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The looming energy glut

Apparently there is a glut of solar energy, and that's worrying the Chinese.

According to reports, Chinese polysilicon makers are suffering from "chronic overcapacity" and in order to address this problem, production is about to be slashed from 200,000 tonnes per year of the source material to just half that figure.

Polysilicon is the raw material used to create photo-voltaic arrays (PVAs) and, as best I can determine, China is producing more than 40% of the world's supply of this material.

Thanks to the laws of supply and demand, the price of polysilicon has tumbled from around $400 per Kg five years ago to just $20 per Kg today. As a result, the cost of PVAs has also tumbled, to the extent that what was once a rich-man's form of alternative energy is now within the reach of the middle-classes.

More affordable PVAs has also resulted in many countries backing away from their previously generous in-feed rates -- the amount they paid private generators for their excess power when fed back into the grid.

At one time, this infeed payment was set close to (or even higher) than the rate those users paid to buy power during periods of low PVA output. The difference was often subsidised by governments keen to promote the installation of solar energy generation.

Today however, infeed rates are typically a tenth or less of buy-rates making the quest for affordable, safe domestic electricity storage systems an even higher priority.

A couple of months ago, fellow YouTuber Dave Jones in Australia posted this video showing the installation of a PVA system on his own home and the economics really seem quite impressive, even with the low infeed payments.

I wonder if *now* might be the best time to buy PVAs -- given that once China cuts production, prices may well rise.

China seems to be playing a canny game with the raw materials that are in high demand for alternative energy systems. Not only have they slashed exports of the materials (such as neodymium) essential for making rare earth magnets but now they're about to put the brakes on their polysilicon production.

I'm sure the conspiracy theorists will assert that the Chinese government has been "bought off" by "big oil" who are not keen to see a shift away from reliance on their dino-juice products. I doubt this is true however, especially given that China has announced plans to boost its own solar-power generating capacity to an astonishing 35GW over the next two years.

Perhaps those considering investing in NZ's currently state-owned power generating SOEs would do well to remember that if the price of solar continues to fall (or even just remains static as power prices rise), eventually the vast majority of NZers will have great incentive to generate some or all of their own electricity requirements.

Is the generating of electrical power at huge hydro or thermal stations then distributing it around the country by way of an expensive network of power pylons actually a sunset industry?

Will increasingly efficient appliances, lighting and heating, combined with self-generation, eventually result in a significant reduction in demand for "on grid" power?

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