Monday, April 15, 2013

Walking on a Blister in the Sun

Mungo's latest KPC bleg for an EconTalk topic elicited the following suggestion from His Cheddarness Senior Dr. Partner K. (Angus) Grier: "[h]ow solar is getting better and is actually the most libertarian (sic) of all power sources. What should the government be doing regarding energy sources and pollution and safety."

This got me to thinking. Solar, were that she not so heavily subsidized (and maybe even despite that), would be pretty close to euvoluntary: it's still sort of a luxury item in the wealthy western nations, and the BATNA is commercial coal-fired electricity.

But what happens when there's an undistorted crossover? By this, I mean what happens when the unsubsidized median kilowatt-hour price for solar power drops below the unsubsidized kilowatt-hour price for conventional electricity delivery? What happens to the euvoluntarity of each? What happens when coal power generation becomes the next buggy whip?

One of the reasons New Deal-era projects like the TVA and the WPA were so popular was because they were (touted as) more than just buying jars filled with cash then digging them back up. They had the instrumental value of providing vital services like electricity to historically bucolic areas. Power and Light was then quickly capitalized into the expectations calculus of these areas. Would the same thing happen if solar were to gain purchase in earnest? If not, what's different? And what does the world look like with a strictly regulated solar power industry? Grier calls it "libertarian", I'd call it "democratic". Which of us is closer to the truth?

Conventional power transmission: not euvoluntary (anymore)
Solar power: still euvoluntary (for now)

1 comment:

  1. Last month NRG Energy chairman David Crane was quoted in the WSJ as suggesting distributed solar "is a mortal threat" to the electric utility business.

    I'd say solar is still a small niche player without government subsidy, and utilities generally have a great deal of state-level political pull to fight encroachment. But few actually want to give up on their connection to the utility because solar won't meet consumer needs without a utility backup (except with a much larger solar system and battery storage, a more expensive prospect). Utilities will charge enough for backup service to keep themselves in business for a while longer.

    Neither "libertarian" or "democratic" seems quite right. If I had to pick one, I'd go with libertarian since non-subsidized solar would minimize externalities and so comports better with non-aggression principles.

    But calling non-subsidized solar PV "decentralized euvoluntary power" seems most apt.


Do you have suggestions on where we could find more examples of this phenomenon?