Under Chu’s leadership, the DOE has begun a massive infusion of funding into research on new renewable technologies. This spring the department announced $777 million over five years to support 46 new energy research centers, another $280 million for eight “energy innovation hubs,” and $400 million to launch and fund the Advanced Research Projects Agency-Energy, a program based on the 1960s-era ARPA program that led to, among other things, the Internet.
Both the research funding and the subsidies aimed at existing technologies could be particularly critical for the solar industry. A number of physicists and chemists argue that finding more efficient ways to use the sun’s energy offers the only feasible long-term option for replacing fossil fuels and significantly decreasing production of greenhouse gases. “We’re bathed in these quantum particles that rain down on us from the sun, each of them carrying about two electron-volts of energy,” says Paul Alivisatos, interim director of the Lawrence Berkeley Laboratory and head of its solar research center. “That’s where the energy is.” But solar power now accounts for a fraction of 1 percent of the total U.S. electricity capacity of 1,000 gigawatts. The main reason is cost.
Silicon cells like the ones Exelon would use, which are made from the type of high-grade silicon used in computer chips, represent the vast majority of installed photovoltaic capacity but are still about five times too expensive to compete with conventional sources of electricity. Newer types of solar cells that replace single-crystal silicon with thin films of semiconducting materials could be cheaper to make but are less efficient. Concentrated solar thermal power, in which large arrays of mirrors are used to collect sunlight and create steam that drives turbines, could come closer to fossil fuels in cost, but the facilities are expensive to build and require large areas of land in extremely sunny spots. In fact, no existing solar technology is currently competitive without help from government subsidies. That means the fate of solar power is especially vulnerable to the vagaries of government policy and the choices of those who make it.
The Sun King
Arnold Goldman knows how profoundly state and federal energy decisions affect the solar-power industry. In the early 1980s, his company, Luz International, built nine large solar thermal plants, with a combined capacity of 354 megawatts, in the middle of California’s Mojave Desert. At the time, the Luz facilities supplied 90 percent of the world’s solar-generated electricity. The technology they used was based on an ingenious design in which hundreds of thousands of mirrors, spread out over the ground, concentrate sunlight on a network of overhead tubes containing a synthetic oil; the hot oil heats water to create steam that then drives turbines to generate electricity.
The solar facilities, the first of which came online in 1984, were economically possible because of generous incentives from both the federal and state governments. In 1979, President Carter had set a goal that 20 percent of U.S. electricity should come from renewable energy by 2000 (today the figure is still only about 2 percent). Carter and Congress passed hefty tax credits for investors in renewable-energy projects, and a federal law called the Public Utility Regulatory Policies Act, passed in 1978, offered further incentives to producers of alternative energy.
Then, in late 1990 and early 1991, it all collapsed, recalls Goldman. The tax credits put in place by the Carter administration had “deteriorated” during the presidency of Ronald Reagan, he says. But the final blow came from a seemingly esoteric change to California’s tax code. The state had exempted renewable-energy facilities from paying property taxes, and because Luz’s largest facilities were valued at more than $1 billion apiece, that exemption was worth as much as $20 million to $30 million per plant. Toward the end of 1990, California’s governor vetoed an extension of the property-tax exemption. But a new governor was taking office in January, and Luz, which was spending $20 million a month to build its 10th plant, gambled that he would quickly reverse the action. When the new governor didn’t immediately reinstate the tax exemption, Luz lost its bet. “We miscalculated,” says Goldman. “We ran out of money and closed down operations.”