How Solar Energy Became Cheap: A Model for Low-Carbon Innovation

How Solar Energy Became Cheap: A Model for Low-Carbon Innovation

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You. Might. Yeah. What's fun right. Great. Thanks, a lot Todd great to be here nice, to see such a full room I'm really impressed that you guys show. Up on a Friday, afternoon to talk about a technology that's outside. Your department but I'm sure pizza doesn't have anything to do with that either so, but. Just to start out my, perspective, and this. Goes through my research and teaching and why I chose to write a book my, perspective, is that I think we can make better choices about, the, technologies. That we're going to need to develop to. Address energy, problems, and climate, problems if. We better understand, how, technologies. Have developed in the past and especially, if, we can understand. How successful. Technologies, have developed and solar, has been a successful, tech, for, the trajectory, that Todd just outlined so that's that's kind of where I'm coming from and really. When. We're talking about where solar is and having access, to cheap clean solar. Electricity that's helpful. But, I really think maybe even more helpful is the lessons that we can learn and apply to other technologies and maybe there's even, nuclear technologies, that can that can pick up something from some of the things that have worked with, solar and so that's where I'm going with this Solar, story it's what can we is what external, validity is, there in terms, of generalizing. This case and think about where it might apply elsewhere. So, the three points that I'll make in. Terms of answering this question of how did solar energy get cheap is one. That. No one country did it no. One country persisted. And taking the technology from, an idea to a commercial product to widespread deployment. Every. Country that was ever leading, in whatever, aspect of the technology was most important at that time gave. Up their lead after a few years, every. Company, that was the most dominant producer. Of solar panels in the world never, stayed like that for more than two or three years it, was really a sequence, of, countries. And companies within them, contributing. Something, unique and distinct, and it was much more instead of a competition, it, was much more of a relay, race of, a sequence that, really goes in the order of US. Japan. Germany. Australia. And China and I'll focus on three of those cases when. I talk about the solar case so that's the first part no one country did it the second part is how important. International. Flows of, odds. Call it knowledge international. Flows of knowledge were in, supporting, that chain. Of developments. And the value chain that emerged, from that it. Was flows of. Information. Moving around the world so you can think of scientific, publications and, scientific conferences, it. Was maybe non written, down know-how. That was in people's heads that, got moved around the world when people relocated. From one country to another and took expertise, with them and applied it in some new domain, it, was machines, moving around especially, production. Equipment was crucial, in getting the cost of solar to come down and that moved across countries, easily. And then, ultimately it, was finance that was moving across countries, and the final products being, produced and that could be shipped anywhere around, the world quite easily so as international, flows of knowledge. Embedded in people in machines, and in final products were crucial to catalyzing. This, global. Innovation, process so that was the second main point and then, the third main point this is really about. External. Validity applying. It to other technologies, is that even though solar was a success, it. Happened. Way too slowly, so that we're thinking about taking the solar model and applying. It to something new. That we think we might need for energy and climate problems. Or thing might be useful for those we. Need to speed that process that. I'll outline in a few minutes up by, a lot, and to. One comparison. I'll put out there probably like on the order of a factor of four so, it took 60 years to go from the first commercial, purchase. Of a solar panel which is by the US Navy. To. The two, cheap solar where we're talking about Power Purchase Agreements. $120. Per megawatt hour sixty years is too long to apply to other technology, so a key contribution. That, I guess I'm continuing, to work on is how do we accelerate. This process how do we speed it speed. Up this development, process so that's, where I'll get to and let. Me just you know kind of talk about the. Story a little bit but let me first start, with a little context, first, I mean I want. To acknowledge my research team that I worked with a, really, interdisciplinary, team they brought a lot of expertise.

A Lot of international experience, that was really helpful but also made it really fun to. Work on this project those were great, people to work with throughout the research. Phase. Of this project the, second one and I'll just make this point I make this point, in. My classes, on energy policy it's kind of a central. Theme. Of the whole class I, start. Up by trying to tell, people that transitioning. Our energy system to deal with energy problems, and climate problems, is. Hard for three reasons so one is, that we disagree on, what. We want from our energy system I think we'd all want an energy system that's cheap clean. And reliable. But. We disagree, and have very contentious, debates about which one we should prioritize should. We prioritize, the affordability, the. Environmental, impact or something, has to do with security and reliability and. We've. Had really hard, discussions, and choices and, people have really different perspectives, on what's most important, there so my perspective, is. Innovation. Can help relieve some of those trade-offs and have solutions. That achieve, all of those in a less contentious, format but for now we're, often dealing with these trade-offs second. If you look historically and. If, you look at transitions. From one primary, energy carrier. To another this is a hundred and fifty years 160. Years there it, took on the order of half a century to, go from a bio-based, economy which, is what we had 150, years ago to. One on which the Industrial, Revolution and, a lot of economic, growth came from which, is one based on taking, advantage of the chemical. Bonds and coal and then, once where transportation, became, huge and oil became the dominant energy carrier but even though you. Know we knew in the. Early, 1900's. That oil is transformative, for mobility it. Didn't become a dominant energy carrier, until. The mid part of the 20th century, and so this, slowness, of transition. Probably. In large part because how long. Stuff. Lasts in the energy sector is. Really different than other areas but. It's something that kind, of has an inertial force on.

How Things look and so we might need things to change faster, than they have in the past and. Then third if we think about the climate problem when you put co2 in the atmosphere and, this, is a really crucial point that I think a lot of people. Miss. And what makes it so different from some of the problems that we've dealt very successfully. With in the past environmental, problems like taking. Sulfur, and. Getting. Rid of sulfur and getting rid of acid, rain and dying forests, and lakes when you put sulfur in the atmosphere, it rains out in a matter of days to week same with particulates, that lead to health problems when. You put co2 in the atmosphere. It stays up there half of it for something like a hundred years so it leads some more kind of inertia more slowness, of the system to. React so one, thing that in making these points I realized. I was getting really good at making these points and as a consequence, I felt like people are coming away from my classes my talks quite. Discouraged, about us actually, making. The type of change that could deal with some of the problems that seem real. Because of the contentiousness, of the baits the slowness, of the system to react and then the the inherent inertia, in the climate system so, I started, to. Myself starting to kind of write down and if ultimately, closing. Some of my courses with reasons why I still, continue to work on this problem even though I think it is really hard for, these reasons so I started putting together a list of reasons to be optimistic, about. Dealing with some of our energy. And climate problems, and. It would be fun to do a whole talk on all these reasons for optimism, but I have to say over time this. List has gotten longer, to me, it's. Also each of the points on it has, gotten stronger and think more convincing. To myself and to others and then also realize that for, other people there's completely different, points that they would see as their reasons to continue working and be, optimistic about it but I think the number one that, I still find most compelling is that even, in. With. Climate change 30, years of really going, from strong, awareness of the problem and politicians. Dithering, about we should do about it in, the background we've got technology. Improving. And I'll, say in a few minutes it's, on a variety of technologies, of them getting, more efficient of using less materials, of reducing the manufacturing, costs of performing, better of getting, starting to get consumers more comfortable with them and so, I think that is really underpins, a lot of these other elements of reasons. To expect we can actually have some. Of the changes that we need and a lot of it has to do with the technology underneath it and so that's what really informs, a lot of my work or motivates it and that's what this book is really about is on this point number one and and. Why I think there is really reason for optimism so, the, second point I'll just put up here is just to make the case with a little bit of us.

Most Of us data but a little bit of others is to look, at how, far things have come and it's. Not so much about where, we are now is so low that I'm interested in smore the trajectory, it's a slope of this line so this is. 2016. Dollars per megawatt-hour I guess I don't need to explain what a megawatt hours in this room. But in other rooms that I've been in I do say, that a megawatt hour is the average residential. Electricity, use for a u.s., single-family home and. So you can think about how is your monthly electricity, bill in, terms of these units so it's like dollars per month of electricity, so grid, electricity is something like 120 dollars a month, and that's been pretty stable if we, look at the average cost of solar, that's been going down over. This 20-year period here and then. These blue dots are, a million data, points of US, households that have installed solar you, can see a lot of dispersion, there so some really expensive systems, others. That are cheaper, than grid electricity. And. Then we've, also got a, larger, scale these are utility. Scale plants. In the US and then we've got a few, at the bottom there those open. Circles. Right. Here that, are utility. Scale plants. In other countries, in very sunny, locations. And this is all took out all subsidies, out of this one so. If we just zoom in on this point here you can see that some of these plants are down. Around $20. Per megawatt hour those. Red dots on. Your. Right for 2030, this, is a an, experiment. We did in called expert elicitation, that we did around 2008, 2010. Where we found, solar experts, interviewed. Them for half, an hour to an hour each tried. To elicit probability, distributions, in their head about, what the cost of solar would be in 2030. And so we, have their highest. Cost outcome, worst case that we call that 90th percentile, most. Likely case and then in. A, low cost case, like at their 10th percentile, and now. Taking, those 2010. Interviews. Or expert elicitation z' that's the red dots there and comparing. Them to Power. Purchase Agreements. In multiple, countries we've, now got Power Purchase Agreements, in, 2018. That, are below the most. Optimistic, elicitation. From the most optimistic, expert, for 2030, so people got surprised. Even those that you would think would have motivational, bias to talk about how cheap solar is going to get they, didn't expect it would be as cheap as. It is and so I think, that's interesting that it's beyond expectations. What, I really want to get at though is come the slow for this trajectory of the the. Line because Soler's had, this rate of improvement that's been more than any other energy, technology. And so I really want to do is try to understand, that the. Other thing that makes it interesting is it's not the only one it's not completely, a case. By itself so, if you look at solar. PV, if you look at wind and batteries. They've, been on similar, long-term, cost declines though when one goes a little bit longer because we had some expert. Elicitation about the the future batteries. The slope of that line looks quite a bit like solar and. Potentially. With a lot more room to run in terms, of, power. And energy per. Cost of the of the batteries so there's there's more going on here than just than. Just solar so. I, guess. The other question I had to answer in this project is why write a book so, I've, been. Working on solar data since the beginning of grad school for me and I've been really you. Know collecting, as much data as I could got some pretty nice data sets like this million homes in the u.s. that we have prices for every single system, that went in and you can identify some of the factors, and identify some of the cost reductions, and I've. Done a lot of that work with econometrics models. And bottom-up. Engineering, cost models but. Along the way I kind of had this feeling. That. There was missing, there was things missing, things that we were hard to measure there, were hard to operationalize. And turn, into variables, that you could put into a model and that was what this book. Project. Was really about was to identify, omitted.

Variables, Things that seemed like they might be important they, hadn't shown up in in some of the quantitative data before. So that's why I wanted, to try to write this book so it was three, questions. How did solar become cheap, why. Did it happen as it did in terms of how long it took and then how can we apply that to other other. Technologies. So let me just yeah, show you what I found here the. First thing I talked about is I talked, about some of the solar costs if, you go all the way back to. The late 1950s. That's that first commercial. Solar. Sale. It's. Four, orders of magnitude of, cost, reduction so a factor of 10,000. From, the. First solar. Cell that was, originally. Produced by Bell Labs and then an entrepreneur, called les Hoffmann late 50s, started. Making, small, ones and then got, a contract, to the US Navy to, power. One of the first satellites after Sputnik called, Vanguard 1 and so that was the first application of solar was a launch in 1958. And that solar, tiny, solar cell to just transmit, information. Back, to earth, costs. About three hundred thousand dollars per, watt in today's, dollars. So that's an expensive, member. Or. Two thousand three hundred thousand dollars per megawatt hours that's your electricity, bill if you did your whole household on those. Little Vanguard, one solar satellites, so, that's, where it starts. There's. A front page of the New York Times the day after Bell Labs made, their big breakthrough, there that, said here's the technology for the future solar. Could power the Earth's energy system, and that. Was big expectations, and really. Nothing. Happened for the next, twenty, years and really the big push in the u.s. was on nuclear power in, the 1950s, and the 1960s and, there was huge deployment that. Happened after that push then, we have. 1973. October, Arab. Oil embargo. The, Arab. Oil States, refused, to sell oil to, the US to, Japan. To the UK the Netherlands in Canada, and as a result those countries, but especially us, and even more so Japan, decided. To get really serious about, finding. Ways to produce energy, domestically. And that launched. Project independence, that was President Nixon's plan to. Have the u.s. import, no foreign oil by. The end, of the decade by 1980. And that. Wasn't achieved but there were a lot of improvements, that happen but there's a lot of funding that, went into R&D and a lot of it went into nuclear a lot, of it went into finding, ways to turn coal into synthetic fuels, and then, a little.

Bit Went. Into solar but for solar that little bit was gigantic, it was like a billion dollars of R&D that, went in in the late 70s, into, the early 1980s, and he, had a couple things that came out of that so technical, improvement so efficiency went way up there. Was it, entrained a law people, so people moved from the space program the Apollo program that had just finished up and we're starting to work and taking some of their skills to, photovoltaics, and people came from other industries as well, and, one of the most important, people there was, a guy named Paul macaque he came from Texas. Instruments we're, in the 60s he'd been working on building calculators, and they. Had developed this idea. And. We're. Measuring it that as they built more and more calculators, the cost, per unit were coming down, and, there, was kind of a idea, behind this of the learning curve that as you build more units you. Find ways to spread fixed costs over more and more units or, you make incremental, improvements, or you. Get experience that leads to developing. New ways of doing the manufacturing. And. So Paul macaque said why couldn't we do this for solar and so he came up with this, graph here and this is me kind of, replicating. His graph, all the data except for one point and all. The axes are from Paul macaque from 1975. And so, what he did he just took the costs, from 1958, to 1974. And, applied. What he called a learning rate so a learning rate is what. Happens to costs, when you double, cumulative. Capacity. Produced. So, he, said with calculators, and the other things Texas Instruments had built it's. Between a 10 and 30 percent cost reduction, for every doubling. And 20% is a good kind of mid-range number, to use and so he just forecasted. That into. The future using those early 15, years of PV. Production, data. He. Had one. Interesting, way. That he. Thought about it too is this. Calculation. Here and so, here he was saying this. Is the extra, investment it would take, to. Get solar, down, to what he thought would be grid parity so where we wouldn't need to subsidize it anymore and so in a way you, can maybe think of it as a triangle that. Starts at whatever number you think is grid parity and, goes up to here and you need to subsidize that amount, above the regular electricity, price in, order to move. Capacity. To the right on this axis and that costs, would follow. And then I just plotted 2018. On it and you can see, Mecox. Projection. Is pretty prescient, it really, he didn't take that much data, but. There's something about this learning curve that did, seem to work, really well for calculators. And it's worked really well for solar I mean well in terms of being pretty. Accurate, prediction, of what happened, and, then there's also a, real. Policy. Implication. That comes out of this idea. Is that. You. Know maybe what you do is you, get companies. To pay for this or maybe you get the public sector government that's, subsidies, to do this so. That eventually you don't need to subsidize it anymore I think that's one. Of the most important, ways to think of subsidies. For solar the. Subsidies, aren't really. Trying, to, get. Us the benefits of clean energy the, subsidies, are trying to get us to the right on this learning curve to get the cost down so we don't need to subsidize it anymore and if the costs keep going down then, you start having social benefits, say this is great electricity, that, start paying back. The. Subsidies, and remember, this is a log scale so a small triangle here, is worth, a lot of public benefit and this is the subsidy, that you need and so. If. The one country that really took this idea and ran with it was, Germany, in the early 2000s, and they did a subsidy, program that. Added up to about. 200, billion dollars which, is a lot it's. Not you know a giant country, but. It's pretty in line with with make Hawks estimates, so if you take nineteen, seventy five dollars, and account for inflation that. 10 to 20 billion dollars looks, like something like seventy billion dollars in. Today's dollars so, maybe the Germans paid too, much and there's a lot of people think that we could have gotten the same outcomes, from. The Germany subsidy program with maybe half that much subsidies, there's something about this, projection, that I really, like because it got a lot of a lot of things right I'll come back to the German case in just, a minute so going back to this overall picture we've. Got project. Independence project sunshine the, other thing that was an important, development, and this is one, of the things I think was really lost in the soul Solar story was.

There. Was a policy, in nineteen seven US, federal government called. The public utilities, regulatory. Policy Act and it was just a way to say, that, small-scale, producers of electricity should. Be allowed to put. Power onto the grid and should be compensated, for it by utilities. And then also that utilities, needed to compensate those. Producers. At, the utilities, avoided, costs so what it would have cost them to, produce that power separately. And so it's kind of an arcane, federal, law, from the 1970s. That gets mostly. Forgotten about but, it starts to get implemented in, the, 1980s, in California, and really. For the wind power sector so we. Start seeing it implemented, in California, and it's it's really hard for these small-scale producers to negotiate, with the large utilities, and so, what the Public Utilities, Commission in, California, did is come, up with standardized. Contracts, so it said here's the legal language it's all right here we'll. Come up with a schedule of rates for the next ten years and, if. You qualify, for, being able to commit to provide reliable. Power to the grid you, can get this reimbursement. Rate it was like 12 cents per kilowatt, hour so a pretty generous rate and you're guaranteed that rate for ten years and that became, known as the interim, standard offer contract, number four that's that data, point there from 1985, and, it. Was dramatic, not, for solar solar was still too expensive but it was for wind so about two billion dollars, of Wall, Street investments, went, into California, wind farms, in, kind of three mountain passes in California, in their early net into mid-1980s, because. They were getting this almost, a guaranteed, a guaranteed. Return for. Ten years on the electricity, they produced and people around the world saw that that, you could catalyze investment. By, giving, certainty, to. The producers, and the Germans especially saw, that so that was a policy innovation, that, the Germans later pick up I'll talk about that in a minute the next one are talking about is Japan, and Japan. Keeps. The solar. Industry alive, in the 1980s. And 1990s. The. U.s. really kind of divests, from solar in the early 1980s. It cuts R&D, funding, over, two or three years from 1981 to nine in 84 by, almost 80% so it gets down about 20% of the highest level which is 1980, to, 1981, and so the. Research frontier, goes elsewhere it especially, goes to Japan a lot of the people move around and start, attracting interest, in Japan, electronics. Companies in Japan thinking, of Panasonic. And sharp start. Getting interested, in solar they had some experience, with it from this R&D, program and started, doing it in, in funny ways they started putting tiny. Solar panels into watches, and calculators, to distinguish, their products a tiny, market, makes no difference to global energy supply but. It got large companies, familiar, with the technology, and they, started seeing that there was a way to differentiate their product and start to use it a little bit and then, all the sudden there's industrial, support for what. Paul macaque would have liked which is a subsidy, program and that's the rooftop program in, Japan from. 1995. To 2004. So about 200,000. Homes, install. Solar on Japanese, roofs it's. The first time, that. We give a subsidy to consumers, so you get about half off. A half, value, rebate, for your solar system and to, see people actually embrace. It so 200,000. Customers decided. To take that on and get 50%. Off discount on, their on their solar system so that was a policy innovation the, other innovation, that, Japan. Did and this also fits with this mayhawk learning curve idea is, that they. Weren't going to continue that subsidy forever, they said it's 50 percent in year 1 it's, going to go down to 0 percent in year 10 and it's going to go down on a predictable schedule each. Year, and so that the subsidy will go away over time with, the idea that we, wouldn't need to subsidize overtime because there's a technology gets better and gets to, scale the. Cost would go down and so that was another policy. Innovation, and so the. Germans take that up next so I'll do in my own little, picture for the Germans here so. And. I've got the sequence on the top of the slide here but just to really simplify it if, you, had to if I just just, take a break to do. The overall picture here, if. You think about three, countries making contributions, I think that explains a lot the. Us-korea, the technology. The. Germans created, a market and the. Chinese made it cheap and it was in that sequence and it made, sense to be in that sequence and each of those places added, as distinct, set.

Of Efforts and capabilities that really, led us to the solar today so I just want to highlight the. Next two parts of that story the German part and the, in the Chinese part so the German part first. Of all and this is really coming from political. Science and my. Policy, work a policy. Window opened, up so, in, 1998. The. Green Party became, part of the ruling coalition for. Germany. And the, Green Party had been advocating. For solar, for two. Decades, had. A few experiments, in German cities and all. Of a sudden they had their opportunity and so it was hung. Josef fell on the bottom there who is the head, of the Green Party and, a. Social democratic leader. Named Hermann Scheer on the top there and together. Hans. Yosef, on the bottom wrote the policy, and. Hermann. Scheer sold, the policy, and when this it. Was only a few years that they had this coalition with the Green Party in power they. Passed the subsidy, program and it, was, the. Writing was an important, part of it they. It's. A process of policy, diffusion, so they took, this. Idea from the u.s. from the California, implementation, of purpo these, guarantee. Contracts, they saw what happened there so, they said okay we'll give above. Market prices, and the Germans gave way above market prices, like 52, cents per, kilowatt-hour and the. California, was giving 10-year. Contracts, the Germans gave that for 20 years so. It was an amazing deal for. Anyone to, jump in to, that market and as, a consequence, people were, borrowing money at like 2%, because it was such a guaranteed, return for 20 years there so they, took the idea from the, u.s. of these guaranteed. Contracts. And they took the idea from Japan. Of subsidies. Direct to consumers, and a. Declining rebate, schedule and that led to the passage in 2000, of a. Quotes, called a feed tariff that was really strengthened, in 2004. And then, really, created a demand so, that's, what we sometimes called demand poll so, these are installations, in Germany.

And You can see there's a little bit of rise in the, early 2000s, but with. That policy. Change in 2004. The. German market increased by a factor of four, so 300%. In one, year and rose, after, that and stayed high for like five or six years and all. Of a sudden. Solar. Was taken seriously, as a business opportunity and there was a lot of kind, of stability and credibility because of the way the policy was designed with these 20-year contracts, and so, what that really led to what. Later became the. Germans called their gift to the world and this is a little bit ironic, in, that you know the Germans spent 200 billion dollars on these subsidies. Eventually. All the men almost all the manufacturing, happens in China and people are kind of like well why did you do this Germany, and so there's. A few different ways to answer that question one, is that the equipment, suppliers in Germany have done very well supplying. To the Chinese and the, consumers. Of electricity I've, done very well buying solar cheap solar panels from China but. Also it's, our gift to the world and so this was this idea of kind of Germany being a eco. Innovator, and leader but. When I say the gift to the world I think, of it a little bit differently it's they created this market. That. Was so large and, had so much credibility behind, it that it led to investment. And it wasn't just, lots. Of people saying, this is a no-brainer to. Spend, ten, thousand euros and put a solar panel on our house and get a large return over 20 years there. Was that investment, but the really important, investment, was, that. Manufacturers. And even further, up the supply chain, equipment. Suppliers to manufacturers. People that were producing. Specialized, equipment like this wire saw here that would saw silicon. Ingots really thinly so you get many many solar wafers, out of the same amount of silicon, they. Could now start producing, equipment, specifically, for the solar market because, it was big enough to, devote R&D to devote engineering, resources to instead, of what they had been doing was, just take cast-off secondhand, equipment from the semiconductor and computer industry and repurpose. That for solar and their sir a lot of efficiencies, and, cost reducing opportunities that came out about using. Equipment just for solar because you didn't have the need for purity, and the. Concerns that are really important in the semiconductor, industry when. You're just trying to convert. Sunlight into electricity so. That led to all this investment and these machines that, came up so that's the German story and so I really think Germany's. Gift to the world is this, creation, of a market its stimulated, investment, in. China and then, in, the u.s. in Switzerland. And other places that were making these machines that the Chinese then bought so that brings me to the Chinese. Part of the story oh and. This is just some of the if, you say why did it get cheap so plants, got bigger, the. Efficiency doubled, over this period here silicon prices went way down wafers. Got, wider. And they got thinner so, thinner because of those wire, saws and then yields increased as well so all these changes were happening as. We're at this time of increasing, demand and then, the so the China story and so if the. U.s. made the technology. Germans. Made a market a Chinese, made it cheap and this is how it, happened, and it really is two phases it's one the, early 2000s, and then, the second phase is after, 2009, and in that early period, its. Entrepreneurial. It's really the Wild West it's a few scrappy innovators, pulling some things together and scaling, up and be very successful with that after. 2009, the central government gets much more heavily involved, it sees the industry, as a winner and it champions, it and funds it a lot but it didn't really fund up much at all before 2009, so. This. Early, period the scrappy, startup I, think. One of the most kind of revealing. Anecdotes. Or kind of stories that. Makes. The case for this international flows of knowledge. Was. This group in Australia, that. Started. Hiring Chinese, students, and it was in the early. 1980s, Deng, Xiaoping had, this program for a thousand, Chinese students, to go overseas. And come back to China to see what they would learn and to, see how, they could make use of what was going on in the rest of the war and one of those thousands, went, to the University, of New South Wales in Australia and, he had some experience, with micro electronics, and he was hired by the, guy in the left near their name Martin green and he.

Had Good experience, with that student, he said he was quite well trained and he could contribute to the lab and, he hired three more students, over. The next 10 years and then, in the early 1990s. He hired another student and that's. A guy on the right in the picture there and. In. 1994. He brought that student, to China to explore the possibilities, of setting, up production, there and that. Student then was, a translator, for the trip that was that, was only role he had and. They came away from that trip just saying, there's no possible, way you could manufacture, in China there was no infrastructure, there's, no supply chain there's no interest by any of the cities and setting up manufacturing, there there's certainly no investment. To do it and so, they left in after. That trip in 1994, and they went to India to, set up manufacturing, of solar in India and that didn't work either so, then they went back to Australia and set up a company called Pacific solar, in. In Australia, about. Five years later that. Translator. Started, talking to his Chinese friends back home who were saying you know things are starting to change here I should, take another look and so in 2000, he went back and started. Talking to cities about setting up manufacturing and, still. It was pretty hard to get, something to happen but. Some one thing that had changed is that cities now. Could. Retain, some of the tax revenues, from, manufacturers. And other companies, that were located in their cities and so all the sudden the cities were starting to have incentives, to attract. Investment. And to set up manufacturing and, so they were able to get five million dollars, five million dollars to. Set, up a tiny, manufacturing. Line and so. This guy this young. Donkey who's in the picture there travelled. Around the world, bought secondhand. Equipment. Brought, it back to China and set up a manufacturing, line and this, was just around the time that the, German market was starting to take off and so, he, said you know we can sell to the Germans and he tried to. Sell. The panel's to the Germans and the Germans were pretty skeptical they were very you. Know proud, their own engineering process, quite skeptical, of the Chinese Chinese, quality, of those panels, but. She, had. Credibility, because even working in this University, of New South Wales and, they were achieving, world, record efficiencies, on the cells and so the Germans really respected, that and saw that he had the technical credentials, to, make something that would be reliable, and, and, technically, sophisticated and, so, he started selling to the German market and started, this process of iteratively scaling. Up in by, 2005. That company that he started.

I'm. Creating, the name of it right now. Oh man. What. Is that name of that. It'll. Come back to me oh my god I've since so much time researching this company. Anyway. Okay. So he starts this company it goes public on New York Stock Exchange. Raises. 300, million dollars and, so, all, of a sudden, Solar is a, legitimate. Company, so this just to put this in perspective again, there's international, flows of knowledge and, and. Money in this case so it's us pension funds, that. Are taking their retirement, investments. Putting, into the stock market that, stock market is going into these, Chinese. Solar. Companies. Including, this first one here the, Chinese are taking that money so, it's four hundred million dollars. Taken. To China and using that to buy equipment from. The u.s. from. Switzerland. And from Germany taking, that equipment stalling. It in, China, and then. Producing, panels that, they sell to Germany, later. To Italy to, Spain to California, and then ultimately China. Itself becomes the biggest solar. Market and so a few, things that happen with that so, we've got used equipment coming from the US we've, got pension funds and then we are selling to Germany so these international. Combinations. Of knowledge are so crucial to, this whole to, this whole story and this guy's young ground she who was a translator, on that, 1994. Trip. Became. The richest person in China from 2005. To 2007. And then, they. Ended up buying an Italian company that, some, fraudulent, loans. And, the whole thing went under and so by the time I talked to him about. A year and a half ago he, he, didn't want to meet with me he needed to be a little bit quieter. About about his location so, but one thing that even though his, story didn't end very well the. Solar. Industry. Really, legitimized, itself, by. This pathway especially, being able to sell to a market like Germany and be able to attract investment, from the yes those two things really legitimized, it so, that by the time we have the, global financial crisis, in 2009, and 2010, the. Central government's willing to put twenty, maybe thirty billion, dollars, of low-cost. Loans into. Chinese solar companies, to, keep them afloat when, these Western. Subsidy. Programs were ending because of the global. Financial crisis in 2009, and 2010, and then eventually the Chinese themselves, start. Subsidizing, solar and have their own feed-in. Tariffs in them by 2013. China, is the largest market in the world for. Solar and. Then just, to. Two, aspects, of the Chinese case. That are important to. Appreciate. Is that. In. The 2000. To 2008. Period. Chinese. Labor cost advantage, was very helpful it was so much cheaper than trying to do production in Germany, and some, other places like the u.s. at the time and so that was a big advantage but. By. 2008-9. Because, that investment, in equipment and machines that was really developing or response to the German market it, was almost completely. Automated. And so the labor cost advantage was not really, serious it was really about how, do we get autumn a Shinto. Go well and to integrate our manufacturing, lines and have supply chains that are very tight with lots of information flowing very quickly so. That was a big part of the Chinese story was lots and lots of automation and the, other part is that top graph, there lots, and lots of competition, so when the US was dominating.

Solar In the 1990s. We had companies. With 30% of the world market when, Japan was in the early 2000s, that's sharp with, 25, to 30 percent of the world market but. Even. With the. Chinese companies becoming giant, and scaling up and even than this with, this original company, whose name I finally, remember called Sun tech none. Of them ever got above 10% so, it was extremely competitive and so margins. In the industry go way down that was another big reason why. Cost came down as well, so. This is kind of. You. Know China's gift to the world then is this cheap electricity. And the potential, to have you know 30 or 40 percent or, 50 percent of electricity by. Mid-century from. Solar ok, so and then this is just a picture because. It's actually pretty hard to get, into these places of. Solar. Manufacturing, in China and, this is to make. My point about automation. Like how many people do you see in this picture it's. A few reflections of people gawking at the machines doing their things here it's, really about pulling. These machines together, optimizing. Them and they used a lot of know-how. From Applied Materials in the US and some German, companies to come in and string those together and set up their production lines but now they're. Doing that on their own and they've also they're making some of these most of these machines on their own as. Well so, just to now. With the, last few minutes here, to. Make an effort towards, external. Validity so how can we kind of come up from all these stories and anecdotes and, history. And think about it in kind of a stylized reduced, form way that, we might apply to others, and the. First thing I think is helpful to think about is is these kind of three stages is creating. A technology. Building. A market and then. Getting the costs out and in terms of creating, a technology. Einstein. Played a key role here so his nobel prize was. For a paper on the photoelectric effect in, the scientists, at Bell Labs that came up with, the first efficient, solar cell used. His idea of activation. Energy as they were working on. Making. These PN, junctions, on the original, solar cells we, had our D that was crucial throughout, this time but changing, the focus so looking. At configurations. And design but then looking at different materials and our D on manufacturing. Itself that. Was really important throughout the time and then, knowledge spill over so it wasn't all, confined, to individuals, it wasn't confined to companies and it certainly wasn't confined to countries. Either it, moved around and that that's. Bed things up so they're on the creating a technology side those have been important components, in terms, of creating, demand or creating a market creating. Reasons. For an investment one. Is that that's a picture of Sputnik they're these. Niche markets, solar had the benefit of niche markets, all the way along from 1958. And the first, satellite, cell then, it was oil rigs than it was people that wanted to be off-grid, then, it was the calculators, and the toys and all along the way they, were small. But growing high. Willingness, to pay but shrinking, over time niche. Markets, and you didn't need policy. All the way along to, make the technology. Continued if you could find places like, up in orbit where, energy was really expensive and that solar had some unique capabilities that. It could be applied to a second. Part of, the. Building, a market story is the, modular. Scale so. That's. Something that really makes these niche markets, work is you don't have to only have gigantic, solar you. Can have tiny solar so the, think, of the cell in a calculator, and then. Think of the largest, solar, power. Plant in the world it's probably the one being built in Egypt right now and, it's about a factor of a billion from, that calculator, to this plant, being built in Egypt right now and almost, every scale in between has been used to satisfy some need in some market and so there's lots of different ways. That you could find niches, when you had that ability to have lots of different scales and then. Policy. Support. Certainly. Policies been crucial, but. When I say robust it's I, guess it's got two meanings robust in that, the. German policy was very generous and so it's strong robust but, robust also have this has this meaning of you. Know if you if you take away one, factor, or one thing changes you still have that incentive, and that, was the case because we had lots of different countries providing. Policies. For solar so when Spain. Went into the financial crisis and cut off all its subsidies, immediately, the, industry didn't fall apart because you had California, building up its California, Solar Initiative and, then China created its own and so there was never one dominant.

Market Except for the German market for a few years that, was completely, dependent on, a subsidy. And thus, completely, dependent on a political coalition hand-holding. Or an election going a certain way it really created. Expectations, that would be a demand because it was coming from, multiple policies and, then, in terms of making a cheap. There's the learning-by-doing aspect. And that's been certainly, helpful, one. Of the things I got from interviewing. People and, talking, about them setting up their companies was that they, didn't go big immediately, they scaled up over time they built one line got. It to work a little bit built the second line bigger maybe with a different technology there. Was some small incremental improvements, and so this ability to not, get locked into one choice but be able to gradually, make improvements, along the way has been crucial for. Solar in general but for the manufacturing, part especially, and then a delayed system integration, so now you, know we think about, the. Challenges, associated with having an intermittent, resource on the grid because it's not sunny all the time and there's clouds. And thunderstorms and things like that and those are serious challenges that we have to address, but, you know solar developed. For 50 or 60 years without. Having to encounter those problems, and now it does but there's a lot of momentum. Behind it a lot of things have been worked up by the time it has to do with system integration, and compare. That to a large-scale maybe a nuclear power plant or carbon, capture the, large-scale plant we're building some of the first ones of those they. Have to get system, integration, right right, away on a. Multi-billion. Dollar investment so. That is an advantage that that. Solar had as, well okay. So. Is. It, okay to go for a few more minutes okay, I just. Want to put a couple of ideas up there for how we could use PV as a model, and the first thing I'd just say briefly is it's not a model, for everything, and one thing. I've started to work with is sort of thinking about. Solar. PV as kind of one distinct, area, of climate. Relevant. Technologies, that's, got the characteristic, of being having a strong technology component, it, has this iterative, so that when I say iterative, there's. Been about two billion solar. Panels, have been produced, in the history of the industry so lots of chances to you. Changed, things learn, and. Then disruptive, this idea that by compromising. On certain attributes, in the case of solar efficiency. You. Could get gains in other areas, so in terms of costs of production so the Chinese were very savvy, in producing. Cells are about two percentage, points less, and efficient so like. 15 years ago this is going from about 16% to 14% but. You could get the cost down by about half by making those compromises, and. So that what those are characteristics of solar that, I think you could maybe apply to other technologies then. There's other technology, who might need for climate change that are really different like storing. Carbon in soils or trees that's really low-tech and distributed. Large, scale where system integration, seems to be the central, challenge so like, bioenergy, with carbon capture and there we need other models so maybe we need to learn from oil refineries, and chemical plants for those maybe, the Green Revolution is, helpful for understanding. How we can get more carbon, in soils and there's general-purpose technologies, that. Will must be certainly, helpful, for dealing with climate change and we've developed general, purpose technology successfully. Before so. I really, work on now is this first, category how, do we how do we learn from solar so. Let me put up a few points. Here one. Is that and. This, I've, kind of gone through this story but you know we now have several countries where we're talking about close. To 10% of our electricity from, solar it's not capacity that's electricity and close to 2% of world electricity, is, coming from solar and so that looks pretty dramatic, over. This 10-year period here but if you look at my, time frame I think. This is you know way, way too slow, if we're gonna say we're starting in 1958. In getting. To 10% of, electricity, by say 2020. That's way too slow and so part. Of the challenge here is how do we speed this up and so, as an example I've. Been looking at direct, air capture, where you take co2.

That's Already in the air this is address this issue of co2 staying up there really long time and, removing. It. Pressurizing. It and then sticking it underground so taking it out of the atmosphere directly. So. I presented, this to the direct, air capture companies, they didn't like this picture but here's. What it looks like so if you say it took. Something, like sixty years here to go from the first commercial, to low-cost and then we're talking about maybe 30. 40 percent solar by 2040. Let's, take your direct, air capture plants this is the first one that went online in. 2017. In Switzerland. So this is taking ambient. Co2 at. 0.04. Percent concentration. And, absorbing. It pressurizing, it sending, it four hundred meters behind that plant in the upper right hand corner you can see a little picture of a, greenhouse, there and so that's who's purchasing. This, co2, they're using it to raise. The parts-per-million. In their, greenhouse. From about four hundred to six or seven hundred in increasing, the yields on their tomatoes so, 2017. That's a real plant there's a real customer so. If you apply the solar. Timeline, to that they're low cost in twenty seventy six and their. Widespread adoption by, the end of the century that's not on, the. On. The scale that we need to do with climate change these are some integrated, assessment, model results for. How we would meet a two degree temperature, target, and if, you look, at those we. Need to start be deploying, these, negative, emissions these removal, technologies, by. 2030, in a serious way and scaling, it up to. Billions. Of tons by. 2050. Maybe five to ten billion, tonnes a year so, just to put that in perspective it's like, taking. Out of the, atmosphere about a quarter of what we put into the atmosphere now. By 2050, and so they, need to do something if, they're, gonna contribute to this way faster, than solar and just, to put, that in these simple terms here they, need to speed things up by like a factor of a factor, of four and so what so my research is trying, to do now is how could we oh, yeah and this I was looking at, scale. Up for the fastest solar companies. Here so log scale here these are Japanese, the sharp German, sq cells and Sun Tech and Jenko are Chinese. And you can see how fast they. Scaled up their production if, one, of these companies climb, Marx is one of them had a goal to. Remove, one percent of the world's co2 emissions by 2025. They, would have to scale up about twice as fast as these. Solar companies so it's, not out of the question but. It would take serious, commitment, and investment and, the. Type of activity, that we've been seeing in solar but, more to. Do even, 1% of emissions, so. And. This is I'll just stop, with this one here part. Of what I've been trying, to work on is how do we get that factor for acceleration, so we can learn from solar we can say, what happened there but how can we actually do it faster, and so, this is just some initial. Ideas of things we could do to. Speed things up not for solar but for direct air capture, or you, know whatever other technology. Might think important so, I'm, thinking, of it in the three.

Rows. Here so on technology. Push so creating new knowledge on, knowledge. Flows on disseminating. Knowledge and, then, on demand. Pull creating. Markets so the. R&D I talked about already, having. A train for true trained workforce sciences. Scientists. And engineers is crucial here, public. Procurement I didn't, talk about very much but that was a big part of the u.s. effort in 1970s. Was, for the government to start buying solar. Panels that led to companies, actually having to produce for a real customer there, were technical characteristics, about reliability, efficiency that, they had to meet and so that really got the companies become from. Kind of small scale batch producers, to something more a little, bit approaching Industrial on, knowledge, flows so, codifying. Knowledge so taking it out of people's heads and putting, it into maybe. It's science when use reports and papers but probably more importantly data, sets that people have access to and can make improvements on and understand what's happening, knowledge. Spill overs I talked about that so knowledge, going from person to another company, and other country, to another and the, global mobility that I've talked about quite a bit already in terms of people machines, know-how, finance. And then final products and then, in terms of creating, markets so the robust markets part is really important, this. Disruptive. Production, so being able to compromise on attributes that, consumers, don't think are that are important in order to, address. Issues, that they do think are really important and that, might be something like, cost, for solar for. Electric. Vehicles it might be something like convenience. Or safety costs. As well and then the final one I'll put there's political economy, and that is. To make the point, that every. Country that. Had. Strong. Effort, to create. Markets, for solar and subsidize, solar eventually. Got strong resistance from. Competitors. To solar or other entities. That stood. To lose from. From. Widespread, use of inexpensive. Solar and in every country Germany. Japan. US. And China those, efforts. Have been successful in. Kind. Of blocking, the progress, of solar and probably. The best example where, this has actually been resolved. Was in Germany where they passed that strong. Policy, that was in place for seven, or eight years in the big way and about two hundred million dollar two hundred billion dollars of investment goes, in or, public. Investment. But. They made a big compromise they said that large, electricity. Users so. Energy intensive industries. Don't, need to pay for the subsidy only households, need to pay for the subsidy and you, know there's a lot of concern, about fairness. And ability to pay but that was a way to make. Sure that those large users didn't stop the policy I think if, we wanted things to go quickly we might need to make those types of. Politically. Savvy moves. In order to make things go quicker because a lot of these entities stand. To lose from some of these developments, and and can effectively slow, them down in a lot of cases we don't really have, time we need to be moving faster on these things so I'll, stop there and happy to take any questions either now or after. So. How. Does the. Solar. Panels. Trim, that's the same oh yeah. That's. That's a good question. I think. That I think it's faster, in computer, memory, because. With, computer, memory you can do miniaturization, you can do lots and lots of transistors, in the same amount of space with. Sol there's only so much sunshine hitting a panel and so you, can never get above something like 30% efficiency. Anyway, so you can reduce. The, manufacturing. Cost the material cost the thickness but, you don't have this ability to Jam more and more. Photosensitive. Material into, the same amount of space so that's that's, one thing as made computers go go faster but there are a lot of similarities, in terms of the iterations. And the scale-up and even the material, is the same so. Makes. It harder for things, to compete, but. You know there's. Places. Where, you. Know this is in. Chile. And Abu Dhabi and, so. In. Ann Arbor, you, have probably. A third of the sunlight so that triples the costs in terms of dollars per megawatt hour so that doesn't, look as good here so that's these are sunny places that. Makes it better. It's. Even, in Abu Dhabi it's not sunny all the time and so, you do need access, to low-cost storage, so that that. Could be something that you have to add to this as well but, that cost, is coming down too and so you, know maybe as storage looks like that if you add it on. And. Then. You've got space - okay. Bobby, has a lot of space Chile has a lot of space. Maybe. You could in an arbor but there's a lot of other places where especially, large.

Mega Cities where. The energy, density. Of energy consumption, exceeds. The space that you have for, solar, radiation, even if you could take advantage of all of it or 20% of it so, yeah, so there are reasons for other things you know have niches to compete but, it does make it harder to compete because not. Only these costs low but they continue to go down and if they're supplemented, by stores. It's low and continues to go down it's. A moving target in terms of competing with it. There's. One. Yes. You take, the. How. Much it cost to install the, system. Discounted. At a discount. Rate over, a certain number of years so they're guaranteed, for 20 years we use 20 years and for household, systems we use the a, little. Bit higher than a mortgage interest, rate so, you can calculate the, amortize. Or the levelized annual cost that way and then, if you take how much sunshine. There is in each location so there's numbers for Ann Arbor and you, know the efficiency, of the cell you can figure out how many megawatt, hours you can produce in. A year and so you divide the levelized. Cost by the. Megawatt. Hours that you produce and that's our estimate here. Yeah. Yeah. I mean, I don't think it makes a big difference because, that recovery. Factor kind of approaches, the interest rate once you get after. 10. Or 15 years anyway, so it wouldn't make a huge difference in terms of levelized cost. Yeah. Can't, yeah. Right. Yeah there's no battery right so this is just, saying. It doesn't matter when you produce it we're gonna count, those so there's certainly. Electricity. Valued at different, levels. For different places in different times and so that's not included it's just cost no value, yeah. As thing where the power companies, are not so favorable, they. Say cost them more money our. Son. And we under, therefore they're charging is more so. Could. You say something about, the. Advantages. Or disadvantages of. Trying. To purchase power, and, a, sunny. Part of the country, offset. Our news here and how. Is, that real. Or is that a shell, game yeah. I mean it can be real you just have to make sure that if you're you know paying for clean power that's being produced somewhere else that. It's, not just, making all the other power more, Brown, so but there's ways that you know you can make sure that that's, that's. Happening. Yeah. But it does you know raise the issue about how much, renewables. Should be happening in a certain place and whether we should take advantage of building. Renewables. In places that are sunnier, or windier, and then, do we kind of account. For that financially. With some kind of compensation. Or do we do it physically, which. Means building. Transmission. And you know that that can be a challenge but you, know there's been a lot of efforts. We. Have to. To. Change a lot of our thinking I think I've, been having. Students coming into my office for the last three, years, asking. About this and why we don't have solar on all the buildings and I, keep. Saying good question, ask, the. Chancellor and she. Told me they, should be asking you me, so, I had to come up with a different answer and then I said okay well let's look into, all the state regulations, because they're saying yeah they say we're not allowed to make our own power and, we couldn't find anything on that and so the final thing the last thing I heard last week is that the, university, has a power. Purchase agreement, where we get power for three cents per kilowatt hour so it's $30, per megawatt hour so that's. Here, you, know most. My. House, has, to pay this so, if you're only, having to pay this and you're, not in Abu Dhabi but, you're in Ann Arbor or Madison you. Know the numbers are up higher and so that's a big challenge is how do you how. Do you get the university to say okay we don't want this sweetheart.

Three Cent per kilowatt-hour deal anymore but, we care about sustainability so, much having cheap solar helps and having to get cheaper helps but. Yeah it's a real real, challenge and so I think we're going to need not, just solar but lots of lots of solutions to deal with that one. Yeah. The. People are receiving subsidies but, they're not accounted, counted, here so the, way the subsidies work is you. Pay fifteen, thousand dollars for your system and that's, what I count here and then, if you get your thirty, percent investment tax, credit back, you. Get that four thousand dollars out for your taxes but that doesn't show up here this is unsubsidized. But, people are purchasing. These things, knowing that they will get a subsidy. Okay. Yeah yeah. Well. That's one thing about the the learning curve idea is that, you. Know it's a log-log scale and, so, if, you plot it on a linear scale it. Would look like it drops a lot and then it kind of flattens out like it's approaching, almost, almost approaching, an asymptote so. That. Is kind of what we're seeing with solar but if you plot it on a log-log scale it. Actually looks pretty straight, I mean this is one version of it this is the other is. That what you're. Okay. It's so not cost but adoption, yeah yeah, I'm, sorry. I missed your question then oh. The. One yeah, yeah, the. Worldwide adoption, of solar oh. That. One yes sorry. That. One. Mm-hmm. Yeah. I mean these. Are market shares so it's not a total so. You know oil has been. Growing and growing I guess, it's been flat the last, 10. Or 15 years but you, know there is but in terms of share yeah they do get to some level and then stop but, you know most even. The most ambitious people like, people are most optimistic, about solar see. It getting into 30 or 40 percent maybe 50 percent it's not no one's not. Many people are talking about it being a hundred percent because, of some of the things we talked about it's not sunny anywhere sometimes, you have density maybe. You don't have enough storage maybe there's even material, constraints oh yeah. I mean but but, these are tremendously. Large numbers. To get up to 50 percent I mean the one that's been fastest, of any of them is nuclear to. Get up to something like 10, percent in this really short period here, and so, these. Are gigantic. Transitions. Even, though they look like they hit a wall yeah. Yeah. And that's a really, big part of these other technologies of starting to look at too is it's. Something that's not been a big issue for solar but, and. It hasn't seemed to be a big issue for, electric. Vehicles but could for some of these other ones like this direct air capture where you're taking, co2 and storing on the ground people. May not want to have lots and lots of pressurized. Co2 under, the ground so we'll have to see about that one.

2020-02-15 16:16

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