Domestic solar panels, are they a good investment?


Eng. Jayantha Ranatunaga has given a lucid discussion of the pros and cons of investing in solar panels in his opinion piece (The Island, 3rd April 2014). 

I for one have been advocating the use of solar panels on a state-sponsored or cooperative basis. It is too expensive for most individuals. I supported the unpopular tariff hike in my The Island article "The electricity Tariff Hike - a step forward" (6-May-2013). My reasons were that the increase fell in line with international tariffs, and achieved "grid parity" (i.e, grid, and solar electricity, could compete fairly for the higher units).

A sizable part of electricity in Lanka is generated from expensive imported oil. Even "cheap coal" will cost high when clean-up is included. Coal has to be shipped, and shipping costs only go up.

Large tourist hotels are big power consumers who charge international room rates. So they should pay international electricity tariffs instead of subsidized tariffs designed for the householder. Increasing the tariff for the large-volume customer is therefore the correct approach, although this is opposite to what is observed in industrial nations, where the large-volume user is the industrialist.

"Net metering" is getting paid for the excess energy you generate, and drawing power from the grid when you fall low in output. Eng. Ranatunga has argued that in ten years, net metering as well as the use of solar energy would become untenable for several reasons. He suggests that:

 "Solar energy is available only during day time, ... the non-peak time in Sri Lanka unlike other industrialized nations. Therefore the CEB needs ... plants to match the night peak which is not reduced by the use of solar .... (needing) many idling plants which are capital intensive".

This is, in my view questionable since there will be increasing using of energy for air conditioning, as seen from the trend during the last decade, both for domestic and institutional use. This usage peak will move towards the day. Increasing industrialization, and global warming too will increase day-time consumption. The next stage of mass transport (once the current misguided love of highways is over) would be in electrified fast trains, with daytime peak usages.

Eng. Ranatunge argues that "the present tariff is based on ... cross subsidizing the bottom-end lower consumers with the surplus extracted from the heavy users. If the heavy users move the higher units to solar and consume only the first 120 from the grid the CEB will not have funds to subsidize the bottom of the pyramid". 

If heavy users move extensively to solar panels, then the unit cost of solar panels will drop drastically. The low end users will also purchase such panels - perhaps from the CEB. The bottom and the top of the pyramid will get more equalized and the CEB can revise its tariff scheme accordingly. Meanwhile oil prices are expected to go up with increasing international confrontation among the big powers.

The rupee may devalue further!

Eng. Ranatunaga argues that "the upfront nature of heavy investment in solar systems ... will hurt our economy ... short of foreign exchange, ...."

In reality, solar-panel vendors are looking for markets to sustain their industries. Hence, countries like Japan, China and India provide very soft loans for mass orders of panels. There is up-front heavy investment only if individuals attempt to do this. Even individuals can form cooperatives and get mass discounts, although, ideally, the state must come in.

The big power plants like Sampur ("Saamapura" in olden times) or Norchcholoi ("Horagolla", see and Victoria are big state-sponsored programs. Solar power also needs state sponsorship (with the CEB a major player). It will repay itself many times over, creating jobs and reducing polluting fossil fuels.

Here we need to be extremely careful of the shenanigans of wealthy nations. The West will ask for "free markets" a la IMF and World Trade Organization (WTO) rules. However, more advantageous bilateral deals with China, Japan or India can be forged. Many of the components can even be fabricated in Lanka.

 It is noteworthy that Uncle Sam is mounting heavy pressure on India to do away with local-buying of components in the next batch of solar power projects under India’s ambitious national solar mission. In a formal consultation held last week (end of March 2014) at the WTO, the two countries could not reach an understanding on the validity of the domestic buying condition in the projects granted so far under the mission.

Chandre Dharmawardana 

(Professor of Physics, Universite de Montreal).

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