World energy use is rising with GDP growth, mostly in China and other rapidly developing economies.

Most of this energy comes from burning fossil fuels.

There is a well agreed political goal to try to limit CO2 to 450ppm to limit the risks of climate change.

Today the OECD consumes a little more than half of world energy (71,480TWh). By 2050, OECD countries are projected to consume little more than today (92,380TWh), but non OECD countries are projected to consume more than twice as much as OECD countries (198,526TWh). Most of this growth in energy consumption will be driven by economic growth in non OECD countries. Most of this energy will come from burning fossil fuels. Non fossil fuel energy supply, particularly wind and solar is projected to grow substantially from (21,392TWh) today to (70,703TWh) by 2050, but will only account for about 25% of all energy in 2050.

The problem is the higher cost of alternative energy competes with economic growth.  If you are poor,  economic growth is far more important. The only rational solution to this conundrum is to find a source of alternative energy that is cheaper than fossil fuel energy. This allows economic growth while reducing CO2.

The fundamentals driving these IEA projections are economic.  Alternative energy  from wind and solar is not market competitive, nor expected to be for the foreseeable future, so its market size is driven by the scale of government subsidies and taxes. Because of competing national objectives, world agreement is not possible, so alternative energy grows based on political will in individual nations. This will, as with all things political is very fickle. 

The IEA projections assume that fossil energy supply will grow to meet demand, and CO2 reduction will remain a low priority. The known  supplies of coal and gas will likely meet projected demand. Oil is more problematic. Oil demand already regularly exceeds supply and given economic growth, fuel efficiency will have to improve at a rapid rate to keep supply and demand in balance. Looking objectively at these numbers a few things are pretty apparent.

1)      Long before 2050 the world will face a CO2 crunch

2)      An oil crunch driven by demand constantly exceeding supply is highly likely.

3)      What OECD countries do will hardly matter. The non OECD countries will be the major CO2 emitters and oil consumers.

These oil and CO2 crunches are big sources of potential conflict. The oil crunch will increase the cost of oil. This will reduce economic growth. As the CO2 affects become more obvious and more difficult to deny, the demarcation line will be more between OECD and non OECD countries, rather than within OECD countries as at present.

As stated earlier , the only rational way to avoid these looming conflicts is to find a CO2 free energy source that is cheaper than fossil fuels.  This removes clean energy as an impediment to economic growth.  Instead it has the opposite effect. It enhances economic growth. 

This is the point where as usual I plug  StratoSolar as a clean and cheap energy source that meets all the requirements.

A simple question is why can’t ground PV do the same thing as the StratoSolar scenario? The simple answer is it is too expensive and  it won’t get cheap enough anytime soon. The sharp drop in PV prices over the last few years have stopped, and there is no rational basis for them to fall further for a long time.  A good thing about the recent price drops is it has raised awareness of PV and its potential for further improvement. A bad thing is it has created over optimistic and unrealistic assessments of PV’s chance to be a significant energy provider in the short term.  

In the end, energy is all about politics and economics. StratoSolar PV panels have an average utilization of 40%. Ground PV panels have an average utilization of about 13%. Based on a simple analysis, ground PV electricity costs three times as much, and importantly this is significantly more than electricity costs today. That means that it can only be sold with the help of subsidies.  As Germany has demonstrated, profitability drives investment.  By providing subsidies that guaranteed profitable investment, German private industry jumped at the opportunity and installations grew very rapidly. Japan and China are following Germany’s lead.

But things are actually worse than this.  Its always tempting measure solar with the best utilization from sunny places, but unfortunately with solar its all about geography.  There are very few places with good solar near population centers.  Southern California is a rare example.

Take Germany as a more representative example.  PV utilization in Germany is around 11% from the published data.  Germany could do a deal with a sunny location and build HV transmission lines to transport the power.  This has numerous problems. On purely money terms, as panels have reduced in cost, and transmission lines have not, its likely that the better PV utilization in the desert will not cover the HV transmission costs.  Don’t forget that the transmission lines will have the low PV utilization, which more than doubles the cost compared to conventional HV transmission lines. On top of this are the political constraints. HV transmission lines are not liked, and the countries where the panels and HV transmission lines are placed may not be the most politically stable.

Even in the US, politics and economics will favor New York, for example, building in New York rather than dealing with getting power from New Mexico via transmission lines through many states.  What this means is that ground PV discriminates, and northern climes get to pay twice as much, or more for electricity.  Economics will also dictate that southern climes will get most of the synthetic fuel business.

Because of the lower utilization, ground PV electricity will always cost 3X StratoSolar electricity.  This factor makes StratoSolar economic for electricity, and then fuels long before ground PV.  The learning curve is good but not that good. The learning curve will not continue for ever, and when it slows it will create a permanent cost barrier that ground PV will never overcome.

StratoSolar is far less variable with geography, so Germany or New York, for example could provide all their  energy needs, both electricity and fuel, locally.

So to summarize, ground PV is too far from viability today, and too variable with geography to ever be an easy political choice. StratoSolar is viable today, and does not discriminate against geography. The StratoSolar capital investment for both PV plants and synthetic fuel plants will average a sustainable $0.6T/year, in line with current world energy investment. $2T/year capital investment for ground PV is a lot harder to imagine.

The following describes a StratoSolar deployment.  The key point this illustrates is the simplicity. This is not an "all of the above strategy" with lots of moving parts and government interventions to subsidize or tax various market participants. The impact on land and existing infrastructure is indirect, and not an impediment to deployment. China in particular could adopt this strategy and replace coal without penalizing GDP growth. 

This shows that meeting the 450ppm CO2 goal in a realistic time frame with a realistic cost is feasible. Ground PV is still too expensive and will always be a factor of two to three behind in cost. The political costs and delays of land use and grid upgrades will further limit the scope and time frames of what is achievable. The key enabler is economic viability without subsidy.
 
StratoSolar deployment sequence:

Step 1) Deploy StratoSolar initially at $1.50/Wp, $0.06/kWh. This is profitable in most markets and volume growth is not constrained by amount or availability of subsidy.

Step 2) After about 25GWp of cumulative production, StratoSolar initial learning curve takes costs down to $1.00/Wp, $0.04/kWh.

Step 3) Start deploying electrolysers costing $0.50/W making hydrogen for $3.00/kg. This provides fuel for nighttime and winter electricity generation for $0.08/kWh and starts an electrolyser learning curve that will reduce the $/W electlolyser cost.

Step 4) Continue deploying StratoSolar to 1TWP cumulative capacity. Costs reduce to $0.50/Wp, $0.02/kWh. Electrolysers reduce to $0.20/W, Hydrogen reduces to $1.25/kg, nighttime electricity reduces to $0.04/kWh.

Step 5) Start liquid fuel synthesis using hydrogen and CO2. Synthetic gasoline costs $3.00/gallon. This starts a learning curve for fuel synthesis plants.

Step 6) By the 10TWp cumulative deployment point costs are down to $0.25/Wp, $0.01/kWh, $0.60/kg for Hydrogen, and synthetic gasoline costs $1.00/gallon.

This does not discuss time frames. These will depend on time to acceptance.  The cumulative TWp needed to replace all world energy demand projected for 2045 is around 80TWp.  The two time alligned graphs below illustrate a yearly StratoSolar goal of replacing 3% of world energy demand. Yearly StratoSolar production would need to ramp fairly quickly to 1.5TWp by 2020 and then increase slowly to about 2.5TWp by 2045 to meet increasing world energy demand. 3% is pretty aggressive, but not excessive and aligns with a 30 year plant life.

Yearly world  investment never exceeds $1T/y, as costs fall with cumulative installed capacity. For reference current world energy is about 8% of GDP, or about $6T/y. The 3%/year  replacement scenario shown in the graph replaces about 80% of world energy with StratoSolar by 2050 with the remaining energy coming from the current projections for nuclear, hydro and other renewables.

The CO2 emissions reduction chart below shows the CO2 reduction associated with this StratoSolar deployment scenario. We show a simple sequence with coal being replaced first, then oil, and finally gas. The reality would be along these lines but with less distinct transitions. Coal is the obvious first target as the biggest and dirtiest emitter and the easiest to replace with electricity.  Oil is next as its high cost make it the easiest to replace with cost competitive synthetic fuels.  Natural gas is last because it is the logical partner to solar, it’s the cleanest, and its low cost keeps it cost competitive for longer. The most striking aspect of the graph is the illustration of the scale of CO2 emissions saved.

Cumulative CO2 emissions between 2005 and 2043 are 1,800Gt with business as usual versus 820Gt with StratoSolar. By 2043 CO2 emissions could be zero, whereas business as usual is pumping out over 50Gt/year . 820Gt is well within the 450ppm CO2 goal of 1,700Gt.

 Sources: History: U.S. Energy Information Administration (EIA), International Energy Statistics database 
(as of March2011), website www.eia.gov/ies; and International Energy Agency, 
Balances of OECD and NonOECD Statistics (2010),website www.iea.org (subscription site). 
Projections: EIA, Annual Energy Outlook 2011, DOE/EIA0383(2011) (Washington, DC:May 2011); 
AEO2011 National Energy Modeling System, run REF2011.D020911A, website www.eia.gov/aeo, 
and World Energy.

This article in Renewables Energy Focus magazine provides more details on the state of the PV market as companies report their earnings.  SPV Market Research puts the PV panel market in 2012 at 25GWp and $20B. Panel maker losses exceed $4B.  This comes as Suntech the number six PV panel manufacturer declares bankruptcy.

2013 is not shaping up as much better than 2012. Major shifts in regional demand are underway, driven by where the subsidies are growing or declining.  European demand is shrinking with reduced subsidy, but China has a profitable FIT and a goal of 10GW, and the generous FIT in Japan is projected to see 6GW installed.  The Japanese growth will be met by Japanese panel makers despite their lack of market competitiveness, which may not help the PV business generally.  Current panel prices combined with subsidies are also driving growth in the US(primarily California), which may see 5GW installed in 2013.  The story is the same everywhere.  Subsidies drive the market, and their amount determines the market size.  The overall PV market is not likely to grow significantly in 2013 over 2012.

As prices stabilize, and even rise a bit to restore profitability, the historical learning curve of PV panel price versus cumulative volume is still holding up very well.  This is important to understand as it establishes the realistic fundamentals that should drive expectations for what can be achieved by PV.  There has been a tendency to take an optimistic view of PV competitiveness based on extrapolating short term trends, or localized successes (like Germany) driven by large subsidies.  PV has made great strides, but is still only competitive with a large subsidy in normal geography, or with a smaller subsidy in a sunny geography like California. The historical learning curve will take many years of current production rates to get PV panel prices down to competitive levels.

To put things in perspective, PV on a world average has less than a 15% utilization.  StratoSolar is 40% utilization on average.  For ground PV panels to match StratoSolar, prices will have to more than halve from current levels to about $0.30/Watt. This will take a long time, perhaps decades.  It’s a catch 22 for ground PV.  Prices will only fall with volume, but volume will only happen with lower prices.  

StratoSolar competitive energy pricing has the potential to fundamentally change the energy market by driving PV volume installation now.

Analysis of the PV market in 2012 have continued to roll in. They vary considerably in their estimates of PV capacity installed, several estimating capacity installed exceeded 30GWp.  A recent report from NPD Solarbuzz was less optimistic.

According to the market research firm, PV demand in 2012 reached 29GW, up only 5% from 27.7 GW in 2011. Notably, the growth figure is the lowest and the first time in a decade that year-over-year market growth was below 10%..“During most of 2012, and also at the start of 2013, many in the PV industry were hoping that final PV demand figures for 2012 would exceed the 30GW level,” explained Michael Barker, Senior Analyst at NPD Solarbuzz..“Estimates during 2012 often exceeded 35GW as PV companies looked for positive signs that the supply/demand imbalance was being corrected and profit levels would be restored quickly. Ultimately, PV demand during 2012 fell well short of the 30GW mark.”

As usual, the industry and analyst projections going forward are for things to improve dramatically.  A more sober analysis would say that the market will continue its painful restructuring with slow to modest growth.  The analyses tend to focus on GW installed but a look at the dollar numbers is more revealing of the state of the industry and its likely future.

This graph shows a simple analysis of relevant dollar numbers rather than GW installed numbers for 2010, 2011,2012 and an estimate for 2013 based on a forecast of an increase of 20% in GW installed, which may be optimistic.

 The Total line shows the total world dollars spent on PV systems, which includes PV panels and Bulk of Systems (BOS).  This line has been relatively constant at between $50B and $60B.  Over this timeframe the combined reduction in panel and BOS costs has offset the decline in subsidy.

The panel line shows that revenue to PV panel makers has been declining significantly. The increase in GW has not offset the fall in PV panel prices, and the revenue decline will continue in 2013.

As is known the PV panel business has a capacity to produce about 60GW/year, but demand is about 30GW/year. This has led to severe industry restructuring and  low panel prices that in many cases are below the cost of production.  There is no new investment in capacity, so the current panel prices are unlikely to fall significantly if most manufacturers are already losing money. 

The subsidy line shows an estimate of the amount of total world subsidy.  This, as is well known has been declining, but the decline has been dramatic.  Germany alone pumped in over $100B over 2009-2011, but is now well below $10B/year.  China has stepped in energetically, and there is support in Japan and the US, but it still only adds up to half of what Europe used to support, and the overall subsidy amount continues to decline.

The PV business is still driven by subsidies. They have declined from about 60% to about 40% of the business, but are still necessary, as current PV systems do not make electricity at competitive costs despite the dramatic PV panel price decline.  The overall net effect of panel price declines and subsidy declines has been a market with fairly constant overall revenue.

If worldwide subsidies increased that would drive growth which would use up the excess panel manufacturing capacity which would lead to profit and investment in new more efficient capacity and panel price declines that would reduce the need for subsidy.   If subsidies continue to decrease, there is little room for PV-panel prices to decline further, and so the overall business will shrink.  None of this is coordinated at a world level, so it could go either way.  The prospects for increased subsidies overall worldwide seems low, given the current economic focus on austerity in Europe and the US.

This has been a long article to get to the simple conclusion that the PV business is unlikely to grow dramatically in the near future and current PV panel prices are likely to prevail for at least several years.  Also, optimistic projections for PV panel price reductions based on projecting the recent dramatic drop forward are not realistic, and estimates based on the historical long term trend are likely to prove more accurate.

PV at around 30GW/year installation  is a tiny  fraction of world electricity generation (5000TW), never mind world total energy.  The only way to get a dramatic growth in PV is to either get PV to produce electricity at a cost that generates sufficient profit to attract private investment, or massively increase world subsidies.  StratoSolar offers the profitable investment path.  Our current design if deployed today with current PV cells would generate electricity for $0.06/kWh with very conservative platform cost estimating.  This is profitable without subsidy in almost all markets.  

I have written about the lack of political will to alter the energy status quo. So what is this status quo? I would divide it into the incumbent fossil fuel businesses and the current alternative energy challengers.

It’s easy to understand the motives and behavior of the fossil fuel side of the energy status quo.  A more interesting issue is the alternative energy side of the status quo.  The science and technology community, the environmental community and the section of society influenced and supported by these communities have mostly accepted that CO2 is a problem. They also have accepted that the alternative energy technologies to solve the problem are wind, bio and solar. Because these communities add up to a sizeable political constituency they have persuaded governments to subsidize these uneconomic technologies to varying extents. In the US these constituencies are mostly on the Democratic side, so subsidies ebb and flow with the fortunes of the Democrats. This leads to boom and bust and no consistent US energy policy.

A deeper problem is that by supporting uneconomic technologies, success is directly related to government support and the degree of success is tied to the amount of subsidy.  Subsidy amount in the US has been small. This and this alone has determined the small scale of current energy that comes from alternative energy, mostly wind. 

The other element of policy that has been pursued is carbon taxes.  The motivation is that raising the cost of fossil fuel energy will make alternative energy sources more competitive.  However this is putting the cart before the horse.  The current alternative energy technologies only directly compete with fossil fuels in a small fraction of the energy market, mostly electricity generation.  Oil is the economic king of energy, tied almost exclusively to transportation where it holds a virtual monopoly.  Bio fuels cannot replace oil, and no alternative energy is cheap enough to make synthetic oil without unrealistically high carbon taxes. Interestingly ExxonMobil is in favor of carbon taxes. Obviously they don’t think it’s a problem for them. This means blanket carbon taxes are mostly not going to have the intended consequences, but could easily have considerable unintended consequences.

The economic limit to subsidy and the ineffectiveness of carbon taxes is not appreciated by the broad science and environmental constituency who think that wind and now solar have crossed into economic viability and are being held back by unseen forces.  The economic reality is far from this perception, but so long as these constituencies are backing this losing horse, they are blocking the development of technologies that might be viable competitors.  This blocking is a form of self-defeating political-correctness blinders within the constituency.   

At TED2010, Bill Gates unveiled his vision for the world's energy future, describing the need for "miracles" to avoid planetary catastrophe and explained why he's backing a dramatically different type of nuclear reactor (Terrapower).  The necessary goal?  Zero carbon emissions globally by 2050.

In my view in this talk Bill gets a lot right, including the woefully inadequate level of energy R&D investment, the misplaced investment in deploying uneconomically viable technologies, the inadequacy of current alternative energy solutions, the need to be cheaper, and the need to try a lot of different approaches to improve the odds of success. These perspectives have led him to conclude that nuclear power is the best available option, and putting his money and time where his mouth is he has invested in and promoted a high-risk nuclear power venture called Terrapower.  With his investment in Terrapower he also perhaps inadvertently has created a big angel investment model for what is necessary to get the ball rolling given the inability of the capital markets or government to address the problem.  

Terrapower represents the big R&D investment approach aiming to produce carbon free energy that costs less than energy today.  It is using around $100M to produce paper designs.  It will need billions and a decade to build a test reactor and billions more and another decade to design and deploy production reactors.  It ultimately has to overcome the public skepticism of nuclear power and a whole host of technical problems.  It’s definitely the big R&D approach but relative to the scale of the energy business it is tiny.  It is small even relative to US investment in clean power which mostly funds deployment of technologies that can never realistically compete but satisfies various political constituencies.  

In contrast StratoSolar is solar not nuclear and is a small R&D approach.  It builds on existing PV and construction technologies and materials.  A relatively small investment of $10M builds a test platform in 18 months rather than computer simulations.  Incremental investments develop production platforms and then assemblies of production platforms.  It generates competitively priced electricity in production, so it needs no subsidies.  It simply needs R&D investment.  Energy is so large scale that ramping up production initially may need government guarantees to bolster investor confidence.

The alternatives to fossil fuels have several well-known problems, but land use is rarely raised as a limiting factor.  Generally this seems to be because only limited solutions for particular geographies are considered.  This is a simple analysis of land use for all energy for some major industrial countries.  It shows that nuclear, wind and ground solar are very constrained in their ability to scale to a full solution by land use limits alone.

LAND USE km2/TWh/y
                  Nuclear     Wind    Ground PV StratoSolar
exclusion       72            77               13          2.5
occupied       <1             2                13          <1

The table above shows land use in km2 per TWh per year for various energy alternatives.  Exclusion is land area affected but still available for limited use.  For nuclear the exclusion area is the international standard 30km radius evacuation zone.  This is the area of possible permanent contamination in a major accident and rationally should not include any major urbanization. We assume 5GW plants.  For wind the exclusion area is more restricted only allowing agriculture. The area estimate is based on NREL data and assumes an optimistic 5MW/km2. Ground PV exclusion allows for no other use.  StratoSolar exclusion use is similar to nuclear allowing anything but dense urban use.  Occupied shows the land area actually occupied.
                   EIA 2009                           km2           km2       km2             km2            km2
                   QuadBtu      TWh/y       nuclear       wind  ground PV   StratoSolar   Total Land
Japan          21.863          4,000       286,707       307,770     50,701        10,140           377,930
Germany     14.355          2,777       199,021       213,642     35,195          7,039           357,114
France         11.29           2,184       156,527       168,026     27,680          5,536           551,500
England        9.349          1,808       129,617       139,139     22,921          4,584           242,900
Spain           6.508           1,259        90,228         96,857     15,956          3,191           505,370
Italy              7.838           1,516      108,668       116,651     19,217          3,843           301,336
USA            99.278         19,203    1,376,412    1,477,528   243,403         48,681        9,526,468

The table above estimates the excluded land area required by each energy alternative to supply all current energy for the major industrialized countries listed and also lists the land area of each country.  This gives a sense of the scalability of the different resources.  It’s pretty clear that for Japan and Europe wind and nuclear don’t have the room to scale, and ground PV given that it fully uses the land it’s on is also implausibly large.  Even the US would find it practically and politically impossible to find the necessary land, once we exclude mountains, rivers and lakes.

The StratoSolar land area required is by far the smallest, and has the least impact on use, excluding only dense urban.  Based upon this data, StratoSolar is the only viable alternative for a complete energy solution not constrained by the availability of land.