Solar Energy

Solar energy, like any other renewable energy sources, is seen to be a key source for the future. The progress and use of solar energy technologies are increasingly becoming vital for sustainable economic development; yet while the solar industry is growing rapidly, it still remains a small part of our overall energy grid. One reason it’s not growing quicker is the challenge with the calculation of solar as an alternate energy resource is the cost.

Solar power is a cheap traditional energy source in Italy and Germany. Solar energy has attained something called a grid parity, which “is meant to describe the point in time, at which a developing technology will produce electricity for the same cost to ratepayers as traditional technologies. That is, when the new technology can produce electricity for the same cost as the electricity available on a utility’s transmission and distribution grid. (REA, 2016)” Although the cost of solar energy has drastically dropped in the past 45 years, the cost is still comparatively high. Why? The reason being is because of soft cost. “Soft costs can vary significantly as a result of a fragmented energy marketplace. In the U.S., there are 18,000 jurisdictions and 3,000 utilities with different rules and regulations for how to go solar. (Energy.gov, 2016)” It also includes everything from taxes, company overhead and other fees. For instance, while German installers added $1.20 per watt to the cost of each panel in 2011, American companies added $4.36 per watt. And according to the Department of Energy, soft costs make up 64 percent of the price tag on installing residential solar systems in the U.S. (Energy.gov, 2016). “The soft or “plug-in” costs of solar account for as much as 64% of the total cost of a new solar system. These barriers are often the result of a lack of information needed to do a job or make a decision. These information gaps can slow market growth or prevent market access (Energy.gov, 2016).” While there have been various financing methods and sources of capital for solar energy projects, most funding has come from limited and expensive sources. For example, as of May 2015, only around 25 tax-equity participants were investing in the U.S. market, requiring after tax returns of 8%–10% for unlevered projects and 11%–14% with project debt. (Feldman and Bolinger, 2016)

So will Solar Energy ever be cost efficient? According to Fortune, the cost of solar energy will continue to fall over the next decade. (Fehrenbacher, 2016). As with the developing technology, the prices for solar energy will continue to fall are falling with the increase in production and technological innovations. As stated above, the similar programs in Italy and Germany are continuously being launched in the United States; assuming that the cost for solar energy will continue to decline. Experience has shown us that each time the total production quantity has doubled; the prices for solar modules on the world market have fallen by 20%. (Solar-is-future.com, 2016)