The Political Economy of Solar Energy

Abstract

At the present time, solar power is not a competitive fuel for supplying electricity to the grid in the United States. However, an economic model developed by the U.S. National Renewable Energy Laboratory (NREL) forecasts that solar power production costs could drop twenty percent every time output doubles. Commercial demand for solar cells in the United States has been increasing at a rate of twenty-five percent a year. Such cost projections, if accurate, imply that solar power could be a competitive source of power to the U.S. grid by 2010. Eventually, technical progress and falling production costs will render solar power an important source of energy in the future. As technology improves, it may be possible to supply a substantial part of the nation with solar power from sites in the southwest of the United States and Mexico. Scientists believe that the cost of solar power will drop approximately two cents a kilowatt-hour or perhaps even one cent per kilowatt-hour. If there is enough foresight to develop the technology, then solar-derived hydrogen would become a competitive feedstock in petrochemicals. This would be a dramatic shift that would revolutionize economic development, much like the shift from hunting and gathering to agriculture. However, without government leadership, this process of change could take fifty years. With proper leadership, it could be realized in less than ten to fifteen years. Removing the world’s dependence on Middle Eastern oil has major implications for the stability of the international order. Leadership to push the large scale study of solar power must come from an important institution such as the National Academy of Science. Economists, engineers, and scientists should conduct an investigation to see what technologies—such as nano-technology for storage and transmission—need to be developed to facilitate the widespread adoption of solar power. It may be that the problems of Middle Eastern oil dependence and global warming can be solved at a cost no higher than the current subsidies of ethanol.