Solar Power Economics

Introduction

Solar Farm
(click image to enlarge)

The economic viability of solar power or power from any other renewable energy source depends on the use requirements, market forces, and governmental policies (e.g. mandates or subsidies) that determine the profitability of each particular installation. It is important to distinguish between solar-based, utility power plants, designed to produce electricity for the grid, and residential applications, such as installations of solar panels on the roofs of homes. The types of installations discussed in this section are solar power plants designed to convert sunlight to electricity for feeding to the electrical grid. For residential applications, see our "USES->HOMES++" section.

Solar vs Fossil Fuels

Solar power for electrical generation is usually too costly to compete with power from fossil fuels, namely coal or natural gas. At present, solar power plants require either subsidies or construction mandates, in order to be economically viable. This is likely to change over the next 5-10 years, perhaps dramatically, as the technology of solar power develops, hopefully resulting in lower costs for solar cells and other equipment used in the construction of solar power plants. There is brisk, ongoing research activity directed toward finding more economical ways to harness solar energy for the production of electricity, but the costs are still too high to attract much investment interest, except for projects which are mandated and/or subsidized by government at the state or federal level.

Solar vs Nuclear Power

The viability of solar vs nuclear power is less determinable than in the case of fossil fuels, due to the variability of estimates for the construction of nuclear power plants. There is a history of rising costs for nuclear power plants, but that could be changing with the development of Generation 4, componentized nuclear systems. Photovoltaic solar power costs have been declining, but it is not clear without detailed analysis of each project whether solar or nuclear would be the winner on a cost basis.

Research

There are several possible directions that solar energy research can take to become more competitive. Photovoltaic research is making notable strides in increasing the efficiency of solar cells and lowering the cost of deploying and maintaining arrays of solar cell panels, which are required for utility-level power generation. Concentrated Solar Power, long the more efficient means for delivering solar power, is also undergoing brisk research activity and development.