Solar Energy is Cheap Today, Why?

The Remarkable Transformation of Solar Energy

Solar panels today are easily accessible and much more affordable than ever before. Large-scale solar farms have proliferated around the world and have become more cost-efficient than just about any other source. Dr. Greg Nemet, a professor at UW-Madison’s La Follette School of Public Affairs, published a book in June 2019 called How Solar Energy Became Cheap. In his work, he examines the programs, policies, and business models that have facilitated the reduction in solar energy costs.

Nemet began studying solar energy in 2002 and earned a Ph.D. in energy and resources from the University of California-Berkeley. He had always monitored solar costs but became driven to look for the real story that he felt was not reflected in the statistics. He received an Andrew Carnegie fellowship in 2017 that helped him delve deeper into the matter and to spend the time necessary with experts in the field.

Taking a glance at the history of solar energy use, the ability to convert light into electricity through a photovoltaic cell was developed in 1954. The price, in terms of dollars in 2017, would have been $300 to produce only 1 kilowatt-hour of electricity. Today, large-scale solar farms can produce the same amount of electricity for only three or four cents. Nemet sought to understand the reason for the dramatic drop in prices. He believed that if he could uncover those dynamics, he would be able to apply the same strategies to other technologies in the effort to reduce carbon emissions.

Solar Energy’s Winding Road

Nemet uncovered a path that was anything but straightforward. At first, the main consumers of photovoltaic (PV) energy were the Department of Defense in the 1960s. PV energy’s use in the space program was an important element in the DOD's ability to boost space exploration. PV energy also became popular with oil companies that needed a cheaper way to fuel their offshore drilling operations. Otherwise, though, PV energy was a little-used commodity.

The US energy development program was phased out in the 1980s, sending solar-energy enthusiasts to Japan and Australia. These countries began to incorporate solar cells into watches, calculators, and other electronics, ultimately placing panels on the rooftops of homes.

When the German Green Party entered the government in 1998, there was a resurgence in legislation encouraging the use of renewable energy, which opened new opportunities for solar. With an increase in demand, PV suppliers had a new market. They took advantage of the situation to develop PV-powered machinery for factories. This step precipitated the first decline in solar prices.

Not to be outdone, China saw the advantages and immediately increased its production, further lowering prices. The quality was not as good, but the volume of their production was so high that prices decreased.

The Need for Speed

Scientists predict that there will be disastrous climate change by the end of this century unless proactive measures are taken to reduce emissions within the next 30 years. Time is too short to develop still-emerging energy technologies to the point where they become as cheap as solar. Nemet argues that lessons can be drawn from the way that prices were reduced in the solar-energy process in order to apply them to today's emerging energy technologies and to get things done faster. Solar and wind power will not be enough to power the world in the future.

Nemet contends that the critical steps that must be taken are to fund the research and development of new technologies, to build niche-specific markets, and to subsidize the use of these technologies in order to help bring them to scale and reduce prices.

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