2015: The Year For the Downside of Solar Energy and the Upside of Banking

Solar Concentrator

Photographer: Chris Sattlberger/Getty Images

Downside of Solar? Yes, downside.  The side where you slide down and things get easier and more efficient, and lower priced, and better, and people want more of it. That’s what is happening with solar power.  Look at this slope for US energy pricing:

Solar Price Falling

Source: EIA, CIA, World Bank, Bernstein analysis

(Henry Hug, is natural gas, Brent is crude oil, LNG is liquefied natural gas)

This solar slope is definitely a diamond double black run.  (Yes I love skiing).

Notice how the other energy sources are climbing.  That’s cross country skiing and really, a lot of work. The scenery is great though.

So what’s been happening in solar that is different in the other energy sectors: technical advances are improving output, reducing costs. As more people want it, they leave established alternatives and make it main stream.

I’m saying that that is what has happened to solar recently.  I’m just choosing the start of 2015, since, well, its the start of 2015. I’m also suggesting that oil prices may not return to previous highs.  Has the down side been seen yet, no I don’t think so, but it is getting close.

Oil prices may rise again, but not for very long.

Demand for electric vehicles is expected to rise rapidly from 2017.

Nafeez Ahmed and Tony Seba explain why here How Solar Power Could Slay the Fossil Fuel Empire by 2030.

Said in June 2000, by Sheikh Zaki Yamani, former Oil Minister of Saudi Arabia (1962–86), “Thirty years from now there will be a huge amount of oil—and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the Oil Age will come to an end not because we have a lack of oil.”

Are we are  getting to about that time the Sheikh mentioned?

See that 44.1% blue pie piece below?  That’s all burnt in passenger cars.

Crude Oil

From Renewable Energy World.

The falling solar prices will lead to distributed energy generation and this will break the hegemony of centralized energy production and reticulation.  This the heart of the world financial system presently. A good example is Africa. It cannot be tamed primarily because it doesn’t have centralized energy infrastructure.  This may appear a little complicated, but stay with me.

This is what I mean by the upside of banking.

The financial system is having it’s own problems and seems on the brink of collapse, as James Quiin, Executive Business Editor of the Telegraph elegantly put it two days ago.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11321497/Why-2015-could-spell-the-end-for-the-hegemony-of-the-big-banks.html

He covers it well, though I would add that fractional reserve banking is the core of profit generation for the modern banking system, coupled with excessive derivative trading. These two systems are under heavy strain presently.

Changing direction a little further to discuss the upside of banking, I see that the people of China and Russia have a great deal of contiguous history, both recent and ancient: Russia, 1,000 years and China, 5,000 years. This means lots of lessons learnt from the mistakes of their ancestors. For instance in the early 1,000’s and for 500 years China tried and failed with paper money systems 5 times before the people ignored the government and switched to silver for their medium of exchange.  Each successive Chinese government had tried to print their way out of debt. China also has recent living memory failures, similar to Russia.  So I see that they are acting as a group of interested people, as a collective, rather then the haves and havenots system of a monarchical, plutocratic system common in the west presently. For instance, China has a history of executing bankers caught defrauding customers and investors and Vladimir Putin has an approval rating of almost 90%.  So, ostensibly Russia and China are for working for their people and will adopt technologies and social systems that benefit everyone.  So I foresee solar and new financial systems quickly being adopted in these countries.

Moving on…

2015 is also good year to start on the down slope of oil demand, so a new currency won’t be petrodollars.  It will be remain  commodity based, however more likely onto gold and silver. Meanwhile, Russia, Iran and China are active in forging closer ties.  It’s not about competing with the USA business model. These alliances form natural blocks for US companies accessing resources.  For instance Afghanistan has over $1T in gold and lithium deposits…  This is part of the reason why Russia was interested back in the 80’s.

Tom Randle over at Bloomberg made this interesting article about 8 weeks ago:

Every time fossil fuels get cheaper, people lose interest in solar deployment. That may be about to change.

After years of struggling against cheap natural gas prices and variable subsidies, solar electricity is on track to be as cheap or cheaper than average electricity-bill prices in 47 U.S. states — in 2016, according to a Deutsche Bank report published this week. That’s assuming the U.S. maintains its 30 percent tax credit on system costs, which is set to expire that same year.

Even if the tax credit drops to 10 percent, solar will soon reach price parity with conventional electricity in well over half the nation: 36 states. Gone are the days when solar panels were an exotic plaything of Earth-loving rich people. Solar is becoming mainstream, and prices will continue to drop as the technology improves and financing becomes more affordable, according to the report.

The chart below shows how far solar will come out ahead in each state in 2016, assuming a worst-case scenario of lower tax credits. The blue bars show the anticipated cost of solar energy (assuming a conservative 20-year lifespan for the panels) minus average electricity prices. Positive numbers indicate the savings for every kilowatt hour of electricity.

Grid Parity to Reach 36 States in 2016

US Solar Price Parity Chart

Source: Deutsche Bank, EIA. Graph shows LCOE minus average electricity price

Solar has already reached grid parity in 10 states that are responsible for 90 percent of U.S. solar electricity production. In those states alone, installed capacity growth will increase as much as sixfold over the next three to four years, Deutsche Bank analyst Vishal Shah wrote in the Oct. 26 report.

The reason solar-power generation will increasingly dominate: it’s a technology, not a fuel. As such, efficiency increases and prices fall as time goes on. The price of Earth’s limited fossil fuels tends to go the other direction. Michael Park, an analyst at Sanford Bernstein, has a term for the staggering price relationship between solar and fossil fuels: the Terrordome. I’m not sure exactly what that means, but it doesn’t sound very forgiving.

The price of solar will soon undercut even the cheapest fossil fuels in many regions of the planet, including poorer nations where billion-dollar coal plants aren’t always practical.

Solar will be the world’s biggest single source of electricity by 2050, according to a recent estimate by the International Energy Agency. Currently, it’s responsible for just a fraction of one percent.

Because of solar’s small market share today, no matter how quickly capacity expands, it won’t have much immediate impact on the price of other forms of energy. But soon, for the first time, the reverse may also be true: Gas and coal prices will lose their sway over the solar industry.

http://www.bloomberg.com/news/2014-10-29/while-you-were-getting-worked-up-over-oil-prices-this-just-happened-to-solar.html

So, there you have a few changes on the world stage, conveniently coming together at about the same time: the fall of oil, the rise of solar, and the shakeup of the financial system. A good time to plan new investment and business strategies for yourself and your family.

Jeremiah Josey

Meci-Group

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