We can unhook from oil and gas wars with solar

By Anthony Smith

Full disclosure, I’m a reformed oil trader now hedging energy costs with solar for public serving entities.  As it turns out, our company’s solar work is reducing our vulnerability to oil wars and creating clean energy jobs in coal country to support the transition to a renewable energy economy.

In its early incarnation, from 2004 to 2009, Secure Futures was an oil trading company.  We were (and still are) registered as a Commodity Trading Advisor (CTA) with the National Futures Association.  Our company helped trucking and bus companies hedge the volatile costs of diesel fuel by buying and selling oil futures and options contracts.  In 2010 our company introduced the first solar Power Purchase Agreement in Virginia, with a 104 kW rooftop solar array at Eastern Mennonite University.  The solar PPA financing method, first introduced by Jigar Shah and Wells Fargo Bank in 2003, offers customers affordable solar. Under a PPA, all capital costs, performance risk and maintenance and operating costs borne by the developer, with the customer paying a fixed rate per kWh at a known price below utility grid price for a 20 to 25 year period.

Today Virginia has 700 times as many kW’s registered under solar PPAs. 

The current surge in oil and natural gas prices recalls the spikes in the 1970s, caused by hostilities in the Middle East. Since Russian President Vladimir Putin first ordered a massing of military forces on the Ukraine border in March and April 2021, crude oil prices have risen by 122 percent, tracked by natural gas (84 percent), as shown in the graph below as of March 8, 2022.  (Source:  NYMEX: CME Group). While much of the rise in the early half of 2021 represents increased demand for energy that is end-of-pandemic related, the steep rise since November 2021 is most definitely war related.

The global oil market and its volatility tracks with natural gas, the single largest source of fuel for generating electricity in Virginia. This affects electricity prices, as in 2020 natural gas accounted for 61 percent of the electricity generation in Virginia.

Note how only one third of the energy used to generate electricity for the grid actually gets delivered to the customer, as shown in the chart below, courtesy of the Lawrence Livermore National Laboratory. The rest goes up as smoke and waste heat during generation, transmission and distribution.

By contrast, behind-the-meter solar electricity operates at 88 percent or greater efficiency in converting sunlight into AC power for your home or business.  The rest, or 12 percent, is lost in waste heat, but not emissions.

Another way of looking at it, for every unit of electricity you buy from the grid, over 65 percent of it gets wasted, mostly in the form of air emissions, the rest in waste heat.  

According to the EPA, natural gas plants emit on average 898 pounds of CO2 for every megawatt hour.  For a typical Virginia household using 14,000 kWh of electricity per year, of which 61 percent is generated from natural gas, that translates to 3.8 tons of CO2 emissions per year for grid power.  That’s 7,600 pounds of dirty air that every Virginia household emits each and every year from its electricity consumption.

Not only does fossil-fuel based grid power contribute to poor respiratory health and global warming, but it also represents an extremely volatile cost.  

Rooftop solar, that can be installed in a matter of weeks, can offset the spikes of the oil war economies.  We don’t need to wait years to build a “clean” nuclear or natural gas power plant.  If our national priority is to fast-track our path to energy independence, solar, especially when coupled with energy efficiency and energy storage technologies, represents the fastest and lowest cost solution.  According to the Energy Agency’s World Energy Outlook 2020, “For projects with low cost financing that tap high quality resources, solar PV is now the cheapest source of electricity in history.” (p. 214).  

Today our company is focusing on creating solar jobs in Southwest Virginia and elsewhere in partnership with community colleges and high school vo-tech centers.  This summer students will help install solar on 11 public school building rooftops in Wise and Lee counties as well-paid apprentices, as we build a pipeline of rooftop solar projects to convert these into permanent, sustainable jobs.

In addition to acting on our humanitarian instinct to bring immediate relief to the war-torn people of Ukraine, we should address underlying causes. Releasing oil from our Strategic Petroleum Reserves may seem necessary in the short term, but it simply perpetuates our vulnerability to oil wars.  Solar represents the fastest path to reducing our dependence on war oil.  

At the federal level, we need to restore and maintain the investment tax credit for solar to 30 percent for a 10-year period.  The U.S. Treasury should support small business by allowing for grants in lieu of tax credits as proved so effective from 2009 to 2011 in stimulating private sector investment in solar during the Great Recession.  

At the state level, we need to incentivize the electric utilities to align their profit motives with energy efficiency and distributed solar by decoupling their returns from sales of electricity, a policy currently deployed in 18 other states.  We should also ramp up the schedule for achieving the Renewable Portfolio Standard that was approved under the Virginia Clean Economy Act of 2020 to incentivize our investor-owned utilities to shift more of their generation assets to rooftop solar.

Any change to the utility business model will require leadership, vision, and focused, systematic, hard work with broad stakeholder engagement led by the Virginia Department of Energy and/or the State Corporation Commission, with recommendations not requiring unanimous stakeholder support, but rather based on best industry practices and goals for clean energy and community workforce development.  Let’s put business as usual aside to reduce our dependence on war oil and transition nimbly to a more resilient renewable economy.