The energy industry is changing even as you read this.
Right now, nearly 200 countries from around the world are attending meetings at the 22nd annual Conference of the Parties, or COP-22 for short.
Much of the discussion this year will focus on implementing plans to reduce carbon emissions globally and halt the rise of global warming at just two degrees maximum.
As I pointed out last week, solar and wind are going to be a big part of this transition. But even these clean energy leaders are facing their own market roadblocks.
Beauty Before Age
I’m not sure “jumped the gun” is enough of a statement for what Tesla has done, but it’s certainly a start.
The company and its ambitious CEO Elon Musk are well known for going above and beyond with fantastical features in the products they design.
Some of them are really cool. I mean, an all-electric motor that gets to 60 miles per hour in less than three seconds? Count me in!
And yet some of these features cause more problems than they solve. For instance, the infamous “wing doors” on the Tesla Model X. On paper, they sounded like a great idea. Who wouldn’t want smart doors that could adjust to open in tight spaces?
But design and function are two totally different animals. Musk found this out the hard way when the first cars had major production problems owing to those doors. They were no exploding Samsung phones, but both issues stemmed from the same concept: taking the tech further than it wanted, or needed, to go.
Usually when a company designs a product, utility comes first, then style.
But Tesla tends to work backwards, designing something beautiful and exciting and then figuring out how it works later on.
And now that the company is looking to acquire SolarCity, Musk has jumped the gun once more.
We knew the moment this deal was announced that Tesla would be offering some kind of solar roof system to be paired with its Powerwall batteries. In fact, Tesla and SolarCity were already pairing their separate systems long before anyone thought of merging the two.
Last week, we saw the fruits of this joint venture in the form of solar panel tiles, meant to look like various types of regular roofing materials.
Image Retrieved from Tesla.com
Click Image to Enlarge
Did some people want this? Probably. Musk himself noted that many were reluctant to put solar on their roofs simply because the panels are ugly. And he’s not wrong; huge black squares of silicon and glass do not a luxury look make.
But did we need this? Not yet. This would have been a better offering once solar prices had come down across the board and solar roofs themselves were more ubiquitous.
As it stands now, these solar tiles could do more harm than good for the solar industry anyway…
It Takes a Village
I think we can all agree that people are attracted to the idea of freedom. So when states started offering solar roof owners net metering options, people jumped on board.
Net metering allows homes with solar roofs to connect to the main grid but get paid back for all of the solar power they send back into it.
On the surface, this sounds like the beginning of a gridless world, where everyone has a self-reliant solar panel system and expensive utilities bite the dust. But that’s not what’s happening.
Instead, people are finding that the solar roofs are actually more expensive. Aside from the cost of the tech itself, people are still using energy from the grid when the weather is bad or the sun is down. Moreover, some states are increasing rates for solar users to make up for the lost revenue.
The tax credits for these solar installations are being phased out slowly but surely, so it won’t be long before even that boon for rooftop solar disappears.
No amount of pretty tiles is going to solve this problem.
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To avoid the increasing costs, people are turning to larger, utility-scale projects.
A study published by The Brattle Group last year found that the cost of producing energy from utility-scale solar is about half as expensive as producing from residential solar, even when tax credits and other changing economic scenarios were included.
A lot of the problem is simply placement of the panels.
In rooftop solar, there’s only so much you can do to max out the efficiency of your panels. Your home’s shape and the direction it faces can either help or hinder how much solar power you actually get.
But with utility solar, the installations are planned out in advance and designed to get the most sun possible. Some can even make use of self-adjusting panels that swivel to face the sun all day long.
Plus, large-scale systems are maintained by companies with people specifically trained to keep everything running. Rooftop systems either need outside maintenance or owners who aren’t afraid of heights.
Some communities are offering shared solar plans wherein participants can pay a fee to be connected to the large-scale installation. This is still slightly more expensive than feeding off of today’s regular grids, but those costs are dropping all the time.
Solar Future
Keith has already noted that our new president-elect won’t be bringing solar power down anytime soon.
Now, in fact, may be one of the best times to buy into renewable energies. While the market at large is seeing doom on the horizon, you could be adding the best companies in the industry to your portfolio at a bargain!
Don’t let short-term drama get you down.
Until next time,
Megan Dailey
Energy and Capital
