Question

In spite of inflation increasing most prices, the price of solar power declining. Also in contrast to fossil fuels, the cost of generating electricity from solar energy is driven by the infrastructure costs instead of the cost of the natural resource. Therefore the costs and prices are more stable, particularly for large-scale electricity generation.

Historically, solar technologies have had high upfront infrastructure costs but low operating costs. The SunShot program launched in 2011 by the U.S. Department of Energy (DOE) seeks to make solar energy economically competitive by 2020. To achieve this goal, the cost of solar power will have to be reduced by roughly 75% relative to 2010 prices. The U.S. DOE has reported that cumulative adoption of solar technologies has increased over tenfold since 2008. It is expected that achieving the price reduction set by the SunShot initiative could lead to solar representing 14% of the electricity demand in the U.S. by 2030 and 27% by 2050.

According to a study by the National Renewable Energy Laboratory and the Lawrence Berkeley National Laboratory, reported prices of both residential and commercial photovoltaic systems decreased on average from 6% to 12% annually between 1998 and 2014. At the end of 2014, photovoltaic prices ranged from $4.27/W for residential systems with a median installed capacity of 6kW to $2.08/W for utility-scale systems. Costs for utility scale systems are projected to fall $1.00/W to $1.75/W by 2020. It is expected that within the next two decades, the cost of solar technologies will be lower than the costs of conventional fossil fuel electricity technologies. These lower electricity prices can decrease inflation and contribute to increased economic activity and growth.

Interestingly, the deployment of solar technologies continues to increase despite the 2015 plunge in oil prices. Solar was the third most added electricity-generation capacity in 2015, after wind and natural gas. However, the share of solar compared to the total U.S. electricity capacity in 2015 was 2%, while its generation share was only 0.9%. So it remains to be seen if the goal of the SunShot initiative will be met.

1. Deflation decreases the general prices of goods and services and increases purchasing power. How does this differ from the declining price of solar technologies?
2. Currently, most electricity generation in the U.S. is from fossil fuels, including petroleum, coal, and natural gas. In what ways has the 2015 decline in oil prices affected the adoption of solar technologies?
3. Use Internet resources to compare the changes in the prices of renewable energy technologies including wind, solar, and geothermal over the last 5 years. Which of these three technologies has achieved the greatest cost decline during that period?
4. In addition to cost, what are other barriers to the adoption of photovoltaic systems?

Answer 1