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Solar Duels with Natural Gas and Oil

There has long been a debate regarding whether solar power will compete effectively with other energy resources in price and reliability. States such as California that have provided economic incentives to solar energy have experienced explosive growth in solar energy utilization. Nevertheless, most states in US are still highly dependent on coal and natural gas.

According to a report published in the Motley Fool, gas generation is increasing everywhere in United States, even in Western states where solar energy as an electricity source has made a strong showing over the past few years. The article reprints three graphs from the U.S. Energy Information Administration showing the projected rise of natural gas power generation in key power regions over the next few decades. We have also reprinted these graphs.26.jpg

These pictures might frustrate some solar enthusiasts, with the green lines showing the growth in renewables far behind gas especially in the East and South.  The reason for the red lines increasing is that the price of natural gas has dropped to the pre-recession highs and is now trading steadily around $4 per mmBtu, with little to no volatility, according to Forbes.

After comparing this cost to solar energy’s high investment cost and maintenance fee, plus the immature government subsidy policy, many people just don’t want to take the risk of switching to solar power.

Even in places where solar panels are widely in used, natural gas is still a need to complement solar generation, supporting the growth of renewables. The innovation in solar power is not in the technology as much as it is in the economics of solar power. Solar power is now about to achieve price parity with the cheaper natural gas in several places in the US. As reported by Forbes, two factors are driving the cost down:

 Innovation Lowers Cost:  “Advances made in photovoltaic (PV) cells, combined with an explosion in solar panel manufacturing in China, helped send solar prices down far faster than fossil fuels. The average solar panel now costs around 75% less than it did just five years ago and continues to fall despite the total decimation of the heavily subsidized US solar manufacturing industry.”

Economy of Scale/Scope: “The more solar that is put in, the faster prices drop. Citibank estimates that the price of an average solar panel falls by 30% whenever installed solar capacity doubles in a given area. As such, by 2020, they believe solar will be ‘cutting it’ (successfully competing with fossil fuels on an unsubsidized basis) in most parts of the world, if it hasn’t done so already.”

To solve the high front-cost issue, solar power is now still relying on government subsidies. Some researchers have been doubting if there is any way to end subsidies while still promoting green energy. One way would be to place a fee on CO2 emissions, reports the Northwest Voice.  “If revenues from the fee were returned to households, the cost to middle-income residents would be mitigated.  Market forces would decide the most effective ways to reduce fossil-fuel use.”

Compared to expensive oil, relatively dirty coal and troubled nuclear power, renewable energy can play a major role in the country’s energy needs. But obviously solar is not the only key to America’s energy needs. It will depend on many factors, including a balance of cost, reliability, consistency, and government policy.