Solar power is in the middle of a breathtaking global surge. In 2017, countries around the world installed nearly 100 gigawatts — fifty Hoover Dams — worth of solar capacity. Investors poured over $160 billion into solar projects, more than any other electricity source, clean or dirty. And the price of solar power plunged to once-unthinkable lows around the world. In Mexico, Chile, and Saudi Arabia, the price of solar electricity fell to around 2 cents per kilowatt-hour, less than half that of power from coal or natural gas plants.
Supportive government policies have helped encourage the boom in solar energy. Developed countries such as Germany footed the bill for the early scale-up of the solar industry in the 2000s. Then China lavished billions on its domestic solar producers, creating an unrivaled manufacturing industry, and set sky-high mandates for the deployment of solar panels, making it the world’s largest solar market today. It is tempting to continue with more of the same.
That would be a grave mistake. Solar power is no longer a cottage industry, and the public policies that it will need to thrive over the coming decades are very different from those that kick-started its growth.
Harnessing the sun’s energy is the single most promising way to combat climate change and deliver affordable energy to rapidly growing economies around the world. Every hour, the sun beams down more energy to Earth than the world uses in a whole year. But today, solar energy only supplies about 2 percent of global electricity and meets less than 1 percent of total global energy needs. The solar industry will have to surmount formidable barriers to displace fossil fuels as a primary source of energy. Those barriers — including a shortage of investment, stagnant solar technology, and the unpreparedness of power grids to handle large amounts of volatile renewable power — could cause the industry’s surge to fizzle, halting a promising transition to cleaner energy.
The world needs three types of innovation to boost solar energy’s long-term prospects. Financial innovation will make it easier for the biggest funds to invest in solar projects and deliver the trillions of dollars that the industry needs to continue its rise. Technological innovation that replaces today’s solar panels with versatile coatings tomorrow could drastically reduce solar power’s cost, and other new technologies could store the sun’s energy in the form of portable fuels. Finally, systemic innovation could upgrade power grids and refashion the entire electricity system, making it easier to store and productively use solar power, despite its surges and sags.
Governments around the world should focus on promoting all three types of innovation. Unfortunately, the most common policy interventions — such as direct incentives to install solar panels on homes or trade barriers to prop up domestic solar panel production — fail to support any of the three and instead waste money while setting back innovation. By updating their policies, countries can reap the benefits of clean and abundant solar energy while doing their part to save the planet.
