Energy

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

President Donald Trump, having claimed that his border wall would be paid for by Mexico, has now set his sights further afield for financing. About 93 million miles further afield.

More accurately, the president told a campaign-rally crowd this week that covering the wall in solar panels would generate revenue to reduce the amount that Mexico would pay. "My idea" he said.

This is where I ask you to leave aside your general thoughts on this whole wall thing -- its utility, its moral dimension, its likelihood. Suspend belief and join me as I try to work out one thing: Could a #solarwall really pay for itself?

In this, I am helped by Claire Woo, an engineer specializing in renewable-energy system design (full disclosure: Claire works with my wife).

First, some basic dimensions and assumptions. The wall would be 1,933 miles (3,207 kilometers; Claire's based in Paris) long and 30 feet (9.15 meters) high.

Now, just covering a flat wall with solar panels like tiles in a bathroom isn't great for generating electricity (the sun shines from above, as you know). So assume the panels are mounted on a slope on each side. Given that the wall is nominally designed to prevent people entering from the south, the slope on that side would have to be sharper (though this means less sunlight hitting those panels). I'll assume a 60 degree angle on the south side and a more solar-power-friendly 20 degrees on the north side. See my detailed blueprint below:

For the sake of simplicity, I'm also assuming the wall faces just straight north and south, even though it obviously runs in multiple directions across its entire length. And while the amount of power you get from a panel changes depending on where it's located, the reference point I'm using is El Paso, Texas.

The resulting structure has a surface area of 43.6 square miles with 58.3 million panels -- roughly equivalent to covering the entirety of the Bronx. At 320 watts per panel, the solar wall's capacity is 18.6 gigawatts, with 72 percent of that facing north. Overall, it generates with 16 percent efficiency for an annual output of 25.3 terawatt-hours per year. Assume it gets 6 cents per kilowatt-hour (wholesale power is crazy cheap in Texas) and the wall's annual revenue is a whopping $1.52 billion.

Now let's talk expenses.

The average cost of a fixed, large-scale solar project is now around $1.08 per watt, according to Bloomberg New Energy Finance, implying a total cost of just over $20 billion (cue image of a contractor planning several new beach houses). Forget the investment tax credit because the government's subsidy would be paid by taxpayers anyway. This is on top of the cost of the wall itself, where estimates range from as low as $8 billion (that's the bottom end of the president's range) to as high as $40 billion. I'll go with $20 billion, for an all-in cost of about $40 billion.

Let's assume the government borrows all that money at 2.73 percent (the yield on the 30-year Treasury bond) and annual maintenance of the panels equals 0.5 percent of the construction cost (Claire's rule of thumb), or about $151 million. After overheads and interest costs, therefore, the panels generate free cash flow of $272 million a year.

Still with me? The upshot is that, assuming all this and that the #solarwall was somehow completed by 2020, it would have paid for itself by the year ... 2168. That's more than a few election cycles away, I think we can all agree.

And, of course, it wouldn't actually have paid for itself by then because of that pesky time-value-of-money thing.

First, here's what the cash-flow profile of the #solarwall looks like for the first 30 years:

Thirty Summers
Financing and maintenance costs leave a small amount of positive annual free cash flow for the theoretical #solarwall -- but it is dwarfed by the upfront construction cost
Source: Claire Woo, Bloomberg Gadfly analysis, Bloomberg, Bloomberg New Energy Finance
Note: See accompanying column for assumptions.

If you squint, you can just make out the positive free cash flow over there on the right-hand side.

But now discount it back at 4 percent and add it all up to get a sense of the cumulative, discounted cash flow over 30 years. This gives a clearer picture of the payback period:

How About Never? Is Never Good For You?
On a discounted basis, #solarwall would pay for itself roughly by the time the sun dies
Source: Claire Woo, Bloomberg Gadfly analysis, Bloomberg, Bloomberg New Energy Finance
Note: Assumes discount rate of 4 percent. See accompanying column for underlying assumptions on #solarwall.

This is even before we get into things like replacing the panels after several decades, hooking them into the grid or random things like vandalism. Forget all that, though, and assume something more bullish, like a cost of only $10 billion for the underlying wall and the panels generating double the amount of power assumed above. Even then, on a discounted basis, the wall isn't paid for until the mid-2050s.

I'm no president, construction tycoon or even businessman, but that sounds like a bad deal for America.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The National Renewable Energy Laboratory has a website where you can plug in a location and it calculates how much power you would get from a solar system based on average weather there. Cool, right? It's here.

  2. And Mexico, obviously.

To contact the author of this story:
Liam Denning in New York at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net