In many locations, solar energy is now even more affordable than coal or other fossil fuels, thanks to recent price drops. Due to large tax credits and subsidies, the number of solar installations is going up around the world. Here are a few solar power related economic factors to take into account.
In a Nutshell
- Solar energy is now more affordable than coal or other fossil fuels due to recent price drops
- The number of solar installations is increasing around the world due to large tax credits and subsidies
- The true cost of fossil fuels, including health costs and damage to the environment, is expected to be $5.2 trillion per year around the world
- Solar energy still makes up only a small portion of total energy consumption in the United States, but its availability is increasing.
Understanding Solar Energy’s Economics
Sustainable energy has not yet completely replaced conventional fossil fuels, despite great technological advancements. For a long time, solar and wind power were much more expensive than regular electricity. To encourage people to use renewable energy, governments have offered tax breaks.
The direct costs of solar and wind power to customers have nevertheless decreased as a result of rising environmental concerns, government subsidies, and increased production. In some places, producing renewable energy is actually cheaper for customers than making fossil fuels. Unlike wind energy, which is mostly used in wind farms, solar energy can be used in both businesses and homes.
The True Cost of Fossil Fuels
Many predictions indicate that fossil fuels will run out in fewer than 100 years; oil in 2052, gas in 2060, and coal in 2090, although it is impossible to pinpoint a precise date. The quality of the sources of coal, natural gas, and crude oil has not improved, but fossil fuel usage has.
Fossil fuels perform better than nuclear and renewable energy sources overall. Fossil fuels made up over 85% of all energy consumed in 2019, up from 80% in 2014. Fossil fuels are not only non renewable, but they also have a negative impact on the ecosystem in a number of ways.
The burning of fossil fuels is the primary source of anthropogenic CO2, which has profoundly influenced climate change. Some of its effects are global warming, the melting of Arctic ice, rising sea levels, and less food from crops.
Accumulation of Economic Costs
Despite the fact that the United States spends more than $1 trillion a year on fossil fuels, their detrimental impacts continue to have a negative financial impact. In fact, the US spent $649 billion in 2015 on subsidies for fossil fuels alone. According to research, illnesses and deaths caused by air pollution cost the European Union’s economy $1.6 trillion annually.
When spending on fossil fuels, health costs, and damage to the environment are taken into account, the true cost of fossil fuels is expected to be $5.2 trillion per year around the world.
1956
The first solar cell was created in the year Bell Laboratories made the announcement.
Price of Solar Energy
Despite accounting for a small portion of total energy consumption, the United States is the largest consumer of renewable energy. However, solar energy still makes up only 2.3% of the total energy used in the United States, despite an increase in its availability during the previous ten years. With 11.5% of all renewable energy usage in the United States in 2019, solar energy trails just hydropower and wind in terms of preferred renewable energy sources.
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Solar thermal and photovoltaic systems are the only two types of solar technology that can now transform solar energy into an energy source. Solar thermal collectors absorb solar radiation and use it to heat a house or water. In order to supplement or replace the electricity provided by the public grid, photovoltaic gadgets use the sunshine.
The sun, with all those planets revolving around it and dependent on it, can still ripen a bunch of grapes as if it had nothing else in the universe to do.
Galileo Galilei
Adoption of Solar Energy
Solar energy systems were previously only available to the wealthy or the fervent. However, the availability of solar panel systems is expanding due to dramatically falling costs. In the early 2000s, the typical American solar system cost $10 per watt.
The International Renewable Energy Agency (IRENA) said in a 2017 report called “Renewable Energy Generation Costs in 2017” that the cost of solar photovoltaics (PV) has dropped to $0.10 per kWh.
By 2020, the U.S. Office of Energy Efficiency and Renewable Energy hoped to have solar electricity prices on par with those of conventionally produced electricity, free of government subsidies. Utility scale solar photovoltaic (PV) prices fell to $0.06 per kilowatt hour in 2017. (kWh).
The price targets for residential and commercial solar energy systems were now $0.16 and $0.11 per kWh, respectively. (In contrast, the cost of a kWh of power generated from fossil fuels in 2017 used to range between $0.05 to $0.17.)
Because of this, there are now a lot more PV systems on both residential and commercial buildings in the U.S. Solar energy capacity increased from 0.34 gigawatts in 2008 to 97.2 gigawatts in 2021.
An Overall Increase
Globally, the use of solar energy has increased as more nations become aware of the negative repercussions of burning fossil fuels. Due to more competition in the solar energy industry, the cost of installation has gone down by a huge amount. The United States, China, India, and various European countries, which have some of the world’s largest economies, have all started to use solar energy.
China is the nation that has invested the most in renewable energy and has set up the most solar systems in an effort to reduce pollution. India, a country with severe pollution problems, has set a goal of using 175 gigawatts of renewable energy by 2022. In the meantime, it is expected that the United States’ solar PV capacity will more than double in the next five years.
Large Companies
Large corporations are also purchasing reusable solar systems. Walmart (WMT), Verizon (VZ), and Apple (AAPL) have already switched some of their stores, offices, and other buildings over to solar power. In the fall of 2019, Google bought 1,600 megawatts of solar power from 18 different companies. This was the largest solar purchase in history.
Even though solar is still a small part of the overall energy supply, both homes and businesses are slowly starting to use more renewable energy sources. As prices continue to go down, solar power systems are likely to be used more often. By 2025, one kilowatt hour of electricity in Europe is expected to cost between 4 and 6 cents, and by 2050, it will only cost 2 cents.
Photovoltaic Solar Energy
If predictions come true, solar PV will rank among the least expensive energy sources. With prices lowering, the IEA projects that by 2030, solar energy systems will supply 5% of the world’s electricity needs, increasing to 16% by 2050.
It would take an increase in worldwide solar power capacity from 150 gigawatts in 2014 to 4,600 gigawatts in 2050 to realize this ambition. 6 billion tons of carbon dioxide would not be emitted annually as a result.
In more recent predictions, solar energy is predicted to supply 76% of the world’s electricity by 2050, according to Lappeenranta University of Technology (Finland), for instance.
There is a rising commitment to minimize greenhouse gas emissions from using fossil fuels while also boosting the generation of renewable energy. The world’s cities and nations, including New York City, have made commitments to cut greenhouse gas emissions by 85% by 2050. The goal for California is 40% by 2030.
Tax Credits for Solar Energy
For systems installed in 2022 and 2023, U.S. households that install solar panels are eligible for tax credits of 26% and 22%, respectively.
Even though solar energy systems are now more affordable, the government still provides incentives for their use in homes and businesses. Solar energy consumers in the US pay less tax thanks to the renewable energy tax credit. Depending on the date the property was put into operation, a taxpayer can deduct 30%, 26%, or 22% of eligible expenses for systems supplying an occupied facility.
Both wind and geothermal energy systems qualify for the same credit from the US government. In order to make renewable energy systems more appealing, many European nations apply a feed in tariff system. Owners of renewable energy systems may receive funding under this method. Prices are determined per kilowatt hour (kWh), and they differ from one country to the next.
Is Solar Energy Economical?
Depending on the sun and weather at the installation site, solar energy can be less expensive than fossil fuels. The cost of solar energy is falling every year. Popular Science says that solar energy is the cheapest energy source in the United States right now, with costs as low as $0.70 per watt.
What are the Negative Aspects of Solar Power?
Minerals from the earth must be mined in order to make the components of solar panels. As with the extraction of coal and copper, this technique can harm regional ecosystems. Also, panels don’t last forever. After a certain point, they break down and become electronic trash. Additionally, not all places are best for using solar energy because some have more consistent exposure than others.
What does it Cost to Convert a Home to Solar Power?
Unless you were ready to go without electricity for an entire night, it would be challenging to power a house solely on solar energy. According to some estimates, it costs between $16,000 and $35,000, plus installation fees. The local energy market will determine how economically viable this is.
Wrap Up
Most people, big businesses, and nations have made a commitment to using renewable resources. Companies like Google (GOOG) and Amazon (AMZN) have made commitments to power their buildings with wind in addition to solar. The negative environmental effects of using fossil fuels should lessen if big businesses, people, and nations continue to switch to renewable energy sources.
FAQs
Due to recent price decreases, solar energy is now more economical than coal or other fossil fuels.
As governments offer substantial tax credits and subsidies to promote the use of renewable energy, the number of solar installations is rising globally.
It is estimated that the true cost of fossil fuels, including health expenditures and environmental harm, is $5.2 trillion year.
Although solar energy is becoming more widely available, it still only makes up a small fraction of the nation’s overall energy usage.
Yes, tax incentives and subsidies are provided by governments all over the world to promote the use of renewable energy.
Yes, solar power is a form of renewable energy.
The two types of solar technology that can convert solar energy into an energy source are solar thermal and photovoltaic systems.
A typical American solar system cost $10 per watt in the early 2000s.
According to the International Renewable Energy Agency (IRENA), the cost of solar photovoltaics (PV) has decreased to $0.10 per kWh, according to a 2017 report titled “Renewable Energy Generation Costs in 2017.
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- NASA – The Effects of Climate Change
- International Monetary Fund – Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates
- U.S. Department of Energy – Solar Energy in the United States
- Millennium Alliance for Humanity and the Biosphere – When Fossil Fuels Run out, What Then?
- Solar Energy Industries Association – Solar Industry Research Data
- Google – Our Biggest Renewable Energy Purchase Ever
- IEA – How Solar Energy Could Be the Largest Source of Electricity by Mid-Century
- E&E News – IEA Estimates Solar Could Dominate Energy Sources by 2050
- PV Magazine – Solar May Cover 75% of Global Electricity Demand by 2050
- Popular Science – Solar Power Got Cheap. So Why Aren’t We Using It More
- How Stuff Works – How to Run Your House Solely on Solar Power
