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Are Google’s solar panels a good deal for California?
Such environmental initiative is to be lauded, but nowhere in the press release did Google mention the massive subsidy the company will receive from the state of California for installing the solar array. We don’t have any philosophical quibble with such incentives, but we couldn’t help wondering: just how much are California taxpayers paying for Google’s carbon reductions? California currently offers a subsidy of $2.80 per installed watt. Google is putting in 1.6 megawatts of capacity, which translates to a subsidy of about $4.5 million. According to the engineering firm responsible for designing the array, Google’s array will reduce over 3.6 million pounds of CO2 per year and has an expected lifespan of 30 years, for a grand total of almost 50,000 metric tons of carbon reductions. Sounds great, right? But at a total cost of $4.5 million, California taxpayers are paying about $90 per metric ton of CO2 reduction. TerraPass customers pay about $10 per metric ton for a portfolio of wind energy, biomass energy, and industrial efficiency projects. And the picture is actually a little worse than that. Much of the carbon reduction from Google’s solar array won’t be realized for decades, even though they’re most needed now. Furthermore, the actual reductions in future years are probably overstated in my straightline projection. None of this is to suggest that the solar array is a bad idea. In fact, we’d love to see Google expand the program to its energy-hungry data centers. However, it’s not clear that California should be subsidizing the build-out. These carbon reductions are mighty expensive, and the state probably could achieve a greater environmental benefit at lower cost by putting the money elsewhere. Moreover, the subsidy may not even be necessary. With the subsidy, Google’s investment in solar energy will pay for itself in 7.5 years. Without the subsidy, the payback period stretches to 19 years — long, but not unreasonable. Surely a company with so many billions in the bank can afford to wait? Update: Great discussion in the comments thread. Further thoughts on this topic here. Tags: Carbon dollars, Google, Solar energy, subsidies
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Comments2.
Comment by Anonymous
@ Oct 18, 2006 9 AM
 And we can probably be hopeful that this is but a first step for Google, who will continue to take bold green initiatives. Between their new philanthropic endeavors and contributions to Bill Clinton’s fund, it would seem this is just their way of arriving at the party. It might be okay to subsidize CO2 reductions to the tune that Google is receiving in order to provide incentives for early adopters of renewable technologies. (An easier solution would be if municipalities - some of the largest consumers of electricity - adopted those technologies first to jump-start local clean energy markets). In the state of California, I’m not sure incentives for large, early adopters are needed anymore. Perhaps the subsidies would be better spent reduciong the payback time (and thus making capital financing easier) for LATE adopters (individual residences). A single rooftop solar system saves more than 100 metric tons of CO2 over it’s life. At $90 per ton, that’s $9000 that could go a long way toward reducing the capital costs of home installations. Instead of making financing easier for the big guys like Google, why not put the money up-front by providing low or no-cost financing for on-site solar/wind installations for homeowners? Chris Cooper 4.
Comment by Andrew
@ Oct 18, 2006 9 AM
What’s often ignored when people complain about subsidies for solar panels is how much subsidies are given towards fossil intensive fuels (in particular oil). I don’t know how much energy that Google will be getting from solar would have come from oil (but I would guess at least some). The point is how many billions and billions of dollars does the government put into protecting our oil supply (in the name of fighting terrorism)? If dirty sources of energy are subsidized, shouldn’t the clean sources be too? 5.
Comment by LochDhu
@ Oct 18, 2006 10 AM
The first paragraph says, “30% of the energy in their Corporate Headquarters.” That probably does not include their main data center and it definatly does not include the meriad of other data centers distributed world-wide. 
Andrew: totally! Clean energy should be subsidized. The point adam is making is at what cost. The whole idea of carbon trading is that the market figures out the lowest cost way to accomplish environmental goals. The current economics of solar would place it just about last place for subsidies. Or in other words, that $4.6M could have reduced a lot more CO2 when used to subsidize more economically rational projects. 7.
Comment by Bryan
@ Oct 18, 2006 10 AM
What seems to be ignored here is the other benefits accruing from the solar initiative. To attribute 100% of the subsidy to carbon reduction ignores the fact that the panels reduce peak load, which lowers the need for more power plants and bigger T&D systems. It seems to me you need to back out the benefits accrued from those areas before you start figuring out the price per ton of carbon reduced. Heck, why not just go to the CCX and purchase it at less than $5 per ton? Are you saying that the only objective of the solar initiative was carbon reduction? 8.
Comment by Alex Censor, M.S.
@ Oct 18, 2006 10 AM
This brings up the whole issue of whether conservation subsidies in general and and California are being wisely used: Simply put:
What it comes down to it our politicians, and many of our well intentioned green technologists, are so enamored of sexy high tech solutions that Alex Censor, M.S. 9.
Comment by ben
@ Oct 18, 2006 10 AM
i don’t have the time to do all the calculations but i think this is not a fair comparison. I think the Terra Pass $10/metric ton is not enough to really spur development of alternative energy. It is just a “sweetener”. The Feds and the State add far more to this to make alternative energy competitive with fossil fuels, and not just for the reason of reducing greenhouse emissions, obviously. Secondly, 7.5 years is a very long time for a “simple” payback of investment (actual return is much longer after considering taxes and depreciation), and Google should be applauded for this investment. A company must get returns of at least 20% to stay healthy and grow, so this return is pretty poor. If it were a 19 year return, it would be no longer in the realm of reasonable - it would be thought of as foolish. 10.
Comment by Greg
@ Oct 18, 2006 10 AM
Also remember: (1) Wind is already heavily subsidized, and (2) subsidizing solar more than wind makes sense if your goal is to stimulate production in order to accelerate the reductions in cost that result from mass production of solar panels. Wind is much closer to a mature technology than solar. 11.
Comment by stefan
@ Oct 18, 2006 10 AM
Google should make sure that their solar systems do not count towards meeting existing renewable requirements placed on the utilities. 12.
Comment by John Schreiber
@ Oct 18, 2006 10 AM
Photovoltaics in their current iteration, are a pretty bad deal IMHO. How much CO2 is generated in making them? However we are approaching a time when they will make a lot of sense. See www.solfocus.com for the answer to SILLYCON photovoltaics. 13.
Comment by Wayne
@ Oct 18, 2006 10 AM
It just shows how much the cost of PV panels needs to come down to be competitive in today’s incomplete accounting system. If these are to be Nanosolar panels which Google invested heavily, one has to think about what the real cost to Google is? The cost of the electricity produced by pvs when you take the initial cost and divide it by the kWh produced over 30 years comes out around 20-25 cents per kWh. Wind is probably about 2-4 cents per kWh, hence the ten times as much cost per ton. 14.
Comment by Joe
@ Oct 18, 2006 11 AM
California must have set a subsidiary cap on their $2.80 per watt funding. If tax payers are upset at Google for receiving $4.5, then they are blaming the wrong party. I wish there were more environmentally forward-thinking companies. 15.
Comment by Phil
@ Oct 18, 2006 11 AM
It seems pretty snippy on TerraPass’s part to be critical of a subsidy for clean energy. Not everything in this world is about carbon emissions after all. Solar also doesn’t have an impact from mining, transporting, refining, or extracting the fuel, nor does it require additional infrastructure or environmental impact like wind does. C’mon TerraPass, focus on raising awareness and directing funds to alternative energy generation, not playing internecine warfare with environmental policy.
Fascinating discussion, guys. Seemed like it merited a follow-on post, which you can find here: 17.
Comment by Chad
@ Oct 18, 2006 2 PM
One thing that is complicating the matter is that there is currently a shortage of silicon metal, the key ingredient of solar panels. In the past, solar panels were made from the scraps and off-spec silicon that was produced for the semicondutor industry. However, in the last couple of years, solar has grown so fast worldwide that there is not enough solar-grade silicon to go around. Of course, all of the major manufacturers are expanding as fast as they can, but this will take several years (disclaimer: my company is the major stakeholder in one of these corporations). In the more distant future, alternative technologies such as thin-films may reach sufficient levels of efficiency to displace the current method. But until this happens, do not expect the costs of PV to fall far enough to make it competitive with wind, coal, or gas. 18.
Comment by Jim Crimmins
@ Oct 18, 2006 4 PM
Clean energy should not be subsidized - dirty energy should be taxed -it’s different. Energy consumers can then make whatever choice they want. It’s a simple idea that many don’t get, becuae they believe that “carrots” are more paltable than “sticks”. The problem is that you have CA paying Google to put up solar panels, when instead they should be taxing them for pollution and national security costs due to carbon based fuel consumption. It may feel good, but it’s dumb economically. 19.
Comment by pradwastes
@ Oct 18, 2006 5 PM
The up-front cost of solar panel is high from the fract there has been a shortage of the high-grade silicon. There are new ideas involving carbon as base for these at a lower cost and higher eficientcy. There is still the problem of paying for the electricy produced over the next 20 years up front. The grid tie can give us some gratificaton watching our electic meter go backward. This is a secondary benefit making us to us the air condition less and lights off to save energy you may not have done before. Sort of like the Prirus owners dirving slower than they used to. Wind is more efficient but if you live where the suns shines a lot more than the wide blows what are your choices? The SCE subsidy has dropped to $2.50 per installed watt as of the end of May. Higher subsidy lowers costs and there will be more of us installing it. When you start to see these PV systems on other homes near your there will be more pressure to do it yourself. 20.
Comment by Art Trese
@ Oct 18, 2006 5 PM
Regards Chris’ comments that it is appropriate to subsidies late adopters such as homeowners, I would propose that the subsidies be targeted to low income home buyers who are least able to pay utility bills, and thus would benefit the most from solar panels. Essentially taking the argument that Google doesn’t really need susbidies of they desire to install solar, neither do the most affluent Californians. From what I have seen, California is subsidizing the installation of solar power on homes that are ridiculous in size and symbolic of conspicous consumption. Why should tax dollars help them get lower utility bills. My proposal would be that the subsidy dollars be given to Habitat for Humanity first, and other groups working to provide adequate housing at reasonable costs, not the most opulent Californians. 21.
Comment by greenfuture
@ Oct 18, 2006 5 PM
Count me among those who applaud the California incentives and Google’s application of them. The subsidy per ton of CO2 avoided is just part of the equation. The avoided burden on the transmission & distribution system, and deferring new peak power plants, is what really makes the subsidy a bargain. 22.
Comment by Michael Brown
@ Oct 18, 2006 6 PM
This is a quote from the SF Chronicle online outlining something I think some of you folks are missing: “The rebates will be funded by a surcharge to residential and commercial gas and electricity customers, based on how much they use.” (http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2006/01/13/state/n000741S66.DTL) That’s about as progressive a “tax” as you’re going to find - it’s based on consumption! Funding clean energy makes a lot of sense, as does taxing energy usage. And as another poster pointed out, it would be smart to tax those who use “dirty” energy sources, as well. Taxes (I know this will sound insane to everyone, but) aren’t BAD, in and of themselves. If they are unfairly levied or spent inappropriately, sure that sucks - however, they nonetheless make the whole thing go. This is one those really unusual instances where the money for the subsidy is generated in a reasonable way - through use surcharges - and spent on something that benefits everyone: reasonably clean energy. You are right that on a straight carbon reduction basis, solar is much more expensive. However, there are 2 issues: first, we’ve made the decision that we will subsidize a variety of renewables so that they can innovate and achieve economies of scale; second that investment in California in alternative energy effectively reduces the need to add power plant capacity. This affects all of us. Given a 7 or 19 year payback, given Google’s return on invested capital, I’m sure they are not making any money either. When it comes to renewable energy, we need to try a variety of approaches before we make a decision to choose one over the other. 24.
Comment by Chad
@ Oct 19, 2006 10 AM
Taxes are not BAD, per se, but whatever you tax, you discourage. Unfortunately, most of our taxes are discouraging work, thrift, increasing the value of one’s home, and trading - all GOOD things. We definitely need to move away from this, and to the extent we can, tax BAD activities like polluting. There are probably not enough taxable bad activities to generate all the revenue we need, but we could get a much larger portion than we currently do this way. A good start would be to raise the gas tax and lower income taxes (and increase the earned income credit for the very poor), in a manner that is revenue-neutral. In addition to all the excellent comments here, it’s worth comparing the cost of avoided emissions not just to what TerraPass pays in the US—which does not have mandatory cap & trade system, but is strictly voluntary. Look at the EU, where carbon trading is mandatory across a range of industries. The value of credits there has averaged about $25, currently under $20. So $10 looks closer to the mark than $90. As to the infamous subsidies for oil and gas, whatever you think they include, even up to the $50 billion estimate for protecting the Middle East, they still work out to a fraction of the cost of oil—say $0.25/gallon on gasoline. CA’s $2800/kW subsidy, on the other hand, works out to over $6000/average kW generated. That’s six times the capacity cost of gas-fired turbines and twice the high-end estimate of nuclear. $2800 is also much higher than the total capacity cost of wind, which has a similar capacity/output ratio. As others have said above, the less we spend on each increment of clean energy, the more of it we can afford.26.
Comment by Peter
@ Jul 25, 2007 1 PM
Speaking of Google… [Ed. — this post has nothing to do with Adwords. Please keep on topic.] 27.
Comment by Daniel
@ Aug 15, 2007 5 PM
California Solar Initiative pays for only up to 1 MW of Solar capacity. Furthermore TerraPass pledges to use 30% of money towards renewable projects. I am in the solar industry and the CSI is definitely a factor driving new solar projects. In my opinion CSI is much more cost effective than TerraPass.
Daniel: CA pays $90 per metric ton under CSI. TerraPass customers pay $9. Don’t get me wrong, its all hands on deck, and we celebrate everything that moves us in the right direction, including Google’s initiative and your work in the solar industry. I think the broader point we we’re trying to make, is that as energy efficiency and different renewable technologies vie for support, maybe a common carbon price could bring things into focus. 29.
Comment by steven
@ Sep 10, 2007 1 PM
are you kidding me? google would have never invested in solar had it not been subsidized. 19 years to pay itself off is a horrible return. the company has much better things to invest its money in that can yield better returns. also, reduced carbon emissions aren’t the only benefit of the solar panels. it creates less demand for oil, which will help lower energy costs for all californians. 30.
Comment by Johnny G
@ Jan 3, 2008 8 AM
What about the payback period to Californians in terms of the lower health care costs. Have you seen how much the cancer/asthma/heart etc… disease, sickness, infection rates jump in highly polluted areas. I think you are simplifying the equation quite a bit. What about the reduced cost of having to fight terrorists, because we no longer need to have troops on the ground in their oil fields, I mean countries. What about the benefit of hope, you know the audacity of hope! A hope for a cleaner planet! Finally don’t act like other fuels aren’t subsidized because ethanol is made from corn, and we all know who gets paid for that one. 31.
Comment by rhonda
@ Mar 30, 2008 5 PM
How can your article be so informative and so negative at the same time? Are you being “subsidized” by for-profit electric companies for your article? What frustrates me is that you go into the thought process that Google - because they turn profits shouldn’t get the incentives or rebates offered to individuals and corporations for going solar. You should be applauding them and encouraging every consumer to do the same. I’m sorry if the for-profit electric companies will ultimately lose the money from google and others who go solar, but isn’t it time for consumers who pay outrageous amounts for fossil fuel addicted electricity to get their own? I would rather see Google or anyone else for that matter get solar panels AND rebates/tax incentives AND reduce CO2 emissions than see a corporation go out and build a 10million dollar solar plant and STILL charge the consumers the same rate!!!!! Which by the way is happening all over. Just an FYI for any consumer reading this. Go out and get your own solar system on your house before your electric company and Governer make it illegal or not feasible anymore!!!! Post a commentSearch the TerraPass blogTurn your old cellphones and PDAs into a FREE TerraPass. |
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Google made a splash this past week with the announcement of plans to provide 30% of the energy in their corporate headquarters from an array of 9,200 solar panels installed on campus buildings and over parking lots. “We wanted to dispel the myth that you can’t be both green and profitable,” 
19 years isn’t that long of a wait for a company with so much cash, but we can’t make exceptions on a case by case basis. The subsidy was put in there for a reason — to encourage companies to become more environmentally friendly. Google has done exactly that, and they shouldn’t be made to pay more than anyone else, simply because they are successful. Just my 2cents :)