Munich Personal RePEc Archive

The Political Economy of Solar Energy

Brito, Dagobert and Rosellon, Juan (2005): The Political Economy of Solar Energy. Published in: The James A. Baker III Institute for Public Policy (2005): pp. 1-16.

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Abstract

At the present time, solar power is not a competitive fuel for supplying electricity to the grid in the United States. However, an economic model developed by the U.S. National Renewable Energy Laboratory (NREL) forecasts that solar power production costs could drop twenty percent every time output doubles. Commercial demand for solar cells in the United States has been increasing at a rate of twenty-five percent a year. Such cost projections, if accurate, imply that solar power could be a competitive source of power to the U.S. grid by 2010. Eventually, technical progress and falling production costs will render solar power an important source of energy in the future. As technology improves, it may be possible to supply a substantial part of the nation with solar power from sites in the Southwest of the United States and Mexico. Scientists believe that the cost of solar power will drop to the neighborhood of two cents a kilowatt-hour or perhaps even one cent per kilowatt-hour. If there is enough foresight to develop the technology, then solar-derived hydrogen could become a competitive feedstock in petrochemicals. However, if there is no leadership from government, this process of change could take fifty years. With proper leadership, it could be realized in less than ten to fifteen years.

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