panels, etc.,” Simmonds added.
The training coordinator explained further the thinking behind Wigton’s efforts.
“Previously Wigton’s tagline was ‘Making renewables a breeze’. Now our tagline is ‘securing Jamaica’s energy future’. To secure the energy future, you could do it in multiple ways. You could do it from a commercial point of view, which is what Wigton is. So we harness clean energy from the wind,” he explained.
“You could also do it from a technical standpoint, which is where we train. So we are trying to create interest in renewable energy and ensure that people have a better appreciation for it. So it is two fold — the commercial side and the technical side,” the engineer added.
The plan, he said, is to have the programme be annual.
“The courses will develop as time goes on. We didn’t want to start it five days and then people wanted three. So we started it on a minimal scale to see what the feedback would be like and the feedback was really exceptional,” Simmonds said.
“So now we will look at expanding the courses. Maybe in the future we will have five days of courses or even two weeks,” he said.
They also have their sights set on having the courses accredited.
“Currently it is just a certificate of participation (that participants receive), but as we go along, we are trying to figure out how we can get the courses certified,” Simmonds noted.
He was, however, quick to emphacise: “We are not trying to compete against the other institutions providing the training. What we are trying to do is stimulate the interested among the general public and then grow that interest.”
“When we talk about the energy policy, one of the core parts of it is to increase renewable energy penetration into the grid. If you are to do so, you have to make people aware of the type of the technologies that you are pushing,” he added.
Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.
In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Taking advantage: Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, who gained experienced in Europe and now seek new markets abroad as subsidies dry up at home.
Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.
“These are game-changing numbers, and it’s becoming normal in more and more markets,” said Adnan Amin, International Renewable Energy Agency ’s director general, an Abu Dhabi-based intergovernmental group. “Every time you double capacity, you reduce the price by 20 percent.”
Better technology has been key in boosting the industry, from the use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun. It’s also driven by economies of scale and manufacturing experience since the solar boom started more than a decade ago, giving the industry an increasing edge in the competition with fossil fuels.
The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance.
That’s in step with other forecasts.
GTM Research expects some parts of the U.S. Southwest approaching $1 a watt today, and may drop as low as 75 cents in 2021, according to its analyst MJ Shiao.
The U.S. Energy Department’s National Renewable Energy Lab expects costs of about $1.20 a watt now declining to $1 by 2020. By 2030, current technology will squeeze out most potential savings, said Donald Chung, a senior project leader.
The International Energy Agency expects utility-scale generation costs to fall by another 25 percent on average in the next five years.
The International Renewable Energy Agency anticipates a further drop of 43 percent to 65 percent for solar costs by 2025. That would bring to 84 percent the cumulative decline since 2009.
The solar supply chain is experiencing “a Wal-Mart effect” from higher volumes and lower margins, according to Sami Khoreibi, founder and chief executive officer of Enviromena Power Systems, an Abu Dhabi-based developer.
The speed at which the price of solar will drop below coal varies in each country. Places that import coal or tax polluters with a carbon price, such as Europe and Brazil, will see a crossover in the 2020s, if not before. Countries with large domestic coal reserves such as India and China will probably take longer.
Coal’s Rebuttal
Coal industry officials point out that cost comparisons involving renewables don’t take into account the need to maintain backup supplies that can work when the sun doesn’t shine or wind doesn’t blow. When those other expenses are included, coal looks more economical, even around 2035, said Benjamin Sporton, chief executive officer of the World Coal Association.
“All advanced economies demand full-time electricity,” Sporton said. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”
Even so, solar’s plunge in price is starting to make the technology a plausible competitor.
In China, the biggest solar market, will see costs falling below coal by 2030, according to New Energy Finance. The country has surpassed Germany as the nation with the most installed solar capacity as the government seeks to increase use to cut carbon emissions and boost home consumption of clean energy. Yet curtailment remains a problem, particularly in sunnier parts of the country as congestion on the grid forces some solar plants to switch off.
Sunbelt countries are leading the way in cutting costs, though there’s more to it than just the weather. The use of auctions to award power-purchase contracts is forcing energy companies to compete with each other to lower costs.
An August auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction grabbed headlines with a bid of 2.42 cents a kilowatt-hour. Developers have been emboldened to submit lower bids by expectations that the cost of the technology will continue to fall.
“We’re seeing a new reality where solar is the lowest-cost source of energy, and I don’t see an end in sight in terms of the decline in costs,” said Enviromena’s Khoreibi.
Energy minister Dr Andrew Wheatley (left) and Petroleum Coprporation of Jamaica general manager Winston Watson.
The Petroleum Corporation of Jamaica (PCJ) will be carrying out major energy efficiency and renewable energy projects at six public hospitals to reduce electricity costs under the United Nations Development Programme’s (UNDP) Deployment of Renewable Energy and Improvement of Energy Efficiency in the Public Sector Project.
The facilities slated to benefit are the National Chest Hospital and the Sir John Golding Rehabilitation Centre in St Andrew; Bellevue Hospital in Kingston; May Pen Hospital in Clarendon; Savanna-La-Mar Hospital in Westmoreland and the Black River Hospital in St Elizabeth.
Among other things, the interventions at these institutions will involve energy audits and the installation of energy-efficient lighting, solar photovoltaic technology and solar water-heating systems, PCJ said in a release yesterday.
SPECIALISED SERVICES
The selected institutions provide specialised services to a large cross section of the population and have high capital and operational expenditure.
Assessments revealed that energy-efficiency interventions at these hospitals can achieve considerable savings which will help to achieve the PCJ’s objective of reducing the public sector’s energy spend. The infusion of renewable energy and energy-efficient technology into the hospitals’ operations is expected to reduce their collective electricity demand by 1,305,000 kWh each year, which at current rates translates to more than J$41 million in savings.
The PCJ’s general manager, Winston Watson, said: “We are pleased to partner with the UNDP on this project, since the objective of incorporating more energy-efficiency solutions into the public sector’s operations aligns perfectly with our mandate to reduce the Government’s energy bills.”
The Deployment of Renewable Energy and Improvement of Energy Efficiency in the Public Sector Project is a US$12-million initiative comprised of three components.
The energy interventions to be undertaken by the PCJ are being carried out under the third component, which focuses on economic and fiscal instruments to facilitate the uptake of renewable energy and energy efficiency in the public sector.
Project execution under this component is projected to cost US$2.01 million, of which PCJ will provide just over US$1,360,000 and US$650,000 will come from the Global Environment Facility Trust Fund.
WORTHWHILE INVESTMENT
“We consider this a worthwhile investment for the Government and people of Jamaica as it will improve conditions in the health sector while reducing electricity costs, which will mean savings for the public sector, and we are therefore looking forward to a successful partnership with the UNDP,” Watson said.
Bruno Pouezat, UN resident coordinator and UNDP resident representative, said: “As we mark the official launch of this landmark project, I recall the words of United Nations Secretary General Ban Ki-moon, who in 2010 called for ‘a global clean energy revolution’. He added that “energy is the golden thread that connects economic growth, increased social equity and an environment that allows the world to thrive. We look forward to working with all of our partners in Jamaica in securing these ideals.”
Minister of Science, Energy and Technology Dr Andrew Wheatley said the public sector accounted for 15.5 per cent of total electricity sales in Jamaica in 2015.
“We are working assiduously to reduce our overall consumption and I am pleased that this project seeks to deploy renewable energy and improve energy efficiency in the public sector, as these interventions will serve to bolster our ongoing efforts to reduce the Government’s energy consumption while driving efficiency,” he added.
The Deployment of Renewable Energy and Improvement of Energy Efficiency in the Public Sector Project was officially launched on November 30, 2016. The PCJ will begin project implementation in early 2017.
Rooftop solar energy is becoming a financially viable way for millions of U.S. consumers to generate their own electricity — and utilities are doing everything to kill the solar boom before it gains too much traction. Utilities in states such as Florida, Wisconsin, and Nevada have tried to undermine rooftop solar at the regulatory level and in ballot measures. As a reaction, voters have fought back and beaten the efforts to squash solar energy.
The impact on residential solar companies Tesla (NASDAQ: TSLA), Vivint Solar(NYSE: VSLR), Sunrun (NASDAQ: RUN), and SunPower (NASDAQ: SPWR) shouldn’t go unnoticed. They’re winning the policy war against utilities, and as they do, it’ll open a larger and larger market across the country.
POLICY WINS ARE GOING TO RENEWABLE ENERGY
The election earlier this month was accompanied by a number of ballot initiatives that will impact solar energy for years to come. And for the most part, solar energy was a huge winner.
Despite utilities’ spending $26 million to pass a referendum that would have undermined solar economics in the state, Florida voters rejected the utility referendum. The state now looks like it’ll have a bright solar future.
In Nevada, less than a year after the public utility commission essentially killed the rooftop solar industry, residents overwhelmingly voted to break up Berkshire Hathaway (NYSE: BRK-B)-owned NV Energy’s long monopoly in the state. Customers have to be given energy choice, meaning more solar in one of the country’s sunniest states.
In the past, Wisconsin has tried to add fees to utility bills that would kill solar energy before it ever got started, but those attempts were rejected by the court.
There’s an important trend here for utilities and solar companies: When solar energy goes on the ballot or to the court, it wins. That should have every utility in the country frightened because that gives millions of customers choice regarding their energy needs.
THE LOOMING THREAT FOR UTILITIES
Policy wins are important because they lay the groundwork for future innovations to take hold in energy. Today, that means rooftop solar on more than 1 million homes in the U.S. — and that number is growing quickly.
The next step will be adding energy storage to homes, something that Tesla is leading on and that Vivint, Sunrun, and SunPower are all adding, as well. As energy storage is added, customers can use more of their own energy, making net metering less important and providing more flexibility for customers.
The holy grail for renewable energy is allowing customers to cut the cord to the utility altogether. We may be a decade from that being a reality, but the more utilities add fixed fees or demand charges, the more quickly the economics of cord-cutting will become compelling. Long-duration energy-storage technologies are already beginning to be deployed, and before long, a couple of Powerwalls and a long-duration energy-storage system may be a viable option for consumers, making utilities irrelevant.
THE SLIPPERY SLOPE IN ENERGY
Utilities are in a tough position, having incentives to apply policies that protect short-term profits but which may undermine long-term competitiveness. It’s clear that when push comes to shove, voters are willing to overturn utility policies, voting for solar energy across the country. That has to be a concern for utilities, and it shows that the future is getting brighter for solar energy companies providing the solutions customers want.
Electric avenues that can transmit the sun’s energy onto power grids may be coming to a city near you.
A subsidiary of Bouygues SA has designed rugged solar panels, capable of withstand the weight of an 18-wheeler truck, that they’re now building into road surfaces. After nearly five years of research and laboratory tests, they’re constructing 100 outdoor test sites and plan to commercialize the technology in early 2018.
Wattway’s solar road in Tourouvre
“We wanted to find a second life for a road,” said Philippe Harelle, the chief technology officer at Colas SA’s Wattway unit, owned by the French engineering group Bouygues. “Solar farms use land that could otherwise be for agriculture, while the roads are free.”
As solar costs plummet, panels are being increasingly integrated into everyday materials. Last month Tesla Motors Inc. surprised investors by unveiling roof shingles that double as solar panels. Other companies are integrating photovoltaics into building facades. Wattway joins groups including Sweden’s Scania and Solar Roadways in the U.S. seeking to integrate panels onto pavement.
To resist the weight of traffic, Wattway layers several types of plastics to create a clear and durable casing. The solar panel underneath is an ordinary model, similar to panels on rooftops. The electrical wiring is embedded in the road and the contraption is topped by an anti-slip surface made from crushed glass.
A kilometer-sized testing site began construction last month in the French village of Tourouvre in Normandy. The 2,800 square meters of solar panels are expected to generate 280 kilowatts at peak, with the installation generating enough to power all the public lighting in a town of 5,000 for a year, according to the company.
For now, the cost of the materials makes only demonstration projects sensible. A square meter of the solar road currently costs 2,000 ($2,126) and 2,500 euros. That includes monitoring, data collection and installation costs. Wattway says it can make the price competitive with traditional solar farms by 2020.
The electricity generated by this stretch of solar road will feed directly into the grid. Another test site is being used to charge electric vehicles. A third will power a small hydrogen production plant. Wattway has also installed its panels to light electronic billboards and is working on links to street lights.
The next two sites will be in Calgary in Canada and in the U.S. state of Georgia. Wattway also plans to build them in Africa, Japan and throughout the European Union.
“We need to test for all kinds of different traffic and climate conditions,” Harelle said. “I want to find the limits of it. We think that maybe it will not be able to withstand a snow plow.”
The potential fragility joins cost as a potential hurdle.
“We’re seeing solar get integrated in a number of things, from windows in buildings to rooftops of cars, made possible by the falling cost of panels,” Bloomberg New Energy Finance analyst Pietro Radoia said. “On roads, I don’t think that it will really take off unless there’s a shortage of land sometime in the future.”’
On Nov. 4, Walmart announced an aggressive plan to increase its investments in renewable energy, pledging to power half its operations from wind, solar, and other renewables by 2025 and to cut the carbon footprint of its operations by 18 percent over the same period. Ten days later, Microsoft made its largest wind-power purchase agreement ever, with a deal to buy 237 megawatts of electricity from turbines in Kansas and Wyoming to run data centers in Cheyenne.
In between those announcements, Donald Trump was elected president, in part by calling climate change a hoax and vowing to gut most of Obama’s clean-energy policies and revive coal mining. If the actions of Walmart and Microsoft are any indication, a Trump administration will do little to dissuade companies from continuing to invest in renewables. “I think fears of a negative impact of Trump on renewable energy are really overblown,” says Thomas Emmons, a partner at Pegasus Capital Advisors, a private asset management firm focused on sustainable and alternative investments.
One reason is timing. The biggest economic incentives for clean energy are federal tax credits for solar and wind projects. Both were set to expire at the end of last year, prompting a surge in investments as companies raced to get in under the deadline. In December, Congress unexpectedly extended both credits (for solar until 2021 and for wind until 2019) as part of a deal to lift the 40-year-old ban on U.S. oil exports. It’s not clear that Trump will try to persuade Congress to repeal the extensions. Wind power is especially popular across the Midwest, a Republican stronghold; in many cases it’s become cheaper than other sources of grid power.
Sixty percent of Fortune 100 companies have renewable-electricity or climate change policies, and 81 companies globally have committed to get 100 percent of their energy from renewable sources, according to Bloomberg New Energy Finance. Companies tend to invest in renewable energy in one of three ways: sourcing clean power from wind and solar projects through long-term agreements; purchasing a stake in green power projects; or using renewable-energy credits to offset the dirtier power they consume.
Since 2008, U.S. companies have signed agreements to purchase more than $10 billion worth of wind and solar power— about 10Gw, enough to run almost 2 million U.S. households for a year. BNEF expects that pace to increase over the next decade, with at least 50 U.S. companies signing long-term agreements to buy an additional 22Gw of clean energy. “A Trump presidency does not lower our expectations for the growth of the corporate renewable-energy market,” says Nathan Serota, a clean-energy analyst at BNEF. “If anything, a less ambitious stance on renewables at the federal level could encourage corporations to pick up the slack even further.” With the government providing less support, more businesses may decide the best way to ensure clean-power projects get built is to sign long-term purchase agreements. That way, renewable developers have a guaranteed customer, ensuring they can finance new projects.
These agreements are emerging as the preferred way to invest in clean energy. Locking in electricity prices for up to 15 years, the deals let companies hedge exposure to volatile natural gas and coal prices, which have historically determined wholesale power prices in the U.S. As wind and solar get cheaper, companies are able to lock in renewable power for less than the average wholesale power price, says Swami Venkataraman, senior vice president at Moody’s Investors Service.
“Companies are investing in sustainability, not because they’re making a political statement, but because they have a fiduciary duty to protect shareholders and make money,” says Mindy Lubber, president of Ceres, a nonprofit sustainability advocate. Even if Trump rolls back Obama’s commitment to the Paris climate accord and his signature clean-energy initiative, the Clean Power Plan (CPP), which directs states to lower carbon emissions from power plants, it’s unlikely to influence investment decisions. “Renewable developers weren’t building a business model premised on the CPP,” Serota says.
On Nov. 16, 300 U.S. businesses, including General Mills, EBay, and Intel, called on Trump to support the Paris accord. “The sustainable investing trend has global momentum and big players such as Goldman Sachs and Bill Gates,” said Amy Myers Jaffe, executive director for energy and sustainability at the University of California at Davis, in an e-mail. “Corporate America has lots of millennial customers, and they want to buy from companies with sustainable supply chains and a commitment to renewable energy. I don’t see that changing.”
It’s a question many Americans are asking themselves now that the U.S. has wrapped up one of its least policy-specific elections ever. The president-elect has offered only the loosest of legislative prescriptions, including whatever plans he may have for the energy industry.
The mystery hangs over turbine manufacturers like Vestas Wind Systems, which fell 12 percent since the election, and coal companies such as Peabody Energy Corp., which soared 73 percent. In his only major energy speech, Trump, 70, said he would rescind “job-destroying” environmental regulations within 100 days of taking office and revive U.S. coal. It’s terrible news for efforts to slow the pace of climate change, but the impact on the renewable energy revolution may be limited. Here’s what it could mean for America’s clean-energy darling, Tesla Motors Inc.:
1. Solar and wind subsidies are probably safe
Tesla is, first and foremost, an electric car company. But on Nov. 17 shareholders will vote on final approval of CEO Elon Musk’s $2.2 billion deal to buy SolarCity Corp. The acquisition would make Tesla the biggest U.S. rooftop solar installer and the first major manufacturer to integrate solar panels with battery backup to extend power into the night.
The swift spread of rooftop solar in the U.S. has been made possible by two government policies. First, most utilities are required to credit homeowners for the excess power they send back to the grid. Those requirements are state-level and shouldn’t be affected by Trump. Second is the 30 percent federal tax credit to offset the cost of installations. The credits were first signed into law under Republican President George W. Bush in 2005 and extended by a Republican Congress late last year. Given their broad support, the subsidies are unlikely to be repealed.
2. Even without incentives, renewables will get cheaper
Solar panel prices have dropped, on average, more than 15 percent a year since 2013. On a utility scale, solar power is already cheaper than coal-fired grid electricity across most of the U.S., after subsidies. Even if the incentives were suddenly removed next year—an improbable and economically destructive scenario—the industry would eventually recover as prices continue to fall.
Incentives are designed to make superior new technologies initially affordable, but once those technologies take off, economies of scale take over.
Source: Bloomberg New Energy Finance
A loss of the federal tax credit could slow the rollout of Tesla’s unusual new rooftop solar shingles. Traditional rooftop panels, however, are almost ready to stand on their own. The payback period currently ranges from about 5 to 10 years, after subsidies and state rebates. If Tesla can achieve the cost savings it hopes for with the merger, it won’t be long before that’s the payback timeline without subsidies.
3. Gasoline fuel-efficiency targets could be dismantled
One of President Barack Obama’s most significant climate achievements was to push through ambitious fuel-economy regulations for U.S. vehicles. The Environmental Protection Agency is scheduled next year to re-asses rules intended to double the average efficiency of cars and trucks to almost 55 miles per gallon by 2025. Those goals could be delayed or dismantled under Trump, accelerating America’s shift to trucks and SUVs. Stocks of Detroit carmakers have predictably surged, while Tesla shares fell 4.9 percent in the two days after the election.
This is obviously bad news for human health and the environment, but it’s impact on Tesla won’t be catastrophic. The price of batteries is dropping rapidly, and by the early 2020s electric cars should be cheaper and better performing than their gasoline-powered equivalents across the board. Lowering efficiency standards will make gasoline cars a bit cheaper to manufacture, but it will also make them more costly to drive over the life of the vehicle.
4. Electric vehicle incentives will expire on their own
The U.S. push for electric cars was set in motion by a $7,500 federal tax break. The Trump administration could eliminate the subsidy, but the impact would be short-lived for electric pioneers including Nissan Motor Co., General Motors Co., and Tesla. That’s because the electric-vehicle subsidies were already designed to phase out after each automaker reaches its 200,000th domestic EV sale. Tesla may be first to cross that finish line, probably in the first half of 2018.
The incentives were intended to overcome steep startup costs and slow initial demand for new electric vehicles. Removing the tax break now would effectively pull the ladder up behind Tesla and make it more expensive for other automakers to transition to battery power, a result that wouldn’t be in anyone’s best interest.
5. States wield the power of their own incentives
Some of the biggest incentives in renewable energy are offered by states, not the federal government. Each state has authority over its own solar and wind rebates, credits for power sold back to the grid, renewable-mix requirements for utilities, and electric-car subsidies. These policies cross ideological borders into deeply Republican states. For example, Louisiana residents can get an additional tax credit of almost $10,000 for buying a long-range electric car. In Colorado, it’s an extra $5,000.
Under Trump, the role of cities and states in regulating pollution and expanding clean energy will increase. So will the disparity between states that prioritize the issue and those that don’t. But again, don’t expect the energy revolution to follow rigid red-state, blue-state definitions. The states producing the most wind power in the U.S. include Texas, Kansas, and Oklahoma. For solar, Arizona, North Carolina, and Nevada are among the top ten. Of those, Hillary Clinton won only Nevada.
6. Keystone’s resurrection won’t make gasoline cheaper
This election was great news for oil companies. Reviving the Keystone XL pipeline, which was rejected under Obama, is on Trump’s list of priorities for his first 100 days. He is also likely to support the beleaguered Dakota Access Pipeline. The company building it, Energy Transfer Partners LP, says business is “only going to get better” under Trump.
These pipelines are hugely symbolic for climate activists who say we can’t keep building infrastructure for oil we can’t afford to burn. But the impact of the pipelines themselves is open to debate. They increase profitability for oil companies, but as oil trades on a global market, the impact on U.S. gasoline prices and by extension demand for electric cars is negligible.
7. Trade barriers with Mexico would hurt Tesla’s rivals
Trump wants to scrap or renegotiate the North American Free Trade Agreement (NAFTA). That could be a dicey proposition for the car industry. Since 2010, nine automakers, including Ford Motor Co., GM and Fiat Chrysler have announced more than $24 billion in Mexican investments. They rely on Mexican plants to produce millions of vehicles and a high volume of parts.
By contrast, Tesla’s manufacturing and assembly are done almost entirely in California and Nevada. Tesla also plans to begin solar-panel production next year at SolarCity’s massive plant in Buffalo, N.Y. Tariffs on solar panels made outside the U.S. would make Tesla’s American-made products more competitive.
In the end, the confluence of all of these forces, but especially the precipitous decline of coal and increasing affordability of renewable sources of energy, is probably too strong to be reversed by the incoming Republican administration. That’s good news for Tesla, and a lot of other companies working to clean up the energy supply.
Elon Musk has staked a claim on a distributed energy future, but recent comments suggest he’s not going to be a fundamentalist about it.
The billionaire has arguably done more than any other individual to accelerate electric cars and make distributed energy desirable. His vision, detailed explicitly in his Master Plan, seemingly renders the traditional role of the electric utility obsolete.
This stance has prompted many a think piece framing the future of energy as a battle between Musk and billionaire investor Warren Buffett, who owns several utilities via Berkshire Hathaway Energy and favors a more centralized approach of utility-scale renewables projects feeding the grid. The apparent dichotomy between their world views only strengthened when one of Buffett’s companies, NV Energy, succeeded in its efforts to charge rooftop solar customers more and pay them less for the electricity they put back into the grid. That development struck a blow to Musk-affiliated SolarCity, which subsequently pulled out of the state.
Of course, it’s likely that neither of these two visions will succeed entirely, and the future will be determined by some sort of compromise struck between them. That outcome appeared in a statement made Friday by none other than Musk himself.
Before showing off the fancy new solar roof product Tesla has been working on, Musk unveiled new versions of his Powerwall and Powerpack batteries, and ventured into big-picture territory.
“The solution is both local power generation and utility power generation — it’s not one or the other,” Musk said.
He went on to suggest that the breakdown in electrical generation will be two-thirds utility and one-third local. It’s worth noting that this forecast refers to an electrified future where the grid powers things like transportation and heating, which currently utilize fossil fuels. That means the pie of electricity consumption that gets divvied up will be significantly larger than it is today.
One-third might not sound like victory, but that would be a major coup for distributed energy, which is still very small compared to overall utility-scale generation.
That’s also an olive branch for the utility industry, which has been hearing rhetoric from some sectors of the solar industry that clean energy will eradicate customers’ need for an entrenched, monopolistic utility to make power for them. Musk is affirming that, with all the power we’ll need in a low-carbon, electrified world, there will be plenty of room for utilities to make money.
And that means there will be plenty of room for Tesla to make money off them.
Utilities are the target audience for Tesla’s larger battery, the Powerpack, which now starts at 50 kilowatts/210 kilowatt-hours and scales up indefinitely. Tesla has already made deals to deploy 80 megawatt-hours with Southern California Edison and 52 megawatt-hours with the Kauai Island Utility Cooperative, among others.
At an industry gathering of investor-owned utilities last year, Musk said he expects 80 percent to 90 percent of batteries the company sells to be Powerpacks, not Powerwalls. That makes a lot of sense, both because utilities need more batteries than homeowners do and because the economics are much better in the large-scale battery market than in residential storage, at least for now.
SolarCity, which has taken a strong stance on solar policy issues in key states like Arizona, has begun courting utility customers as well. The residential solar company launched a utility and grid services division in May, and has worked with Tesla on grid-scale solar-plus-storage plants.
Musk clearly sees room for both utilities and distributed energy providers to prosper in a clean energy future. Plus, why sell to one market when you can sell to two?
