Solar energy supports all life on the planet and is our most abundant energy resource. That said, while more solar energy falls on the earth than we could ever need, harnessing it is a challenge. A recent report from the Trottier Energy Futures Project, entitled An Inventory of Low-Carbon Energy for Canada, puts it well:
Here is an overview of some of the benefits and costs of solar energy with links to more information.
Solar Production matches Peak Demand
Solar systems generate power only when the sun is shining as shown in the graph below. In summer when solar output is at its highest, this is exactly when power is at its most expensive. Electricity must be produced when we demand it – the grid is the ultimate ‘Just in Time” supply system. At peak periods when demand from air conditioning is the highest, Hydro Ottawa, Hydro One and other local distribution utilities must pay the spot price for electricity generated by natural gas fired plants that only run at peak times. Solar power systems have a high fixed cost to build but have no input cost to operate as the “fuel” is free sunlight. Therefore, having power available from a solar array during the peak demand time can actually reduce the cost of meeting this demand.
Solar Reduces Transmission Power Losses
On average, 7 to 9% of the electricity generated in Ontario is lost during transmission to what’s called ‘line loss’. The longer the distance from the point of production to the point of consumption, the higher the demand and stress on the grid, and the greater the line loss. In peak demand periods, when lots of power must be shipped a farther distance, the line loss is even higher – up to 15%. Roof mounted solar PV systems are, by definition closer to demand, and deliver power during the summer peak. Solar PV generation therefore significantly reduces grid line loss, providing both a financial and operational benefit. (ref)
Solar has created a new global industry
Solar development is already providing new jobs in the form of manufacturing, installation finance, and R&D. Sales of solar equipment have been growing at a steady 30% per year for the last 20 years. In the last quarter of 2014, the global photovoltaic solar industry manufactured a record $5.9 billion in solar PV cells. Over 19.5 GW of new solar PV systems were installed brining the global total to over 200 GW.
Ontario is participating in this growth. Several new solar manufacturing plants are already operating and new installation jobs are being created all across the Province. A 2011 report by the Pembina Institute showed that investment in renewable energy and energy efficiency creates far more jobs than nuclear or coal with carbon capture. Solar power generation was at the top of the list.
Global solar costs are high but falling rapidly
The cost of solar photovoltaic (PV) electricity generating modules has fallen in the past 30 years and is closing in on the cost of conventional energy. These costs will continue to fall according to the US National Renewable Energy Laboratory (NREL).
The graph below illustrates how the falling cost of solar modules could make solar electricity competitive at peak periods (peak load) by 2020 and at all times (base load) by 2040.
How do feed-in tariffs drive down solar costs?
The cost of solar in Ontario will not follow the above cost reductions unless there is an indigenous solar industry and market here. The Ontario Feed-in Tariff (FIT) Program is part of a long-term clean energy strategy to create a solar industry in Ontario and drive the cost of solar down through economies of scale, joining the global solar market and making solar a key component of Ontario’s future. Feed-in tariffs provide 20-year fixed price contracts for new suppliers of power from renewable sources. These prices are set to provide a reasonable return on investment for these suppliers. The demand for solar equipment resulting from these contracts creates a competitive market and drives down the cost. This approach has been used successfully in many other countries.
Feed-in tariffs for new projects are lowered every few years to reflect these lower costs. Current 2013 solar costs in Ontario are 50% lower than 2010 when the FIT Program started, showing how successful the FIT Program has been. In countries where similar programs have been running for over 10 years, solar costs are now close to the costs of conventional energy sources.
For more information on Feed-in Tariffs and how they work, check out our FAQ on Feed-in Tariffs.
Ontario’s new solar and wind systems are not responsible for electricity price increases.
Feed-in tariffs are for power from new renewable energy projects built today so they should not be compared with price of power from existing conventional power plants built thirty years ago. The reason for this is that these existing power plants were built when the costs of labour, materials, and fuels were much lower. They also have been fully paid for already.
Over the last 40 years, political pressures have caused electricity bills to become disconnected from the actual cost of generating, delivering and maintaining the electrical system. Taxpayers are expected to cover overrun costs on large fossil and nuclear power plants, waste disposal and insurance risks. Provincial health costs cover the fiscal impact of smog and pollution. A true user pay system would internalize these costs with the rate payer. Under the Feed-in Tariff, all costs relating to the generation of solar PV electricity is borne by the ratepayer; there are no charges applied to the taxpayer.
A report by Ontario’s Independent Electricity System Operator (IESO), the agency that runs Ontario’s wholesale electricity market, says purchases from nuclear and gas-fired generating plants — not from renewable energy suppliers — are the biggest component of your hydro bill. Only 17% is made up of payments to renewable suppliers disproving critics’ assertions that electricity prices have gone through the roof due to Feed-in Tariffs.
Behind the Switch, a 2011 report by the Pembina Institute shows that adding large amounts of solar and other renewable energy systems to the grid over the next 15 years will have little impact on future prices – in fact by 2025, prices will be lower than they would have been without renewables. This is partly because of the rapidly rising cost of nuclear power. In 2009, the Ontario Government received quotations for a new nuclear power plant. The prices came in between $7500 and $10,000 per kW – three times the projected costs. The 2012 near-meltdown in Japan will lead to even higher costs to ensure fail-safe plants.