As fossil fuels run out and climate change exacerbates, the world has an increasing demand for renewable energy. Photovoltaic (PV) solar power, harnessing electrical energy when sunlight stimulates the production of electrical current, has attracted people’s attention. Due to its low environmental impact and essentially unlimited supply. Despite its popularity, solar power is still in the early stages. Currently, it only accounts for about 2.3% of the total electricity generation in the United States by 2020.
Many of us may think that the reason why so little energy comes from solar is straightforward. Solar panels are expensive. That used to be correct. But, in the past decade, economies of scale and refinement in solar technology have eliminated this assumption. And panels have become cheap.
Levelized Cost of Electricity (LCOE) is a measure of the average net present cost of electricity generation. This can be used during the entire lifetime of a power plant. It is used to compare different power generation methods in a consistent manner.
What is Solar’s True Cost?
According to a report by Lazard in 2020, the LCOE of solar power has dropped precipitously in the past decade.
The lifetime cost of power is $31 per megawatt-hour for utility solar. This is much lower than fossil fuels and the lowest of all renewable energy alternatives. What is truly remarkable is the fact that the Lazard analysis doesn’t take environmental externalities into account. Which means solar energy should be more economically profitable than fossil fuels. This is even without the added benefits to the environment. So, you might wonder why solar has such a low market share.
While renewables are cheaper than fossil counterparts when considering a new plant. This does not necessarily apply to operating fossil fuel plants that already exist. The cost of producing one more unit of electricity is generally cheaper using the existing fossil infrastructure. So the government’s desire to build a new renewable infrastructure is low.
Given a high start-up cost of this fossil fuel infrastructure. The economy does not allow rapid phase-out before the end of the life cycle of fossil fuel plants. Furthermore, for infrastructure investments in fossil fuels, there is a lot of inertia in the system. This isdue to long-term contracts between utilities, energy producers, and mining companies. And, the country’s total energy use has not increased that much every year. So there is not much motivation to build new renewables.
Other than market forces, there are other more practical hurdles intrinsic to solar power. The sun is not consistent throughout the day or year. And so the best place for solar power generation doesn’t have many people living there. The aging US power grid is currently unable to distribute electricity from renewable sources over long distances.
But as old fossil fuel plants retire and appropriate policies are enacted, these problems would be solved.
Many economists believe that instituting a fee on carbon would facilitate the transition to renewables. As a result ensure the polluters behave in the interest of society. The regulation could take the form of a cap-and-trade market or impose a tax on every ton of emissions produced. California is one of the earliest participants of the cap-and-trade program. And successfully reduced emissions and stimulated the rise of renewable energy in the past decade.
In 2021, Biden’s administration set a goal of achieving 100% carbon-free electricity by 2035.
The country’s electric grid will receive $100 billion in funding for updates. “R&D and the technologies of the future” received $180 billion of earmarks.
If passed, his plans would provide essential infrastructure and force rapid growth for the solar industry.
Meanwhile, new technological breakthroughs would provide additional impetus to solar power’s rise. Cutting-edge research by a group of physicists at the University of Oxford demonstrated that perovskite is an excellent semiconductor. As a result means that PV cells could be built with a simple stack of thin layers. This technology has the potential to simplify manufacture enormously and deliver much enhanced efficiency.
In the long run, solar energy would most likely overcome obstacles and realize its potential. The U.S. Energy Information Administration predicts that by 2050, 47% of renewable energy generation in the United States will be solar. Which confirms the market’s confidence in the future of solar energy.