Emerging Markets Law

The History of Wind and Solar Power

solarpanelsThe New York Times ran a great piece over the weekend on the history of wind and solar power.

The piece describes the development of wind and solar generation in Germany and contrasts that development with the United States.  It accurately portrays the importance of government subsidies to fund generation and the different experience in Germany in comparison to the U.S.

Importantly, the article describes the problem of base load generation that persists as a chief problem for the economics of distributed generation.

The "base load" of the electrical grid is the amount of power that is almost always constantly in use.  Power usage may ebb and flow, but the base load never disappears.  (Think about all of the devices in your house - AC, lights, clocks, etc. - that never turn off.)

Providing base load power is the chief duty of incumbent electric utilities.  Utilities receive subsidies from the government (in the form of price controls and monopoly control over the electrical grid) that make it possible for the utilities to maintain base load power.

Interconnecting distributed generation to the grid, however, imposes additional costs on the utilities.  And, while distributed generation can help to meet peak demand for power (think of all the power required to support air conditioning on a hot, sunny day) distributed generation does little to support the base loan (imagine the power drop off from solar on days when there is heavy cloud cover)

For decades, utilities made additional profit margin on the swells in electric power needed on peak days.  If distributed generation from independent producers takes on that part of the power curve, the economics of the utilities changes.

There are no easy answers here, but it's interesting to focus on the challenge.

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