The Bull Case For Solar

My partner Albert blogged about solar yesterday and posted this chart:

solar cost trends

I’d like to add another chart to this conversation, mortgage rates over the past thirty years:

mortgage rates 1980-2013

The bear case for solar has been that the payback times are too long. But with cost declines (Albert’s chart) and carrying cost declines (my chart), solar makes more sense today than ever.

The other chart worth looking at is home energy prices over time. Your payback on solar depends a lot on how much you are paying for alternative sources of energy.

This part of the analysis is not as easy. It depends on what kind of energy you are consuming (coal, natural gas, oil) and where you live.

But my view is that the long term price of carbon energy will not decline as fast as the long term price of solar. Particularly if carrying costs (which are dominated by interest rates) continue to be low.

Cap rates (the yield an investor gets in real estate) are in the 5-6% range around the US these days. That means an investor is willing to wait for 15-20 years to get their money back on a real estate investment.

Solar payback times are half of that and going down fast.

The Gotham Gal and I are putting solar onto every building and home we construct these days. We are believers and bullish on solar.


Comments (Archived):

  1. Guillaume Lerouge

    “The Gotham Gal and I are putting solar onto every building and home we construct these days.” : I have to ask, how many buildings and homes do you have under construction at the moment? Written like this, it sounds like a lot 🙂

    1. fredwilson

      we do real estate development as a hobby. we have a number of projects underway right now. it is where we invest our excess capital that is not in cash or venture capital/angel investments

      1. Guillaume Lerouge

        I see! I guess David Cummings wouldn’t be the only person who could be accused of doing too much…

      2. Dave Pinsen

        What do you do with your homes when you’re not in them? Do you rent out your beach house or ski house off season? Have friends or your kids stay there? Or just leave them vacant?

        1. LE

          If you start to let friends stay at your vacation places you will end up will all sorts of feeler calls where people beat around the bush until you finally bring up the subject. Same with boats (even small boats I am not talking yacht size here.) Best is to just never go there at least that is what I have found.

      3. mike

        Stick with bitcoins for your excess captial

    2. Mario Cantin

      I was going to type the very same question — you beat me to it, kudos::)

    3. David Barnes

      I read stuff like that and it makes me feel like such a failure.Real estate development! AS A HOBBY!Related but not related: I love flying and it’s such a privilege to be able to fly with my job, but I still feel a flash of revolutionary fervour when I walk through first class on my way to economy.The psychological impact of inequality is harsh, even if the practical impact is beneficial. I don’t know what the answer to that is, for me personally or as a society.(I presume I’m not alone as a fan of AVC who still has to check if he can afford to upgrade from McDonald’s to Five Guys.)

      1. LE

        I read stuff like that and it makes me feel like such a failure.Real estate development! AS A HOBBY!Sometimes people will purposely deprecate what they are doing so that expectations are lowered and they won’t be judged as to success or failure.NYC, of all places, is a well oiled machine of real estate success. Therefore saying RE is a “hobby” more or less tells people not to judge you in the way they judge professional operators. Since you aren’t a professional operator. Then if you make a killing the win seems all the better. Gives you great latitude to make mistakes. Plus both Fred and Joanne have full time jobs so it’s more accurate to say that they “dabble” in real estate.As a similar example I often say that I can have made money from programming but do not consider myself a professional programmer or hacker at all. I usually say “I can do some stuff”. I say that because it’s true but I also say that because I don’t want to be judged by professional standards and don’t want to overstate what I can do. I am no Falicon in other words.

      2. Matt Zagaja

        We had some kind of demographic survey/profile of Fred’s twitter and blog followers a while back and discovered many do not have to check that. However you are certainly not alone, I continue to post here under the osmosis theory of success. 🙂

  2. Ian Smith

    I understand that solar and wind are causing an energy market problem in the UK. They tend to produce peak energy during the day, which is good when they are available, but the alternative peak power is from natural gas. The economics for building gas power stations to compete in this new market, especially where renewables have subsidies, is an issue. I’m not sure how we address that.

    1. Guillaume Lerouge

      There’s a mega answer by Ryan Carlisle on Quora on this very subject. The reasoning is lengthy, but his answer is very simple: yes, going solar-only at large would be a huge problem:…Now I’m not sure how much of an impact Powerwall-like batteries will have on this.

      1. JLM

        .Damn good read. One of the best dissertations on the issue of real world solar I have ever read. Thank you.Well played.JLMwww.themusingsofthebigredca…

        1. Guillaume Lerouge

          If you look at Ryan’s Quora replies, he has a number of additional gems on this topic, such as this one comparing Germany to France:

      2. sigmaalgebra

        The Quora piece URL is a keeper.Very nice presentation. I’d heard the German program of solar subsidies and feed in tariffs was a disaster, $0.50 per KWh, but from this detailed Quora piece the situation is much worse than I would have thought possible. We’re talking world-class FUBAR.I’ve been bitter against the solar flim-flam, fraud, scam, but the German situation means I’ve been way too soft, reasonable, tolerant, and accepting. No more Mr. Softie Nice Guy for me!Athttp://www.businessinsider…. Hillary Clinton plans to power every home in the country by 2027 with renewable sources of energy. No way, Hillary!Of course it can be FUBAR: Engineering was never the point. The only points were: (1) money from subsidies (2) based on politics (3) based on public concerns about the environment, (4) based heavily on what Al Gore did as VP to aim Federal Government research grants at climate science to claim that human generated CO2 was going to overheat the atmosphere (5) based on some measurements of CO2 concentration by a professor at, IIRC, Yale that Gore knew as a student.Renewables for all residential electric energy? We’re talking self-inflicted unanesthetized upper molar root canal procedures with barbed wire enemas while shooting self in the feet, knees, gut, chest, and between the eyes and sucking down toxic swill.In simple terms, Hillary would do more damage to the US than any of Hitler, Tojo, Stalin, or Saddam ever hoped to do. Hillary, just on this one issue, if she had her way, would go a long way to destroying the US.Did they teach freshman physics at Wellesley? Did she take it? Did she pass it?When see wacko, destructive Kool-Aid, either refuse to imbibe or get one heck of a sore GI tract.IIRC, the French have done really well with nukes. So, for one of the rare times, the French beat the Germans at something in engineering!Allons enfants de la Patrie!

        1. Guillaume Lerouge

          I can’t help but agree, flattery is music to a Frenchman’s ego 😉

          1. sigmaalgebra

            What France has done with nuke power is even better than Chambertin and Montrachet! Better even than the Haut Medoc!

  3. Mario Cantin


    1. Mario Cantin

      There I did it again 🙂

  4. Twain Twain

    Are you installing Tesla Powerwalls?

    1. Matt Kruza

      Any idea why not just make powerwall (or equivalent) out of lead acid battery instead of the much more expensive lithium ion? Would / should reduce cost 50-80% roughly I think? Main reason you can’t use lead acid for cars is a density issue. In a house, there is usually not too hard to add 2-3x the size, especially if you can take a $5k system and make it $1,500 or so? I am wondering if there is something basic i am missing as i have never really seen this adequately addressed in all the hype of powerwall so figured i would see if my point had merit or if there was something that i had been missing from our essteemed readers here!

      1. Jess Bachman

        I think it’s more of a branding thing than anything else. Anyone getting a powerwall wants the latest tech. The tech in their phone.. Not the tech in their dirty car.I mean… Lead…acid… Yeah, its going be tough to convince people to bring that into their homes.

        1. Matt Kruza

          hard to put into your garage to save you hundreds or thousands a year? I mean, only for techies, 95% of the population wouldn’t care i don’t think. But yeah, i guess on the branding side is really what i was thinking, and that is a pretty dumb long-term reason. But, perhaps this is enough to kill it from getting momentum

      2. Twain Twain

        This is a useful article for some comparison numbers on energy discharge, relative weight of batteries and terminal voltage:*…It’s also important to compare their respective recyclability:*

        1. Matt Kruza

          appreciate the response. Interesting articles. The article didn’t exactly get down to a dollar for dollar comparison so i still think there might be a chance for an application where space is not much of a constraint (ie home use). But very good articles to stimulate some more thought / investigation for me. appreciated1

    2. Dave Pinsen

      Why aren’t there solar panels built into the tops of Tesla cars? Seems like it could be a bit of a range extender if you park in the sun for hours at a time.

      1. Matt Zagaja

        Toyota had a solar option for the Prius but it only powered a little fan to keep the cabin cool. I think the impact is negligible at its size.

  5. Matt Kruza

    I too am bullish on solar long-term. One major idea that is important is that it may make sense to do more centralized solar developments (ie your 100-500MW installations that either a powerco or a few companies like google have invested in). There are two main costs for solar: Hard (ware) costs: think panels, inverters, etc. and “soft costs”: labor, marketing, overhead etc. This article explains in more detail (… , but basically in residential soft costs can be up to 60% of the total installation costs. This can be drastically reduced in central power applications, probably making total install costs 30-40% less when done in commercial setting vs. home

    1. Matt Kruza

      Additionally, a public entity can raise funds MUCH cheaper than a home owner can. You can actually probably make this into an asset class for investors, just like REITSs are for real estate and MLPs (master limited partnerships – mainly gas / energy pipelines etc). They have started to do this:… , Was out grabbing drinks with a friend who is i-banker and this conversation came up. I am not a fan at all usually of financial engineering and our current system, but it actully appears with some good policy around this you can probably attract stable, long-term funding (think 15-25 year funds) at 3-4% vs the much higher rate residential needs.

  6. Josh Goldberg

    Fred, you nailed the analysis. In addition, most solar is behind the meter and thus in addition to displacing the commodity cost of power, solar also offsets transmission and distribution costs, which in a utility territory like Con Edison, can be up to half of your bill.Think of the utility as a long distance phone carrier and solar as wireless. With the distinction being that we’ll still need the utility for a bit longer, but it’ll be a lot less profitable business.Probably much safer doing your real estate development than investing in what publicly traded utilities. If you look at Germany where solar adoption is higher the large utilities are all basically bankrupt or massively devalued.

    1. JLM

      .Of course, there are those who would point out that even if solar is behind the meter, the public utilities — who will still have to provide the night time and cloudy day power — will have less volume with which to amortize these costs thereby increasing the costs to the still connected folks.Solar is also being analyzed from the perspective of not just the “micro” implications but also the impact on the grid. If the grid has to build a capability to serve every single installation but only get revenue from those who are non-solar, the cost impact is big.JLMwww.themusingsofthebigredca…

    2. Russell

      Great comment Josh!

  7. Josh Goldberg

    There are also a few speciality finance companies springing up with a focus on financing residential solar. These companies allow a homeowner to borrow the entire cost of a system on an unsecured basis for 20 years. From the customer’s perspective, the principal and interest payments they make are less than the utility savings they have. So the customer is cash flow positive on day 1.From an underwriting perspective, there is a strong case to be made that the asset class is incredibly sound because unlike most traditional debt which creates a negative cash flow to the customer (e.g, paying off a home equity loan for a kitchen remodel), solar debt actually creates positive customer cash flow.If anyone wants to go solar, they should check out my old company Astrum Solar, which we sold to Direct Energy actually a year ago yesterday. They’ll give you a great deal with excellent service. Happy to make an introduction for anyone on the blog interested and make sure you get the best friends and family rate possible. I don’t work there anymore, so no conflict.

  8. John Frankel

    You can also factor in Solar Renewable Energy Credits (SRECS). Add in Federal tax credits as well. These will go away, but have artificially boosted the returns of those that install in states that allow them.The key point is that ONCE the economics work the demand will go exponential. We are very close for that to be the case. Big job stimulus.This will, however, be a disaster for utilities who will have to manage the transmission system that was not built for two-way loads.Ultimately, we will move to a world of distributed energy generation, where each building could effectively trade with every other one its surplus and deficit. A node based model vs a broadcast based model.

    1. Sebastien Latapie

      Making the node based model a reality would be amazing. A distributed peer network for energy would be awesome. Solar can definitely help us get there.

    2. Josh

      Silly question here: If two-way loads are such a problem for the transmission system, why not just eliminate the whole “I sell my excess back to the grid” gimmick?That selling of excess has always seemed an odd leap to me. It’s certainly a nice perk. But I install solar panels primarily for my own consumption. I’m not interested in becoming a local power generator for my community. It’s nice if I can provide it to my neighbors, but it’s not the driving motivation. I’d be content to keep excess energy in local battery storage.My vague guess is that the current economics of solar require selling of excess back to the grid to make the homeowner financials palatable. But if solar costs are going down, can’t we just avoid the whole “re-architect the transmission lines” conundrum?

      1. LE

        If you are correct (and I don’t know if you are not my area of knowledge) I would take a stab and say it has something to do with human psychology more than money or common sense. Kind of the reverse of how people don’t know exactly how much they are really wasting in energy, likewise they don’t really care if they are only making any trivial amount they just feel that all of those pennies add up.After all Fred is installing Solar Panels on all of his real estate. Clearly the cost savings in no way could be a factor in that decision. For the Wilsons. It’s all about feeling good. I don’t think with a straight face he could say he cares about the dollars or the payback and so on.

        1. Josh

          Good point. I also learned from this discussion that if we don’t send power back into the grid, the peak solar that occurs when we’re not home gets wasted. Right now, sending it back to the grid is the only option. But the emerging home battery market should soon provide a storage option. Good thinking, Elon. :)So it seems the home energy storage technology could save the utilities from having to solve these reverse transmission problems.

          1. Vasudev Ram

            >the peak solar that occurs when we’re not home gets wasted. >Right now, sending it back to the grid is the only option.Or use the extra electric power to drive electric devices (motors, etc.) that do some useful work (that may get you money, like making peanut butter (for e.g.) and selling it 🙂 Saying this because I know some people who do it. Not an option for everyone, I know.

    3. ShanaC

      Depends on how far along a certain company in the Vancouver metres area gets. They are working on fusion. If that works, all bets are off

  9. kidmercury

    solar may be fun and useful for real estate developers now while commodity prices are low, but it lacks scalability. from a societal perspective, the only way it becomes the heir to fossil fuels is if (1) society agrees to considerably lower its total energy usage (an idea almost no one would support, even those who say they do, once they fully thought through all the implications) or (2) better storage and transmission technology that has the result of increasing solar’s power density (meaning requiring less land to generate it). the technology needed is not in’s portion of US energy consumption:

    1. JamesHRH

      You are short the Powerwall story then, Kid?

      1. kidmercury

        i’m sure it’s worth it if the price is right. generally musk gets around at the economic maladies of solar through subsidies, so perhaps that will be the case this time general, though, societies currently cannot live on solar alone, or even as the dominant player. countries that have tried that, like germany, just import energy from countries that don’t.

        1. Don

          Germamy exports power, at times at negative prices because renewables are generating so much power.

          1. kidmercury

            germany has excess solar power at times because it cannot store really sunny days. so it has excess solar power some days and none on other days. in aggregate for germany, as i’ve mentioned elsewhere in this post, solar is not generating a huge amount of power, and the country’s insistence upon relying so heavily on solar ultimately sets them up for energy poverty if they do not embrace other energy sources that exhibit greater density.

      2. pointsnfigures

        I am short Powerwalks. I saw a better way in the Clean Energy Challenge in Chicago

    2. Stephen Voris

      I am reminded of XKCD’s graphic of just how vast the disparity between fuel energy densities is: not technically be a renewable source of energy, but the timescale for depletion is I suspect rather more favorable than that of oil, gas, or coal.Solar could be a lot more interesting if/when we figure out how to manufacture it in space – there’s a lot of empty, sunny real estate up there.

      1. Chimpwithcans

        Thanks for turning me on to these guys. Love this one:

        1. Joe Cardillo

          gone down the xkcd rabbit hole again huh = )

          1. sigmaalgebra

            That’s a total riot!Before I started developing my first, and so far only, Web site, I heard lots of stuff about SQL injection.When I looked at what they meant, I wondered, how could anyone be so darned stupid to let user contributed data be used without some checking? But, apparently a lot of people did.

    3. JLM

      .Pretty much puts the discussion in perspective that folks can understand.Well played.JLMwww.themusingsofthebigredca…

    4. Joe Cardillo

      A startup in my hometown is working on something in the middleground (… ) and while I found myself initially skeptical, the reality is that a ton of solar in the U.S. is still the result of offsets & incentives…I mean, spending tens of thousands of dollars on solar panels seems like a pretty big barrier for most individuals given the long term payoff. I would tend to think we need a) demonstrated demand and b) both storage and transfer technology that is much, much better (a big reason that W. Texas and E. New Mexico aren’t filled with solar farms, if I’m remembering correctly, is that it’s a billions of dollars project + decades to build electrical infrastructure that could even deliver that power).

    5. christopolis

      So you are saying the DoD must use as much energy as they do? I think your assumption that we have to use as much energy as we currently do is totally wrong. Remove fed controlled interest rates and watch energy use plummet and global wealth equality skyrocket.



    1. Twain Twain

      “There’s this handy fusion reactor in the sky— called…the sun…you don’t have to do anything, it just works.” — Elon Musk presenting Powerwall.He’s so drôle as well when he delivers that. Such a brilliant brilliant founder-CEO.

      1. Chimpwithcans

        How’s his storage tech developing? Any idea? Seen powerwall in action by any chance?



  11. Doug Calahan

    Unfortunately, the solar momentum seems to have dissipated. Q1 marked the first YoY decline in solar installations in the U.S. (I gotta go find the chart).

  12. howardlindzon

    You would like reading @gregormacdonald research. Also would you invest in any direct private companies or an ETF like $tan

  13. JLM

    .Solar is one of those things you just want to work. It’s cool and you just want it to work. Why not?I’ve had occasion to use it on a large scale — completely subsidized as an experiment — and it is not an easy thing to do correctly or well.The biggest problem with solar as a practical replacement to connecting to the grid is its “micro” and “personal” nature versus the wholesale nature of the electric company.You install solar, YOU own the problems of generation, distribution, storage, and maintenance.You connect to the grid, the power company owns the problems of generation, distribution, storage and maintenance.The cost relationship is not even worthy of a faux debate. It is way more expensive to go solar and you still have to decide how you’re going to power up during darkness and on cloudy days.In spite of all of that, solar will continue to decline in cost and will always be the “cool kid” but it won’t make financial sense without enormous subsidies and gov’t intervention. Not entirely bad if there are legitimate policy objectives articulated, debated and embraced.Solar is currently about 0.2% of power generation source. Less, even, than hydrothermal power generation. Check me on this.Those 20-year warranties on solar panels? Good luck with that.Love solar. Doesn’t love us back. Yet.JLMwww.themusingsofthebigredca…

    1. LE

      You install solar, YOU own the problems of generation, distribution, storage, and maintenance.Exactly.What I think of is the impact and cost of roof problems over time as only one factor.For example my office and several condos that I rent have the HVAC package on the roof. And there is no question that there are additional costs and problems as a result of it being up there that are unanticipated. For example the HVAC unit doesn’t last as long apparently when on a roof, it is much harder to service, and even doing routine service ends up creating wear and problems on the roof. You have no idea what the workmen are doing up there..they leave tools, buckets and all sorts of crap. This design decision (HVAC on roof) was done by the developer prior to my purchase. However I am sure that future issues like this weren’t fully considered (this is only a 55 unit complex) when the property was built. It would become someone else’s problem (unit owners..)And you can’t even do service when it’s wet outside and certainly not when it snows which is a reason I replaced a unit prior to it reaching the end of it’s useful life. [1] I was afraid it might break in the winter and I couldn’t get it serviced at that time…Anyway, to your point, this is the type of wide eyed enthusiasm that people who have not been around the block and have never gotten burned have when they have little experience with something and think they can schuss out everything by reading about it over the Internet. [2][1] To do that the contractor had to rent a crane to hoist and to pull the old unit down even though the building is only 1 story. This required part of the parking lot being closed as well as made things much more complicated and obviously costly.[2] In case anyone was wondering, there really was a reason that people never got fired for choosing IBM.

      1. JLM

        .When you have roof top mounted HVAC units, you have to put in walking surfaces to and from the units or the roof just gets destroyed.JLMwww.themusingsofthebigredca…

        1. LE

          Yup. And in this case it’s worse than that. The roof is depressed 5 feet from a sloped surface. There is no way to get up to the top point because it’s a slippery slope when wet. Metal roof, so I do mean “slippery slope”. Plus the ladders going down are broken as well. The HVAC guy brings his own ladder instead of jumping down. So they also need surfaces on that slanted area as well. [1]Just one of the daily discoveries of dealing in real life with real people.Picture attached. I am a “hobbyist” photographer.[1] Of course the complex was designed with roof hatch access from each unit. However the roof hatches are in areas that are used for other purposes. For example in my unit it’s in the Kitchen area and there is no way to get a ladder there so I had mine sealed up. A design defect for sure, done to either pass inspection or maximize space.

          1. sigmaalgebra

            Concrete slab, on the ground, out back, with the compressor or heat pump on it, with a pipe to the inside with the evaporator and/or radiator? Or, if want things really quiet, then put the slab in a shed or hidden with a wall, fence, or bushes. For A/C, should be able to run the high pressure side from the compressor for a very long way, say, 100 yards, with no problems with losses, etc.Once get the output from the compressor inside, can use it in a variety of evaporators for cooling. E.g., can have an evaporator that stands in a corner, pulls in air from the floor, puts out cool air at the top, and lets the condensation collect and run down a pipe to the sewer.

          2. LE

            if want things really quietFor a different reason I installed soundproof windows at my office. Such is having so many windows and being near a road with a great deal of traffic and also constant lawn maintenance.

    2. Matt Kruza

      Per my comments below, i definitely think key is more “centrally” generated big power installations. There conveniently is massive amounts of otherwise pretty much underutilized land in the south which gets up to 50-100% more chargeable sun hours. Also, you can transport the electricy 1000’s of miles with less than 10% efficiency drop it appears (i get that there are certainly some grid challenges, but not insurmountable ones)

      1. JLM

        .When considering any “new” installation, you have to consider the entire system — step up transformers at origination point, line losses in transmission, step down transformers when connecting to the distribution grid, distribution network transformers and connection cabling.It is nowhere as easy as English majors and poets think it is. Here is a good article that touches on it.http://blog.schneider-elect…This is why adding an incremental power plant to an existing grid is often so efficient — much of the installation cost has already been incurred.The ROW costs and the high voltage transmission cables are an enormous cost.Boone Pickens — a guy who knows something about making a buck in the energy biz — tried to make wind turbines work in north Texas.He got the installations of the hardware done just fine and caught his heel on the transmission grid. He tried to create a MUD (municipal utility district) to make the transmission costs a public expense and couldn’t get it done. He pulled the plug.The idea of remote solar or wind generated power has been studied to death by some very smart people and other than some commercial size highly subsidized operations nobody has figured it out yet.JLMwww.themusingsofthebigredca…

        1. sigmaalgebra

          So, Boone shut down the wind farms. I hadn’t heard. Surprised? Only when I first heard that he was going to try.

        2. LE

          Boone used to run advertisements on cable for what he was doing. Might have been CNBC.

        3. Matt Kruza

          I am not so sure that they haven’t figured it out, as much as the economics don’t work YET. Right? I mean, lets say traditional power is $.06-08 cents wholesale (all-in, fuel, plant infrastructure, operations, but no distribution). There is little reason to think that it will decrease long-term. Lets say large scale solar is $.09-.11 . Basically no non-subsidized would happen. However, if solar got down to $.05-.07 you would see a MASSIVE investment in a period of a few years. I get that the details are murky, and i certainly don’t know where that cross-over point will be, but they are in similar ballparks and solar will decrease (how much is up for debate) and traditional will stay the same or increase. When that point happens i think we will see a massive shift. You could see 20% of the federal grid shift in a decade AFTER price crosses i think. will be interesting to see.

          1. sigmaalgebra

            The US grid wholesale costs I’ve heard are 0.5 to 2 cents per KWh.

          2. Matt Kruza

            no… almost certainly not. Do you have links? The fuel cost for coal and nat gas are around 2.5-3.5 cents per kwh. (this is obviously variable as coal and nat gas prices can fluctuate a lot). How you account for the operation and capital expenditure to build the plants is much more subject to accounting principles and such. But i think in the 2-5 cents range is in the ballpark. Putting I guess a range of 4.5-8.5 cents? I think this is decently accurate, much closer than the 0.5 – 2 kwh. Do you have any place you read that? (again, happy to be corrected as this is not my primary subject expertise but i think the “back of the envelope math i just discussed is close”)

          3. sigmaalgebra

            For my 0.5 to 2 cents per KWh for the wholesale price of electric energy on the US grid, I was working from memory.At…from the WSJ is an article with the wholesale price in part of Texas of $40 per megawatt hour or $0.04 per KWh.But at…is a graph of some US EIA data with the ranges of wholesale prices for 10 regions of the US for the month of May, 2015 and for the year of 6/1/2014 through 5/31/2015.I attach the graph here below.The horizontal axis is in dollars per megawatt hour or cents per KWh. So, the “5” on that axis means 5 cents per KWh.Well, the ranges for the year are quite wide from, trying to read the graph, maybe 0.1 cents per KWh to maybe 28 cents per KWh.Why so wide? Well there is likely some case of nearly real time market bidding: So, on some hot day with a lot of A/C, some part of the grid may be short for an hour or so and willing to pay 28 cents. Some other time, maybe some power plant can’t reduce their power level fast enough and for a hour or so has more power than they can distribute to their usual customers so just need to get rid of the excess power to anyone who will take it, even at, from the graph, maybe 0.4 cents per KWh.So, the yearly range figures can be quite wide due just to some short term, maybe as short as an hour (I’m no expert in that market), situation once in the year. Sure, a histogram of the prices would be better, show the same range but also show how common the different prices within the range were.But we expect the ranges for the month of May, 2015 to be not so wide, and they are not.For that May data, we see a lot of it is from about 2 cents to 4 cents, maybe 1.5 cents to 4 cents.The wholesale is just that, just some price for selling on the grid.Sure, sometimes the wholesale price can be less than the total cost of generation, including capex, opex, etc.Still, that graph is some good insight into prices so that any power source that wants to play on the grid should be prepared at least occasionally to buy/sell at such prices.In an area where the wholesale prices are usually under 5 cents per KWh, it would be foolish to build new capacity that cost 6 – 8 cents per KWh if only because it would be cheaper and easier just to buy all the power wholesale from the grid for usually less than 5 cents. Net, those wholesale prices are not irrelevant.So, any new source, wind, solar, nukes, microwaves from the moon, needs to get their full cost down to close to 5 cents per KWh, and maybe less.The problem with wind/solar remains: For use on the grid, both need storage, and so far the cost of storage is too high.So, without subsidies, and I am outraged at the idea of such subsidies, wind/solar are not promising for the grid or, really, residential use.Just how mixed up and wacko the subsidy situation can be is in…Maybe could use wind/solar to make gasoline or some such.

      2. sigmaalgebra

        Your 10% is really good news, much better news than I would have expected, so good I’m thrilled. Really good news. And the cost figures, say, from New Mexico to Chicago, those are really good, too, right? Did I mention I’m thrilled, surprised?

    3. Joe Cardillo

      Agree, and I do think solar will come around but it may be just a matter of timing. There is still too much going into convincing people it works. This may not be the right swing of the 5 or 10 year cycle, but it’s coming.

  14. Mroberhozer

    As revealing as those charts are, there is one data point missing: average price of electricity from other means. On average, US folks pay 12 cents per kWh (….So by that measure, solar still has to drop by 2/3 to be competitive, and that’s not counting the not-inconsequential install costs.Not a hater, would love to do it myself. But it doesn’t seem like it’s there yet from a unit economics perspective.

    1. Joe Cardillo

      Lot of coal plants still going. *something something local and state politics corrupt influencing mumble mumble* = (meaning, the reason electricity is cheap is not also a reason that it will continue to be)

  15. ZekeV

    We’re at the point where it is entirely possible to power a normal, efficient new construction home on all solar. The only issue seems to be storage, and I’m confident this will be solved over a predictable log schedule. The grid is going to become primarily a way to share surplus energy between users, though perhaps our aging infrastructure isn’t currently up to that task until we have a true smart grid. I wonder what will become of large utilities. As they suffer disruption, commercial power might get increasingly expensive as the only offtakers will be industrial customers. Then eventually even these folks will come up with more local power solutions on-site. This may be a bit of a logical leap. But I see the same thing happening in computing. As costs decline, I think we’ll see a shift to more computation being performed on home machines and less server-side. Google and the other monumental tech companies will still have vast server farms, but we may reach a plateau where that can’t be scaled any further. These things are linked in the long term, power and computing. Both will become quite decentralized, the opposite direction from what’s happened over the last 20 years.

    1. JLM

      .Drive around and take a look at subdivisions in any area of the US and 99.9% of them are being connected to the grid.Solar power — which I adore — is a side show at best.The numbers don’t work and are laughable without gov’t subsidies.The wind blows like crazy up around Abilene, TX and the sun is pretty damn hot but you can’t stand the cost of distribution, the line losses (resistance) and the fluctuating level of supply at night and on cloudy/calm days.There is no mystery as to where the sun shines and the wind blows. It is getting the power to where the people live that is the challenge.JLMwww.themusingsofthebigredca…

      1. Chimpwithcans

        Are you saying that you’re not willing to relocate to a windy desert JLM??;)

        1. JLM

          .Abilene is actually a very nice town but it isn’t the ATX, my friend.I wouldn’t live anywhere else in the Lone Star state other than the ATX.JLMwww.themusingsofthebigredca…

      2. ZekeV

        At present moment, solar makes sense b/c the guvmint makes the utility companies pay us at retail price for our production, through net metering laws. So the current .2% or whatever the number is, that just shows what the subsidy has accomplished. But, storage is almost at the point now where solar could make sense without net metering (if you can store it, and replace grid power, then the payback is the same — you just have to factor in depreciation, and the cost of that power wall). I realize that solarcity is surely taking advantage of all manner of subsidies and loan guarantees for its operations, but at least on the residential customer side, we may nearly be at the point where payback can happen in a reasonable time period without direct subsidies.

        1. JLM

          .Zeke, change your shirt. You’ve dribbled some Kool Aide on it, my friend.Absent gov’t intervention, solar is nothing.The reverse metering at retail prices is just another subsidy.I have been messing with solar for over thirty years and I have never seen a reasonable payback period absent gov’t subsidy. Ever.JLMwww.themusingsofthebigredca…

          1. ZekeV

            You are talking about the period of time from 30 years ago, ending in the present or near future. Draw a line on cost of installed solar, cost of storage, and battery life, and you can see how the economics are going to flip at some point in the future. I think your experience of the past is blinding your taste buds when it comes to anticipating this delicious new Kool-Aid flavor.

          2. JLM

            .Hey, Zeke, I’m a freakin’ engineer with an MBA — my knowledge of the numbers is current and pretty damn good. I like solar but I know the numbers.Solar has been the “next big thang” for a quarter of a century, dude.Clean shirt it, Zeke.JLMwww.themusingsofthebigredca…

          3. ZekeV

            I’ve spent a couple thousand hours scribing energy finance deals for gas, nuclear, hydro, and solar projects. This doesn’t make me an expert yet, but I do have some insight into where these projects get their financial juice. As of a couple years ago, and possibly true today, the only place where solar actually made sense without subsidy was for remote miners in the Atacama Desert. Highest consistent sun of anywhere on the planet, combined with high-value extractive industry offtakers remote from central grid. And even there, of course some incentives came into play. But that appears to be changing, and doing so in a predictable fashion similar to Moore’s Law. Are you disagreeing with that extrapolation, or are you saying that no matter how efficient solar / battery tech becomes, it will not be good enough?

          4. JLM

            .Not at all. Solar is clearly — CLEARLY — headed in the right direction but it is not there yet, by a long distance as measured by cost/KWH, and will not be there likely for quite a while.I’ve actually installed solar arrays on the roofs of commercial buildings and studied them up close from an operational perspective — big installations for industrial uses.The operating characteristics are an important, oft overlooked, element of the mix.The battery tech is an entirely different issue but it, too, is moving in the right direction.If we were really serious about energy, we would be building a lot more nuclear plants.JLMwww.themusingsofthebigredca…

          5. ZekeV

            Here’s where I’ll go off the koolaid a bit. Nuclear power from what I understand is much more promising than any of the fossil fuel or renewable options, in terms of sheer efficiency and minimal environmental impact — particularly in newer model reactors that are not capable of reaching critical mass in an accident. My enthusiasm for solar is due to its ability to reduce the number of hands in my pocket every month. If I can install something on my house for $10-20k that means I never have to see another Con Ed bill, that is pretty attractive. But I’m a residential user, and theoretically could get my needs down to a minimum. Heavier commercial users may need to rely on centrally produced power for awhile, or maybe for real heavy use (data centers, factories) could install a mini nuke plan.

          6. JLM

            .Mini nuclear — the Promised Land!JLMwww.themusingsofthebigredca…

          7. LE

            About as likely as getting Trump to pump breast milk.

          8. JLM

            .You may be selling The Donald short. He likes to keep company with eminently pumpable breasts, no?This comment is so out of line and inappropriate as to be worthy of banishment. Sorry.JLMwww.themusingsofthebigredca…

          9. pointsnfigures

            I haven’t seen one solar deal that works without subsidies. Not one. I’d eliminate all subsidies on all energy and let individuals decide. Let the market allocate the assets

          10. ZekeV

            OK, let’s say you have $100mm in OPM to seed energy tech. Do you put that into solar opportunities? If not, is it b/c you think subsidies are going to disappear; solar economics will never make sense with or without subsidy within meaningful timeframe; other power tech offers better possibility for venture capital returns?

          11. pointsnfigures

            Writing from north of Eau Claire WI as @lakefrontlisa drives. I don’t think the folks up here believe in solar come October. The little cabin I am going to in Grand Marais has 0 electric and 0 running water. We installed solar years ago and it’s been nice. Let’s put more realistic constraints on it. I have a 5yr fund. Investors expect returns in 10 yrs. assume I am the mgr too. Answer No. I have zero energy experience and the bulk of my network doesn’t believe in solar as a large scale thing. They are C level people in mining and oil cos. I have spoken at length to scientists at Argonne. Nuclear is the way forward for big time power.I would not invest in solar panel tech or the hardware surrounding solar. Battery tech is the largest impediment. Batteries screw up the environment as bad as anything else. In energy there is no free lunch.Do I invest in a distributed marketplace that derives a more efficient price or creates a solar network? Might.I think solar can be huge as an unbundled network As a main centralized power generator it is destined to be a failure.I think innovation would happen faster if the industry felt the full force of the free market. But that means getting rid of subsidies in other energy markets too.

          12. ZekeV

            I happen to have spent my formative years in N. WI, and heated for about five years entirely with wood. I wouldn’t invest in that, either!Reading Albert’s original post, he favors carbon taxes as opposed to tech-specific subsidy. Instinctually I’m on the opposite end of politics from Albert, but if I had to choose one evil or the other, at least a carbon tax could possibly create an environment where the best alternative tech could win. (Note I’m not in favor of carbon tax!)

          13. pointsnfigures

            Right. Negative externalities. I’d first get rid of market distortion. See what happens. You might not need a tax. Without opening a can of worms the rationale for a carbon tax is global warming. Highly doubtful the science is settled there but that’s a different blogpost. If you believe in AGWR and have a good grasp of statistics read All I know is in case after case Coase theorem works better than govt intervention

          14. sigmaalgebra

            Maybe use wind/solar to desalinate water, split water to make hydrogen, provide the energy to combine coal and water to make gasoline, reduce CO2 to make carbon for gasoline, etc. Why? Because it is easy to store the output (electric energy is a total pain to store) and don’t have to care about the intermittent and unpredictable nature of solar/wind. But for the grid? Not a chance.Solar stands to go down in history as the most attractive and lovable thing since kittens, puppies, and pretty teenage girls but also the least practical. We’re talking totally irrational love affairs.In love with solar! Economically broke. Poor, tired, cold, hungry, sick, and nearly dead, but, still, in love with solar!Totally sick-o engineering, but totally in love with solar!No thanks.

          15. sigmaalgebra

            Residential solar is totally hopeless forever, even if the panels are 100% efficient, last forever, without maintenance, and are for free, and this is because the power just sucks — none at night or in bad weather.Even panels 100% efficient don’t work at night or covered in snow. Sorry ’bout that. Was this difficult to see?The issue is not the panels. There’s nothing that could ever be done with the panels to make residential solar reasonable.Instead, for residential solar, the issue is the storage. F’get about the panels. Instead, talk storage. Currently the cost of the storage is too darned high, even if the panels are for free.More generally, for the grid for residential users, the cost of the energy is not the issue: Getting the energy for free wouldn’t much lower electric bills because the bills are commonly now 12 cents per KWh while the power itself, on the grid, goes for 0.5 to 2 cents per KWh. The extra 10+ cents per KWh is for distribution and will remain even for free power. Why distribute it? Because it is too darned expensive to store it.

          16. JLM

            .Not to splash too much reality on things but have we all forgotten the government’s disastrous funding of Solyndra?There are twenty more disastrous other gov’t funded deals other than Solyndra.Those guys were very smart guys who just go it wrong.JLMwww.themusingsofthebigredca…

          17. ShanaC

            But the batteries aren’t scaling to Moores law.

          18. Richard

            Have any issue with Fred’s interpretation that a 5% cap rate implies that an investor is willing to wait 30 years to get their money back?Pro Forma ncomeAsset AppretiationRisk Ajusted Return

  16. William Mougayar

    I’m not getting any calls from any “Alternative Energy Salesperson” who can educate me on the best non-grid, non-gas energy choices I may have.If someone credible came over and talked to us about it, it would be a lot easier to make decisions.

      1. William Mougayar

        Glengarry :)I need to watch that movie…the cast of actors is amazing.

        1. LE

          Also don’t forget Boiler Room.

          1. William Mougayar

            Yup. Both . on the list.

          2. sigmaalgebra

            William, both of those movies are “only for closers”!

  17. daryn

    Need to figure out how to squeeze some solar in on our new house. Ran a conduit and have a metal roof begging for panels, just weren’t in the initial budget.

  18. DJL

    When the market deems solar ready – it will be a home run, save the planet, and make billions for people. But keep the government subsidies and venture investments (Solyndra) out and things will be okay. Many people pay a premium and decide to use solar to feel good about their carbon footprint. I can already buy “clean” energy for my home in Texas.If your goal is to reduce emissions – then by far the wisest investment you can make is improving emissions from carbon-based systems – which produce 70% of our electricity. Improving coal emissions by only 5% would be a 10X return compared to doubling the amount of solar used in the US. Unfortunately, this demonstrates how solar is as much about politics as it is about economics.

    1. Matt Zagaja

      Maybe seems like a good idea retrospectively but you can only build things going forward.

  19. sigmaalgebra

    Suppose residential solar panels are 100% efficient, never need maintenance, last forever, and are available for free for both the panels and the installation. Similarly for the equipment to connect the panels to the house electrical system.Still don’t want them. IMHO, too soon, neither will anyone else.Why? Because solar panels don’t work when the sun goes down or in bad weather. Gee, I thought that most people understood that? Maybe I’m wrong: You mean that we’re about to have solar panels that work well in the dark covered by snow? Amazing. Forgive my reticence.Asphalt shingles don’t last forever; you mean that solar panels are more durable than asphalt shingles? Amazing. Gee, I would have been wrong on that one, too.So, need either (1) electric energy storage at the house or (2) connection to the grid.Here’s a huge, biggie point: The electric companies are regulated monopolies. For a connection to a house, they pay for cables, transformers, trucks, etc., that is, lots of capex and opex. E.g., when a winter ice storm brings down lots of power lines, the electric company crews are out there, maybe in the middle of the night in a blizzard, fixing the lines.My father in law ran a local electric utility — the biggie was maintaining the lines, especially in winter in northern Indiana.For these capex and opex expenditures, the electric company gets paid just for the electric power (really, the ‘integrated’ power, that is, the energy in KWh, which is a unit of energy, not power) they deliver. That is, they don’t get paid for the physical connection to the grid but just for the (as is common, call it) power.So, if solar panels have the monopoly deliver less power, then the monopoly gets less revenue and will have to raise their rates per KWh (and I get ripped off) or have additional charges. E.g., the monopoly may just charge for a connection and, then, charge in addition for electric power delivered.If an electric company charges for the connection, then that stands to be about as much as current charges.Why? Because in the US, electric power is cheap, ballpark 0.5 to 2 cents per KWh, that is, the wholesale price on the grid. If we take nukes seriously, then the price can be close to “too cheap to meter”.So, an electric company that charges, say, 12 cents per KWh is charging at least 10 cents per KWh for just the connection, that is,100 * 10 / 12 = 83.33%of the electric bill is just for the connection, not the power. I can believe that: Anyone want a job, on call 24 x 7, to go out in any blizzards and fix downed lines and poles and get the power back on before the temperature in the houses falls to freezing? Solar panels will work in such blizzards? Gee, such good news!I remember a day in a winter in northern Indiana: The mission, and I needed to accept it, was to walk about 150 yards from the main house to a tenant house, in about 30 MPH wind and -40 F temperature. Scary stuff. I wouldn’t want to be putting up downed power lines in such weather.The community had a club of intrepid guys with snowmobiles and lots of super heavy clothes, e.g., gloves to the elbows that looked like some medieval gauntlet, who would go around and check on people to see if they were okay. Important work. Good community.Once the regulators permit the company to charge separately for the connection and the power, the savings for solar will disappear. Then people will ask, “What’s all that junk on top of your roof?”.Net, the attraction of residential solar is not really economics but politics, a way, for a while, to trick the electric company and their regulators.If solar starts to be significant, then that trick will start to hurt; there will be a charge just for a connection; and solar will go the way of a snowball at noon in Vegas in August.Residential solar is a “head fake”, a scam.The simple, bottom line, bold, blunt fact about electric power from wind and solar is that, to replace power from the grid or to supply power to the grid, they are worthless, as in zip, zilch, zero, a big goose egg, and, really, due if only to reliability and stability issues, not wanted, even for free.E.g., sell power from solar panels back to the grid? Okay, maybe sell it for, say, 0.1 cents per KWh? Maybe less? Did I mention worthless?If residential solar gets widely deployed, then it’s all just really bad for all of economics, engineering, and politics, really, just really bad politics.Wind and solar power worthless? Maybe not quite: Might use them in some places to desalinate water. Why? Because it is really tough to store electric energy but really easy to store desalinated water. Might use that electric power, with coal and water, to make gasoline. Good. The really good way to supply energy to a car or light truck is just a nice 20 gallon tank of gasoline.IMHO, the solution is for the US to take nukes fully seriously for energy for the grid and then use cheap energy on the grid for all we can. The benefits for the US are in better standard of living, a stronger US economy, better US balance of payments, and better US national security.Here I didn’t mention the flim-flam, fraud, scam hysteria of Al Guru’s earth religion and global climate change.Of course, for more with nukes, we’d have to placate the de facto US Secretary of Energy at Large for Life, destructive, delusional, ditsy bimbo Jane “China Syndrome” Fonda. I’ll admit: When she was young, and nicely fixed up, she was a very pretty girl. But definitely ditsy.

    1. Amar

      @sigmaalgebra:disqus, @JLM:disqus … yeah i am struggling.. revisited this decision twice in the past 5 years. As a home owner (not as a real estate investor).. is there a case to be made for this as a residential buyer?The big barriers imo are- the payback period is almost all driven by rebates from state government and the local utility and they seem to get worse over time not better.- the payback period is in the 10-15 year time horizon. I don’t know if I will necessarily stay in my current house that long. Assuming I don’t, i weigh the opportunity cost of this investment against something with a proven track record of paying back when i sell the house (say bathroom, kitchen upgrade) or even replacing windows to lower utility bills- this does not take me closer to real grid independence since (single user) battery tech is just starting to emerge (thanks Elon Musk)I want to do this since it feels like the kind of step an empowered, educated person “should” take 😉 but it keeps failing my common sense spending test.What am i missing?@zekeV i noticed your back-n-forth below… What am i missing. Note I am not playing with lots of money 🙂 and asking as an individual home owner. I assume my simple model is what 90% of the home owners in the country will be adopting as they make their purchasing decision. Why is this a compelling investment to me?

      1. David Gobel

        I have reexamined this decision based on the criteria you describe above every year for the last 9 years. I ask the installers a simple question. Can you provide a system that will deliver a conservative 12 year payback period including all incentives? So far after lots of haranguing, the answer is always “no, we really can’t”. So I don’t. Every year since 2006.I did lease a highly discounted 2012 Chevy Volt for 2 years, and it was a wonderful car and the financial payback was significant. Normally there would be no payback, but I’m a very very very patient person and wait for deals to come to me – and if they don’t, so be it.

        1. Amar

          Thanks for the response. That is pretty much my experience as well. I wanted to make sure there was no obvious secret handshake that i was missing which everybody else knows about.

      2. sigmaalgebra

        IMHO, essentially all the interest in US residential solar electric power is (1) based on subsidies (2) based on politics (3) based on public concerns about the environment, (4) based heavily on what Al Gore did as VP to aim Federal Government research grants at climate science to claim that human generated CO2 was going to overheat the atmosphere (5) based on some measurements of CO2 concentration by a professor at, IIRC, Yale that Gore knew as a student.Maybe for a while in some circumstances some homeowners might make a little money with solar. Maybe.But if a lot of people try to stay connected to the grid but draw much less power from the grid and, thus, try to pay much less to their electric monopoly, then the regulators of the monopoly will have to have the monopoly charge for a connection and, then, separately for power. From my arithmetic, considering that the power itself is 0.5 to 2 cents per KWh, the charge for the connection will be ballpark 80% of the present total charge. Then, no great savings.Sure, can use politics or whatever to let residential solar installations sell power back to the grid: If this effort gets to be significant, then there will be significant money involved and, then, adjustments will be made to sell the solar power to the grid for about what it’s really worth which is ballpark 0.1 cents per KWh, i.e., nearly worthless and likely not enough to significantly fund residential solar without big subsidies.Okay, there is the option to totally disconnect from the grid. But for this, with solar, need a means of storing electric energy. That’s not easy; that is, it tends to be expensive.To know how expensive, have to do the arithmetic. Sure, with enough in subsidies, low interest rates, rose colored glasses for estimates of lifetime and maintenance, etc., maybe storage could work in some cases. It looks to me like trying to make a lead balloon, but I have no solid proof that it’s impossible.A really good solution, with patents, etc., for residential electric energy storage likely would make one heck of a good startup, but it’s a bit premature to install solar panels in anticipation of such technology, which, if I am correct, exists at best at small scale in a lab somewhere.Heck, can make nearly anything taste good — just get a really good banana split and dump it on top! Similarly, can make nearly anything economically feasible — just add enough subsidies.There is another way, something I’m using: Some years ago, my electric utility too often for my taste let the power go out. Once the power was out for about two weeks; at that time I was traveling in Ohio (I live in NYS 70 miles north of Wall Street) so just had to clean out the refrigerators when I returned. Gee, that was a good five pound box of frozen US Gulf shrimp I was hoping to cook.With high irony, the electric monopoly was enclosing in their bills ads for gasoline electric generators!So, I got a gasoline powered electric generator, IIRC about $1000 at Home Depot. It worked great for years — no more outages!I did a good job: At Wal-Mart got several big, red, plastic six gallon gasoline containers. At Sam’s Club got a $100 wire shelf unit for storing the gasoline containers. Filled the containers with gasoline.Eventually learned a lesson: The containers were not completely air tight, and after about two years all the gasoline had evaporated. Bummer.But this week, I had to revisit the situation: At about 3 PM, the power went out. Okay, I can take two minutes. But the power was still out at 5 PM. So, my hard wired phone via my ISP didn’t work so that I couldn’t call for an estimate of when the power would be back on. And otherwise I don’t need or have a cell phone (not true: someone gave me a cell phone, but to use it somehow I have to have an account and pay money — no thanks).So I got the junk off the generator and rolled it out of the garage into the driveway, got out my printed notes, poured in a few gallons of gasoline kept for the lawn mower, and got the generator running. Good.Then I drove out to investigate: Got a couple of Deluxe Quarter Pounders at McD’s. Found other areas that did have power the outage seemed to be for only a small area. Got 12 gallons of gasoline for the generator.Needed some fresh 6 V lantern batteries but had to drive all the way to Wal-Mart to get them.By the time I got back, the power was on again.Okay, not so bad: I got my electric generator skills up to date again. Also revised my printed notes to make them more clear, put more references on my computer. Sure, in time will get a IPS for my computer.But my electric generator setup could also be used to handle presumably short term, rare events, black swans, for someone trying to be off the grid and depending on solar and a battery.The generator I got will put out 6500 W with a peak of IIRC of 8500 W. My arithmetic says that at about 3500 W the generator burns six gallons of gasoline in 10 hours. If so, then would be looking at24 * 6 / 10 = 14.40gallons for each 24 hours. So, for an outage of several days, might want to be able to get to a gas station to refill the six gallon containers.The generator I got is from Generac, and it looks like it is mostly for construction sites.There are likely better solutions, e.g., some natural gas powered thing, or a Diesel. These things can be connected to start automatically, etc.If you want to be totally off the grid, then add up some solar panels, a big battery, various electrical connections and control devices, and an emergency generator, take the subsidies while they last, and see if can make some money. I doubt you will, and I suspect that in 10 years no one will.YMMV.

  20. Jeff Jones

    The physical size of homes continues to grow as average household size shrinks. In the 1970s the average home size was about 1500 SF and now it’s about 2600 SF! Bigger isn’t better – we should be focusing on reducing our footprint and energy usage in order to create net zero energy homes. Through green building techniques, energy efficient appliances, reduced home size, photovoltaics and reduced energy usage we can achieve the net zero goal. In fact you may have energy to spare to power your Tesla 🙂

  21. Matt Zagaja

    Suppose we have two methods of creating power, one requires large infrastructure investment, employees to report to work everyday that are paid full salaries, benefits, etc. and there are costs associated with maintenance of the building, property taxes, business taxes, etc. along with the opportunity cost of not selling the building.The other method of creating power lets you take your existing building and generate electricity from it and only requires occasional maintenance and is cheap enough for individuals (or at least wealthy individuals) to afford and finance. Only needs repairs and maintenance after major events and otherwise intermittently.Decoupling the cost of generating electricity from the cost of labor and real estate seems like a no brainer for any person who is long on cities. As a bonus no need to pay extra money to the utility company to generate profits for shareholders.

  22. Louis Gray

    This is spot on. Solar is a no brainer, especially in regions like California, where climate change and the drought are leading to more sun and less water (which is required for much of standard power production). I put panels on my roof just over a year ago with Sunrun (Affiliate link: and have saved about 67% vs what we were paying before. My 20 year PPA will be paid off in six years at this pace. And Sunrun is going public soon. $RUN

  23. conorop

    Love this trend! My uncle, cousin, and team are doing lots of experimenting in their lab in Northern Minnesota. Through a combination of solar, large south facing windows, and 12″ cooler-like walls, their 4 bedroom home is a constant 67 degrees year round with a total energy bill of <$80/month.

    1. sigmaalgebra

      The well insulated house arithmetic I did says that can heat a place with just waste heat from people, appliances, and lights.Then if want some fresh air, use a heat exchanger, but in the winter the input air will need water, that will cool the air and need energy to heat it. If exchange the air slowly and don’t have radon or inside sources of air pollution, then still might be okay.In the summers, much of the energy is for taking water out of the air. Still, a well insulated house can keep down summer A/C bills.Yes, $80/month, I can see that.What can be done with insulation and low air leaks in the winter is amazing.

  24. pointsnfigures

    Said this same thing on Albert’s blog. Solar can work unbundled. That’s what you are doing. Unbundling the power grid. It doesn’t work for an on demand need it now capitalist economy. For that we should be building out lots of nuclear power plants.

  25. Rick Mason

    I’ve been a fan of solar since the seventies. Back then we were told it was just five years away. Now in 2015 we’re still being told it’s just five years away. It feels so inevitable that it might make it. But it is also possible another new energy source, say Thorium, will leap ahead of it and future generations will come to regard solar as quaint.

  26. Brett Battles

    Additional bearish view: 1) home ownership is at a 50 year low point; 2) utilities have zero interest in end-user solar, and are highly driven toward utility-scale solar; 3) regulatory/governmental forces still dominate the landscape and are slow to change or move out of the way (interconnect tariffs, incentives still needed for compelling ROI, lack of wide spread RPS in many states).That said…certainly hope you and Albert are right!

  27. sigmaalgebra

    Mod: Delete.

  28. William Mougayar

    Speaking of solar and being bullish on it, Facebook just released today photos of its plane that will provide Internet access to remote regions on the world, and guess what – “the entire outside shell will be covered in solar panels”. It will be in the air for 3 months continuous flying time.

  29. Sujit Kalidas

    Can anyone elaborate on what Fred means by “carrying costs” ?

  30. Jens Achilles

    I just read Fred´s post and I didn´t go through all 118 comments already made, so sorry if I missed a point already made here. But I am writing form Germany and I just wanted to give you a perspective from a “Kraut”.Solar is as far as I can tell a great technology. However, in Germany we sort of f*cked it up, because we used to have and partly still have big subsidies for renewable energy build into everybody´s energy bills, which helped some German solar players in the first place (most of them went bust by now) but now benefit greatly Chinese solar panel manufactures. The resulting high energy costs in Germany might help to save energy (high energy-consuming industries get an relief, however) but definitely don´t help to build great clean tech businesses in Germany.Similarly, for some reason, German car manufactures also build the first electric powered cars decades ago and now wonder that Tesla is taking all the credit. My point here is, in clean tech like in the rest of startup land not technology is making the difference but how you make a business out of it. Well, Fred, I guess that might have something to do with why you guys at USV not invest in clean tech so far. Actually, I don´t know any real success story in clean tech except of Elon Musk and Tesla. And that does not mean, I don´t believe there is some great value to create in clean tech. But trying to make the world a better place only works if someone can make some money or can take at least some benefit out of it. Well, at least in my opinion. Anyway, let´s find a way – no matter if in the US or in Germany or any country – to make the world a better place with clean tech 😉

    1. DJL

      Jens – thanks for making my point way better than I could. I think the same is true for “carbon credits” that were tried and a total disaster – driving costs up for consumers an enriching a very few corporations. And yet some Americans still push this idea as a viable market solution. (As for Elon – the US public markets are supporting Tesla as they spend incredible amounts of money. Perhaps a better example is his solar installation company – which I think is making a nice profit.)

  31. ShanaC

    But the super bull case is in batteries. Becuase rain is a thing, and you need storage for a rainy day literally. Better batteries are critical for solar to work at scale

  32. Donna Brewington White

    I recently came across a startup in LA promising to make clean energy easy and accessible. My initial interaction online hasn’t produced much result. Their primary offering is wind technology and my location seemed to make solar the only viable option they can facilitate. I’m supposed to be hearing from a rep. I’m really curious as to how they will pull this off and hoping they will! Intrigued by this as a “tech startup.”

  33. Don

    Fred, et al, EPA offers a great tool for understanding what types of energy generate the electricity you use. They call it the power profiler and it can be found here:

  34. TeamKevinPichu


  35. Stephen Voris

    My understanding of it was that this didn’t get traction, and one of the main reasons was that making solar panels sturdy enough to have thousands of people driving over them every day made it cost-prohibitive. One of the alternative proposals that stuck in my mind was just to build the panels over the road instead – in places like Arizona, say, where you’d probably want the shade anyway so your tires don’t melt on the asphalt.

  36. kidmercury

    thank you for bringing up germany, which is the poster child for why solar doesn’t work at scale for society. first, your chart focuses on capacity, which is wildly different than availability. the latter is of far greater relevance to what actually happens in day to day life for society at large. to that end, here is german electricity mix (note that this is just electricity, leaving aside non-electric energy that is still a huge piece of the energy puzzle in germany and many other parts of the world).http://carboncounter.files….

  37. Mario Cantin

    Ha ha, I was trying to reply to the first comment but I started a new comment by mistake; and as there does not seem to be a way to delete a comment on Disqus (?!), short of being a moderator, the best I could do was to replace the comment with a period.Either there is a way to delete a comment which eludes me, otherwise I cannot possibly be the first one to have used this hack…

  38. LE

    Not even close to the best use of your time when you are building a new business either.

  39. LE

    Not entirely true. For example you were all hep on buying a McDonalds until I set you straight last month.And the bad news keeps rolling in.

  40. JLM

    .The current tech is just fine. It is the cost per KWH that is making it suspect. Those costs are moving in the right direction. They are, however, not anywhere near where they need to be to make it ECONOMICALLY viable.JLMwww.themusingsofthebigredca…

  41. kidmercury

    i guess there are two issues at play:1. is adoption of solar panels scaling? yes.2. is all this adoption actually producing much energy? no.the idea of using the sun as a source of power is not new. it is literally thousands of years old. the challenge has always been storage/transmission. maybe they’ll solve it some day, but i don’t see what the breakthrough technology is. if our case for adoption boils down to “some new technology will solve challenges,” by that rationale we should adopt everything, because technology can theoretically be introduced to solve any problem.

  42. Don

    Are you kidding? You post a 2013 graphic when discussing solar? Rhetorically, that is like posting a stat about smartphones from 2005. Just one example. SolarCity alone installed 189 MWs in the last quarter beating their own forecasts by 9MW. In the same quarter last year, it was 106 MW.Regarding your point about capacity versus actual solar production, states that Germany’s installed solar capacity is already capable of meeting 1/3 of peak power demand (see chart), And, last Saturday, renewables (including solar) met 78% of Germany’s total energy demands for the day. You can see solar’s contribution throughout that whole week in the attached graphic (yellow). SolarCity generated 4GWh in a single day way back in March. See the chart below for a multi-year look at SolarCity’s actual electricity generation trends. I think they surpassed 5GHw since but can’t find a good chart on that.The idea that additional capacity does not lead to increased generation is simply false. With capacity and generation by solar on an exponential curve, it will not be long (30 years or less) before it is the dominant form of power generation.

  43. Don

    What exactly does “anywhere near where they need to be” mean? Deutsche Bank predicts solar will be at grid parity in 80% of the globe by 2017. In early July, Austin, TX signed a PPA for solar at a cost below 4 cents per kWh (subsidized). See chart below for the lowest solar PPAs to-date. 4 cents per kWh is crazy low. read more about this chart and the Austin PPA. First Solar’s CEO believes they will be below $1/kWh fully installed by 2017.

  44. JLM

    .I fear you are mixing apples and oranges here, Don.First, what you are talking about are “bids” for mega-plants. Not one KWH of such electricity has yet been installed or connected to the grid. They are “bids” not reality.Austin, where I live, has been at this for quite a few years starting with the Webberville project which was bid but not built at a rate of 16.9 cents/KWH.They are bids for mega plants — not the cost of an individual generating their own power. These mega plants have a very weak record of transferring their promise into reality.There is no doubt that Austin’s (city owned municipal utility) target of delivering 55% of its electricity by renewable source by 2025 is a great goal. As an Austinite, I applaud it.Call me when the plant (Recurrent Energy rather than SolarEdison, thought to have been the earlier winner of the bid) is actually built and actually providing energy.To my knowledge the contract has not been signed though I expect Austin to eventually sign it.If the proposed costs actually materialize, a phenomenon that has not always been achieved in similar situations, then it will be a huge win for solar power. We are likely looking at 2020 to test the hypothesis.With Sharp’s purchase of Recurrent Energy what nobody knows is whether this is further subsidized than normal and is it a sustainable level of performance or just a pilot project?I don’t really care as long as Austin gets what it bargained for in the deal. Austin is taking a huge risk because if it fails to materialize — then what?Solar is clearly headed in the right direction. Austin is a great place to make it happen.JLMwww.themusingsofthebigredca…

  45. Don

    Sure, some bids fall through, but Austin is not alone in low-priced bids as the chart demonstrates. Many of these have or will materialize at their bid price. The solar transition will be a combination of small and large projects. They both will enjoy economies of scale (albeit in different dimensions). At the individual level, there are three big opportunity spaces that companies are filling 1) leasing (e.g. SolarCity) 2) outright purchase by the consumer 3) community/solar gardens. The point in the context of this specific sub-thread is that everyone will have their own price point at which solar becomes viable and the market is, and will, offer different vehicles to address the different needs of the consumer base.Solar sceptics use a model of absolute equivalence (or better) in price before solar becomes viable. In reality, individuals and organizations commonly include other criteria besides raw price in making purchasing decisions. Solar is a viable option for many today when these other criteria get considered. With each passing day, any economic argument against solar becomes harder and harder to justify. Solar is already at parity in a growing range of places in the USA.

  46. JLM

    .You come across as a zealot, Don. Not a bad thing but there seems to be no dose of reality that you are willing to mix with the “potential” for solar.Right now the City of Austin is dealing with a bid, not reality.You make the knee jerk proselytizer’s mistake of categorizing anyone who is not a zealot as a “skeptic” or an opponent. These folks are simply being prudent because there is ample history wherein potential has not been delivered.This is about the same kind of analysis that said that nuclear power would be so cheap that it would not even have to be metered. As it turned out — Austin’s involvement in the South Texas Nuke, as a real world example — that was not the case.The potential was there but the reality was not what the promise had suggested and there were a great number of costs which had not been incorporated until the plant was actually in operation.Nobody saw the political implications of Yucca Mountain and the disposal issue. Planned in 1987, authorized in 2002, cancelled in 2011 by the Obama administration for “political” reasons. Their explanation at the time of the official cancellation.You state the obvious as if it were a revelation — “everyone will have their own price point at which solar becomes viable.” Duh?Take a deep breath. Maybe the Austin plant numbers will turn out to be true. The South Texas Nuke numbers were better and they didn’t turn out to be true.The City of Austin needs to be cautious because if they tie their future to this plant and it doesn’t work, they cannot just go out and get another source of power at Home Depot. They are committed and will have to live with the outcome just like they did with the South Texas Nuke.Please don’t take my comments as being directed toward you personally. It is the engineering, the decision making and the reality of what is happening.JLMwww.themusingsofthebigredca…

  47. JLM

    .Graphene is a huge potential technology which has implications to replace silicon. I am amazed we do not hear more about graphene on a daily basis.It has the potential for you to have your own WiFi for 100 miles from your house.JLMwww.themusingsofthebigredca…

  48. Don

    JLM, Thank you for your comment and for the soft manner in which you called me out. It hurts me that “zealot” is the word that came to your mind. I sincerely apologize if I have in any way offended you, any other reader, or this wonderful AVC community.I do think the data around solar is compelling but I also understand your argument that Austin (and others) must be prudent. I wish our country would get serious and price fossil fuels at their true cost to society. If we did that, those who have the fiduciary responsibility to be prudent would have a much easier time making the case to switch to solar.I do believe that to maintain a liveable planet for human beings, we must divest ourselves of fossil fuel as the primary energy source for human civilization. In that regard, I am passionate about the switch to any and all renewable forms of energy … especially solar.I find the comparison of solar to nuclear as case studies in “potential” to be difficult to swallow. But, again, I respect the argument you are making. Time will tell whether solar will continue to see precipitous declines in price or whether something will alter that equation, like nuclear, and drive the price sky-high (no pun intended). The data I see indicate continued declines in price.

  49. JLM

    .Bit of zealotry and passion in any discussion is a very good thing, so don’t take whatever I said as a personal criticism.When ideas wrestle, better ideas are the result.I am with you 100% as to the true cost of fossil fuels not just in the environmental context but also the geo-political context as well. We are mired in the Middle East almost exclusively because of our insatiable appetite for oil.It is also a life and death thing that we have not prudently achieved complete self-sufficiency within the US. Importing energy is nuts if it has to be protected by armed might.There is no argument that the pricing of solar is headed in the right direction and will eventually get to where it is not only viable but also the “right” solution. We just need to make sure we don’t respond to a head fake.The Austin #s are incredible and therefore they have to be watched carefully. The South Texas Nuke was going to make power in the ATX so cheap it would not have to be metered.Alas, it did not work out that way.We should all be able to contest and test ideas without being disagreeable. Thank you for YOUR tone.Hopefully, everybody is looking for good ideas. The best ideas.JLMwww.themusingsofthebigredca…

  50. kidmercury

    you keep focusing on capacity, which is only making my point. it is like saying there is a lot parking capacity on jupiter. while that may be true in some theoretical sense, it is completely useless for someone in new york city driving around in circles looking for a place to park. for that person, availablility, at that location, is all that matters.since you seemed to find 2013 data unacceptable, here is 2014. hardly different. before objecting please note that 2015 is not yet complete.