Costs of Solar are in Decline

7 Reasons Why The Solar Revolution Took Off

Rob Wile                  Oct.  2, 2013,  9:33 AM                                        4,529                 8

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The shale revolution has gotten a lot of attention in the past few  years, and rightfully so.


But during pretty much the exact same time, a solar boom has occurred, as  you’ll se in the chart at the right.

It shows percentage growth of various forms of electricity  generation.

Solar is up 700% since 2001.

Fossil fuels and nuclear barely even register.

We’ve lately been documenting the rise of solar, including a new world record in solar efficiency and how solar  generation has already begun wreaking havoc on utilities.

But we wanted to chronicle how solar has been able to explode in the past  decade.

No one thing has helped push solar over the top.

It’s more like a bunch of events building to a head.

1.  Climate change got real

Even before Columbia University astrophysicist James Hansen published his warning in 2005 that climate change was  spiraling out of control — and then was told by the Bush Administration to keep  quiet — there was concern about rising temperatures and more extreme  weather.

The very first line of the New York Public Service Commission’s 2003  introduction to their proposed Renewable Portfolio Standard is, “We are  increasingly concerned with the effects on our climate of fossil-fired  generation.”

According to Hansen’s model, ocean heat content — the amount of heat, as  measures in Watts, in the ocean — had increased 600% in the previous decade:


2.  Oil and gas prices started increasing

When they first introduced a renewable portfolio standard, the New York Public Service Commission noted that energy  prices were becoming increasingly volatile after a decade of stability

Here’s what they were talking about (for reasons you’ll see in a moment we’ve  extended out the dates): first is natgas, second is oil

natural gasFRED






Gas prices began to feel effects from shut-ins caused by hurricanes,  while oil prices shot upward as a result of global demand.

Plus, peak fossil fuels apparently had come back on everyone’s minds.

“Inasmuch as there is a finite supply of natural gas and other fossil  fuels, over-dependence on such will leave the State vulnerable to price  spikes and possible supply disruptions,” the commission said.

3.  Everyone got a renewable fuel standard

Twenty nine states plus Washington DC now have enforceable renewable  portfolio standards (RPS), meaning a percentage of an electricity  supplier’s sales or new generating capacity must be green. The two  previous steps help explain why more than half of states with RPS adopted their  standards between 2004 and 2007, according to a University of Michigan study.

Sixteen of these have specific requirements for solar (the  biggest solar generators like California don’t even need them).



4.  And everyone was ordered to get net metering

Net metering allows a homeowner with a renewable power supply to sell  electricity back to their utility. The Energy Policy Act of 2005 mandated that all public utilities offer net metering upon  request.


5.  Solar incentives get packed into The Bailout (yes that  Bailout)

The Energy Policy Act also created federal incentives for solar —  a 30% investment tax credit (ITC) for commercial and residential  solar energy systems. Between 2006 and 2007, the amount of solar electric  capacity in the U.S. doubled.

The ITC, as originally conceived, was only supposed to last until that year, though it ended up  getting an initial one-year extension.

But then the ITC received a major expansion — in Emergency Economic Stabilization Act of 2008, aka The  Bailout, of all places:

  • It got extended for eight years
  • A monetary cap on eligible residential installations was eliminated
  • Companies and and utilities paying the alternative minimum tax could now  qualify for the credit

6.  European subsidies unleashed a global tidal wave of cheap solar  panels

Of all the items on this list, this may be the most consequential.

For almost a decade, European countries poured billions of dollars into their  renewable sector, with solar often leading the way. Germany was at one point spending €1.5 billion a year on its  solar industry.

It paid off there: Between 2000 and 2008 photovoltaic generation increased  from 32 million to 4.4 billion kilowatt hours.

germany solarREUTERS/Kai Pfaffenbach

Sheep graze between the solar panels of a solar park in  Waghaeusel, 20 km (12 miles) southeast of Karlsruhe, March 21, 2011.


As a result of Europe’s head-first dive into solar, the Chinese  began rolling out enormous quantities of solar modules, ultimately capturing a  full 25% of the market:

china solarStefan de Haan/iSuppli


Not surprisingly, solar module costs plummeted:

This ultimately led to a big fight, with Europe accusing China of dumping.


The U.S. also ended up imposing tariffs last fall, and  President Obama actually got in trouble during the 2012 campaign for  spending stimulus dollars on less expensive Chinese panels.

As the New York Times noted, tariffs often to backfire:

“The opponents argue that the duties would  make it more expensive for American families and companies to install solar  systems.”

The Commerce Department ended up structuring the tariffs such that U.S. firms  could buy Chinese-made solar panels from other countries, and GTM Research’s  Shayle Kann told the New York Times that there wouldn’t be much of an  impact.

But the supply glut created by the Europe-China dynamic is expected to last until next year — meaning costs are  going to remain pretty low.

7.  Solar got its own Moore’s Law

Moore’s Law dictates that computer processing speeds increase exponentially  every year thanks to ever-improving technology.

The same phenomena is now true in solar: every year, solar cells get  incrementally more efficient, meaning they’re able to convert more electrons  into energy.

The following chart from the National Renewable Energy Laboratory shows what  this looks like:

solar efficiencyNREL


While these represent efficiencies achieved in a lab, efficiencies  on retail panels have gone up more than a third of a basis point each year since  2000,  from 11.2% to 16.1%.


This helps explain why Colorado’s public utility just declared solar to be cost  competitive with gas.

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