The basic question goes something like this:
Given that solar energy prices are falling and will continue to fall, eventually ending up below the price of fossil fuel energy production, why aren't more people investing? "If solar energy is really close to dropping below the cost of conventional energy, why isn't it showing up in markets? How come solar companies (and not just thin film firms like Solyndra) getting hammered, while things at good old fossil fuels are getting better?"
This question is more critical than it may at first seem. One might think "oh, people just don't see the potential on solar, etc etc" but really, there are hella people who are literally paid to make a career out of looking for stuff like this. It's almost impossible that something so huge as a major structural change to the energy industry in the mid-to-short run to happen without drastic changes in markets and prices ahead of time. If we were really on the cusp of a new energy paradigm (in any predictable fashion), people would be flipping the hell out. FLIPPING, I tell you.
So, why aren't people flipping out? Here are some possibilities:
- People are flipping out.
- People should be flipping out, but aren't, because they are ignorant OR the future is obfuscated.
- People aren't flipping out because solar tech won't change anything in the near term.
I would out-of-hand dismiss #1 just because we'd see the enormous shift in stock prices as people, well, flipped out. There would be more manufacturing investment and people would be working harder on building up capital in related sectors, such as shipping and production of parts for solar panels, etc-- all this would be reflected in stock prices, startup investments, etc. I don't think #2 is likely, either. I don't think investors are ignorant, despite all the evidence to the contrary. There are people who make good money by not screwing up, and if there really was writing on the wall, people would be seeing it and making hella money.
"But wait!" you protest, "banks and stuff were dumb. I remember this. It totally happened!"
Okay, reader. That's fair. On the other hand, identifying that mortgage-backed securities made up from mezzanine tranches of subprime ARM blocks carried systemic risk blah blah blah insurance blah blah was not easy-- the writing may have been on the wall, but then the wall got painted. And then wallpaper got put on it. And anyone who DIDN'T look for the writing on the wall had the opportunity to make some money safely.
So I will hold open the possibility of some obfuscated energy revolution waiting to happen, unknown either due to some enormous incompetence I haven't heard of, or because technology is weird and sometimes shit just happens. This is how things go, sometimes-- the tech industry sometimes trots and sometimes lurches forward, and it's hard to tell how it's going to go ahead of time.
What I want to address is #3, and how many people are also addressing it. McArdle begins by addressing this graph:
This graph is used by proponents of solar energy. It has data on the cost of producing energy via solar tech up through 2010, and draws a trendline of cost decreases, and compares this trendline to the current average energy cost. The trendline falls below the current average energy cost by 2020, indicated that in 10 years, solar power will be as cheap or cheaper than conventional energy McArdle notes a variety of flaws in this reasoning, and I'd like to address a particular criticism of this graph.
McArdle raises valuable points regarding the price of solar energy and its components (including labor, cabling, etc that are unrelated to the actual panel tech) and the viability of energy production that only works during the day, and continues to address other cost-related issues for solar energy. In effect McArdle says "I question the accuracy of this extrapolation" and provides convincing arguments.
I agree with McArdle, but I think that we have stopped too early. There's another trendline here that has been entirely unquestioned-- the average energy price trendline. It strikes me as horrifically unrealistic. Over the course of the past 15 years, the average energy price from an energy-only provider in the continental US has risen by 80%-- and I don't think this trend will stop. Despite a recent decline in fossil fuel prices, driven by a staggering dropoff in international demand during this recession, we can expect higher energy prices in the future.
Overall, I agree with the idea that Solar Energy, in the near term, is unlikely to revolutionize the energy industry. It seems highly unlikely that such a thing would be likely AND nobody would see it coming, as the case is now. I wouldn't draw so close to my chest the idea that Solar is dead, though. Solar energy doesn't need to immediately be more profitable than fossil fuels or nuclear energy production in order to succeed-- a questioning eye turned to that graph will realize the red dotted line need to curve upwards as the low-hanging fruit of our fossil fuel natural resources begin to run low.
Where will solar go? I don't know. It might not be even viable in my lifetime. But it's not a matter of if, it's a matter of when. It doesn't expend fuel like other forms of energy production do, and although its use is sharply limited by daylight, I'm sure we'll see more of it before we're done. I just thought I'd make this point, though-- if you're going to question something, make sure you question the other obvious things. I think both of the trendlines on that graph are probably wrong in their own ways, but the one that's just straight-up a flat line with 2009 energy prices? That one's definitely wrong.
For a parting note: I was partly inspired by the graffiti on the inside of a public restroom. Someone had scratched into the wall next to the toilet in shaky block letters:
Written beneath it, by someone who clearly thought himself very clever:
 US Energy Information Administration - Detailed Average Price by State by Provider, Back to 1990 (Form EIA-861): http://eia.gov/cneaf/electricity/epa/average_price_state.xls