California’s plan to spend nearly $3 billion (U.S.) over 11 years to promote the use of solar technology has been given the go-ahead. The money, which will be given out in the form of subsidies toward the purchase of solar PV and thermal systems, will theoretically translate into 3,000 megawatts of sunshine-based electricity and heating over the next decade or so, easing peak-load pressure on California’s grid and reducing reliance on natural gas. The program is targeted at homeowners, businesses, farmers, schools and public facilities.

The California Public Utilities Commission said the program, if fully exhausted, would create enough power to eliminate the need for six modern power plants, and would only add about $12 a year — a buck a month — to consumer electricity bills. It would also boost the number of high-paying jobs in the state’s booming solar industry. It’s no wonder that the share prices of publicly traded solar PV companies, both N.A.-based and overseas, soared after the announcement, which created certainty for solar PV manufacturers, suppliers and investors. It will also assure more production of silicon to support the solar PV industry because manufacturers are now reassured that the increased production will be in demand for many years.

I think this is a great, much-anticipated development, but it’s important to cut through the hype a bit. This only addresses peak power, not base load issues, so the six modern power plants it would replace would be natural gas-based. That is, this isn’t a replacement program for nuclear. Also, the 3,000 megawatt figure is likely based on potential — i.e. all systems generating power at optimal sun conditions.

Now let’s do a bit of very rough math, assuming that natural gas plants would only be used when peak power is required. In Canada it’s estimated that it would cost about $1.5 billion to build 3,000 megawatts worth of natural gas plants — that’s excluding the cost of gas used over the lifetime of the plant and all other operating costs.

Given this, you might say it’s uneconomic to consider a similar $3 billion, 3,000 megawatt solar program in Ontario. Even more so when you consider the program is just a subsidy program that leaves consumers and businesses still shouldering three-quarters of the cost of an average $20,000 solar system. In other words, the true cost is more like $12 billion.

The question becomes what is the cost over 20 years of running those natural gas plants, and what is the cost of the natural gas itself? It’s a difficult question to answer, given natural gas prices are rising over time, the plants themselves wouldn’t be used all the time, and other unknown factors. But if we could get that answer, you’d have to subtract that cost from the $9 billion or so premium that would come with the solar approach, and after doing that subtraction, you must also account for the following:

* There is a positive environmental gain, difficult to place a value on, by selecting solar.

* There would be no transmission line losses with the solar systems, creating even more value from the solar approach.

* Solar equipment prices will fall over time, and once a system is installed you don’t pay for a fuel to sustain it. The sunshine is free, unlike natural gas and its rising market prices.

* Homeowners and businesses have more independence from the grid, allowing them to have power in the event of a major blackout.

* The basic fact that society must be willing to pay a premium for the benefits of renewable power.

* Homeowners and businesses that invest in a renewable energy system are more likely to engage in aggressive conservation to reduce the size — and cost — of the system that needs to be built.

* The economics become even better when solar-integrated building products become more available, because much of the cost of going solar is absorbed into the price of roofing, siding and other building materials that you would have to pay for anyway.

I’m not saying the California approach is the right one, but it’s certainly heading in the right direction. The Ontario government, as it considers its own power mix over the next 20 years, should seriously take a program like this into consideration — the Ministry of Energy, if it has any vision or political will, should have a team dispatched to California’s Public Utility Commission right away and begin a learning process that needs to take place.

Ontario, if it chose this approach, could even broaden it by providing subsidies for geo-exchange (heat pumps) systems or more aggressively promoting conservation. Yes, California is taking a bit of a risk by going down this path, and yes, there may be bumps or missed expectations along the way. But given our willingness to consider high-risk nuclear projects with histories that are riddled with multibillion dollar cost overruns, setting a few billion aside for a renewable energy kickstart program for homeowners and businesses is a drop in the bucket that — 10 or 20 years from now — we would hopefully look back on with pride and satisfaction.

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