Market Forces Drive Solar

The sun is the ultimate source of energy for the world. Yet, we have only begun to utilize sun power not long ago. The main reason was that the price of solar could not compete with fossil fuels. The tide is turning now due to two great factors – government subsidies and technological change.

Government subsidies in Europe (led by Germany) and later the United States have given solar the initial push. Now that all the subsidies are ending, solar continues its momentum by relying on technological advancement, making it competitive with oil.

The most significant is the price. In contrast to ever rising oil prices, the cost of photovoltaic modules has plummeted from $3.5 per watt in 2008 to around $0.8 in 2013 (US Department of Energy). This price collapse has caused bankruptcies and havoc in the solar industry, but has brought growth to the market and benefits for the consumers. It reminds us of the dramatic advent of computer chips, the personal computers and cell phones.

As a result, solar deployment in the US jumped from 700 to 7,500 megawatts (MW) from 2008 to 2012. One MW of electricity serves about 250 homes. In not-too-sunny Germany, which paradoxically is the world’s leading solar country, production has jumped from 4,170 to 24,800 MW from 2007 to 2011. All these dramatic growths have occurred during a period of deep worldwide recession and phasing out of government subsidies.

Seeing the solar opportunity, many banks in the US now offer zero down payment for solar installation on private homes. This has boosted solar the same way as for auto sales.

The solar potential is huge as evidenced by the following:

First, the sun will not stop shining after we have all died. Everybody will love clean solar energy if the price is competitive with fossil fuels.

Second, the current efficiency of photovoltaic cells is only under 20%. This means plenty of room for improvement and likely further price drops.

Third, most homes in industrialized countries are not equipped with solar yet. Furthermore, in the developing world, a large percentage of the population (600 million in Africa alone) do not even have electricity due to the lack of a delivery infrastructure. Solar can bypass this handicap by making each home or neighborhood an independent producer of electricity.

Fourth, for all countries around the world, electric and plug-in hybrid account for only a small portion of all the cars on the road today. As these cars become popular, they will reinforce solar installation in the homes, factories, offices and shopping centers where people park their cars and recharge.

Fifth, new technology continues to turn out a more efficient battery with lower price, less weight, and bigger storage. It will someday turn out peel-and-stick solar panels for curved surfaces on cars, ships and buildings (Stanford Engineering Review 2012-13, Page 11).

This generation has seen the world moving rapidly from paper and plastic to paperless and electronic transfers and downloads. We have also seen energy usage moving from human muscles to horses and cows, then to steam and fossil and nuclear fuels. Electric energy derived from the sun, wind and other clean sources belongs to the future. It is replacing the traditional costly and dirty fuels.

March 2014

This entry was posted in 21st Century, Business/Investment, Environment, Game Changer, Inspiration, Science/Technology. Bookmark the permalink.

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