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The Power of the Sun

The sun is the source of almost all the energy that the planet converts into heat, the wind, waves, and of course light. More energy from the sun falls on the earth in a single hour than is used by everyone in the world in one year. So it is a powerful source of energy that we can capture and use to heat, cool, and light our homes and businesses.

The Tesla Concept

The big question is: "Will it be possible to make a significant contribution to the total energy needs of the planet using solar power?" In the last decade the cost of production of solar panels has dropped dramatically making it possible to install solar power very inexpensively. In fact, increasingly the proportion of new installed electrical power is from solar - and it is selling power to customers at a very low price. But this is deceptive if one imagines it is possible to extend this to a 100% solar solution. The EIA estimate of capital cost (excluding delays and financing costs) for solar is about $3,800/KW capacity. The least expensive is about $1,000/KW. The problem is that solar is only capable - on average - of delivering power directly from the sun for about 25% of the time. What do you do about the other 75% of the time? A number of companies are working on very large battery arrays to store enough extra power to deliver power in the dark and gloomy hours. To gather the needed power, the solar array must be 4x as large as the actual amount of power to be delivered. This allows the array to accumulate 3x the power while delivering 1x the power. This means that an array to deliver power 24 hours a day needs to be four times as big. In other words, the $1,000/KW rises to $4,000/KW delivered. In addition batteries are currently being sold by Tesla at about $2.5 million/MW. Thus the overall capital cost is considerably higher when attemp[ting to

Thus the overall capital cost is considerably higher when attempting to deliver solar power on a 24 hour basis.

Is it too high? A number of installations are now being implemented by Tesla. The project at Kaua'i in the Hawaiian Island chain is a joint venture by Tesla and Solar City. The latest estimate is that the price to be paid to Tesla is $0.1395/KWh by the utility that will ultimately deliver the power to the customers. Currently the power is derived from diesel generators.

Let's do some estimating to build a large utility capable of 2,000MW delivery 24 hours a day. At $1,000/kw capital that is about $1 million/MW or $2 billion for the 2000MW capacity. Because this needs to deliver 24 hours a day, we need a minimum of 8,000MW capacity or about $16 billion for the solar array.

The batteries need to deliver about 6,000MW capacity. At a discount price of $2million per MW, that is about $12 billion.

The total initial investment for this system would be on the order of $28 billion.

Is this profitable at $0.1395 per KWhr? The best estimate I could find of operation and maintenance costs is about $24.95/KW or just shy of $50 million per year cost of generating electricity. At $0.1395 per KWhr for a year at 24 hours peak capacity that would be about $1.69 billion per year net revenue. By year 16, the initial investment is paid off. If the project lasts 25 years without refurbishment, the Return on Investment could be as high as $13 billion above the original investment.

So the conclusion is that for a location like Hawaii, 100% solar can work and turn a profit given the assumptions of 10% financing costs and 15% contingency for delays. But it is not cheap and the cost for delivered power is not as low as one might expect from the price of solar currently delivered on a "non-despatchable" sale basis. That is if you can sell it as you accumulate it and don't have to store power, solar is a clear winner. Once solar needs to deliver 24 hours a day, the story changes rapidly.