David Anthony’s Last Question – Can We Power the US Solely off of Solar?

By Tao Zheng, with David Anthony, an active cleantech venture capitalist, who passed away in April 2012.

 The sun is the champion of all energy sources, in terms of capacity and environmental impact. The sun provides earth with 120,000 terawatt (TW) energy, compared to technical potential energy capacity of single digit TWs from other renewable sources, such as wind, geothermal, biomass and hydroelectric. More energy from the sun hits the earth in one hour than all of the energy consumed on our planet in entire year. In the last blog, we estimated that the technical potential of electricity generation from rooftop photovoltaics (PV) can take over 1/3 of U.S. electricity consumption demand. The next question is: can we power the U.S. solely by solar energy, technically? The answer will rely on development of utility-scale solar farms and energy storage solutions.

Assuming the rest 2/3 of U.S. electricity demand can be fulfilled by utility-scale PV solar farms, we can estimate how much land required to install such solar farm systems. The total U.S. electricity demand in 2009 was 3,953 TWh with 1% annual growth projection in next 25 years. Two third of U.S. electricity demand is about 2,635 TWh. The PV power density is calculated with a weight-averaged module efficiency using market share for the three most prevalent PV technologies today: crystalline silicon, cadmium telluride, and CIGS. The resulting PV power density is 13.7 MW/million ft2, assuming an average module efficiency of 18.5% in 2015. If we assume 10 hours/day and 200 days/year with sunshine, the annual available sunshine time is 2,000 hours. The total land required for solar farms to generate 2,635 TWh, can be calculated as:

Total Land Required = Total Energy Generated / PV power density / Annual available sunshine time

                                 = 2,635,000/13.7/2000 = 96.2 ×109 ft2 = 8,937 km2 @ 100 × 100 km

Therefore, to generate energy equivalent to 2/3 of U.S. electricity demand, we need to install solar panels in a tract of land with size of 100 by 100 km, the area about 0.1% of U.S. land. Technically, to provide electricity for entire U.S. demand, we only need to cover PV-accessible residential and commercial rooftop with solar panels and install solar farms in desert area equivalent to 0.1% U.S land. In addition to rooftop and desert, there are many opportunities for installing PV on underused real estate, such as parking structure, airports, and freeway margins. PV can virtually eliminate carbon emissions from the electric power sector.

In comparison, Nathan Lewis, professor at Caltech, predicted a solar farm with land size of 400 by 400 km to generate 3 TW energy to power entire America. The represented area is about 1.7% of U.S. land size, comparable to the land devoted to the nation’s numbered highways. As shown in Figure 1, the red square represents the amount of land need for a solar farm to match the 3 TW of power demand in the U.S. Of the 3 TW energy, only 10% represents electricity demand, and the rest represents other energy needs, such as heating and automobile. Thus, Lewis’ calculation is consistent with our estimation: 10,000 km2 solar farms can generate enough electricity to fulfill 2/3 U.S. demand.

Figure 1. Solar Land Area Requirement for 3 TW Solar Energy Capacity to Power Entire U.S. Energy Demand. (Source: Prof. Nathan Lewis group at Caltech).

One of big challenges using solar to power U.S. grid is intermittency of sunlight. Solar energy is not available at night, and the variable output of solar generation causes voltage and frequency fluctuations on power network. Energy storage technology can smooth the output to meet electricity demand pattern. There are many grid energy storage technologies, from stationary battery to mechanical storage methods. Pumped hydro technology is clearly a better choice for solar energy storage, due to its high energy capacity, low cost, and public safety assurance.

For solar to have a dominant role in the electric power generation mix, in addition to power storage infrastructure, upgrading America’s transmission grid is required. In contrast to traditional electricity generation, solar power collections are distributed across numerous rooftops or centralized in utility-scale farms. Distributed solar requires grid operators to install smart grid technology to monitor power supply and demand and balance thousands of individual generators with central power plants. The current century-old transmission grid needs to be upgraded with high-voltage lines to carry electricity from remote solar farms to consumers. The American Recovery and Reinvestment Act (ARRA), signed into law by President Obama in 2009, has directed $40 billion to accelerate the grid infrastructure transformation.

The U.S. photovoltaic market has been growing quickly in recent years. In 2010, the U.S. installed 887 megawatts (MW) of grid-connected PV, representing 104% growth over the 435 MW installed in 2009. Current trends indicate that a large number of utility-scale PV power plants are in the south and southwest areas, such as in the sunny deserts of California, Nevada and Arizona. For example, the Copper Mountain Solar Facility in Boulder City, Nevada, is one of the U.S. largest solar PV plants with 48 MW capacity, as shown in Figure 2.

Figure 2. One of the U.S. Largest Solar Plants, the Copper Mountain Solar Project with 48 MW photovoltaic in Boulder City, Nevada.

Historically, solar PV deployment has been limited by economic factors, since solar energy is too expensive to compete with traditional fossil fuels, due to lack of economies of scale. However, the cheapest solar cells are now being produced for as little as 70¢ per watt. They are selling for about $1.26 per watt, with prices expected to drop to $1.17 next year. Most anticipate the price of solar module, such as thin film, will hit 50¢ per watt within four or five years. First Solar, the world’s largest maker of thin-film solar panels, has told investors that production costs will range between 52¢ and 63¢ per watt by 2014. When companies can produce solar photovoltaic modules for less than 50¢ per watt, solar energy will reach grid parity. Grid parity refers to the point at which the cost of solar electricity rivals that of traditional energy sources, such as coal, oil, or nuclear. The solar module price drop is driven by cheaper manufacturing costs, lower costs for such crucial raw materials as silicon, and rapidly improving technology. A recent study even claims solar grid parity is already here today, based on a legitimate levelized cost of energy (LCOE), calculated the cost in $/kwh. The value of LCOE is determined by the choice of discount rate, average system price, financing method, average system lifetime and degradation of energy generation over the lifetime. Figure 3 illustrates the effect of initial installed cost and energy output on the LCOE value. For a PV system with production cost at $0.5/W, the initial installed system cost will be $1.5-$2/W, after considering labor cost and module margin. If we assume energy output is 1500 kWh/kW/yr, which is reasonable in south west area in the U.S., the LCOE value in Figure 3 will fall in the range between $0.06/kWh and $0.08/kWh, the lower side of grid parity value for the U.S. residential electricity rates range.

Figure 3. LCOE contours in $/kWh for solar PV systems for energy output versus initial cost of the system for a zero interest loan, discount rate of 4.5%, degradation rate of 0.5%/yr and 30 year lifetime (Courtesy of Prof. Joshua Pearce at Queen’s University)

Based on the analysis above, it is reasonable to believe we can power the U.S. electric grid solely by solar PV, technically and economically. Thomas Edison had a great quote on solar energy: “We are like tenant farmers chopping down the fence around our house for fuel when we should be using Natures inexhaustible sources of energy — sun, wind and tide. … I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”


David Anthony was the Managing Director of 21Ventures, LLC, a VC management firm that has provided seed, growth, and bridge capital to over 40 technology ventures across the globe, mainly in the cleantech arena. David received his MBA from the Tuck School of Business at Dartmouth College in 1989 and a BA in economics from George Washington University in 1982. David passed away in April 2012. 

Tao Zheng is a material scientist in advanced materials and cleantech industry. He held 20+ patents and patent applications, and published many peer-reviewed papers in scientific journals. Tao Zheng received his B.S. degree in polymer materials sciences from Tsinghua University in China, and a Ph.D. degree in chemical engineering from University of Cincinnati. He obtained his MBA degree with distinction in finance and strategy from New York University, Stern School of Business, where he was designated as “Stern Scholar” and received “Harold Price Entrepreneurship Award”. 

Financing Energy Innovation in the Midwest

by Richard T. Stuebi

A few weeks ago, the Chicago Council on Global Affairs (CCGA) and NorTech collaborated to throw an event in Cleveland entitled “Financing the Midwest Energy Transition”.  I was asked to wrap up the session with some concluding remarks.  Normally, I don’t script out my talks, but for this occasion I did, and so I’m presenting my prepared comments on this topic as today’s blog post.

*   *   *

I’ve been working in Ohio for almost five years to help accelerate our region’s transition to an advanced energy economy.  My work has been driven by four considerations:

One, diversification.  Our transportation system in the Midwest is virtually entirely dependent upon oil, and our electricity supply is nearly 90% reliant on coal.

Two, environmental.  Obviously, we burn a lot of fossil fuels, and would benefit from reducing that burn.

Three, economic.  The prices we pay for fossil fuel energy are likely to rise as the supply-demand balance tightens — there are only finite quantities of these fuels, while demand continues to grow — and as environmental regulations tighten.

Fourth, also economic:  We see tremendous opportunity to create new industries in support of the future energy sector, employing thousands of people, based on our region’s inherent skills and advantages. 

About two years ago, I was pleased to be invited by the Chicago Council on Global Affairs to represent Ohio interests on a regional task force chartered to outline the energy challenges and imperatives facing the Midwest.  I am glad they asked me to join their effort because I have long felt that we in the Midwest — from Cleveland to Chicago, and all parts in between and surrounding us — need to work together to pursue our common opportunities and overcome our collective challenges.  

We in the Midwest can’t succeed as independent islands.

When the task force completed its report in June 2009, the CCGA held a great event in Chicago to present the findings.  I thought we should do something similar here in Cleveland – hence our collaboration to convene this event today.  But rather than covering the whole waterfront of issues relating to advanced energy, I thought we should focus on just one.

To me, the biggest one:  Capital.

Energy is an incredibly capital intensive industry, perhaps like no other.  A couple of years ago, the International Energy Agency estimated that about $1 trillion per year of capital will be required globally over the next 20 years to replace and/or extend the current asset base to meet growing demands for energy. 

And, that’s just for a status quo energy sector.

If we want to transition to an advanced energy economy, a host new technologies will have to be commercialized – and this commercialization process takes additional capital for R&D.  Lots of it.

I heard a speech given last week by the head of ARPA-E — DOE’s center for innovative energy R&D — in which it was said that the U.S. annually spends less on energy R&D than on potato chips, and less on electricity R&D than on dog food.

Obviously, this will have to change if the U.S. is to avoid being reliant on other countries to provide a reliable energy supply in a world constrained by dwindling fossil fuel supplies and tightening environmental pressures.

Where will this capital come from to build the new energy sector?

And, what should we be doing in the Midwest to address this capital challenge – both for global energy opportunities, and for the need to transform our own regional energy sector?

Those questions are the crux of what brings us here today.  Based on what we heard and discussed today, I’d like to offer some closing thoughts on future directions for us in the U.S. Midwest.

We know we’re not Wall Street, and we’re not Silicon Valley, but we do have important financial institutions that we need to leverage.  For instance, we have two Federal Reserve Bank branches – in Cleveland and Chicago – and we need to figure out a way to get them into this conversation about the energy transition.  We also have large commercial banks such as Key Bank (NYSE: KEY), many of whom have dedicated energy-related practices, and we want to see them become major players in advanced energy financing.

The corporate titans of the Midwest – both industrial giants and large utilities – can benefit from the advanced energy transition if they take proactive actions to prepare and gain competitive advantage.  They can create wealth and increase profits via new business lines.  They can also lose if they stay mired in the status quo and fight change.  We need to help these companies see the first perspective, and move off the latter perspective, as these corporates have large capital resources to put behind the energy transition.

With our collective universities – not to mention other institutions such as NASA’s Glenn Research Center, Argonne National Labs, Battelle and so on – the Midwest may be unparalleled in its research capabilities.  We need to help these institutions gain more and better access to DOE and NSF funding on energy-related topics. In turn, this requires that these universities make energy-related research a higher priority – and pick focal areas for them to become distinctive winners. 

These institutions, and other Midwestern parties that can’t pick up and move also need to start allocating some of their investment portfolios to local opportunities.  In particular, we need more Midwestern venture capital funding regional entrepreneurs and innovation. 

This is a particular passion of mine.  Early-stage venture capital is a local phenomenon, requiring a lot of interaction between investor and management.  But, as Frank Samuel has pointed out with his recent research at Brookings, we have a huge deficit in Midwestern venture capital — which translates to a huge deficit in Midwestern entrepreneurship.  While we might want to attract venture capital to the Midwest from outside the region, that capital is not likely to come from without if it’s not first coming from within. 

To start this process, states and municipalities with pension funds and other asset pools can and should require a percentage of their dollars to be deployed locally.  If they’re not willing to do this, then they’re not investing in their own futures.  In which case, I would say:  Shame on them.

And, though I’m a devout capitalist, yes, there is also a crucial role for government.  We need policies – at the local, state, and Federal level – that push us here in the Midwest towards the new energy future.  Both positive pressures (incentives/subsidies) and negative pressures (penalties and requirements) imposed by the government would shift capital towards the opportunities and the needs for new energy in the Midwest.

You’ll notice that, in all of the thoughts I’ve just expressed, I use the word “we”.

Well, who exactly is “we”? 

I think it’s us, here in this room, to start.  And, clearly, we need to expand the circle.

So, as you go home tonight, and to work tomorrow, be thinking about new actions you can take to expand the pool of energy capital flowing to our region.  Ask yourself the following two questions:

What did I learn today that might be able to make me or my organization a good return on investment?

And, who else do I know that should have been here today, but wasn’t?

Really think about answers to those questions, and then go forth and act upon them.  In so doing, let’s reclaim for the Midwest the leadership that made this region great in the mid 20th Century:  serious industriousness, innovation and wealth-creation to invent the economic system that enables the next phase of global prosperity and peace.

Richard T. Stuebi is a founding Principal at NorTech Energy Enterprise, where he is on loan as the Fellow for Energy and Environmental Advancement at the Cleveland Foundation.  He is also a Managing Director at the Cleveland-based venture capital firm Early Stage Partners, where he leads the firm’s cleantech investment activities.