There are many reasons why the solar energy industry has been in the news so often lately. Within the last decade, costs have taken a nose-dive, while volume and usage have steadily climbed. Within the next 30 years, the International Energy Agency predicts that solar energy could count for up to 16% of the globe’s entire energy. As it stands, it generates 1%. However, analysts have been critical of this optimistic growth potential, citing that it would only be possible if governments change their policies concerning solar energy.
The widespread psyche towards solar power was the result of subsidies. Many believed the industry could not survive without government help. However, this point of view is quickly becoming antiquated. In geographical locations where the sun is strongest, solar power actually beats fossil fuel electricity in terms of price, even without subsidies.
Even in countries where the solar energy industry needs subsidies to operate (such as the United States), costs are getting cheaper. This has sparked American utility companies to enter into 20 year agreements to purchase solar power at prices roughly 5 cents per kilowatt-hour – in some instances even lower. These price points are in some cases low enough to compete with electricity generated from natural gas, an American staple. If gas prices rise in the future, which is not an unlikely scenario, solar will be that much more competitive.
There are several reasons why the old arguments against solar power are brittle. It used to be that solar power was too inefficient given its price point. However, recent technological advances have made solar cells much more productive in converting sunlight into power. Moreover, as the manufacturing scale of the industry as a whole has increased, the cost of producing the individual components has fallen. Lastly, more and more locations are taxing energy production that also produces greenhouse gas – solar does not have to deal with this added cost.
These factors alone, however, are not enough to grow the industry to where it needs to be. Expanding solar to account for 1% of global energy required much investment and technological advancement – neither of which come in unlimited quantities. Given what has been required to reach 1%, making solar big enough to make a true environmental difference would cost astronomical figures. There are essentially three things that need to be done: (1) increase the amount of solar panels installed, (2) increase the ability to store intermittent energy produced by solar panels by producing batteries or other methods of energy storage, (3) increase transmissions lines to transport energy from where it is produced to where people live (which very often is far apart).
To effectively accomplish these things, economic efficiency is pivotal. Current policy standards are either unfeasible or else completely unsustainable. To make matters worse, some policy decisions lack foresight and are contradictory in nature. Take for example two recent developments in United States policy. The government is attempting to lower the costs of solar energy by offering companies tax breaks. At the same time, the government is increasing tariffs on China, the world’s largest producer of solar panels. This is largely due to the government’s lack of attention to renewable energy as a whole so that policy decisions that affect solar do so as an afterthought.
The taxes against the Chinese are motivating those solar companies to establish factories in low-cost countries, as opposed to the United States. Moreover, the Chinese government has decided to levy their own tax against American-made solar goods in response. This quasi-trade war is indicative of how far the industry has come. After the first solar panels were developed by the United States in the 1950s, the production slowed significantly. This speed did not pick up again until China arrived on the scene in the early 2000s and begin imitating the technology at lower costs. Since then, they have been producing and exporting very cheap solar panels.
China still leads the global solar-panel manufacturing market. Estimates released last year (according to HIS Markit), China produced 70% of the globe’s capacity for crystalline-silicon solar panels which is the most popular type. That year, the United States accounted for 1%.
The moment for the US to act, however, is ever approaching. China is now innovating in the solar panel space, whereas before, they simply replicated existing technology at lower costs. Their advancements are creating more efficient ways to transition energy from the sun into electricity, and they are attempting to expand their breadth across the world. American policy makers need to account for this so that the cost of solar power is minimized while also benefiting the American economy.
The New York Times has proposed what it believes is an ideal policy approach to accomplish those goals. The first and foremost component would be continuing to cut costs for solar manufactures and researchers, as opposed to making production more costly. Secondly, they see a world where America and China work together on solar research and development, so that we leverage their superiority, not bury it. Lastly, it would continue to subsidize the industry, but it would focus these subsidies on research and development as opposed to manufacturing. This last part is especially true if the vision of automated solar manufacturing is accurate; automated manufacturing in America can be cheaper than manual labor in China.
Shifts such as these are likely to produce a push back from all across the political spectrum. Liberals and Democrats will be upset that subsidies will be geared towards research, not factory jobs on the manufacturing front. Conservatives and Republicans will be against American cooperation with China. Whether President Trump will take either of these stances still remains unclear.
The President has spoken favorably and enthusiastically about levying taxes against China. He has long criticized the unfair behavior – since before his candidacy for President even. Yet his choice in ambassador to China, Governor Terry Branstad, leaves some hopeful that cooperation is possible – a position echoed by the new ambassador.
Trump himself has spoken about solar panels in his 2015 book, “Great Again.” Here, he states that he will only be willing to entertain the notion of solar paneling when the costs are low enough that they make economic sense. He also cites that they will actually need to be able to supply us with our energy needs in a substantial way. Today, analysts believe that time has come.
