Energy Department is seriously underestimating solar power abroad

Energy Department is seriously underestimating solar power abroad
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If trends in solar power around the world deserve a theme song, it’s “Here Comes the Sun.” But as foreign solar rises, the Department of Energy seems to be “Blinded by the Light.” And those blind spots could leave us unprepared for solar’s brightening future.

Later this month, the department’s Energy Information Administration will be issuing its Annual Energy Outlook. That report is the most influential crystal ball for future energy trends within the United States.

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Its sister report, the International Energy Outlook, receives less scrutiny, but covers the entire world. Delving into the latest outlook, I found that its projections for solar power in other countries were so weak that they couldn’t withstand the scrutiny of simple Google searches.

 

Across Latin America, solar is poised to reach 40 gigawatts by 2021. That’s five times as much solar as EIA projects the region to achieve not in 2021 but in 2050, three decades later. Solar in Brazil has already surpassed EIA’s forecast for 2050.

In Asia, EIA’s outlook underpredicted last year’s solar additions in China by a factor of five. China aims to reach 1300 GW by 2050; the outlook predicts just 306 GW by then, a level that China is on pace to surpass within a decade. Japan expects to reach 100 GW by 2030; EIA’s outlook forecasts half that much by 2050, two decades later.

Elsewhere in the world, EIA’s solar estimates appear even less plausible. The outlook projects no solar will be added in Russia for the next 33 years, and that installations in Canada will slow to a tenth of their recent pace. It also projects a sharp slowdown in solar in Australia, where local analysts find solar to be booming.  

How can EIA’s projections for solar abroad be so implausibly low? The International Energy Outlook document says little about its methods for projecting renewable energy. So I followed up with EIA staff to learn more. Their answers stunned me.

EIA discounts the targets issued by foreign governments for wind and solar power, assuming they won’t be fully met. For Brazil, EIA cut the country’s solar target for 2024 by 97 percent, pulling it below the level that was reached last June. For Mexico and Chile, it cut the 2030 target by 45 percent.

Then, after those target years, EIA makes the implausible assumption that solar and wind will grow only as fast as overall electricity demand. That ignores how solar and wind prices are continuing to plunge, making growth in market share inevitable. Recent auctions have seen solar prices at just over 2 cents per kilowatt hour in Chile, and just under 2 cents in Mexico.

Do EIA’s underestimates of solar abroad matter to us in this country? After all, U.S. companies mainly import rather than export solar panels. But the U.S. is becoming an increasingly important exporter of fossil fuels.

EIA cautions that its outlooks “are not predictions of what will happen.” But in practice, they are often treated as forecasts. I’ve lost track of how many times I’ve seen EIA outlooks used to assure readers or listeners that fossil fuels will continue to dominate over renewables for decades to come.

Since the outlooks are issued by a government agency, they’re often perceived as less biased than those from a particular industry. And unlike private forecasts, EIA’s modeling results are publicly available for all to see.

Errant outlooks could leave coal and natural gas exporters overconfident in the demand for their products. For now, solar has been growing from such a small base that even its explosive growth hasn’t taken a big bite out of fossil demand yet. But exponential growth can change that quickly.

Both solar and wind power are nearing two crucial tipping points. The first tipping point comes when solar or wind becomes cheaper than fossils for new power plants. The second comes when further price drops let renewables outcompete even existing fossil power plants.

Many countries are already nearing the first tipping point. That’s why solar and wind continue to grow while plans for new coal plants are abandoned, including over 100 cancelled in China. Those cancellations will dampen demand for coal for decades to come.

The second tipping point — parity with existing power plants — is still a ways off in many countries. But the gap is closing. Those ultra-low prices for solar in Chile and Mexico suggest it may already have been reached in especially sunny locations with cheap land and labor. Even where solar isn’t quite so cheap, its falling price can bring it into competition with natural gas made costlier by the need to import it in liquefied form.

How quickly will cheaper solar power begin to squeeze down overseas demand for American coal and natural gas? It’s tough to say. The “side cases” of the International Energy Outlook consider only two factors — oil prices and economic growth rates. That leaves a void for guessing how fossil fuel demand would change if solar or wind reach these tipping points on price, or if countries implement more aggressive climate policies.

EIA is developing a new International Electricity Market Model, its staff tell me it won’t be used until the 2019 International Energy Outlook. Until then, we must treat EIA projections with deep skepticism to avoid being blindsided by rapidly evolving energy markets abroad.

Daniel Cohan is associate professor of civil and environmental engineering at Rice University.