Topic 8 Flashcards
Experience Curve
The downward slope of the production cost of a type of technology as the volume of that production accumulates. The steeper the experience curve, the quicker that the industry learns from accumulated production, and faster the cost is driven down.
The experience curve is a long-range strategic rather
than a short-term tactical concept.
Experience curves provide quantitative relationship between price and the cumulative production or use of a technology. It shows investment needed to make technology competitive (not when)
The time of break even depends on deployment rates.
Learning Investments
The investment that allows a technology to ride down the experience curve. It allows for learning efforts which bring prices to break-even point.
Disruption
the idea that an interruption results in the system leaving its stable condition and change into runaway: parity is an example of these interruptions
As solar-generated electricity and solar storage prices decrease thanks to their advancement on the learning curve, customers switch to solar electricity, causing the utilities to lose business and revenues. The fixed cost of generation, transmission and distribution is therefore borne by less customers, pushing up electricity prices that drives even more customers away.
Parity
Break-even point on experience curve
Point at which PV is competitive with conventional grid-supplied electricity. Parity must be clarified: is the parity subsidized or not? Cost, or price parity? Parity in what price: average price or peaking price? Parity in centralized G or DG? Parity in what type of solar technology? Distinguishing between these differences is very important for solar market forecast and determining what solar policies are required going forward.
Market Shakeout
Markets enter shake outs when prices fall faster than costs. (not sustainable)
After the producers in the market attain a certain level of technological maturation, the price level that has been maintained throughout the price umbrella period begins to fall faster than the decline rate of cost. Market shakeout exists for only a limited length of time because it brings price to be lower than cost. [optional hereafter] When this happens, the market adjusts itself for the price to stabilize at a stable level above the cost, thus achieving a stable price-cost ratio in the more stabilized last phase on the experience curve.
Price Umbrella
Under price umbrella new producers learn and reduce their cost.
The stage on the experience curve where the market leader maintains the price level, and where more producers enter the market who then engage in the learning process for the technology and who experience declining production cost as their production volume accumulates. In the price umbrella phase, the difference between price and cost grows wider and wider, because cost falls faster than price.
Normalization
is holding one factor constant when comparing another factor. For example, when comparing solar PV panel manufacturing cost, the efficiency of all panels is sometimes held constant (set to 100%) in order to isolate the impact of efficiency on the cost, and to observe the impact of material (i.e. different combination of chemical elements) on the cost.
Distributed Generation
Distributed generation is the production of electricity at or very near the customer load. The main driver of DG is PV. DG technologies can be cost effective on a very small scale and can be sized to match the specific customer load.
Insolation
How much sun is available for capture at any point on the surface of the planet.
Fungible Criteria for Solar:
Where and How Much
When
How Certain
Soft Costs
Soft Costs: costs outside of installation and balance of systems, (developers vs installers)
Regarding DG.
MACRS (Modified Accumulated Cost Recovery System)
Under MACRS, the assets of solar power generators get accelerated depreciation rate for the first several years of asset life, therefore, during these initial years the generator accordingly pay less income tax because of the higher depreciation rate than a straight line method. As depreciation rate declines after the first few years of service, income tax rises accordingly. The net effect of MACRS is an moratorium for the generator on his or her income tax payment to the government. Because the generator pays less income tax for the first several years of asset operation, the generator could face more favorable financial situation than otherwise, which is beneficial for the capital accumulation process for solar startups during their initial years in the market. The difference between MACRS and its precedent, ACRS of 1981, is that MACRS elongated the number of years for accelerated asset depreciation rate. Therefore, under MACRS, firms could pay reduced income tax for a longer period of time.
Pecuniary Costs and Benefits
Costs: 1) loss of revenue
Value of Solar Tariff
Solar feed in tariff gives utility scale renewable electricity generators an electricity price above the retail rate of electricity (in Germany), or mandates the utilities to purchase solar DG electricity at the same price that they would procure the electricity elsewhere (in the US), thus incentivizing massive solar PV investments and generation. In Germany, the rapid rise in production capacity has driven solar electricity price down, poising solar electricity towards grid parity or even beyond, which could incentivize substantially more demand for solar electricity both now and in the future. Thus, solar tariff has inherent environmental value as well.
