MIT’s ‘Future of Solar’ report: Why it matters

By K Kaufmann

At a time when new reports on the transformation of our energy system or how to accelerate the growth of solar and other distributed energy resources seem to appear almost weekly, the “Future of Solar Energy” report from the Massachusetts Institute of Technology (MIT) Energy Initiative is a refreshingly pragmatic and provocative outlier.

Yes, some of the recommendations in the report, which was released May 5, may elicit knee-jerk concerns and criticisms — and are not totally devoid of self-interest. But the paradigm shifts the report calls for in research and policy present clear opportunities for utilities, policy makers and other solar industry stakeholders that deserve careful consideration.

The rapid scale-up of solar — as much as 50 times the current capacity in the United States and globally by 2050 — the report calls for is based on critical economic and environmental drivers, said Robert Armstrong, director of the Energy Initiative, speaking at the report’s official launch in Washington, D.C. The need to meet growing power demand to sustain economic development worldwide must be balanced with the equally pressing need for dramatic cuts in carbon emissions to mitigate the impacts of climate change, he said.

“Solar energy represents a particularly important tool for addressing our planet challenge, and it does so because it is a resource with the scale and the broad distribution that makes it one of the very few low-carbon, low-emissions technologies that truly have the potential to meet the scale, meet the demand for future electricity globally,” said Francis O’Sullivan, a senior lecturer at MIT’s Sloan School of Management and one of the cross-disciplinary group of engineers, scientists and business experts who compiled and wrote the report.

But, with solar now providing only 1 percent of power production worldwide — despite impressive market growth — the report says, achieving such high deployment levels will require a re-ordering of research and policy priorities.

— Federally funded research and development: The primary focus of federal R&D should shift from improving mature photovoltaic (PV) technology to prioritizing “transformative,” next-generation materials and technologies that will that maximize solar output while continuing to cut costs. Specifically, the report said, more federal research dollars should be targeted at scaling up new materials and technologies for thin-film solar panels and concentrated solar power (CSP).

— A high-penetration solar grid: The issues here are more familiar. The top priorities for preparing the grid for high levels of solar are developing affordable and scalable energy storage — although not necessarily in battery form — and rate designs that equitably distribute the costs and benefits of solar integration. One of the report’s strategic insights is that current state-by-state battles over net metering may be counterproductive.

“Retail pricing needs to be reformed to avoid unnecessary political resistance to distributed generation,” said study chair Richard Schmalensee, a professor of economics and management at the Sloan School.

— Incentives and subsidies: The report states that — minus the politically unlikely chance a federal carbon price could be set — federal incentives for solar provide essential support for the industry and should continue beyond the sunsetting of the 30-percent federal income tax credit (ITC) at the end of 2016. But these subsidies need to be restructured to get the most value out of every dollar. The focus should shift from incentivizing investment and deployment — which ends up giving higher incentives to residential rooftop installations than for more cost-efficient utility-scale solar — to actual production.

Ramping up thin-film research

Drilling into the details of these recommendations, one is repeatedly struck by the thinking behind them, the solid science — which one would expect of the authors — filtered through a slightly off-center,  innovative lens. They are imagining the things that we have not yet allowed ourselves to imagine.

One example — research on emerging materials and technologies is one of the things MIT scientists and engineers do extremely well, so the call for more federal funding for this kind of work could be downplayed as not-so-veiled self-interest, were it not so well argued.

Photovoltaic (PV) technology — and specifically the industry standard crystalline silicon-based panels — is a mature, robust technology, said Vladimir Bulovic, an MIT professor of emerging technology and innovation and the report’s co-chair. Yet, federal research funding for solar is now heavily focused on reducing near-term, non-panel “balance of system” costs that the industry has the means and market incentives to do on its own, he said.

Looking for a primer on solar technology? Check out SEPA’s Solar Fundamental report here.

Crystalline-silicon PV made solar industry growth possible and will remain a dominant player for decades, he said. But its structural limitations — low light absorption that results in thick silicon wafers and today’s thick, rigid glass panels — could ultimately be a brake on rapid, wide deployment.

Targeting federal research dollars at developing the materials and technologies that can overcome such limitations and take solar growth and grid integration beyond the near-term, could be the smarter course, he argued.

Emerging, next-generation thin-film materials — such as perovskite and colloidal quantum dot photovoltaics (QDPV) — have their own, complex limitations. But research to overcome such barriers could lead to lighter-weight, flexible solar panels that would “allow us to re-imagine what balance of system integration might look like,” Bulovic said.

Circumventing the ITC debate

With the solar industry gearing up for an election-year battle to extend the ITC, the report’s call to rethink federal incentives for solar is probably its most controversial, but politically savvy recommendation.

Here again, the authors’ thoughtful arguments are persuasive, echoing the views of some utilities that large-scale solar is more cost effective than residential rooftop, while also providing more flexibility and resilience to the grid.

The current ITC has its own implicit, if unintentional cost-shift, providing higher per watt incentives for less efficient types of solar installations, specifically rooftop solar and installations in regions with less sunshine, the report says.

The ITC for a residential system in California averages out to about $72 per megawatt versus $37 per megawatt for utility scale, said Schmalensee. The same “perverse” mathematics apply to utility-scale installations in Massachusetts and California, he said, with an installation in less-sunny Massachusetts getting a higher per-kilowatt hour ITC than a similarly designed, but better-producing installation in California.

“Subsidizing residential-scale solar more heavily than utility-scale solar generation, as the United States now does, will yield less solar generation (and thus less emissions reductions) per dollar of subsidies than if all forms of solar were equally subsidized,” the report says. “Subsidies for solar and other renewable technologies should reward generation not investment and should reward generation when it is most valuable.”

Get more insights into the U.S. solar market with SEPA’s 2014 Utility Solar Market Snapshot here.

Such economic arguments are straightforward enough, but will likely have little power to overcome the popularity of rooftop solar and emotional investments homeowners have in the environmental value and immediate savings on their electric bills it represents. The report also downplays the benefits of distributed solar, specifically the efficiency and savings on distribution costs that local generation provides.

Another weakness, existing production-based incentives, such as the European-style feed-in tariffs the report presents as a possible alternatives, are themselves politically controversial.

At least one of the values of outliers is that they create space for discussions around an issue to refocus or shift to accommodate them.  Clearly, that is at least part of the motivation for the MIT report, and at a time when debate around hot-button issues such as net energy metering have become so divisive, much needed.

By shifting the focus, the MIT report provides a foundation for collaboration on reform of the ITC and other federal support for solar, one in which utility-scale solar and utilities’ role in integrating solar onto the grid is prioritized and critical.

K Kaufmann is the Communications Manager for the Solar Electric Power Association. She can be reached at [email protected].