Energy Prices High, Expectations Low

Dan Drollette

Shouldn't California's electricity crisis be good news for the field of photovoltaics, which converts sunlight to electricity?

"Sort of," seems to be the consensus of energy experts.

The wide-scale, commercial development of this environmentally friendly, high-tech alternative to fossil fuels has been hampered by the relatively high cost of the electricity it generates: 25 to 50 cents per kilowatt-hour. In contrast, when we last interviewed photovoltaics researchers, some utilities were generating electricity at 3.5 cents per kilowatt-hour, by burning cheap, $10-per-barrel oil.

Consequently, photovoltaic electricity seemed consigned to specialty applications, such as providing power to satellites, emergency phones or remote locations far from the electrical grid.

Today, with oil costing $30 per barrel, skyrocketing natural gas prices and a bungled deregulation effort, the wholesale price of electricity averages 30 cents per kilowatt-hour in California. (At times, the price jumped far higher on the spot market.)

At these numbers, you would expect investors to rush into the newly competitive field of photovoltaics. But economics is not called "the dismal science" for nothing.

The key is not just a spike in the price of electricity, but how long prices remain high, researchers said. A rooftop photovoltaic system is a long-term investment that can take decades to pay for itself, said Bill Rever, senior manager at BPSolar in Linthicum, Md. "Before you invest in it today, you have to have some confidence that what makes economic sense today makes economic sense tomorrow," he said. "You have to think of it as a 30-year bond with an energy dividend on it."

This sentiment was echoed by Terry Peterson, manager of the solar power section of the Electric Power Research Institute in Palo Alto. He sees the state's high electricity prices as a phenomenon that will not be prolonged enough to have an effect on alternative energy sources. "Time is the key," he maintained. "If prices went up to even 15 cents for an extended period, that would have a beneficial effect on all alternatives, making them more competitive."

However, some do see a plus side for photovoltaics, including John P. Benner, a researcher at the National Renewable Energy Laboratory in Golden, Colo. "Regardless if it's a short-term blip or a long-term trend," he said, "it reminds people that energy is not something that we can ignore."