Energy & Environmental Policy Technology Policy

Clean Tech’s Real Solyndra

The iconic image for the debate on climate change over the last decade has not been footage of glacial ice tumbling into the arctic sea or the cover of An Inconvenient Truth (2006). It is the climate forecast PowerPoint, crisscrossed with variable lines, demonstrating the empirical case for any number of global outcomes. The graph is familiar not only to people interested in the climate dilemma or in the energy industry, but also if you’ve perhaps seen a TED talk or Al Gore’s film. The truth is that forecast models appear persuasive, but if it ever felt a bit odd to nod your head to an argument applied to so many other endpoints, you’re onto something.

Part of these evocative illustrations is a guess—to call it by name—about future benefits to come from technology improvement and innovation. The idea is that future technologies will contribute to the global balance of emissions. Putting aside the deception of building an argument on this fungible figure, the problem arises, even for well-meaning presenters, because the information needed to guess wisely doesn’t exist. From an early age, schoolchildren are prodded to look critically at arguments that don’t pass the sniff test. This is a moment to remember that fundamental civic tenant. The fact is, at this point, no one can accurately estimate the real value of technology improvement because the incentives driving technological change are so mixed up.

Fortunately, we’re not information poor. Where we struggle is coherency. A number of competing alternatives in energy policy have been demonstrated. Demand- or supply-side policy, direct RD&D support, trade and intellectual property redesign, and comprehensive trading schemes each now has a body of research and nicely packaged best-practices for application. With (very) few exceptions, the trend has—correctly—been for policy to incentivize technology selection in a neutral manner, and aim toward a broad mitigation target (see: renewable purchase obligations, feed-in tariffs, cap-and-trade, etc.). These market friendly policies are the new norm and should remain so. However, I believe there must be a way to say no to bleak promises. As public investment grows, insolvent technologies that fit the policy mandate but will never materialize as clean energy alternatives increasingly pose the risk of massive public financial waste. When these technologies seize public support, it’s not an investment. It’s pure loss for taxpayers as a consequence of policymakers neglecting lessons learned and doubling-down on subpar programs. Meanwhile, the context is increasingly one of a public with little tolerance for poorly managed energy investments—when aware of them.

Public investment in cleaner energy has grown, so shouldn’t there be clear examples of wasteful technology choices? If you look closely, there are obvious examples in the market already. These are not the same as firm failures: perhaps precipitated by insolvent business models, poor attention to market developments or uncertainty. Such cases of failure have been quite visible (see: the demise of Solyndra or the recent meteoric decline of Vestas). The cases with which I am concerned match these characteristics: 1) The technology would not be viable without public support and 2) either the technology does not have a potential market, a feasible supply chain, or has drastically underappreciated fatal flaws. Cadmium Telluride (CdTe) thin film solar modules have enjoyed increasing investment, public support and market share. But these are just the kind of bleak alternative that should be avoided.

Thin film solar emerged as a competitive force when dynamic growth catapulted solar PV upward. Cost reduction in traditional polysilicon modules slowed around 2008 as a result of the declining availability of refined silicone, which had been sourced as a byproduct of the electronics industry. The impact? Thin film exploded. Thin film solar modules increased in the global marketplace and are now expected to make up about a quarter of solar PV market share by 2012.

Not all thin film technologies are a bad investment, but CdTe is clearly a poor choice. It meets all the criteria of a bleak alternative. One of its material components, telluride, is a very rare and sparsely produced material poised to cause a supply bottleneck. Low production costs have earned CdTe strong investment appeal, but with the best estimates of commercial module efficiency hitting its peak at a mere 14%, the product is under threat of a competitive alignment problem. Since crystalline modules reach approximately 30% efficiency, CdTe would need both an inexhaustible supply of source materials and a hungry market for cheap, inefficient modules.

In addition to undeniable supply chain deficiencies, CdTe modules face an insurmountable handicap to developing a meaningful market. Cadmium is a well-known toxic, carcinogenic material. Consumer safety concerns may prevent some markets from accepting a diffused cadmium unit. Until recently, the European Union prohibited application of CdTe solar for precisely this reason. How long this tolerance will persist as application becomes more common remains unclear. This point is critical because the European market accounts for about three-fourths of the global market share for solar PV applications.

In an effort to protect the commons, the global community has taken enormous pains to infuse the economy with initiative to reduce greenhouse gases. While many—myself included—feel we must make a still greater commitment, it is time to reflect on feedback from lessons learned. CdTe is a wildly deficient technology despite the magnitude of support it has received. But its success is a product of what is known to be the best approaches to combating climate change. The good news is the problem is infinitely solvable. To prevent waste, improve buy-in from the public and empower smart public investments, policy needs to build smarter bridges into the market.

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