Solar Enigma—How Much? How Soon?

PUBLIC CONSCIOUSNESS of solar energy opportunities, problems, and prospects has perhaps been stirred more in the past year than ever before. In May, Sun Day was celebrated with the strong endorsement and visible presence of President Carter. Public and private solar energy studies appeared in increasing numbers. Federal solar outlays, amounting to approximately $35 million in 1974, have accelerated to about $500 million yearly in 1978 and might well reach $650 million within another year. Part of these expenditures finance the Federal Solar Energy Research Institute in Colorado, established in 1977 and slated to be staffed by five hundred to six hundred employees by the end of 1979.

In spite of this expanded commitment, some solar advocates believe that still greater governmental support is warranted. They point to solar's prospective benefits to society—such things as renewability, environmental soundness, and a lessened dependence on complex, centralized technologies—and to promising investments in research and demonstration projects that could accelerate the momentum toward making solar a marketplace reality. Others, not unsympathetic to solar energy, nevertheless take a more reserved stance about the extent to which solar prospects can be decisively advanced. They favor strong federal support of solar research and development but are dubious about the payoff from maintaining a rapid growth in the rate of federal spending.

Since support for solar energy blends both ideology and hard-nosed engineering and economic calculus, one need scarcely be surprised to find diverse judgments about how best to further solar objectives. For similar reasons, one is exposed to a wide range of projections about solar's potential future importance in the nation's overall energy picture. Of course, this need not mean that a high projection is pre-determined simply by whether one is an ideological booster of solar power; or that a low projection follows merely because one is captive to conventional wisdom and the narrow confines of cost accounting. There are plenty of reasons—just on straightforward economic, technological, and institutional grounds—to entertain diverse assumptions about growth paths for solar energy. (It should incidentally be noted that a broad definition of solar—as used in the studies referred to here—includes conventional, "high-head" waterpower and various types of biomass, such as productive combustion of wood wastes. These two categories account for an estimated 5 percent of today's aggregate energy consumption.)

OTA's assessment. Interestingly, one of the most thorough recent efforts to probe solar prospects stops short of assigning even a numerical range—let alone a best-guess figure—of the probable solar share of future U.S. energy use. (See Congress of the United States, Office of Technology Assessment [OTA], Application of Solar Technology to Today's Energy Needs, Washington, GPO, June and September 1978, two volumes.) The OTA report nevertheless comes up with a number of important and explicit findings and provides a basis for critically evaluating the conclusions of other studies based on less detailed and rigorous analyses.

The OTA concerned itself with "on-site" solar systems—equipment that is located on or near the buildings served. Primary attention was directed to domestic hot-water and space heating, although industrial process heat, air conditioning, refrigeration, and electricity were examined as well. One virtue of onsite, in contrast to centralized solar systems, lies in presumed opportunities for design flexibility, for small-scale experimentation with modular components, for lessened transmission and distribution costs, and for a capital commitment that, not being acutely dependent on economies of scale, may be relatively modest.

In summary, the OTA study suggests that:

• Solar-based space and water heating are already, or are on the verge of becoming, competitive with electric heating in a number of U.S. regions. In new housing, electricity (excluding electric heat pumps) has lately represented around one-third of the heating market. (Electricity is far more expensive than other heat-energy sources.)
• By the end of the coming decade, the likely range of costs for onsite energy systems will overlap the range of costs for conventionally based systems in the case of heating and other functions representing 40 percent of aggregate U.S. energy demand.
• While the cost of solar-based systems will probably always be higher than those based on recent or historic oil and gas prices, a prospective price rise for gas and oil could alter that situation significantly. Specifically, with the expectation that real oil prices were to double by the year 2000, and gas prices to rise by the still greater factor necessary to reach (or exceed) equivalence with oil prices, solar could begin competing for residential and commercial oil-gas-heating customers by the mid-1980s.
• The outlook for solar electric systems is more problematical. But the report is cautiously optimistic about the chances for competitively priced solar electricity during the 1985-90 period. High-temperature industrial heat from solar sources using existing technology looks doubtful.
• Among the factors making solar cost calculations difficult, there is, in particular, the uncertainty about the nature of the back-up or storage system for circumstances when direct sunlight is absent.

The OTA report concludes that the primary barrier to solar penetration is economic more than technological. In the words of the report: "The most straightforward, but politically the most difficult, approach to stimulating markets for onsite solar energy would be to remove price controls and implicit subsidies granted to conventional energy sources, and allow energy prices to rise to the cost of energy from new production facilities." But federal participation in solar development should, in the OTA view, extend beyond rectifying cost and price distortions: "Unless a concerted effort is made to identify the special problems of onsite technology, remove regulatory barriers, provide financial incentives, and support an aggressive research, development and demonstration program . . . it is unlikely that onsite equipment will be able to contribute significantly to U.S. energy supplies by the year 2000."

Other studies. Other recent studies expressed more explicit judgments about the degree to which solar energy could displace conventional fuel requirements. To some extent, of course, such judgments depend on assumptions about the prospective level of overall energy use and about the changing distribution of energy-using activities. The Council of Environmental Quality issued a report stating "that under conditions of accelerated development and with a serious effort to conserve energy, solar technology could meet a quarter of our energy needs by the year 2000."

An interagency Domestic Policy Review panel, convened by the president to provide policy guidance, issued an interim report which, speculatively, pointed to a base-case solar contribution of around 8 percent in the year 2000. The panel held a number of public hearings at which at least some groups chastised the government for timidity in its solar programs. At year's end, the panel completed its final report, and a prepublication version of it was leaked to the press. This document was quoted as indicating a possible mid-range solar share somewhat higher than the 8 percent mentioned in the interim report—predicated, however, on federal spending (for R&D, demonstration, subsidy programs, and other activities) in excess of $1 billion yearly.

The interagency group considered a variety' of options, including some upper-bound cases deemed technically possible but—apparently—considered not very realistic in terms of a "high enough" level of prices for conventional energy sources and the needed governmental financial stimulus. The mid-range option mentioned above involves, in addition to the assumed federal expenditure requirements, an assumed real world oil price of $25 in the year 2000 (based on 1977 purchasing power), that is, roughly a doubling over the 1978 level; real GNP growth of 3.1 percent yearly; and total energy growth of 1.8 percent yearly—signifying a level of overall energy demand of 114 quadrillion Btus in the year 2000, as compared with 76 quads in 1977. The solar component (in its broad definition, given earlier) would come to around 13 quads, compared with 4.2 quads in 1977.

The major issues. Clearly, there remain different perceptions about the obstacles to an expanding role for solar —for example, at first blush the solar impediments underscored by the OTA differ somewhat from those implied by the interagency effort; the latter appears to see a more direct connection between solar prospects and the magnitude of the federal budgetary commitment. There are differing viewpoints about the policies which would be most effective in removing obstacles to reliance on solar energy and about the pace at which solar might enter energy markets even if various underlying conditions are met and barriers overcome. It is probably less fruitful to debate the plausibility of different hypothetical forecasts than it is to clarify the issues around which important policy decisions need to be made in the immediate future. We content ourselves here with listing three broad groups of issues:

1. Institutional barriers to increased use of solar. These include, among others, the legality of "sun rights," mortgage practices discriminating against solar, and utility policies governing the cost and availability of backup service.
2. Removing preferences for competing energy sources. Such "antisolar" bias stems from price regulation of oil and gas, and utility rate-making resulting in user costs well below replacement values, and various subsidy programs. Of course, such policies have also inhibited the exercise of nonsolar options—for example, conservation.
3. Positive programs to "force" solar penetration. An important step might be development and enforcement of performance standards, analogous to the EPA's mileage specifications. A large-scale federal demonstration program would help enlarge the market and instill consumer confidence. Subsidization through tax credits and expenditure programs could also strengthen solar's market potential, though such programs should be sufficiently transparent to disclose the social costs at whose expense the benefits of increased solar are being obtained.