To Cash In on Solar Stocks, Look for Trade Barriers
To Cash In on Solar Stocks, Look for Trade Barriers
Energy crisis is making some governments more protectionist, a good sign for solar investors
While everyone obsesses over [what happens to oil flows] in the Strait of Hormuz, a solar-power revolution is under way in some emerging countries.
Unfortunately, investors will struggle to make money from the trend because of [China’s suffocating dominance]. But another side effect of the war could provide some breathing room: [rising protectionism].
China’s exports of solar components doubled from February to March, reaching a record-high 68 gigawatts of capacity. Fifty countries set all-time highs for Chinese solar imports in March, says clean-energy think tank Ember.
For comparison, the average nuclear plant produces 1 gigawatt of power, so China is exporting 68 nuclear plants worth of power generation during this window. In Nigeria, for example::
Nigeria’s imports of Chinese solar panels rose 519% in March compared with February. Diesel prices have more than doubled since the war broke out, so Nigerian households have an incentive to scrap their diesel generators. The savings they make from substituting from diesel can pay for the roughly $60 cost of a 420-watt solar panel in three months, down from six months before the war, Ember analysis shows.
A similar boom happened after the 2022 energy crisis triggered by the Ukraine war. Solar went from generating around 3% of Pakistan’s electricity in 2020 to 32% today, according to government data. The surge wasn’t caused by national policy, but the individual decisions of hundreds of thousands of consumers and small businesses who swapped expensive-to-run diesel generators for rooftop solar panels.
There is, of course, a downside - which makes it hard to make money (except by taking advantage of the technology)
The problem is that China is producing twice as many solar components as the world needs. This flood of supply has pushed down prices, encouraging uptake of the technology but destroying profitability.
Some important nit-picking – the capacity numbers should be corrected for how much power they can produce in the real world (their capacity factors). For solar the capacity factor is something like 25-35%, while for nuclear it is typically 90%.
China is also overproducing batteries. The capacity factor for “batteries plus solar” is 30% to 60%.
Let’s compare a 3 GW solar field and a 1 GW nuclear power plant.
Detailed System Comparison
1 Gigawatt (GW) Nuclear Power Plant
Capital Cost (CAPEX): ($5,500) to ($12,000+) per kW. Total installation generally runs ($7\text{B} - $12\text{B}) depending on the reactor technology and regulatory delays.
Reliability: Functions as constant baseload power with a high capacity factor.
Lifespan: (60+) years.
Operational Costs: Fixed/Variable O&M is relatively low on a per-megawatt basis, but requires constant, specialized labor and uranium. [1, 2, 3, 4, 5]
3 Gigawatt (GW) Solar + Utility Battery
Capital Cost (CAPEX): Solar arrays average ($1,000) to ($1,500) per kW, while utility-scale battery storage costs about ($300) to ($450) per kWh. Total costs typically amount to ($4\text{B} - $6\text{B}) depending on how many hours of battery backup (e.g., 2-4 hours) you attach to the (3) GW solar grid.
Reliability: Intermittent. A (3) GW peak solar farm only yields about a (20-25%) capacity factor without storage, meaning you must overbuild and pair it with storage to achieve steady baseload.
Lifespan: Solar panels last (25 - 30) years, while utility batteries degrade and require replacement 2-3 times over a nuclear plant’s lifespan.
Operational Costs: Very low maintenance; there are no fuel costs. [1, 2, 3, 4, 5]
Economic and Practical Trade-offs
Levelized Cost of Energy (LCOE): According to financial analyses like Lazard, the unsubsidized LCOE for utility-scale solar often trends cheaper ((\approx $40 - $90/\text{MWh})), while nuclear hovers around ($110 - $155/\text{MWh}) for newly constructed plants.
Land Footprint: A (3) GW solar farm coupled with batteries requires vast tracts of land (often (15,000+) acres). A (1) GW nuclear plant requires a significantly smaller spatial footprint. [1, 2]
For the most accurate read on current global costs, resources from the U.S. Energy Information Administration (EIA) and the Lazard Levelized Cost of Energy Analysis provide ongoing, up-to-date benchmarks for these energy mixes.
Nuclear vs Renewables - Costs for Baseload? - LinkedIn
Jul 12, 2024 — Comparison. Solar ($2.7b) + battery ($8b) => $10,700/kW vs $7,800/kW for nuclear projects. · Nuclear lasts for ~60 years, · Solar ..
The thing is, utilities aren’t trying use solar like that. Solar plus storage isn’t being used to provide base load, it is providing peak load. Basically, solar generates lots of power mid-day when demand is low-ish, stored in batteries, and then used in the late afternoon/evening when demand is high. Obviously, seasonal and weather conditions factor into this.
That’s why in addition to LCOE, they also consider the levelized avoided cost of electricity (LACE). LACE Is basically the cost difference between a conventional source and a renewable source.
Fossil fuel peaker plants are very expensive to run on a per-megawatt-hour basis because they have low utilization rates and high fuel startup costs. The LACE of battery plus storage is usually higher–often much higher–than fossil fuel peaker plants (higher LACE is better). That’s the reason why solar plus storage is flying off the shelves. It saves a ton of money at peak times.
It is clear that solar panels is one of the industries that China has decided to dominate. Their low cost panels can be viewed as a global good will venture. Their low cost problem is domestic producers who try to compete with them. Nations can protect domestic producers with tariffs. But then consumers must pay higher prices.
China also dominates wind turbines, lithium batteries, rare earths, and maybe EVs.
How do we deal with this problem? Enjoy the low cost Chinese products? Or find national security reasons to object and try to compete by investment, automation, or better technology.
I agree. I was just making the point that if you installed solar with a large enough battery to make it competitive with a nuclear power plant, it would still likely be cheaper.
There are some things you must have for your national security. Metal foundries, missile production, raw materials supply, energy availability, things like that. (I would add an educated populace which I thought would go without saying but these days…)
Anyway, there are also some things that are not, and solar panels is probably one of them. Even if the supply was suddenly cut off, OK, well we have lots of other ways of producing energy both in the short and long term. China is producing lots of jobs for itself, for sure (and wouldn’t it have been nicer if we had thought about that, but we didn’t) so in the meantime, enjoy the heavily subsidized panels.
It’s a more difficult conversation when it comes to “auto industry” and “rare earths processing” and “shipbuilding” and things like that, but solar panels? Pfft.
Two good points. In another thread I mentioned the Gorilla Game economy where you outsourced everything not core to your business and low cost countries benefitted mightily. Here at TMF lots of people complained that “We don’t make anything anymore” to which I replied that America had the most powerful technology companies. Jobs were lost but cheap imports made up for it, at least in part. This economy made China not only rich but dangerous with its ability to curb exports of essential goods like rare earths.
The time has come not for “difficult conversation” but for bringing back the manufacture of these essential goods. Some forward looking people like Elon Musk are doing just that. The time has come when security trumps cheap outsourcing. Ukraine is an interesting case, building their defense industry to get out from under foreign control and dangerous restraints. The Comedian does have the cards!
We had money allocated to do this with the Biden Administration’s Inflation Reduction Act:
WASHINGTON, Dec 3 (Reuters) - U.S. President Joe Biden’s administration has awarded over $100 billion in grants created by its signature climate law, the Inflation Reduction Act, Biden senior advisor for international climate policy John Podesta said.
The administration hopes the spending milestone will help to continue the deployment of clean energy even after President-elect Donald Trump, a climate change skeptic who has pledged to rescind all unspent IRA funds, takes office.
The Trump Administration clawed back much of the monies and has been fighting to keep wind and solar projects from proceeding.
Jaak
