Solar Power, The Economics

Solar Power, The Economics

All elements that fall under the title of Fossil fuels, including crude oil, natural gas and coal, are the primary source of the world’s energy. Though non-renewable, these fossil fuels remain in high demand due to their cost efficiency and high yields. These traditional fuels play an essential part in energy production, from heat and light to fuel and industry, they form a core part of the global economy.

Despite technical innovations over the recent decades, renewable energy sources remain secondary to fossil fuels. Thus, in order to incentivize further sustainable energy usage governments have begun levying tax credits for solar, wind and other alternate energy production sources. As a direct result of this, and due to increased demand for clean energy sources, the overhead cost of such production platforms has steadily decreased to a point when clean-technology energy production has become cheaper than traditional fossil fuels. Furthermore, micro-systems have become widely available for non-distribution networks, such as businesses and homes, further expanding the reach of the clean-energy market.

Fossil Fuels

While unquestionably essential for modern energy production, the deterioration of natural gas and crude oil points to a point of complete depletion within the next 100 years. Despite this well recorded fact, global consumption has not altered, in fact the U.S. Energy Information Administration has reported that fossil fuel production and consumption rose to 70 quadrillion and 80 quadrillion British thermal units (BTUs) in 2014 from 62 quadrillion and 77 quadrillion respective BTUs in 2012 (a 3% increase in fossil fuel consumption, in merely two years).

Keeping in mind that fossil fuels accounted for over 80% of energy consumed in 2014 (shadowing both renewable and nuclear energy sources), and that renewable energy sources account for 10% over global generation, and the scale of necessity becomes clear of the dependency on this non-renewable fuel, its encroaching depletion and the rising need for clean-technology.

Renewable Energy Source

While solar energy remains only a fraction of the total energy consumed around the globe, the demand and necessity of it is rapidly rising. Solar power however only constitutes 0.4% of the total energy production in the U.S. over the last ten years. However, with the price per watt being estimated at just under 4 USD in 2013 (a significant decrease from the 10 USD estimation in 2000), the estimated global energy output from photovoltaics has increased by 40% yearly.

Though it accounts for a relatively small share, the solar energy is becoming more favourable for commercial and residential sectors, with the price per kilowatt expected to decline to reach 4-6 cents in 2025. This has resulted in many companies such as Apple, Walmart and Verizon to switch to solar powered offices and locations. In addition to this, and in a massive counter-pollution effort, China has made the most significant push towards renewable energy in 2014 primarily via photovoltaic energy production, with India following in its tracks.


Despite the efficiency of solar energy system, residential and commercial usage still falls under governmental subsidies. In the U.S., the RETC (Renewable Energy Tax Credit) decreases the tax liability of solar energy users, which can reach up to 30% of the total cost, akin to the tax alleviation in effect for geothermal and wind-based systems. Similarly, Europe has its own version of this system with Feed-In-Tariff, in which owners may actually collect governmental funds in on a per KWh production.

These aspects and more (reduced environmental footprint, sustainability and increased efficiency) have all contributed in the on-going and rapid growth of the solar energy market.