Thursday, April 17, 2014

Has Grid Parity Arrived?

Has Grid Parity Arrived?

by  | published APRIL 17TH, 2014
Solar power has always offered up the promise of three tremendous benefits.
It’s renewable, it’s great for the environment, and it can be produced right here at home – safely insulated from the ups and downs of global politics and market bottlenecks.
But there has always been one big problem with solar – the price.
For years now, its high cost has always been the biggest weapon in every critic’s arsenal. “It’s just too expensive,” they claim.
However, a study released last week by investment bank Sanford Bernstein suggests this objection is about to fall by the wayside for good.
It was brought to my attention in an article last week by Giles Parkinson ofRenewEconomy. To say its findings are rather dramatic is an understatement.
In fact, I can promise you this study will definitely turn some heads

You Can’t Turn Your Back on Research Like This

Now I must admit, not all analysts (myself included) would accept the study’s premise without some discussion, but its overall conclusion is impossible to ignore.
According to Bernstein, solar PV (photovoltaic systems that generate electricity directly from sunlight) is now cheaper than oil and Asian liquefied natural gas (LNG). The investment bank bases its conclusion on calculations made on a million British thermal unit (MMbtu) basis. This is the standard way analysts equate and compare the energy output for various liquid fuels.
“For these [developing Asian economies], solar is just cheap, clean, convenient, reliable energy. And since it is a technology, it will get even cheaper over time,” Bernstein writes in the report, adding, “Fossil fuel extraction costs will keep rising. There is a massive global market for cheap energy, and that market is oblivious to policy changes” in China, Japan, the EU or the U.S.
Of course, the bank does provide a needed dose of realism when it acknowledges that the current market share of solar PV in the global energy mix is so small that “the idea that oil and gas is the ‘loser’ in this formulation is laughable… in 2014.”
To the point: The latest BP Energy Survey estimates solar PV accounts for only 0.17% of the global market. That’s the smallest component of any major source. By comparison, oil accounts for 33%, coal comes in 30% and natural gas provides 24%. On the lower end of the scale, there’s hydro power at 7% and nuclear at 4%. Even wind and geothermal power (if you’ve ever been to Iceland, volcanoes provide the power) top solar PV, rounding off the list at just about 1% each.

The Long Chase Might Finally Be Over

The “Holy Grail” for solar enthusiasts has always been what the industry refers to as “grid parity.”
Grid parity simply refers to the cost of the source used as being equivalent to that of the primary manner in which electricity is generated. And until recently, most of the solar input could not be sustained in market terms, unless it was the recipient of significant government subsidies
However, as locations were weaned from dependence upon public sector support, some of them showed signs they could become self-sufficient. Above all else, these projects required two things: lots of sunshine and infrastructure networks that were already in place.
Of course, these developments by themselves were hardly enough to change the global energy landscape. Local changes in the energy pattern have a minimal impact on worldwide energy flows and pricing projections.
But the Bernstein report takes a different view, positing that’s not likely to be the case a decade from now. According to the report, solar is already eating away at the margins of oil and gas demand. Bernstein says the adoption of solar in off-grid areas in developing markets will translate into less demand for kerosene and diesel. Even oil demand in the Middle East will feel the effects.
Meanwhile, the increased use of solar power in China, developed Asia, the U.S., Europe and Australia will likely serve to reduce natural gas demand as well.
But Parkinson’s article goes on to reveal something much bigger. The kicker in the report is what he refers to a veritable “bombshell.”
As he writes, “While solar has a fractional share of the market now, within one decade, solar PV (plus battery storage) may have such a share of the market that it becomes a trigger for energy price deflation, with huge consequences for the massive fossil fuel industry that relies on continued growth.”

A Market as Big as Two Billion Backyards

According to the report, “The behavior from here seems clear: the solar industry will expand. Retaliatory steps from distribution utilities will increase the market for cost-effective battery storage.”
Bernstein maintains, “This becomes – initially – a secondary market for battery technologies being developed for the auto sector. A failed battery technology in the auto sector (too hot, too heavy, too rigid a form factor) might well be perfect for the home energy storage market… with an addressable end market of 2 billion backyards.
“And for some years, that will be the extent of the effect. We have previously calculated how large the solar sector would need to be in order to become a material share of incremental energy supply each year and therefore begin to displace high-cost oil and gas supply and start to depress prices.
“We estimate that the solar industry would need to be an order of magnitude larger than it is today to have this kind of impact. At the point where solar is displacing a material share of incremental oil and gas supply, global energy deflation would become inevitable: technology (with a falling cost structure) would be driving prices in the energy space. But even on an aggressive view, this could take the better part of a decade.”
Giles adds that, according to the Bernstein analysts, “The chief risk is that they are being too conservative. The big oil and gas producers, and the investors that control the flow of capital, may not wait until energy prices do actually deflate; they will likely change their behavior well before that in anticipation that it will happen.”
The report speculates that, “If the downward sloping forward curve is ever accepted as permanent, rational behavior from energy producers will guarantee it is so. Sitting on oil and gas reserves for the benefit of generations yet to come ceases to be a rational strategy if that reserve represents a depreciating rather than an appreciating asset.”
This, Bernstein says, is the hidden flaw with the idea that solar is “too small to matter.”
Ultimately, it says, what may kill the energy market for equity investors is not the fact that renewable technology and battery storage will turn into behemoths, but the realization of that future as inevitable.
With that in mind, there are two things to remember as we move into what the bank claims is going to be a significant change in energy production cycles worldwide.
First, as veteran OEI readers well know, my position remains that it is all about the energy balance, not simply just the pushy new kid in town. It’s the ability to maintain the balance of multiple available and interchangeable energy sources that will bring overall end-user costs down and improve efficiency.
Second, the envelope in this area is really going to get pushed by the nation rapidly accumulating the lead in net generation solar systems…
China. More on that as it develops.

Weird Enuf Fer Y? News From Barbaria: #74 (The First Link Is A Doozy)

"Like" Betty Crocker and she'll take away your right to legal redress.
Isn't she sweet?

As dependable as the day is long.


The Nation's Largest Insurer Thinks Obamacare Exchanges Are Doing Just Fine

America's hard-nosed insurance companies say it's working well too.
"Where's The Train Wreck?"
After taking a pretty cautious approach to the launch of the health insurance marketplaces in 2014, the nation’s largest insurer said it’s looking to expand its Obamacare footprint in 2015.
UnitedHealth Group, which is participating in just five public exchanges this year, said it’s likely to join more insurance marketplaces in 2015 but didn't offer specifics. Executive vice president Gail Boudreaux, on an earnings call with investors Thursday morning, said the company “has a bias to increase” the company’s participation in Affordable Care Act exchanges in 2015 after seeing encouraging trends in the program's first year.
“The size of the overall market is positive,” Boudreaux said. She said consumers’ large interest in “silver” health plans – mid-level insurance plans in which insurers cover 70 percent of the care costs – is another positive sign for the young exchanges. Almost two-thirds of customers selecting health plans through the exchanges have chosen silver plans.
Chief executive Stephen Hemsley cautioned that the insurer is still evaluating the insurance marketplaces, noting that it won’t have to make a final decision until September. “We have time to see how this plays out a bit,” he said.
Though UnitedHealth has limited participation in exchanges this year, its health-care technology division, Optum, has emerged as a major player in the marketplaces. It helped repair, as well as a few broken state-run exchange Web sites. The company said the unit saw revenue rise 29 percent from this quarter a year ago, and it expects to take on more business as a result of its work to rescue
Still, the insurance giant saw its earnings fall 7.8 percent this quarter, which the company partially attributed to Medicare Advantage cuts and Obamacare taxes. The change driven by the health-care law has been “immediate and significant,” Hemsley said.
UnitedHealth is the first major insurer to report quarterly earnings since the full launch of the ACA's coverage expansion, so it will be interesting to watch how bigger players in the Obamacare marketplaces view their early experience. But UnitedHealth’s comments come shortly after a Politico story noted insurers are optimistic about exchanges in 2015.Jason Millman

Gutsy Downhill Biking Caught On Camera

Nicholas Kristoff On The Ukraine Crisis

KRISTOF: In Ukraine, seeking U.S. aid. "For decades, Ukrainians have been starved, oppressed and bullied by Russians, and, with Russia now inciting instability that could lead to an invasion and dismemberment of eastern Ukraine, plenty of brave Ukrainians here say they've had it and are ready to go bear-hunting. If they could just equip themselves....Ukrainians mounted their revolution because they wanted to be more like the West, so it frustrates them that the West hasn't returned the love. Europe fears that sanctioning Russia would hurt business, and even the Obama administration has been cautious and has resisted providing military assistance (except for military meals). The Ukrainians have a point. A bear is charging them, and we offer spaghetti?" Nicholas Kristof in The New York Times.

GOP Makes Sure The States With The People Who Need Healthcare Most Don't Get It

Every time something stupid happens in the United States, 
it coincides with map of The Confederacy.

It also coincides with The Bible Belt.


The tragic red-blue divide on the Medicaid expansion. "The Gallup results are very imprecise, enough that nobody should take specific figures too seriously. And these aggregate totals surely mask all sorts of variation among the states. But the overall pattern -- a sharp divergence between the two groups of states -- is almost certainly real. It's also very tragic. As as you can see plainly in the above graph of Gallup's results, the states rejecting part or all of Obamacare are the ones with the most uninsured residents. They are, in other words, the states that need the most help." Jonathan Cohn in The New Republic.

Obamacare: The Good News Keeps On Coming.. (And Red States Suck)

The Hard Central Fact Of Contemporary Conservatism

The hard, central "fact" of contemporary "conservatism" is its insistence on a socio-economic threshold above which people deserve government assistance, and below which people deserve to die. 

The sooner the better. 

Unless conservatives are showing n'er-do-wells The Door of Doom, they just don't "feel right." 

To allay this chthonic anxiety, they resort to Human Sacrifice,  hoping that spilled blood will placate "the angry gods," including the one they've made of themselves. 

Having poked their eyes out, they fail to see  that self-generated wrath creates "the gods" who hold them thrall

Almost "to a man," contemporary "conservatives" have apotheosized themselves and now -- sitting on God's usurped throne -- are rabid to pass final judgment. 

Self-proclaimed Christians, eager to thrust "the undeserving" through The Gates of Hell, are the very people most likely to cross its threshold. 

Remarkably, none of them are tempted to believe this. 


States that have embraced Obamacare saw their uninsured rate drop this year three times faster than the states that didn't.

States that embrace Obamacare are doing much better at insuring people than non-embracing states are. "Gallup reports that states which fully embraced the law by setting up their own exchanges and expanding their Medicaid programs saw their uninsured rate drop this year three times faster than the states that didn't....Meanwhile, the Urban Institute...finds that states that expanded their Medicaid programs saw their uninsured rate drop 4 percent, while states that didn't expand saw a much slower drop at 1.5 percent." Jason Millman in The Washington Post.

Gallup: 12 million previously uninsured have gained coverage since fall. "That is millions more than Gallup found in March and suggests that as many as 4 million people have signed up for some kind of insurance in the last several weeks as the first enrollment period for the Affordable Care Act drew to a close. Just 12.9% of adults nationally lacked coverage in the first half of April, initial data from the Gallup-Healthways Well-Being Index indicate. That's the lowest rate since the survey began in 2008. Eighteen percent were uninsured in the third quarter of 2013, just before Americans could start shopping for coverage on the new online marketplaces created by the law. Gallup pollsters cautioned that the data are preliminary but said it is increasingly clear the health law is responsible for the gains.Noam Levey in the Los Angeles Times.

Primary sources:
Poll: Uninsured rate drops more in states that embraced health care law. Gallup.
Rapid increase in health insurance coverage under the ACA. Urban Institute.
Poll: Newly insured represent 4 percent of all U.S. adults. Gallup.
Poll: The individual-mandate penalties are working. Gallup.

Youth enrollments: More evidence that we won't have a 'death spiral.' "In the list of ominous predictions about Obamacare, a main fear has been that only sick people will sign up. This would prompt insurers to raise prices, making healthy people even less likely to enroll (the dreaded death spiral). However, Gallup reported that the newly insured are not more or less sickly than the general population. Furthermore, new enrollees are disproportionately young: those aged 18-29 comprise 30% of the newly insured, compared with 21% of the broader adult population. There is no magic number of young, healthy enrollees that will make Obamacare succeed. But a death spiral seems unlikely." The Economist.

Explainer: Obamacare's special enrollment period could help youth signups. Jason Millman.

Why bondholders love Obamacare. "Regardless of what Americans think about Obamacare, reining in health-care costs is winning the support of investors in U.S. Treasuries. After doubling in the past two decades, medical expenses rose less last year than at any time since Harry S. Truman was president in 1949, helped by Medicare reimbursement cuts. The rollout of President Barack Obama's signature 2010 law will hold down consumer prices for years to come as millions of Americans obtain coverage....Less inflation, which boosts the purchasing power of fixed-rate payments, may help attract buyers to Treasuries as the economy strengthens and the Federal Reserve pares its own bond buying." Daniel Kruger in Bloomberg.

Some Republicans are quietly shifting away from repeal. "The repeal-or-nothing approach is getting trickier now that millions of potential voters have enrolled in health plans and started receiving medical care as a result. That means members of Congress running for reelection in November will have to face real people for whom repeal would likely mean losing coverage. On the other hand, hard-line Obamacare opponents within the GOP's base are ready to pounce on any comment that suggests any goal short of repeal....But away from reality, in the bizarro world where political campaigns exist, Republican candidates are trying to appease those voters dedicated to repeal without alienating more moderate constituents." John Tozzi in Bloomberg Businessweek.